GILLATTE INDIA LIMITED, ALWAR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWAR

SA 17/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3765 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 20-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDAR MEHTA
• Keywords: Transfer pricing; Application of stay; Tax effect
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM S.A NO. 17/JP/2019 (ARISING OUT OF ITTPA 04/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 GILLATTE INDIA LIMITED, ALWAR CUKE VS. ACIT, CIRCLE-02, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACI3924J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDAR MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 25/02/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 25/02/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THE PRESENT STAY APPLICATION HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER PASSED U /S 144C(13) READ WITH SECTION 143(3) FOR AY 2014-15 RAISING A TOTAL TAX DEMAND OF RS 44.71 CRORES. 2. THE LD. AR SUBMITTED THAT PURSUANT TO THE DIRECT IONS RECEIVED FROM THE DRP, THE ASSESSING OFFICER HAS PASSED THE FINAL ASSESSMENT ORDER WHEREIN THE TRANSFER PRICING ADJUSTMENTS HAVE BEEN MADE IN S.A. NO.17/JP/2019 GILLETTE INDIA LIMITED VS. ACIT, ALWAR 2 RESPECT OF AMP EXPENDITURE, ADJUSTMENT ON ACCOUNT O F PAYMENT OF ROYALTY AND ADJUSTMENT ON ACCOUNT OF INTRA-GROUP SE RVICES. FURTHER DISALLOWANCE OF INVENTORY WRITE OFF HAS BEEN MADE B Y THE ASSESSING OFFICER. REGARDING AMP ADJUSTMENT AND PAYMENT TOWA RDS INTRA-GROUP SERVICES, THE LD. AR SUBMITTED THAT THE MATTER IS C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BEN CH FOR EARLIER YEARS AND ALSO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT WHEREIN THE APPEAL FILED BY THE DEPARTMENT HAS BEEN DISMISSED. SIMILARLY REGARDING DISALLOWANCE OF WRITE OFF INVENTORY, THE LD. AR SUB MITTED THAT THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE CO-ORDINATE BENCH IN THE EARLIER YEARS AS WELL AS THE DECISION OF THE HONBLE HIGH COURT AND IT WAS ACCORDINGLY SUBMITTED THAT THE ASS ESSEE HAS A GOOD CASE ON MERITS AND IS HOPEFUL THAT ENTIRE ADJUSTMEN T IS LIKELY TO BE DELETED BY THE TRIBUNAL. REGARDING ADJUSTMENT ON AC COUNT OF ROYALTY OF PAYMENT, IT WAS SUBMITTED THAT THE ASSESSEE HAS PAI D ROYALTY IN RESPECT OF TWO NEW PRODUCTS WHICH WERE INTRODUCED BY THE AS SESSEE AND TPO WITHOUT GIVING ANY REASONS DISREGARDED BENCHMARKING ANALYSIS UNDERTAKEN BY THE ASSESSEE AND PROCEEDED TO DETERMI NE THE ARMS LENGTH VALUE AT NIL AS AGAINST ROYALTY @ 4.5% PAID BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT AS PER THE BENCHMARKING ANALYSIS UNDERTAKEN BY THE ASSESSEE, AVERAGE ROYALTY OF COMP ARABLE AGREEMENTS WORKS OUT TO 5.6% ON SALES AS AGAINST 4.5% PAID BY THE ASSESSEE. