TMI Blog2022 (11) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, same is restored back to the file of the Ld.Assessing Officer for allowing the TDS credit as per rules applicable. The ground of the appeal of the assessee is accordingly allowed for statistical purpose. - I.T.A. No. 553/Mum/2022 - - - Dated:- 31-10-2022 - Kuldip Singh (Judicial Member) And Shri Om Prakash Kant (Accountant Member) For the Assessee : Shri Madhur Agrawal For the Department : Dr Yogesh Kamat, CIT DR ORDER PER OM PRAKASH KANT (AM): This appeal by the Assessee is directed against order dated 28/01/2022 passed by the Ld. National Faceless Appeal Centre(NFAC), Delhi [hereinafter shall be referred as the Learned First Appellate Authority or FAA] for Assessment Year 2017-18. 2. The grounds raised by the Revenue are reproduced as under: Each of the grounds and/ or sub-grounds of the appeal are independent and without prejudice to the others. . 1. On the facts and circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP') erred in upholding the action of the Ld. Assessing Officer ('AO') / Ld. Transfer Pricing Officer ('Ld. TPO') in confirming the addition of INR 16, 83, 26,4267 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 271AA and 270A of Income-tax Act, 1961 should be dropped. .1; On the facts and in the circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 271AA of the Act without appreciating that the Appellant has maintained the information and documents in respect of the international transactions and the same were submitted before the Ld TPO and under section 27oA of the Act without appreciating the fact the Appellant has not under-reported any income. 3. Briefly stated facts of the case are that assessee filed its return of income on 30/11/2017 declaring gross total income of Rs.88,15,78,930/- and after claim of deduction under Chapter VIA of the Income-tax Act, 1961 (in short, the Act) of Rs.37,500/-, total income of Rs.86,17,75,520/- was declared. The return was further revised for claim of higher amount of TDS. The case was selected for scrutiny and statutory notices under the Act were issued and complied with. In view of international transaction carried out by the assessee, the matter of determination of arm s length price of the international transaction was referred to the TPO. The Ld.TPO, vide his order dated 24/01/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we shall briefly deliberate on the transactions undertaken by the assessee during the year under consideration: (a). Inbound Collect Air Shipments : Shipper (outside India) hands over the consignments to DHL India s AE to forward the same via air to the consignee in India. DHL AE takes the assistance of DHL India for the same. DHL AE negotiates the terms of the transactions with the shipper. The consignee is assigned by the shipper to pay for the International freight. Accordingly, DHL AE assigns the collection responsibility (from the consignee) to DHL India. DHL AE pays the freight to the carrier. DHL India invoices and collects from the consignee the Origin Charges ( OC ), Freight (Air) and Destination Charges ( DC ). DHL AE invoices and collects from DHL India the OC and Freight. Only DC is considered as revenue for DHL India. Given that the actual amount of OC and Freight (Air) agreed between the Shipper and DHL AE are merely collected by DHL India from the consignee and passed on back to back basis to DHL AE, the OC and Freight (Air) are netted off in the Profit Loss Account of DHL India i.e the assessee. (b). Inbound Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in case of outbound shipments and Destination charges ( DC ) in case of inbound shipments, only form part of the revenue receipts/income of the assessee. (ii). As observed by the TPO, the main component of the income of the assessee is on account of differential freight element which it is able to obtain from the shipping companies on account of bulk booking of space on the liner. It was observed by the TPO, that the carriers in view of heavy turnover of the assessee group would provide them very competitive rates which otherwise would not be available to a normal exporter or importer. TPO observed, that the assessee group in anticipation of the expected shipments would book cargo spaces in bulk around the world at the competitive rates so offered to them by the shipping companies. The TPO held a conviction that the assessee after making bulk bookings with the carriers would enter into bargains depending upon the time, space and the paying capacity of the client. It was observed by the TPO, that though the assessee would collect freight from the customers at an amount in excess of the rate it had negotiated with the shipping company, however, it would issue a House Airway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining its