SPICER INDIA PVT.LTD,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 10, PUNE

PER R.S.SYAL, VP : This appeal by the assessee arises out of the order dated 27-09-2018 passed by the Assessing Officer u/s.143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter called ‘the Act’) in relation to the assessment year 2014-15.

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its return declaring total income of odd Rs.75.67 crore. Such return

was accompanied by the Audit Report in Form No. 3CEB indicating international transactions, inter alia, of payment of Royalty

amounting to Rs.15,36,43,405/-. The Assessing Officer (AO) made

a reference to the Transfer Pricing Officer (TPO) for determining

the Arm’s Length Price (ALP) of the international

transactions/specified domestic transactions. The TPO observed

that the assessee applied the Transactional Net Margin Method

(TNMM) for benchmarking the international transaction of payment

of Royalty. After entertaining objections from the assessee, the

TPO determined NIL ALP of the international transaction by

holding that the assessee did not receive any benefit from the

payment of Royalty. The Dispute Resolution Panel (DRP), on page

10 of its order, observed that the issue raised was similar to that

decided by it in its order for the A.Y. 2012-13. Relevant parts of its

order for such preceding year have been reproduced on pages 11

and 12 of the impugned order by the DRP. Considering the facts

and circumstances as identical to those for the A.Y. 2012-13, the

DRP upheld the action of the TPO on this score. The AO passed the

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final order making transfer pricing addition, inter alia, on this score,

against which the assessee has approached the Tribunal.

relevant material on record. It is pertinent to note that the DRP

confirmed the action of the TPO by relying on its order for the A.Y.

2012-13. It is interesting to note that the order passed by the AO,

implementing the direction of the DRP, for the A.Y. 2012-13 came

up for consideration before the Tribunal. Vide its order dated

11-12-2018 in ITA No.2948/PUN/2016, the Tribunal has deleted

similar transfer pricing adjustment by following its orders for the

A.Ys. 2009-10 to 2011-12. Relevant discussion has been made in

para 6 of the order of the Tribunal. The ld. DR tried to distinguish the facts of the instant case vis-à-vis the preceding year by

contending that the technology, in respect of which the royalty was

paid, was actually acquired from the Associated Enterprises about

15 years ago and there was no rationale in continuing to make the

payment. In our considered opinion, this point does not carry any

weight because what was relevant for the immediately preceding

year continues to remain so even for the year under consideration in

as much as the situation has not undergone any change in one year,

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when we consider that the technology was acquired 15 years ago.

Respectfully following the precedent, we delete the transfer pricing

addition made on this score.

against the transfer pricing addition of Rs.15,36,43,405/-, being,

Management Fee to Asia Investment Pvt. Ltd., which is a specified

domestic transaction. The TPO discussed the payment of

Management Fee along with payment of Royalty jointly from para

15 onwards of his order. The assessee was show caused as to why

NIL ALP of the Management Fee should not be determined. In

response, the assessee submitted details being invoices; details of

experts and facilities which were available for training to the

employees; e-mail communications; and Manuals etc. The TPO

did not find anything convincing and determined NIL ALP of the

specified domestic transaction of payment of Management Fee. The

DRP approved the action of the AO in the draft order, incorporating

the transfer pricing adjustment.

material on record, it is observed that identical issue came up for

consideration before the Tribunal in the immediately preceding

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assessment year 2013-14. Vide order dated 04-07-2019, the

Tribunal in ITA No.609/PUN/2018 has upheld the order passed by

the ld. CIT(A) deciding this issue in favour of the assessee.

Relevant discussion has been made in para 7 onwards of the

Tribunal order. In deciding this issue so, the Tribunal also

considered its own order for A.Y. the 2012-13. Since the facts and circumstances of this issue are mutatis mutandis similar to those of

the immediately preceding year, respectfully following the

precedent, we overturn the impugned order and order to delete the

addition.

Order pronounced in the Open Court on 17th October, 2019.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 17th October, 2019 सतीश

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आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-13, Pune 4. The Pr. CIT-V, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “C” / DR ‘C’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 16-10-2019 Sr.PS 2. Draft placed before author 16-10-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *