COFCO INTERNATIONAL INDIA PRIVATE LIMITED ,MUMBAI vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(3)(1), MUMBAI

The present appeal is directed against the Final Assessment Order, dated 25/06/2024, passed under Section 143(3) read with Section 144C(13) read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per directions, dated 07/06/2024, issued by the Dispute Resolution Panel-1, Mumbai (hereinafter referred to as ‘the DRP’) under Section 144C(5) of the Act for the Assessment Year 2020-2021. 2. The Assessee has raised following grounds of appeal:

On the facts and circumstances of the case and in law, the final assessment order dated 25 June 2024 passed by the learned Assessing Officer is beyond the time limit prescribed under section 153 of the Act and hence time barred and liable to be quashed.”

When the appeal was taken up for hearing the Learned Authorised Representative for the Assessee stated under instructions that the Assessee did not wish to press Ground No. 2, 8, 9 and 10 at this stage. Therefore, the aforesaid grounds are dismissed as being not pressed.

We have heard both the sides of the ground pressed by the Learned Authorised Representative for the Assessee and have perused the material on record.

We would first take up Ground No. 3 to 6 raised by the Assessee challenging the transfer pricing adjustment of INR.18,76,444/-.

The facts relevant for adjudication of the above grounds are that the Assessee is a company engaged in manufacturing of edible oil and trading on oil & agricultural commodities. For the Assessment Year 2020-2021 the Assessee filed return of income on 15/02/2021 declaring total income of INR.2,96,48,670/- after claiming set off of the brought forward losses of INR.42,45,04,737/-. The aforesaid return of income was processed under Section 143(1) of the Act. Later on, the case of the Assessee was selected for scrutiny. The Assessing Officer made reference to Transfer Pricing Officer (TPO) for determination of Arm’s Length Price of International Transactions including the transactions of Import of Traded Goods (Oil & Meal). The Assessee had determined the ALP of the aforesaid transaction at INR.1035,50,90,540/- following Comparable Uncontrolled Price Method(CUP). TPO passed Order under Section 92CA(3) on 18/09/2023 proposing a transfer pricing adjustment of INR.18,76,444/- in respect of on International Transaction of Import of Crude Palm Oil. In respect of all the other transactions of Import of Traded Goods (Oil & Meal) no transfer pricing adjustment was proposed by the TPO since the variation fell within the tolerance range of 1%. In the Draft Assessment Order, 18/09/2023, under Section 144C read with Section 144B of the Act the Assessing Officer incorporated the aforesaid transfer pricing addition. The Assessee filed objections before the DRP against the Draft Assessment Order. Before the DRP, the Assessee contended that the TPO had incorrectly rejected the quotations obtained from Sunvin Group and Murjhi Meghan Services Private Limited (MMSPL) and had determined ALP using CUP method only on the basis of quotations received from Solvent Extractors Associations of India (SEA). The Assessee also moved additional evidence to contend that the Assessee was entitled to benefit of tolerance range of 3% since the Assessee was not a ‘Wholesale Trader’ in terms of definition contained in the relevant notification issued by the Central Board of Direct Taxes (CBDT). The DRP rejected the aforesaid objections and therefore, the Assessing Officer passed the Final Assessment Order, dated 25/06/2024, under Section 143(3), 144C(3) and 144B of the Act making transfer pricing addition of INR.18,76,444/-. Being aggrieved the Assessee has carried the issue in appeal before this Tribunal.

During the course of hearing the Learned Authorised Representative for the Assessee placed on record, the following judicial precedents wherein it was held that the price quotations received from Sunvin Group and MMSPL can be used for determination of ALP using CUP Method:

Per Contra, the Learned Departmental Representative had vehemently contended that the price quotations can be used provided the same pertain to actual transaction and are available in public domain. Both the aforesaid conditions are not satisfied in the case of Sunvin Group and Murjhi Meghan Services Private Limited as the same are private consultants and brokerage firms.

On perusal of the decisions cited by the Learned Authorised Representative for the Assessee we find that in identical facts and circumstances, the Tribunal has, accepting the contentions of the Assessee, decided the issue in favour of the Assessee by holding that price quotations from MMSPL Sunvin Group can be used for benchmarking transaction using CUP Method in absence of any material on record to doubt their reliability and authenticity. The relevant extract of the decision of the Tribunal in the case of Cargill Foods India Ltd. Vs. Deputy Commissioner of Income-Tax, Circle-4, 69 SOT 40 (Pune – Trib) as under:

Ostensibly, the rules pertaining to the transfer pricing assessment refer to information, being price publications including stock exchange and commodity market quotations. It is a common knowledge that for the products which are listed on the stock and commodity exchanges, the transactions of buying and selling are carried out by parties based on the prices prevailing/quoted on the respective stock or commodity exchanges. Therefore, such published data available from stock or commodity exchanges is available to set prices in the uncontrolled and controlled transactions both. At this stage, we may also refer to the judgment of Hon'ble High Court of Gujarat in Tax Appeal No.240 of 2014 in the case of CIT v. Adani Wilmar Ltd. [2014] 363 ITR 338/224 Taxman 51/45 taxmann.com 365 which was relied upon by the assessee before us. In the case before the Hon'ble High Court of Gujarat, the TPO adopted CUP method to benchmark an international transaction. The assessee presented two sets of prices claiming them to be comparable to his transactions with the associated enterprises. One set of prices relied upon by the assessee was supplied by the Malaysian Palm Oil Board and the second set of prices was the quotations published by Oil World, an independent organization. The TPO took into account the rates mentioned by Malaysian Palm Oil Board and disregarded the rates published by Oil World. According to the TPO, the Malaysia Palm Oil Board was a statutory body of Malaysia whereas the quotations published by Oil World did not have any statutory authority. The aforesaid objection of the TPO was negated by the CIT(A) as well as the Tribunal, and such stand of the TPO also did not find favour with the Hon'ble High Court of Gujarat. Following discussion in the order of the Hon'ble High Court of Gujarat is relevant in this regard:—