profit margin. In fact, we find that Rule 10B(1)(e) does not enable consideration or imputation of cost incurred by third parties or unrelated enterprises to compute the assesse s net profit margin for application of TNMM. Rule 10B(1)(e) provides that the net profit margin realized by the enterprise from an international transaction entered into with an AE is to be computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise. As such, it contemplates determination of ALP with reference to the costs, assets, sales etc. of the enterprise in question, i.e the assessee, as opposed to the AE or any third party. In our considered view, the considering of the freight cost of the airlines/ship liners in the total cost base of the assessee had resulted to a distorted picture of the net margin realized by the assessee from its international transactions. Our aforesaid view is fortified by the order of the ITAT, Mumbai in the case of FedEx Express Transportation and Supply Chain Services India Pvt. Ltd. Vs. Dy. CIT, Range 8(1), Mumbai [ITA No. 435/Mum/2014; dated 10.12.2014]. In the said case, it was observed by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its communications viz. letterheads, telephone listings, office signs etc. with the customers, and was specifically prohibited from representing or projecting itself as a Principal (Page 806 of APB ). Further, the agreement also provided for indemnification of the assessee by the member carrier in the event of a loss/damage arising in the course of transportation pursuant to the sale made by the assessee.(Page 807 of APB ). As such, the assessee did not assume any risks while undertaking its business. In order to fortify his aforesaid claim, the ld. A.R had drawn our attention to a sample house airway bill (Page 813-817 of APB ) that was issued by the assessee to its customer which revealed that the assessee had executed the same as an agent of the carrier. Also, we find that the functions (carriage of goods) and liabilities (indemnification of the loss etc.) assumed by the assessee vis-a-vis the customer (as per its standard terms and conditions) corresponds to those assumed by the carrier vis- -vis assessee. Accordingly, we are of the considered view that the functions and liabilities were effectively delegated by the assessee to the carrier and no part of the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the said costs. (vi). As regards the observation of the TPO that PLI of OP/VAE could not be safely applied as the reporting of various companies as regards classification of various expenses is not uniform, we are unable to find favour with the same. In our considered view, the assessee had only selected companies which had provided their VAE separately. Accordingly, in the backdrop of our aforesaid observations, we are of the considered view, that as in the case before us the costs pertaining to the services obtained by the assessee from the third parties viz. shippers/airliners, clearing and forwarding agents, transport service provider etc. neither involved any service element of the assessee nor the assessee had carried any risk or employed any of its assets with respect to the same, therefore, inclusion of the freight cost in the total cost base of the assessee by the TPO was not permissible. We thus are persuaded to subscribe to the claim of the assessee that the TPO/DRP were in error in rejecting the PLI of OP/VAE adopted by the assessee and substituting the same by PLI of OP/TC. As such, we herein restore the matter to the file of the A.O/TPO for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is dismissed as infructuous. 12. In ground 2.5, the assessee has challenged inclusion of comparable, M/s Om Logistics Ltd by the Ld.TPO / DRP. 13. Before us, the learned counsel of the assessee submitted that the said comparable is functionally incomparable in view of the assets comprising more than 5000 trucks owned by the said company. He submitted that this fact was duly submitted before the lower authorities, but same has not been taken into consideration. The Ld.Counsel further submitted that the comparable has been excluded in the case of the assessee in assessment years 2010-11; 2011-12; 2015-16 an 2014-15 of the Tribunal (supra). The relevant finding of the of the Tribunal (supra) for assessment year 2014-15 is reproduced as under:- 16. Whereas, the ground of appeal No. 2.7 pertains to exclusion of comparable Om Logistic Ltd. The Ld. AR submitted that the comparable company is engaged in the transportation and logistics services of vehicle and tangible assets and in the assessee s own case for A.Y 2015-16 it was excluded and dealt at page 13 Para 6 of the order as under: 6. In grounds Nos. 2.5 2.6, the assessee has contested the issue of comparable enti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
