9911796707
TMI Blog2019 (2) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant on October 19, 2011) passed under section 143 (3) read with section 144C (13) of the Income Tax Act, 1961 ("the Act") is not in accordance with the law and therefore not sustainable. Transfer Pricing ("TP") Adjustment - Rs. 179,778,755 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated December 09, 2010 passed by the Ld. AO under section 143(3) read with section 144C(1) of the Act. The Hon'ble DRP while issuing directions under section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Additional Commissioner of Income-tax, Transfer Pricing Officer-1 (2) vide order under section 92CA(3) of the Act dated October 11, 2010 ("TP Order"). On the facts and in the circumstances of the case, the Ld. TPO and the Ld. AO have erred in proposing and the Hon'ble DRP has further erred in confirming the transfer pricing adjustment of Rs. 179,778,755 without due application of mind and without affording a reasonable opportunity of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s replies vide submission dated July 26, 2010 in response to the queries raised vide show-cause notice dated July 1, 2010. In this regard, the Ld. TPO has erred: 1.6.1. By computing freight cost-to-freight income ratio in the case of Balmer Lawrie & Co Limited and by not appreciating the nexus of freight cost-tofreight income ratio vis-a-vis the net profit margin ("NPM") of a company. 1.6.2. By rejecting Transport Corporation of India Limited from the set of comparable companies identified by the Appellant on the grounds of "functional dissimilarity" by citing misplaced and inappropriate reasons based on his conjecture and surmises. 1.6.3. By following an inconsistent approach by accepting Balmer Lawrie & Co Limited having similar functional/ asset profile as that of Transport Corporation of India Limited. 1.7. By disregarding the approach followed by the Appellant for benchmarking international transaction pertaining to receipt of management services. In this regard, the Ld. TPO has artificially created separate business segments on fallacious assumptions, contrary to the fact that receipt of management services are received in the course of routine business activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest u/s 244A of the Act as no interest u/s 244A of the Act has been granted to Appellant earlier. 2.5. By initiating penalty for furnishing inaccurate particulars of income. The above 'Grounds of Appeal' are all independent and without prejudice to one and another. The Appellant craves leave to supplement, to cancel, amend, add and/or otherwise alter/modify any or all the grounds of the appeal stated hereinabove." ITA No. 2434/Del/2014 A.Y. 2009-10 1. Transfer Pricing Adjustment - Rs. 12,09,03,662 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated March 08, 2013 passed by the Ld. AO under Section 143(3) read with Section 144C(1) of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Additional Commissioner of Income-tax, Transfer Pricing Officer -1 (1) vide order under Section 92CA(3) of the Act dated January 15, 2013. 1.1. On the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law in directing levy of interest under Section 234B and 234C of the Act. 4. The Ld. AO erred on facts and in law in initiating penalty proceedings under Section 271(1) (c) of the Act for concealment / furnishing inaccurate particulars of income. The Appellant prays for leave to add, alter, rescind from or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal. ITA NO. 1739/Del/2015 A.Y. 2010-11 1. Transfer Pricing Adjustment - Rs. 13,25,27,364 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated March 25, 2014 passed by the Ld. AO under Section 143(3) read with Section 144C(1) of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Additional Commissioner of Income-tax, Transfer Pricing Officer-1 (1) vide order under Section 92CA(3) of the Act dated November 25, 2013. 1.1. On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by the appellant for earning exempt income. The Ld. A.O has erred on facts and in law in directing levy of interest under Section 234B and 234C of the Act. 4. The Ld. AO erred on facts and in law in initiating penalty proceedings under Section 271(1) (c) of the Act for concealment/ furnishing inaccurate particulars of income. The Appellant prays for leave to add, alter, rescind from or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal. ITA No. 1297/Del/2016 A.Y. 2011-12 1. Transfer Pricing Adjustment - Rs. 20,25,42,955 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated February 17, 2015 passed by the Deputy Commissioner of Income Tax, Circle 1(1), Gurgaon under Section 143(3) read with Section 144C(1) of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Additional Commissioner of Income-tax, Transfer Pricing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D cannot be invoked; * without recording finding that any specific and identifiable expenditure has been incurred by the appellant for earning exempt income. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. AO has erred in considering 0.5% of opening value of investments as against 0.5% of average value of investments while computing disallowance and the Hon'ble DRP has erred in confirming the disallowance of Rs. 1,92,585 under Section 14A of the Act read with Rule 8D of the Rules. ITA No. 6135/Del/2016 A.Y. 2012-13 1. Pricing Adjustment - Rs. 29,29,71,236 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated February 19, 2016 passed by the Assistant Commissioner of Income Tax, Circle 1(1), Gurgaon under Section 143(3) read with Section 1MC 1 of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Deputy C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect assessment year certain erroneous accounting entries were passed and erroneously credited the Profit and Loss Account under the head "Net gain on foreign currency transactions and translation". * The said error was rectified during AY 2014-15 (or FY 2013-14) by debiting the Profit and Loss Account under the head foreign currency transactions and translation account and the said amount was suo moto disallowed by the appellant in the computation of income for AY 2014-15 being prior period item; * The said amount pertains to AY 2012-13 and in AY 2014-15 it reflects reversal of additional income erroneously included in subject assessment year i.e. AY 2012-13 and therefore no allowance has been claimed for the said amount either in AY 2012-13 or in AY 2014-15. 