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE HAS A G OOD CASE ON MERITS AND IS HOPEFUL THAT ENTIRE ADJUSTMENT IS LIKELY TO BE DELETED BY THE TRIBUNAL. FURTHER OUR REFERENCE WAS DRAWN TO CBDT I NSTRUCTIONS NO. 96 DATED 21.08.1969 WHEREIN IT HAS BEEN STATED THAT W HERE THE INCOME DETERMINED ON ASSESSMENT WAS SUBSTANTIALLY HIGHER T HAN THE RETURNED S.A. NO.17/JP/2019 GILLETTE INDIA LIMITED VS. ACIT, ALWAR 3 INCOME, SAY TWICE LATTER AMOUNT OR MORE, THE COLLEC TION OF TAX SHOULD BE HELD IN ABEYANCE TILL THE DECISION OF THE APPEAL PR OVIDED THERE WAS NO LAPSE ON THE PART OF THE ASSESSEE AND THEREFORE THE DEMAND MERITS TO BE STAYED. IT WAS ACCORDINGLY SUBMITTED THAT THERE IS A PRIMA FACIE MERIT IN THE CASE OF THE ASSESSEE THAT THE ADJUSTME NTS/ADDITIONS MADE BY THE ASSESSING OFFICER ARE LIKELY TO BE DELETED, GIVEN THE GENUINE DIFFICULTY WHERE THE DEMAND IS NOT STAYED, BALANCE OF CONVENIENCE LIES IN FAVOUR OF THE ASSESSEE AND IT WAS ACCORDINGLY PR AYED THAT WHOLE OF THE DEMAND SHOULD BE STAYED TILL DISPOSAL OF THE AP PEAL BY THE TRIBUNAL. 3. PER CONTRA, THE LD. DR SUBMITTED THAT SINCE THE LD. AR HAS REQUESTED FOR 100% STAY OF THE OUTSTANDING DEMAND, THE STAY PETITION DESERVES TO BE REJECTED AND THE DEPARTMENT HAS NO O BJECTION WHERE THE MATTER IS LISTED FOR EARLY HEARING. IT WAS FURTHER SUBMITTED EVEN THOUGH THE MATTERS RELATING AMP, INTRA-GROUP SERVICES AND INVENTORY WRITE OFF ARE COVERED IN FAVOUR OF THE ASSESSEE AS SO CLAIMED BY THE LD AR, MATTER RELATING TO ROYALTY ADJUSTMENT IS NOT COVERE D BY ANY OF THE EARLIER DECISIONS AND THE ASSESSEE SHOULD BE ASKED TO DEPOSIT AT LEAST 50% OF THE TAX DEMAND IN RESPECT OF ROYAL ADJUSTMEN T. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS BOTH THE PARTIES HAVE FAIRL Y SUBMITTED THAT THE MATTER RELATING TO AMP, ADJUSTMENT ON ACCOUNT OF IN TRA-GROUP SERVICES AND DISALLOWANCE OF INVENTORY WRITE OFF IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER DECISION OF THE CO-ORDINATE BENCHES AND ALSO OF THE HONBLE HIGH COURT, THEREFORE, AS FAR AS THESE ISSUES ARE CONCERNED, THE ASSESSEE HAS A PRIMA FACIE CASE FOR STAY OF DEM AND. AS FAR AS S.A. NO.17/JP/2019 GILLETTE INDIA LIMITED VS. ACIT, ALWAR 4 ADJUSTMENT ON ACCOUNT OF ROYALTY AMOUNTING TO RS. 1 6.49 CR IS CONCERNED, THE SAME IS NOT COVERED BY ANY OF THE EA RLIER DECISIONS AND THOUGH THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS ON MERITS HOWEVER THE SAME WOULD BE SUBJECT MATTER OF EXAMINATION DUR ING THE QUANTUM PROCEEDINGS. THE TAX EFFECT ON THE ROYALTY ADJUSTME NT COMES TO RS. 5.60 CRORE AND WE HEREBY DIRECT THE ASSESSEE TO DEP OSIT RS. 1 CRORE ON OR BEFORE 15 TH OF MARCH, 2019 AS AGREED BY THE LD AR ON BEHALF OF THE ASSESSEE. THE BALANCE DEMAND IS STAYED FOR A PERIO D OF 180 DAYS OR TILL DISPOSAL OF APPEAL, WHICHEVER EARLIER. 5. THE MATTER IS ALREADY LISTED FOR HEARING ON 18 TH MARCH, 2019. THE ASSESSEE SHALL NOT SEEK ANY ADJOURNMENT IN THE MATT ER OTHERWISE THE STAY SHALL STAND VACATED. IN THE RESULT, THE STAY APPLICATION IS DISPOSED OF F IN LIGHT OF ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 25/02/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25/02/2019. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- GILLETTE INDIA LIMITED, ALWAR S.A. NO.17/JP/2019 GILLETTE INDIA LIMITED VS. ACIT, ALWAR 5 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-2, ALWAR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {S.A. NO. 17/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR