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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: Sri S.S. Godara & Sri M. Balaganesh]
Appearances by: Shri Vineet Jaiswal, A/R, appeared on behalf of the assessee. Shri Goulen Hangshing, CIT, DR appearing on behalf of the Revenue. Date of concluding the hearing : September 6th, 2018 Date of pronouncing the order : October 28th ,2018 ORDER Per S.S. Godara, JM :- This assessee’s appeal for the Assessment Year 2013-14 is directed against the DCIT, Circle-11(1)'s assessment order dt. 05/10/2017 making arm's length price adjustment of Rs.65,02,40,000/- regarding its international transactions with overseas associate enterprises, involving proceedings u/s 144C(13)of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties. Case file perused.
3. We notice at the outset that the assessee's sole substantive grievance challenges the correctness of arm's length price adjustment amounting to Rs.65,02,40,000/- pertaining to its international transactions of sale/resale of manufactured goods in export, payments of sales margins, services rendered etc. to its associate enterprises. It transpires during the course of hearing that this issue is very much a recurring one between the parties. A co-ordinate bench's order dt. 15/12/2017 pertaining to assessment years 2011-12 & 2012-13 in & 322/Kol/2016 & 506/Kol/2017, has restored this issue back to the TPO with the following directions:-
Assessment Year: 2013-14 Epcos India Pvt. Ltd “4. Being aggrieved by the Ld. DRP's direction, the Assessee has preferred these appeals before us for consideration of revised approach and additional evidences as submitted before the Ld. DRP (for AY 2012-13) and for A.Y 2011-12 also before us, for adjudication of the matter. The copy of submission for both assessment years were filed on 6th October, 2017. We note that the following documents have been filed as additional evidence. LIST OF ADDITIONAL EVIDENCE 1. Copy of organization structure of Sales Organizations' engaged In distribution activity 2. Sample copies of invoices raised by Sales Organisation on the appellant and other Manufacturing units pursuant to Distributorship agreement 3. Back to back listing of appellant's sales invoices with sale invoices of Sales Organisation for FY 2010-11 4. Certified copies of cost profitability statements of Sales Organisations from undertaking distribution activity of appellant's products 5. Benchmarking report to substantiate Distributorship arrangement with each of the Sales Organisations has been undertaken at arm's length 6. Copy of royalty agreement considered by the Ld. TPO in relation to exploitation of marketing and distribution rights 7. Transfer pricing order of AY 2012-13 evidencing selection of Mahindra Hinoday and MMG India Pvt. Ltd. as comparable companies for benchmarking appellant's profitability under its Ferrite segment 8. Certified copy of financial information showing profitability earned by the appellant under its Kalyani unit (Ferrite segment) 9. Framework Service Agreement of Epcos AG with other group companies 10. Individual Service Agreement in relation to IT services of Epcos AG with other group companies 11. Sample copies of invoices raised by EPCOS AG on Epcos India and other group companies for provision of IT support services 12. Benchmarking report with respect to the transaction pertaining to payment for business support services (IT support and Export support services 13. Copy of organization structure of EPCOS AG's IT division engaged in rendering of IT support services to group companies 14. List of IT users working on IT systems, SAP and other applications 15. Additional copies of mail communication along with summary of such mails showing benefits received by appellant from IT support services 16. Copy of agreements entered into between EPCOS AG and other group entities in relation to export support services 17. Sample copies of invoices raised by EPCOS AG on other group companies for provision of export support services 18. Evidences of export support services received and consequent benefits therefrom 19. Copy of annual reports of comparable companies (along with details of margin computation) selected for benchmarking the transaction of sales
Assessment Year: 2013-14 Epcos India Pvt. Ltd 20. Comparable price details for benchmarking the unit price of ferrite sold by assessee to AEs for consumption purposes along with copies of third party price quotation 21. English translated copies of IT agreement entered into by EPCOS AG with third party vendors 22. Organization structure of Epcos AG PM team rendering Export support services to group companies 23. Sample copies of debit notes raised by third party vendors on EPCOS AG 24. Details of IT helpdesk tickets raised and resolved during the year FY 10-11 25. Month-wise details of sales margin as paid by assessee to each of the Sales Organizsations 26. Distributorship agreement between EPCOS India and EPCOS Sumperk 27. Cost auditor certificate showing details of capacity utilization and details of contribution earned by EPCOS, Kalyani unit from sale of ferrite for consumption to AEs for AY 11-12 and AY 12-13.
According to assessee, it has appointed the new law firm when the appeal was preferred before the Tribunal for A.Y 2011-12. The New Law firm after analysis of the original T. P study has advised the assessee to adopt transaction by transaction method, in place of entity level bench marking approach. According to the assessee, it should not be penalized for the error/mistake which occurred in the first place, because of wrong legal advice of erstwhile attorneys. We note that the Hon'ble Supreme Court in N. Balakrishnan Vs. M. Krishnamurthy (1998) 7 SCC 123 wherein a similar case where there was a delay of 883 days because of the mis-handling the case by the Advocate of the petitioner, the Hon'ble Supreme Court condoned the delay taking note that the petitioner cannot be faulted due to the latches of the lawyer. Similarly, for substantial justice, the assessee should not suffer because of earlier legal advice which the assessee realizes to be wrong and ready to correct. Therefore, in the interest of justice and fair play, the transfer pricing adjustment ordered by the TPO is set aside with a direction to re-adjudicate only on the issue on which the TPO has found the assessee's transaction not at arms' length, which is to be done afresh after taking into consideration, the aforesaid documents filed before us for A.Y 2011-12 and DRP for AY 2012-13 and after hearing the assessee.”
Learned counsel vehemently contends during the course of hearing that facts are altogether different in the impugned assessment year since the assessee has not filed any additional evidence herein. We find no merit in assessee’s instant plea. The fact remains that the TPO is already seized of the very issue is earlier assessment years 2011-12 & 2012-13. This consequential adjudication would indeed carry all ramifications in the impugned assessment year as well. We adopt judicial consistency in these peculiar facts and circumstances to restore the impugned ALP adjustment issue back to the TPO for his simultaneous adjudication in all these assessment years. The Revenue's argument strongly supporting the impugned adjustment are rejected to this limited extent at this stage.
Assessment Year: 2013-14 Epcos India Pvt. Ltd 4. This assessee's appeal is allowed for statistical purposes.
Kolkata, the 28th day of October, 2018.