2.2. On the facts and in the circumstances of the case and in law, the DRP has erroneously mentioned "Consignment handling services" account instead of "Freight" expense account in its directions although the appellant has only mentioned the "Expense" account in its submissions made before the DRP. The appellant has also filed rectification application before the DRP to rectify its directions to this effect being mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 08.08.2011. Thereafter, the Assessing Officer made addition on account of arm's length price for Rs. 17,97,78,755/- and on account of disallowances under Section 14A of the Act for Rs. 1,00,000/-. 4. Being aggrieved by the Assessment Order, the assessee filed the present appeal before us. 5. The Ld. AR submitted that the TPO held that transaction of payment made by the assessee to its AEs on account of management consultancy services of Rs. 5,16,58,369/- should be segregated from the transaction of freight forwarding. The Ld. AR further submitted that after segregating the aforesaid transaction, the TPO computed the NCP of the transaction of freight forwarding at 9.03% as against the NCP of 6.10% computed by the assessee from both the transactions. The Ld. AR submitted that in respect of the payment of management fee, the TPO applied CUP method and computed the arm's length price of the aforesaid transaction at NIL, however, in respect of the transactions of freight forwarding and cargo handling, he accepted the TNMM as most appropriate method adopted in the TP study and Accountant's Report in Form 3CEB by the assessee. However, the TPO concluded that the payment of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. earns its revenue from manufacturing, trading, turnkey projects and services and operates in different business segments such as industrial packaging, logistics services, travel and tours, greases and lubricants and others. Besides that Balmer, Lawrie & Co. Ltd. is government company and was granted status of mini ratna I PSC in A.Y. 2006-07. Therefore, there is difference in functional profile of Balmer, Lawrie & Co. Ltd. from the assessee company. The Ld. AR relied upon the decision of the Hon'ble Delhi High Court in case of Rampgreen Solutions P. Ltd. v. CIT 377 ITR 533. Therefore, the Ld. AR submitted that this comparable should not be considered. 6. The Ld. DR relied upon the order of the TPO/ Assessing Officer. The Ld. DR further submitted that Balmer, Lawrie & Co. Ltd.is comparable chosen by the assessee only in its TP study. 7. We have heard both the parties and perused all the relevant material available on record. As regards to the first issue of Transfer pricing in respect of the transaction of freight forwarding and cargo handling services, the TPO did not dispute the most appropriate method selected by the assessee. However, the TPO held that since the fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that for A.Y. 2005-06 and 2006-07, the TPO did not dispute that the management fee has been paid to its AE for the services provided by the AEs to the assessee company and these services are interlinked transaction with the freight forwarding services, whereas for A.Y. 2007-08, the TPO took the value of the transaction at Nil by benchmarking the payment of management fee as separate transaction. For A.Y. 2008-09, the assessee company furnished TP documentation, however, transactions of the assessee was not disturbed. Thereafter again from A.Y. 2009-10 to 2012-13, the TPO treated the payment of management fee as separate transaction. The Ld. AR submitted that the assessee did not incur expenditure outside India other than to have made payment to the AEs by way of reimbursement under the agreement and on the terms and conditions as had been entered into. The Ld. AR submitted that various evidences were submitted before the TPO/AO. In fact, the TPO accepted that services were rendered and received by the assessee, still held that arms length value of the management fee is Nil and accordingly made an upward adjustment. The Ld. AR submitted that the TPO has not taken into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, Ground No. 2 is allowed. 19. In result, appeal being ITA No. 2434/Del/2014 for A.Y. 2009-10 is allowed. 20. Now we are taking up ITA No. 1739/Del/2015 A.Y. 2010-11. As regards the Transfer Pricing issue, the same is identical with that of A.Y. 2009-10, therefore, the findings expressed hereinabove are applicable in the present assessment year as well. Ground No. 1 is therefore, allowed. 21. As regards Ground No. 2, relating to disallowance u/s 14A, the same is also identical with that of A.Y. 2009-10, therefore, the findings expressed hereinabove are applicable in the present assessment year as well. Ground No. 2 is therefore, allowed. 22. In result, appeal being ITA No. 1739/Del/2015 for A.Y. 2010-11 is allowed. 23. As regards ITA No. 1297/Del/2016 for A.Y. 2011-12 and ITA No. 6135/Del/2016 for A.Y. 2012-13, issue relating to Transfer pricing, the same is identical with that of A.Y. 2009-10, therefore, the findings expressed hereinabove are applicable in the present assessment year as well. Ground No. 1 is therefore, allowed. 24. As regards to Ground No. 2 the Ld. AR submitted that the issues relating to Ground No. 2 contested therein may be remanded back to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