In terms of clause (c) of sub-section (3) of Rule 10D of the Rules, these price publications as long as the same were authentic and reliable, would be relevant materials. In this background, mere base of the organisation would be of no consequence. Further, though the price quotations of the MPOB would be entitled to its due and full weightage and respect, would not necessarily mean that the other quotations would lose their significance, unless, of course, it is pointed out that such quotations lack basis. In this context, we may recall that the only objections with the TPO to take into consideration the rate quotations of the Oil World were, that were not based in Malaysia and that it was an independent organisation, which had nothing to do with the old price prevailing in Malaysia. When the CIT (Appeals) as well as the Tribunal have accepted the reliability and authenticity of the organisation and its publication of rate-list, such objection of the TPO must be overruled. Learned advocate Mr.Bhatt for the Revenue, however, strenuously attempted to persuade us that the Oil World is a forecasting agency and further that such rates were not based on actual transactions. Quite apart from the observations of the CIT (Appeals) and Tribunal being to the contrary, these were not the objections of the TPO. We would, therefore, focus on the grounds on which the TPO "desired to reject such price quotations."'

It is evident that the Hon'ble High Court of Gujarat held that the price publications are also relevant material for the purposes of carrying out the comparability analysis in the course of application of CUP method; so however, such price publications ought to be authentic and reliable. It is also noteworthy that the Hon'ble High Court of Gujarat was considering an objection of the Transfer Pricing Officer, which is similar to that being raised before us, which is to the effect that the price publication of Oil World only reflect quotations and not actual transactions. The said argument did not find favour with the Hon'ble High Court of Gujarat and it noted that the reliability and authenticity of the material stood established. Infact, the decision of the Pune Bench of the Tribunal in the case of MSS India (P.) Ltd. (supra) relied upon by the Ld.CIT-DR does not help the Revenue on this aspect, and in any case the said decision is not an authority for the proposition that price contained in the Broker Note, based on a commodity exchange, is not a valid CUP data. Based on the aforesaid judgment of the Hon'ble High Court of Gujarat, in our view, the rejection by the TPO of the price publication of Oil World and the prices quoted by MMSPL, which are based on the rates quoted on CBOT, Chicago, is not justified.

In so far as the price quotes of MMSPL are concerned, assessee pointed out before the lower authorities that it is a brokerage firm dealing primarily in edible vegetable oils. It was pointed out that MMSPL has a team of expert professional brokers with experience of more than 50 years in the oil industry and its clients include Fortune 500 companies, banks as well as local and internationally listed companies. It was also asserted that the prices provided by MMSPL are used as benchmark to determine commodity prices by major suppliers in the industry. One of the fundamental points raised by the assessee was that the price Notes issued by MMSPL were based on the prices prevalent in the commodity exchanges, including, Chicago Board of Trade (CBOT), which is an internationally recognized and accepted commodity exchange based in Chicago, USA. At the time of hearing, the learned representative for assessee had also referred to a confirmation letter issued by MMSPL, a copy of which is placed at 358 of the Paper Book. On the basis of this confirmation letter, which is stated to be on the records of the lower authorities, it is contended that MMSPL has confirmed that the prices quoted were derived/based on CBOT and Bursa Malaysia Derivative Exchange (BMD). All the aforesaid assertions of the assessee have not been controverted by the TPO or the DRP in any manner. Therefore, there is no material to doubt the authenticity and reliability of the data sought to be relied upon by the assessee in order to benchmark its transaction of import of oils from associated enterprises. Apart therefrom, in the course of the transfer pricing proceedings, assessee, inter-alia, referred to and produced the price publications of Oil World and sample quotations from Sunvin group to justify its claim that the prices mentioned in the price notes of MMSPL are reliable and was a valid CUP data. Sunvin group is a commodity broker and assessee obtained sample quotes from it during the course of proceedings before the TPO. Another set of evidence produced was the price publications from Oil World, which is an independent agency providing reliable information on market prices. Pertinently, the same publication was a subject matter of challenge before the Hon'ble High Court of Gujarat in the case of Adani Wilmar Ltd. (supra). The reliability and authenticity of the price publication of Oil World was upheld and found to be a relevant material while testing the international transactions of the assessee in the course of application of CUP method. In the face of the aforesaid, we are unable to acquiesce ourselves to the objections of the TPO in rejecting the external CUP data sought to be used by the assessee in order to benchmark its transaction of import of oils from its associated enterprises. We hold so.” (Emphasis Supplied)

The above decision of the Pune Bench of the Tribunal was confirmed by Hon’ble Delhi High Court vide Judgment, dated 19/02/2016, reported in [2017] 297 CTR 380 : Delhi Commissioner of Income Tax, Delhi-II Vs Cargill Food India Ltd:

Following the above judgments, in the case of Assistant Commissioner of Income Tax Vs. Tvarur and Fats (P.) Ltd: 179 taxmann.com 614 (Delhi Trib.), the Delhi Bench of the Tribunal declined to interfere with the order passed by the first appellate authority whereby the price quotations from Sunvin Group used by assessee for benchmarking the international transaction using CUP Method were accepted holding as under: