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Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE
Before: SHRI INTURI RAMA RAO & SHRI SONJOY SARMA
ORDER
PER INTURI RAMA RAO, AM :
This is an appeal filed by the assessee directed against the final assessment order of the ld. Assistant Commissioner of Income Tax, Circle-1, Nashik (‘the Assessing Officer’) passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (‘the Act’) dated 25.01.2017 for the assessment year 2012-13.
Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing of low carbon cold rolled electrical and mild steel. The return of income for the assessment year 2012-13 was filed electronically on 30.11.2012 declaring total income of Rs.13,01,63,940/-. The appellant company also reported the following international transactions in its Form No.3CAB :- S.No. Nature of Name of the AE Amount (Rs.) Method Transaction 1 Import of Raw TK Steel Europe 3,748,726,423 Cost Plus Material AG Method (‘CPM’) TKES GmbH 1,183,269,288 2 Payment of TKAG 45,503,996 Comparable Corporate Mark Uncontrolled Fee Price (‘CUP’) Method 3 Receipt of TKES GmbH 148,579 CUP Method Commission on Sales 4 Provision of TK Steel Europe 98,717 CPM Payroll Services AG 5 Payment of TKES GmbH 1,456,347 CPM Information Technology Service Contract Fee 6 Payment of SAP TKES GmbH 15,856,046 CPM Hosting Fee 7 Reimbursement of TKES GmbH 2,843,744 CPM Common Corporate Expenses 8 Payment of TKES GmbH 885,253 CPM Microsoft License Fee 9 Purchase of Roof TK Steel Europe 18,585,535 CUP Method Sheets AG 10 Reimbursement of TK Steel Europe 1,003,760 Other Method Expenses Received AG TKES GmbH 12,268 11 Reimbursement of TKES GmbH 1,724,219 Other Method Expenses TKAG 400,302 5,020,514,417
The appellant company sought to justify the above international transactions are arm’s length price and for this purpose the assessee company submitted the TP study report wherein, the assessee company had adopted Cost Plus Method as the most appropriate method. On noticing on the above international transactions, the Assessing Officer had referred the matter to the TPO for the purpose of benchmarking the above international transactions u/s 92CA of the Act. The TPO vide order dated 28.01.2016 passed the order u/s 92CA(3) of the Act determined the arm’s length price of the above international transactions adopting TNM Method as the most appropriate method and suggested the adjustments of Rs.56,24,38,069/-. Thereafter, the Assessing Officer passed the draft assessment order dated 24.02.2016 proposing the TP adjustment of Rs.56,24,38,069/-.
On receipt of the draft assessment order, the objections were filed before the Hon’ble DRP stating that the Assessing Officer/TPO ought not to have rejected the Cost Plus Method selected by the assessee company as the most appropriate method for the purpose of benchmarking the international transactions relating to purchase of raw material and this method had been Department since the year 2002-03 and also objected the comparables selected by the TPO on the ground of functionality differences. However, the DRP had confirmed the action of the Assessing Officer/TPO. 5. On receipt of the direction from the DRP, the final assessment order was passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) of the Act vide order dated 25.01.2017 wherein, the arm’s length price adjustment of Rs.54,50,10,490/- was made. 6. Being aggrieved, the appellant is in appeal before us. 7. At the outset, ld. Counsel for the assessee submitted that in the last preceding 10 years as well as subsequent years, the Department had accepted the Cost Plus Method as the most appropriate method for the purpose of benchmarking the international transactions and, therefore, in absence of change in the facts from the preceding assessment years, on the principle of consistency, the Cost Plus Method should have been accepted by the lower authorities. He also placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of PCIT vs. Vishay Components India (P.) Ltd., 103 taxmann.com 421 wherein, it was held by the Hon’ble Jurisdictional High Court that in the absence of change of facts when the Revenue had accepted the TNM Method as the most appropriate method for the purpose of benchmarking the international transactions, there is no reason for the Revenue for justifying change of method for the purpose of benchmarking the international transactions.
On the other hand, ld. CIT-DR has no serious objection to remand the matter to the file of the Assessing Officer/TPO for benchmarking the international transactions adopting the Cost Plus Method as the most appropriate method.
We heard the rival submissions and perused the material on record. The appellant raised the preliminary issue which goes to the root of the matter that the lower authorities are not justified in rejecting the Cost Plus Method as the most appropriate method for purpose of benchmarking the international transactions relating to purchase of raw material and Cost Plus Method which had been accepted by the Department since the year 2002-03 as well as in the subsequent year i.e. A.Y. 2013-14. Undisputedly, there was no change of facts from the preceding assessment year and the subsequent assessment year. Therefore, the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Vishay Components India (P.) Ltd. (supra) wherein, it was held that when a particular method is accepted by the Department to determine the arm’s length price of international transactions in the absence of change of facts, the Department should benchmark the international transactions adopting the same method as most appropriate method. Therefore, in the present case also, it is not the case of the Department that there is difference in facts warranting a different view in the current assessment year regarding the selection of the most appropriate method for the purpose of benchmarking the international transactions. Therefore, in the circumstances, we are of the considered opinion that the Assessing Officer/TPO/DRP was not justified in rejecting the Cost Plus Method adopted by the assessee for the purpose of benchmarking the international transactions in the absence of difference in the facts of the case. Therefore, we remand the matter to the file of the Assessing Officer/TPO with a direction to compute the arm’s length price of the international transactions by adopting the Cost Plus Method as the most appropriate method de novo after affording due opportunity of being heard to the assessee company. Thus, the