TMI Blog2018 (8) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... THE HON BLE Mrs. JUSTICE S.SUJATHA Mr. S.S. Naganand, Sr. Counsel, A/W Mr. U.R. Vikram, Adv. for Appellant- Assessee Mr. K.V. Aravind, Adv. for Respondents - Revenue ORDER 1. This appeal has been filed by the Appellant- Assessee M/s.Toyota Kirloskar Motor Pvt. Ltd., u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, Bangalore Bench A , Bangalore, dated 14.08.2014 passed in IT(TP)A No.1595 (Bang) 2012 for A.Y.2008-09. 2. The Assessee is aggrieved only by the directions of the learned Tribunal for remanding the case back to the TPO/AO for undertaking the Transfer Pricing Analysis with regard to Royalty payments made by the Assessee-Indian company to its Associated Enterprise M/s.Toyota Motors Corporation, Japan and other associated companies. The relevant portion of the learned Tribunal remanding the case back to the TPO/AO is quoted below for ready reference:- The total revenue if both segments are considered together would come to ₹ 4.843.97 Crores and operating profit 202.15 Crores. Profit on sales which is the PLI adopted, would be 4.878%. Learned TPO, himself at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackground, in which, the aforesaid remand directions become necessary. 11. We have perused the orders and heard the rival contentions. There is no dispute that in the impugned assessment year, the TPO had not disturbed the values of the international transactions with regard to the trading segment and manufacturing segment. After making his own analysis TPO came to the conclusion that the segmental results were within the +/= 5% of the mean arithmetical margin of comparables. Only adjustment that he carried out was with respect to royalty payments effected by the assessee. In the first place what we find is that the Coordinate Bench of this Tribunal in its decision in assessee s own case for the assessment year 2007-08 referred supra, had clearly held that segmented approach was not warranted in assessee s case, since the trading and manufacturing transactions undertaken by the assessee were so interlinked and interconnected, requiring it to be evaluated together. We find that there was no change in the business model of the assessee for the impugned assessment year. Hence, the order of the Tribunal for assessment year 2007-08 would be very relevant portion. Paras.41 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they cannot be evaluated adequately on an individual basis. In such a situation, rather than assessing the ALP of the transactions individually, the transactions could be evaluated together using the most appropriate method. 43. The above being the legal position, it becomes necessary to examine the international transactions carried out by the assessee with its AE during the previous year which have been categorized into 2 segments by the TPO in his order and find out if they are interlinked or interconnected so that the transactions need to be evaluated together rather than individually. In this regard, we find that the submissions made by the Assessee before TPO as well as before DRP have not been considered at all. The TPO proceeded on the basis that ALP of each transaction has to be examined independently/individually by placing reliance on the decisions of Tribunal in the case of Star India Ltd. (supra) and UKB(I) (P) Ltd. (supra). We agree with the submissions of the learned counsel for the assessee that these decisions have in fact accepted in principle that aggregation of transactions have to be done where they are interlinked but have on facts found that transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to add that this finding / decision by its very nature has to be case-specific and year-specific as the decision is based on the facts and circumstances of this particular case and of this particular year and is not to be construed as laying down the principle in this regard. We, therefore, direct the Assessing Officer / TPO to compute the ALP at the entity / enterprise level by combining the trading and manufacturing segments. 45. It is no doubt true that the Tribunal has observed that the ruling given in that year is based on the facts that prevailed in that year. We find that the facts in the present assessment year are also identical and there has been no change whatsoever in the business model of the assessee. In these circumstances, we are of the view that the decision rendered by the Tribunal would be applicable for this assessment year also. Respectfully following the decision of the Tribunal, we hold that the trading and manufacturing segment of the assessee are not distinct and are inter-related warranting combined transaction approach. 46. We have already seen in para 9 of this order that the TPO has arrived at the bifurcation of the manufacturing and trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis on the Combined Transaction Approach and not on different segment basis, deserves to be undertaken and in our opinion, the learned Tribunal was justified in remanding the case back to the TPO/AO for undertaking such Transfer Pricing Analysis for determining the ALP of the Royalty payments made by the Assessee-Indian company to the Associated Enterprises of Japan. 7. The factual exercise of determination of ALP, whether it results in any T.P. adjustments or not, is not an issue before us at this stage. It is for the authority concerned to look into these facts and figures by undertaking the requisite exercise of T.P. Analysis on the basis of comparables selected by the authorities in accordance with the parameters available with them. 8. We also do not find the aforesaid judgment of this Court in Ganapathi Subraya Bhat (supra) relied upon by the learned senior counsel is of any help to the Assessee, as the facts and context in which the co- ordinate Bench of this Court found that the remand was not justified are not available in the present set of facts. 9. We do not feel here that this remand direction would entirely an academic exercise only and TPO/AO should be al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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