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Income Tax Appellate Tribunal, DELHI BENCH ‘I-1’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. KULDIP SINGH
This appeal by the revenue is preferred against the order dated 29.01.2016 framed u/s. 143 (3) r.w.s. 144 C of the Act.
The grievance of the revenue read as under :- 1. Whether in the facts and circumstance of the case the Dispute Resolution Panel (DRP) is justified in disagreeing with the description of the activity carried out by the assessee as that of being akin to trading when issue was already decided by its coordinate Bench (Mitsubishi Corporation India Pvt. Ltd. Vs ACIT, Range-6, New Delhi on 23rd August 2013/ITA No. 5147/Del/2010) and also affirmed by the High Court and also when the functions as per assessee’s submission remains the same in all its business segments.
2. Whether in the facts and circumstances of the case the DRP is justified in law in rejecting the functional analysis carried out by the TPO based on the TP study and submissions made in this case.
Whether in the facts and circumstances of the case the DRP is justified in law in rejecting the primacy of functions carried out by the assessee and basing its decision on the ground that risks were minimal in the case of the assessee 4. Whether in the facts and circumstances of the case the DRP is justified in law in stating that no intangibles were created of the supply chain and human intangibles when these intangibles have been specifically acknowledged by their incorporation in the explanation (ii) to section 92B of the Income Tax Act.
5. Whether in the facts and circumstances of the case the DRP is justified in law in rejecting the TPO’s analysis without going into the agreements the assessee has entered into with its AE being the final fact finding authority.
6. Whether in the facts and circumstances of the case the DRP is justified in law in rejecting the use of FOB in the cost base when it is the relevant cost base for determining the ALP of the international transaction of the assessee with its AEs.
7. Whether in the facts and circumstances of the case the DRP is justified in law in restoring the matter to the file of the TPO by already deciding that berry ratio be applied.
Whether in the facts and circumstances of the case the DRP is justified in law in directing acceptance of a PLI that does not include cost of goods among expenses, when all the functions performed, assets utilized and risk undertaken were in that context only.
Whether in the facts and circumstances of the case the DRP is justified in applying the ratio of the Delhi High Court’s decision in the case of Li and Fung India Pvt. Ltd. Vs. CIT to the facts of this case when the assessee is a sogo sosha company and Li & Fung is not.
Whether in the facts and circumstances of the case the DRP is justified in accepting the functional analysis of the assessee when the assessee had not submitted the information regarding its agreements to the TPO.
That the order of the Ld. DRP is erroneous and is not tenable on facts and in law? 12. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.?
3. At the very outset the DR stated that the quarrel is now well settled by the Advance Pricing Agreement u/s.92CC of the Act dated 06.03.2017 with supplementary unilateral advance pricing agreement dated 23.07.2018 between the CBDT and the assessee. The counsel fairly conceded to this.
We have carefully perused the APA u/s. 92 CC of the Act dated 06.03.2017. The term of the agreement, the covered transactions and the ALP have been agreed as under :-
“The term of the Agreement The Agreement shall remain in force for consecutive five years from Previous Year 2013-14 to Previous Year 2017-18, (relevant to Assessment Years 2014- 15 to 2018-19){hereinafter referred to as “APA Years”}. The Agreement shall also apply to four rollback years i.e., previous Years2009-10, 2010-11, 2011-12 and 2012-13 (relevant to Assessment Years 2010-11, 2011-12, 2012-13 and 2013-14) [herein after referred to as “"Rollback Years”}. 3. Covered Transactions
The international transactions between Marubeni India Private Limited and Marubeni Corporation, Japan, as described in Appendix I(a) shall be the covered transactions for the Agreement and this Agreement shall apply to these international transactions.
4. Functions, Assets and Risks The functions performed, assets employed and risks undertaken (hereinafter referred to as ''FAR1') by the Applicant, and MCJ, for the covered transactions shall be as given in Appendix 1(d).
5. Most Appropriate Transfer Pricing Method The most Appropriate Transfer Method for the covered transactions shall be as described in Appendix I(b).
6. Arm’s Length Price
Arm’s Length Price (hereinafter referred to as "ALP") of the covered transactions shall be determined as in Appendix I(c) for each Previous Year of APA Years and Rollback Years”.
And the details of covered transactions and the AE is as under :- 1. MIPL's provision of Support and Business Facilitation services to MCJ, involving commission income, fixed service fee (“Indent Transaction”) 2. Buy-sell transactions of goods between MCJ and MIPL (“Principal Transaction”) 3. Cost allocation for IT/Software and other related services availed from MCJ to MIPL 4. Other miscellaneous transactions including reimbursement of Expenses between MCJ and MIPL
Since the year under consideration is covered by the rule back year as mentioned above, we deem it fit to restore the entire appeal to the files of the AO. The AO is directed to decide the issues afresh as per the Advance Pricing Agreement u/s. 92CC of the Act after giving a reasonable opportunity of being heard to the assessee.
In the result, the appeal filed by the revenue is treated as allowed for statistical purpose. The order is pronounced in the open court on 16.10.2019.