THE PR. COMMISSIONER OF INCOME TAX GURGAON vs. M/S NISSIN BRAKE INDIA PVT LTD

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ITA/341/2019HC Punjab & HaryanaPHHC01075638201910 January 2020Bench: MR. JUSTICE AJAY TEWARI,MR. JUSTICE AVNEESH JHINGAN3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the revenue had not been able to show that the CUP method was more appropriate on facts. Furthermore, no reason was put forth to justify the departure from the TNMM method, which had been followed in previous years, nor was there any averment of a change in circumstances. The Court found no legal infirmity in the ITAT, as the final fact-finding authority, concluding that the invocation of the CUP method was not justified and no reason existed for departing from the past practice. Consequently, the appeal filed by the revenue was dismissed. The ITAT's direction to remand the matter to the TPO for fresh consideration after hearing the parties was upheld.

What were the facts?

The appellant, Pr. Commissioner of Income Tax, Gurgaon, filed an appeal against the order dated 16.11.2018 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The ITAT had remanded ITA No. 6366/DEL/2017 for the assessment year 2013-14 back to the Transfer Pricing Officer (TPO) for fresh consideration, setting aside the impugned order. The assessee, Nissin Brake India Pvt. Ltd., had filed its return of income for AY 2013-14, claiming certain expenses. The TPO disallowed these expenses by introducing the Comparable Uncontrolled Price (CUP) method, deviating from the previously used Transactional Net Margin Method (TNMM). The ITAT, in its order, found no good reason for the TPO to abandon the TNMM and invoke the CUP method, remanding the case for a fresh decision after hearing parties.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in not appreciating that the CUP is the most appropriate method for benchmarking transactions of Royalty and Product Development Fee? (Question of law turning on the application of transfer pricing methods). 2. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in not appreciating that the facts of the case of the assessee are different from the case of CIT vs EKL Appliances Ltd.-341 ITR 241 (Del.)? (Question of law turning on the applicability of precedent). 3. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in holding that the benefit test is not applicable for the benchmarking of transactions related to Royalty and Product Development Fee? (Question of law turning on the application of transfer pricing principles). Assessee's contentions: The ITAT was correct in its findings. The TPO had no good reason to abandon the TNMM method, which had been used in previous years, and invoke the CUP method without any change in circumstances. The facts of the assessee's case were not comparable to CIT vs EKL Appliances Ltd. Revenue's contentions: The Tribunal could at best have set aside the assessment order and remanded the case back for fresh decision but could not dictate what method to follow.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

ITA-341-2019 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 106 ITA-341-2019 (O&M) Date of Decision : 10.1.2020 The Pr. Commissioner of Income Tax, Gurgaon ...... Appellant Versus Nissin Brake India Pvt. Ltd. ...... Respondent CORAM : HON'BLE MR.JUSTICE AJAY TEWARI : HON'BLE MR. JUTICE AVNEESH JHINGAN Present : Mr. T.K.Joshi, Standing Counsel for the appellant. *** AJAY TEWARI, J. (Oral) 1. This appeal has been filed against the order dated 16.11.2018 passed by the Income Tax Appellate Tribunal ,Delhi Bench 'I-1' New Delhi in ITA No. 6366/DEL/2017 for the assessment year 2013-14 whereby the matter was remanded back to the Transfer Pricing Officer (TPO) for fresh consideration for setting aside the impugned order. The appellant has claimed the following substantial question of law:- “i. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in not appreciating the fact that CUP is most appropriate method for benchmarking of transaction of Royalty and Product development fee ? ii. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in not appreciating that the facts of the case of the assessee are different from the case of CIT vs EKL Appliances Ltd.-341 ANURADHA 2020.01.14 16:27 I attest to the accuracy and integrity of this document

ITA-341-2019 (O&M) 2 ITR 241 (Del.) ? iii. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was right in holding that benefit test is not applicable for the benchmarking of transaction related to Royalty and product development fee ?” 2. Brief facts of the case are that the appellant filed his return of income for the assessment year 2013-14 on 29.11.2013 and claimed certain expenses, the same were disallowed by the TPO by introducing the 'CUP Method' (as opposed to the earlier TNMM Method which had been used in the past) and by resorting to the ALP. By the impugned order, the Tribunal has held that on fact there was no good reason for the TPO to abandon the TNMM Method and invoke the CUP Method and remanded the case back to him for a fresh decision after hearing the parties. 3. Before us learned counsel has argued that the Tribunal could at best have set aside the assessment order and remanded the case back for fresh decision but it could not dictate what method to follow. 4. However, he has not been able to show that on fact the applicability of the CUP Method is more appropriate. Neither any reason is put forth to justify the departure from the TNMM being followed earlier nor there is any averment of change in circumstances from the previous years. In this view of the matter, we see no legal infirmity in the Tribunal being the final fact finding authority to come to the conclusion that the invocation of the CUP method was not justified and no reason existed for the departure from the past practice. 5. Consequently, the appeal stands dismissed. ANURADHA 2020.01.14 16:27 I attest to the accuracy and integrity of this document

ITA-341-2019 (O&M) 3 6. Since the main case has been dismissed, the pending application, if any also stands disposed of.

(AJAY TEWARI)

JUDGE (AVNEESH JHINGAN) JUDGE 10.1.2020 anuradha Whether speaking/reasoned - Yes/No Whether reportable - Yes/No ANURADHA 2020.01.14 16:27 I attest to the accuracy and integrity of this document

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