INDIA JAPAN LIGHTING LIMITED vs. THE DEPUTY COMMISSIONER OF

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TCA/652/2017HC Madras25 March 2021Bench: Hon`ble Mr Justice M.DURAISWAMY5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law framed by the assessee. This was due to subsequent developments, specifically the enactment of the Direct Tax Vivad Se Vishwas Act, 2020. The Court was informed by the assessee's counsel that the assessee had already been issued Form-3 under the Vivad Se Vishwas Act and sought permission to withdraw the appeal. Consequently, the High Court dismissed the appeal as withdrawn. No specific finding was made on the merits of the transfer pricing issues raised by the assessee, and the Tribunal's order was not affirmed or reversed. The operative direction was the dismissal of the appeal as withdrawn.

What were the facts?

The assessee, M/s. India Japan Lighting, filed an appeal before the High Court of Judicature at Madras against an order dated 06.09.2016 passed by the Income Tax Appellate Tribunal, Madras "D" Bench, in I.T.A.No.245/Mds/2013 for the assessment year 2008-09. The appeal was filed under Section 260A of the Income Tax Act, 1961. The Revenue was represented by the Deputy Commissioner of Income Tax, Large Tax Payer Unit, Chennai. The High Court was to decide substantial questions of law framed by the assessee concerning transfer pricing adjustments.

What were the issues?

1. Whether the Tribunal erred in not appreciating that appropriate adjustments were required as per Section 92C of the IT Act read with Rule 10B(3) of the IT Rules to even out factors materially affecting profitability compared to comparable companies? 2. Whether the Tribunal erred in not providing appropriate adjustments for capacity underutilization, depreciation, and extraordinary costs (including freight and rejection costs) to ensure correct comparability analysis as per Section 92C read with Rule 10B(3) of the IT Rules? 3. Whether the Tribunal erred in not rejecting comparable companies as per Section 92C read with Rule 10B(3) of the IT Rules, which were functionally different or had a high degree of transactions with their associated enterprises? Assessee's Contentions: The assessee argued that the Tribunal failed to make necessary adjustments for factors affecting profitability and comparability, as mandated by Section 92C and Rule 10B(3). They contended that specific adjustments for capacity underutilization, depreciation, and extraordinary costs were crucial for a correct comparability analysis. Furthermore, the assessee argued for the rejection of functionally different comparables or those with significant transactions with associated enterprises. Revenue's Contentions: The judgment does not record any specific contentions made by the Revenue.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92C

AI-generated summary — verify with the full judgment below

Tax Case Appeal No.652 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.03.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMY AND THE HON'BLE MRS.JUSTICE T.V. THAMILSELVI Tax Case Appeal No.652 of 2017 M/s.India Japan Lighting, Aalim Centre, 82, Dr.Radhakrishnan Salai, Mylapore, Chennai – 600 004. ... Appellant Vs.

The Deputy Commissioner of Income Tax, Large Tax Payer Unit, Chennai. ... Respondent

Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras "D" Bench, dated 06.09.2016 passed in I.T.A.No.245/Mds/2013. For Appellant : Mr.R.Venkatanarayanan For Respondent : Mr.T.Ravi Kumar, Senior Standing Counsel Page 1/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.652 of 2017 J U D G M E N T (Delivered by M.DURAISWAMY, J.) This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 06.09.2016 passed by the Income Tax Appellate Tribunal, Madras "D" Bench, ('the Tribunal' for brevity) in I.T.A.No 245/Mds/2013 for the assessment year 2008-09. 2.The appellant has raised the following Substantial Questions of Law in the grounds of appeal: “1)Whether the Tribunal erred in not appreciating that appropriate adjustments were required as per Section 92C of the IT Act read with Rule 10B(3) of the IT Rules in order to even out factors which materially affect the profitability of the assessee as compared to the comparable companies? 2)Whether the Tribunal erred in not providing appropriate adjustments for capacity underutilization, depreciation and extra ordinary costs including freight cost, rejection cost in order to ensure correct comparability analysis of assessee viz a viz comparables as per Section Page 2/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.652 of 2017 92C read with Rule 10B(3) of the IT Rules? 3)Whether the Tribunal erred in not rejecting as per Section 92C read with Rule 10B(3) of the IT Rules certain comparables which were functionally different to assessee (or) had high degree of transactions with their associated enterprises?” 3.We have heard Mr.R.Venkatanarayanan, learned counsel for the appellant/assessee and Mr.T.Ravi Kumar, learned Senior Standing Counsel for the respondent/Revenue. 4.It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. Page 3/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.652 of 2017 5.We are informed by the learned counsel for the appellant/ assessee that the assessee had already been issued with Form – 3 on 11.12.2020 and the learned counsel for the appellant seeks permission of this Court to withdraw the appeal. 6.In view of the submission made by the learned counsel for the appellant, the Tax Case Appeal stands dismissed as withdrawn. No costs. [M.D., J.] [T.V.T.S., J.] Index : Yes/No 25.03.2021

Internet : Yes

va To 1. Income Tax Appellate Tribunal, Madras "D" Bench 2.The Deputy Commissioner of Income Tax, Large Tax Payer Unit, Chennai. Page 4/5 https://www.mhc.tn.gov.in/judis/ Tax Case Appeal No.652 of 2017 M. DURAISWAMY, J. and T.V. THAMILSELVI, J. va Tax Case Appeal No.652 of 2017

25.03.2021 Page 5/5 https://www.mhc.tn.gov.in/judis/

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