Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 396 - AT - Income TaxRejection of the Appellant’s TP documentation, comparable companies and analysis thereof - not considering and appreciating the business model of the Appellant and its AEs and classified it as a “technical service provider” - assessee i.e. AVLTC is a subsidiary of AVL India Private Limited who holds 70% of its shares and the remaining 30% shares are held by AVL Holding GmbH, Austria - Held that:- DR who had initially taken the stand that non-discussion would amount to non-acceptance from a reading of the submissions was unable to point out whether the issue was considered at all. In the circumstances it was her submission that if the business model needs to be addressed first then the finding of the CIT(A) giving part relief to the assessee should also be set aside as the remaining issues in both the assessee’s appeal and the department’s appeal be treated on the same platform. Thus the grounds in the departmental appeal also should be restored back. The Ld. AR stated that qua the remaining grounds on behalf of the assessee the submissions are in the synopsis. However he agreed that in the circumstances the issue may be restored so as to address the first issue first. In the facts of the present case where the Ld. AR has taken the argument that the intensity of functions with the non-AEs are higher than the intensity of functions with the AE’s the nuanced difference if any on the business model of the assessee has to be seen. This difference in the intensity of functions is stated to be impacting the characterization of the business model itself which difference is stated to be not considered either by the DRP or the TPO a position which is borne out from the record. We find that in the case of BMW India Pvt. Ltd. vs ACIT (2014 (11) TMI 266 - ITAT DELHI) while examining the plea of the tax payer that it was a routine distributor it was found on analyzing the Agreements and considering the conduct as borne out from the record that based on its intensity of functions performed that the tax payer was not a routine normal distributor. Analyzing the Agreements and the functions undertaken the tax payer’s claim that it was a normal distributor was not accepted and the tax payer on an analysis of its Agreement with its AE was found to have performed a greater intensity of functions as opposed to a routine distributor who may not be called upon to perform the intensity of functions undertaken by the BMW. Thus the relevance of the intensity of functions performed as a relevant criteria for characterizing the tax payer as per judicial precedent is well-accepted. Consideration of the difference in the intensity of functions with non-AEs as comparable to lesser intensity of function with AE’s also as per judicial precedent on facts is warranted. The objections to the business model as considered by the TPO we find were raised before the DRP and these remain unaddressed the said position is accepted by the parties. In these peculiar facts and circumstances, we find that the submissions of the Ld. Sr. DR inasmuch that the relief granted to the assessee relatable to the exclusion of a comparable challenged by the Revenue before this forum also needs to be set aside. The said approach would in all fairness be appropriate as once the entire edifice of the business model for non-appreciation of relevant facts is demolished the occasion to consider the appropriateness of selection of the comparables with the demolished edifice does not arise. Accordingly for the detailed reason given hereinabove and considering the arguments of the parties on the grounds agitated before us, we set aside the impugned order. The issues are restored back to the file of the AO/TPO with the above directions. TPO/AO is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of assessee and revenue by way of remand.
|