DEPUTY COMMISSIONER OF INCOME TAX,(IT)-4(2)(1), MUMBAI vs. M/S. SIEMENS, MUMBAI

On 12th August, 2001, the assessee filed a letter declaring following additional international transactions to the tune of INR 18,42,38,160/-: - Sr. No. Name of the Associated Enterprises Amount in Rs. 1. Siemens Limited 149,945,270 2 Siemens Information Systems Limited 26,545,760 3. Siemens Power Engineering Private 217,512 Limited 4. Siemens Corporate Finance Private 6,952,930 Limited 5. Flender Limited 576,688 Total 184,238,160

Thus, during the year under consideration, the total international transactions reported by the assessee are as follows: - Sr. No. Name of the Associated Enterprises Amount in Rs. 1. Siemens Limited 682,524,660 2 Siemens Information Systems Limited 76,424,160 3. Siemens Power Engineering Private 45,326,352 Limited 4. Siemens Corporate Finance Private 6,952,930 Limited 5. Flender Limited 576,688 Total 811,804,790

During the Transfer Pricing assessment proceedings, upon perusal of the transfer pricing documentation filed by the Associated Enterprises of the assessee in India, the TPO observed that the assessee has not reported international transactions to the following extent: - Sr. Name of the Amount of Amount of Difference in No. Associated International International the amount of Enterprises transactions as transactions international per Form as reported transactions (in No.3CEB of by the Rs.) respective AEs assessee (in with the Rs.) assessee (in Rs.) 1. Siemens Limited 15,057,851,644 682,542,660 14,375,326,984 2 Siemens 3,696,736,059 76,424,160 3,620,311,899 Information Systems Limited -Mum-2016 (A.Y. 2008-09) 4

In its submission before the TPO, the assessee submitted that it has declared only those international transactions in respect of which it has earned income from India. The other transactions with the Associated Transactions in India were not declared as there was no income element. The TPO, vide order dated 31.10.2011 passed under section 92CA(3) of the Act, disagreed with the submissions of the assessee, and held that only the transactions where the assessee has received income need to be declared is not acceptable. On the basis that the assessee has failed to furnish evidence and has also failed to prove the transactions are at Arms’ Length Price, the TPO by adopting rate of 10% of the amount declared to be the Arms’ Length Price value, made an adjustment of Rs.8,11,80,479/-.

The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee and deleted the penalty levied under section 271G of the Act on the basis that penalty under the aforesaid section cannot be levied in a case where the income itself is not taxable in India. Being aggrieved, the Revenue is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee reported international transactions with its Associate Enterprises in Form 3CEB to the tune of Rs.62,75,66,630/-. Subsequently, during the transfer pricing assessment proceedings, the assessee declared additional transactions to the tune of Rs.18,42,38,160/-. Thus, the total international transactions disclosed by the assessee were to an extent of Rs.81,18,04,790/-. However, the TPO after perusal of the transfer pricing documentation of the Associated Enterprises in India, with whom the assessee entered into international transactions, noticed that international transactions to an extent of Rs.1876,67,83,248/- were not reported by the assessee with its Associated Enterprises. Rejecting the submission of the assessee that only the transactions which resulted in income to the assessee are required to be reported, the TPO vide order passed under section 92CA(3) of the Act made an adjustment by adopting an ad hoc rate of 10% of the international transactions declared by the assessee. On the basis that the assessee has not furnished the documents and information pertaining to all international -Mum-2016 (A.Y. 2008-09) 6 transactions entered into by the assessee as envisaged under section 92D, penalty under section 271G of the Act was levied on the assessee.

During the hearing, the learned Authorized Representative (“learned AR”) submitted that in the present case in compliance of the provisions of section 92D(1) of the Act, the assessee kept and maintained such information and documents, as are prescribed in respect of the international transactions entered into with its Associated Enterprises. The learned AR further submitted that during the Transfer Pricing assessment proceedings no notice under section 92D(3) of the Act was issued by the AO to furnish any information or documents in respect of the international transaction not reported by the assessee. In this regard, the learned AR referred to the notice issued by the TPO under section 92CA of the Act on 13.12.2010 and 03.05.2011, which forms part of the paper book at pages 113-114 and 179, respectively. From the perusal of both the notices, as noted above, we find that under the same information was sought from the assessee for determination of Arms’ Length Price of the international transaction as reported in Form 3CEB, in respect of which reference was received by the TPO under section 92CA(1) of the Act. Therefore, from the perusal of the material placed on record, it is evident that no notice under section 92D(3) of the Act was issued requiring the assessee to furnish the information or document in respect of the international transaction not disclosed by the assessee. Further, we find that neither in the show cause notice dated 19.04.2013 issued under section 271G of the Act nor in the penalty order dated 30.04.2013 passed under section 271G of the Act -Mum-2016 (A.Y. 2008-09) 8 there is any reference to any notice issued under section 92D(3) requiring the assessee to furnish any information or document in respect of the international transaction entered into by the assessee, which was not complied by the assessee.

