Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
Date of Hearing – 21.08.2019 Date of Order – 30.08.2019
O R D E R PER SAKTIJIT DEY. J.M.
Captioned appeal by the assessee is directed against final assessment order dated 21st January 2014, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2009–10 in pursuance to the directions of the Dispute Resolution Panel–1, Mumbai, (for short “the DRP”).
2 Alan dick & Co. India Pvt. Ltd.
The grounds raised by the assessee are against the addition made on account of transfer pricing adjustment of ` 2,60,72,599.
Brief facts are, the assessee company is engaged in the business of manufacturing telecom and broadcasting equipments and providing infrastructure solutions in the field of telecommunication. For the assessment year under dispute, the assessee filed its return of income on 29th September 2009, declaring total income of ` 6,04,46,552. In the course of assessment proceedings, the Assessing Officer noticing that during the year the assessee has entered into various international transactions with its Associated Enterprises (AE) made a reference to the Transfer Pricing Officer for determining the arm’s length price. After calling for and examining various information and documents, the Transfer Pricing Officer ultimately rejected assessee’s claim that transactions with the AE are at arm's length. After rejecting the claim of the assessee, the Transfer Pricing Officer proceeded to determine the arm’s length price of the international transactions independently by applying Transactional Net Margin Method (TNMM) as the most appropriate method and selected three fresh comparables with arithmetic mean of 22.70%. Applying the arithmetic mean of the comparables to the operating cost, the Transfer Pricing Officer worked out adjustment of ` 7,12,57,027. On the basis of adjustment proposed
3 Alan dick & Co. India Pvt. Ltd. by the Transfer Pricing Officer, the Assessing Officer framed the draft assessment order incorporating the adjustment proposed by the Assessing Officer. Against the draft assessment order so passed, the assessee filed objections before learned DRP.
After considering the submissions of the assessee in the context of facts and material on record, learned DRP granted partial relied to the assessee by directing the Assessing Officer/Transfer Pricing Officer to work out the adjustment on the international transaction relating to sales of finished goods only with AE and not at entity level. In view of such direction of learned DRP, the adjustment was reduced to ` 2,60,72,599. On the basis of directions of learned DRP, the Assessing Officer passed the impugned assessment order.
The learned Authorised Representative submitted, the Transfer Pricing Officer during the course of proceedings did not provide proper opportunity to object to the comparables proposed by him. She submitted, he also did not consider the internal comparables submitted before him for computing the arm’s length price. She submitted, external TNMM was applied as most appropriate method without providing proper opportunity to the assessee. She submitted, due to lack of proper representation, various aspects relating to the transfer pricing adjustment could not be brought to the notice of the 4 Alan dick & Co. India Pvt. Ltd.
Transfer Pricing Officer, as a result, non–comparables were treated as comparables. She submitted, before learned DRP, though the assessee furnished evidences to support its claim that the method adopted and comparables selected by the Transfer Pricing Officer are not proper, however, learned DRP without considering the additional evidences filed by the assessee on technical reason proceeded to sustain a part of the addition. Therefore, she submitted, the assessee may be provided an opportunity to prove its case before the Assessing Officer.
The learned Departmental Representative, though, relied upon the observations of learned DRP, however, he submitted that the assessee can be given an opportunity to justify its claim.
We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the assessee benchmarked the international transaction relating to sale of finished goods with its AE by applying internal TNMM. Whereas, the Transfer Pricing Officer has rejected internal TNMM and determined the arm’s length price by applying external TNMM with fresh set of comparables. It is the contention of the learned Authorised Representative that due to lack of proper representation, the assessee could not justify its claim of applicability of internal TNMM and non–comparability of the comparables selected by the Transfer Pricing Officer. Further, it is seen
5 Alan dick & Co. India Pvt. Ltd. from record, before learned DRP, the assessee had furnished certain additional evidences which were not admitted on the reasoning that they were not produced before the Transfer Pricing Officer. Learned DRP has also observed that the director’s report to the audited account has not been submitted. In our view, if the assessee furnishes certain evidences even at the appellate stage which may have a crucial bearing on the issue, they should not be rejected on technical ground. Therefore, considering the facts and circumstances of the case, we are inclined to restore the issue to the Assessing Officer/Transfer Pricing Officer for de novo adjudication after providing adequate opportunity of being heard to the assessee. The assessee is also directed to furnish all the evidences/material to justify applicability of internal TNMM and to demonstrate that the external comparables selected by the Transfer Pricing Officer are not comparables. The objections raised by the assessee should be properly evaluated / considered by the Assessing Officer/Transfer Pricing Officer and the issue may be decided in accordance with law. Grounds are allowed for statistical purposes.