TMI Blog2014 (2) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... - I.T.A. No.9112/Mum/2010, I.T.A. No.8119/Mum/2011 - - - Dated:- 10-2-2014 - Shri I. P. Bansal, JM And Shri N. K. Billaiya, AM,JJ. For the Petitioner : Shri P. J. Pardiwala For the Respondent : Shri Ajeet Kumar Jain ORDER Per N. K. Billaiya, AM: ITA No. 9112/Mum/2010 - A.Y 2005-06 - Revenue's appeal This is an appeal by the Revenue against the order of the Ld. CIT(A)-15, Mumbai dt. 29.10.2010 pertaining to A.Y. 2005-06. 2. The grounds raised by the Revenue read as under: "1. On facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,11,03,531/- made by the TPO/AO in respect of Arm's Length price determined by the TPO. 2. On facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the TPO/AO in respect of Rs. 2,04,41,412/- and adjustment made in payments amounting to Rs. 3,06,62,119/- without appreciating the facts and circumstances of the case and in law." 3. The assessee is a joint venture between Lemuir Air Express, India and Deutsche Post International B.V. Netherlands and is a logistics service provider, offering a comprehensive portfolio of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and payments. Accordingly, the above adjustment of Rs. 5,11,03,531/- is apportioned between receipts from AEs and payments to AEs on the basis of the value of the transactions. The working of the same is reproduced below: As % of Total Intl. Tax. Receipt from AE 77,32,88,027/- 60% Payment to AE 1,15,74,49,487 40% Total International transaction Selected for adjustment 1,03,07,37,514/- 100% Apportionment of adjustment Adjustments on receipt (51103531x40%) 2,04,41,412 Adjustments on payments(51103531x60% 3,06,62,119 5,11,03,531 The assessee has produced various documents for examination and they are placed on record. In the light of above, an adjustment of Rs. 2,04,41,412/- is made to receipt and an adjustment of Rs. 3,06,62,119/- is made to payments. Thus, an adjustment of Rs. 5,11,03,531/- is required to be made in the income of the assessee as above" 6. The assessee carried the matter before the Ld. CIT(A). It was strongly contended before the Ld. CIT(A) that for the period 1.4.2004 to 31.10.2004 comparable uncontrolled price is the rate (50:50 ratio) at which DHL and the net work members (unrelated third parties) split their residual gross profit. In every ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms length. It has also shown that it is at par or better with 50:50 model (CUP) in producing consistent profitability outcome. As such it is not considered necessary to go into the issue of OP/VAE as this PLI relates to determination of ALP with reference to TNMM. 8. Aggrieved, the Revenue is before us. At the very outset, the Ld. Sr. Counsel pointed out that the Tribunal in assessee's own case in A.Y. 2004-05 in ITA No. 4427/Mum/2010 has accepted the profit share in the ratio of 50:50 both on payments made by the assessee and the receipts of freight from its AEs.Therefore , it was prayed , that for new sharing policy as per the rate card deserve to be accepted . 9. The Ld. Departmental Representative could not bring any distinguishing facts on record. 10. We have carefully perused the order of the lower authorities and the decision of the Tribunal in ITA No. 4427/M/10 for A.Y. 2004-05 wherein the Tribunal at para-6 on page-5 of its order has held as under: "The short controversy before us is to determine the ALP in respect of transactions between the assessee and its AEs towards receipt/payment of freight. The assessee shared profit in the ratio of 50:50 both on the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethodical benchmarking process carried out by the appellant in the Transfer Pricing (TP") documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income- tax Rules, 1962 ("Rules"); 2.2. disregarding the fact that the appellant is a joint venture between two unrelated parties; 2.3. not allowing the use of multiple year data as prescribed under Rule 10B(4) of the Rules read with the OECD TP Guidelines, and determining the arm's length price on the basis of financial information of the comparables for the year ended March 31, 2007 identified pursuant to a fresh search for comparables performed during the assessment proceedings. The AO/ TPO/ DRP erred in rejecting the contemporaneous documentation maintained by the appellant as required under the Indian TP regulations; 2.4. failing to appreciate the economic rationale of using "Operating Profit! Value Added Expenses" as the Profit Level Indicator ('PLI'), and instead using "Operating Profit/ Total Cost" as the PLI; 2.5. upholding the action of the AO/ TPO in rejecting 3 comparables selected by the appellant (based on fresh search) by contending that the appellant had selected the same on a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To Non AE 3,701,263,764 3,701,263,764 Purchase/Expenditure(constant) 5,119,950,526 5,119,950,526 Operating Profit/loss 303,345,301 407,548,062 OP/Cost 5.92% 7.96% Difference 104,202,761+/- 5% of Arm's length value: 1.05*1,826,234,824=1,917,546,5650.95*1,826,234,824=1,734,923,083 16. A perusal of the aforestated chart strongly support the submission of the Ld. Sr. Counsel. In our understanding of the law, benefit of the proviso to Sec. 92C(2) of the Act should be given to the assessee. We accordingly direct the AO. Ground No. 2.9 is allowed. 17. Since we have allowed the appeal of the assessee qua ground No. 2.9, we do not find it necessary to decide the same grievance qua 2.1 to 2.8. 18. Ground No. 3 relates to the levy of interest u/s. 234B of the Act, though the levy of interest is mandatory but consequential in the present appeal. The AO is directed to recalculate the interest as per provisions of law. 19. In the result, the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is allowed. Order pronounced in the open court on 10/02/2014. - - TaxTMI - TMITax - Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