We find that a similar issue came up for consideration before the Co- ordinate Bench of the Tribunal in Procter & Gamble Home Products (P) Ltd. vs. DCIT, reported in (2020) 180 ITD 194 (Mum). While quashing the penalty levied under section 271G of the Act, the Co-ordinate Bench in the aforesaid decision, held that unless and until a specific defect is pointed out in the documents submitted by the assessee under section 92D, penalty under section 271G of the Act cannot be levied. The relevant findings of the Co- ordinate Bench in the aforesaid decision are reproduced as follows: -

Sub-rule (3) to Rule 10D states that information specified in Rule 1 shall be supported by authentic documents, which may include the documents mentioned in sub-clauses (a) to (g). These include official publication report, status and data bases of Government of countries of residents of associated enterprises or other countries, market research studies, price publications including stock exchange and commodity market quotations, agreement contracts with unrelated enterprises etc. The word used in sub-section (3) to Rule 10D is "may".

It is clear from the reading of Section 10D (sic) that it will include almost anything and everything relating to international transactions, including data bases, reports, publications, data bases from Governments or bodies outside India. Some other stipulations are assessee specific and not general, broad or heterogeneous.

Sub-rule (4) further states that the documents specified in sub-rules (1) and (2), as far as possible, be contemporaneous and should be latest by the specified date referred to in Section 92F(iv), i.e., due date in Explanation 2 below Section 139(1). Thus, indicating the documentation/information may be floating, transient and changeable. Constant assimilation may be required. Besides, data/information can also vary. The tribunal has rightly concluded that with such a broad rule, which requires documentation and information voluminous and virtually unlimited, Section 271G has to be interpreted reasonably and in a rational manner. Information or documentation, which is assessee specific or specific to the associated enterprises, should be readily available, whereas other documentation or information relates to data bases or transactions entered into by third parties may require collation/collection from time to time. There cannot be any end or limit to the documentation or information relating to data bases or third parties. When there is general and substantive compliance of the provisions of Rule 10D, it is sufficient. The Legislature was conscious of this fact and, therefore, had specifically stipulated in Section 92D(3) that the Assessing Officer or Commissioner (Appeals) may require a person to furnish any information or -Mum-2016 (A.Y. 2008-09) 10 document in respect thereof and on failure of the said person to furnish the documentation within the specified time, penalty under Section 271G can be imposed. Thus, for imposing penalty the Revenue must first mention the document and information, which was required to be furnished but was not furnished by the assessee within the specified time. The documentation or information should be one specified in Rule 10D, which has been formulated in terms of Section 92D(1) of the Act. Looking from any quarter and angle, the appeal of the Revenue is misconceived, totally lacking in merits and is, therefore, dismissed."

Similarly, Jaipur Tribunal in assessee's sister concern case in the case of Gillette India Ltd. (supra) has considered this issue and Hon'ble High court of Rajasthan High Court in the case of Gillette India Ltd. (supra) has finally held as under: — "8. Copy of the notice dated 23.03.2011 issued by the Assessing Officer has not been filed on record by the Revenue along with the present grounds of appeal

During the hearing, the learned Departmental Representative (“learned DR”) placed reliance upon the decision of the Co-ordinate Bench of the Tribunal in DCIT vs. Canverges Customer Management Group Inc., in and 3530/Del/2015, vide order dated 13.10.2010. From the perusal of the aforesaid decision, at the outset, we find that the dispute before the Co-ordinated Bench of the Tribunal pertains to the levy of penalty under -Mum-2016 (A.Y. 2008-09) 11 section 271AA of the Act, which specifically provides that penalty shall be leviable, inter alia, for failure to keep and maintain such information and documents as required under section 92D(1) or 92D(2) of the Act. However, in the present case as evident from the record, the AO did not invoke the provision of Section 271AA of the Act for non-maintenance of information and documents as required under section 92D(1) or 92D(2) of the Act, and instead penalty was levied under section 271G of the Act, which as noted in the foregoing paragraphs, specifically requires failure to comply with a notice issued under section 92D(3) of the Act. Thus, we are of the considered view that the decision relied upon by the learned DR, being factually distinguishable, is not applicable to the present case.

Therefore, in the absence of any notice issued under section 92D(3) of the Act requiring the assessee to furnish any information or document in respect of international transaction entered into by the assessee, which is sine quo non for initiating the penalty proceedings under section 271G of the Act, we are of the considered view that this is not a fit case for levy of penalty under section 271G of the Act. Accordingly, the sole ground raised by the Revenue is dismissed.

In the result, the appeal by the Revenue is dismissed.