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Income Tax Appellate Tribunal, BANGALORE BENCH “B”, BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI A.K. GARODIA
O R D E R PER A. K. GARODIA, AM.
This appeal is filed by the revenue and the C.O. is filed by the assessee and these are directed against the order dated 19.11.2013 for A. Y.
2009 – 10 passed by DRP u/s 144C (5) r.w.s. 144C (8) of the I T Act 1961. (B)/15 & CO No.15(B)/16
The grounds raised
by the revenue are as under:- “1.The directions of DRP is opposed to law and facts of the case. 2.The DRP erred in giving direction to the AO to give relief to assessee on the issue of treating the royalty paid by the assessee as Transfer Pricing Adjustment u/s 92CA.
3. For these and such other grounds that may be urged at the time of hearing.”
The grounds raised by the assessee in the C.O. are as under:-
“1. The order of the ld. DRP, Bangalore to the extent prejudicial to the respondent is bad in law.
2. The DRP, Bangalore ha erred in confirming the action of the AO in making a reference to the TPO for determining the arm’s length price without demonstrating as to how or why it was necessary and expedient to do so.
3. The DRP, Bangalore gas erred in confirming the action of the AO and TPO in a. Passing the order without demonstrating that he respondent had motive of tax evasion. b. Not appreciating that the charging or computation provision relating to income under the head “Profits & Gains of Business or Profession” do not refer to or include the amounts computed under Chapter X and therefore the addition made under Chapter X is bad in law; and c Not appreciating that the provisions of sec.40A(2) override the provisions of Chapter X and there being no action under section 40A(2) for royalty payment, no adjustment under Chapter X can be made. Grounds relating to Segmentation 4. The DRP, Bangalore has erred in confirming the action of the AO and TPO in (B)/15 & CO No.15(B)/16
a. Concluding that the trading and manufacturing segment of the respondent are distinct without any substantiation and supporting material and without appreciating that both the segments are interwined and inter-related warranting a “Combined Transaction Approach” in arriving at the arm’s length price. b. Not appreciating that the respondent had adopted the TNMM at the entity level, in which process, the royalty payment was considered as closely linked transaction and hence was submitted into the expenditure and accordingly already considered; c. Not substantiating how the royalty payment was singled out of the many transactions for determination of the arm’s length principle; d. Not appreciating that once the net profit margin is tested on the touchstone of arms length price, it presupposes that the various components of income and expenditure considered in the process of arriving at the net profit are also at arm’s length. e. Comparing prices after completing the analysis of comparing margins, which process is unacceptable in law.
Learned DR of the revenue submitted that similar issue in assessee’s own case was decided by the tribunal in A.Y. 2008 – 09 in IT (TP)A No. 1595/(Bang)/2012 dated 14.08.2014, copy on pages 1008 to 1029 of the paper book and in particular, our attention was drawn to page 1026 of the paper book and it was pointed out that in that year, this issue was restored back to AO/TPO for a fresh decision. HE submitted that in the present year also, the issue in dispute may be restored to AO/TPO for a fresh decision with similar directions. Learned AR of the assessee could not point out any difference in facts in the present year and therefore, we find no reason to take a contrary view. Hence, by respectfully following the tribunal order in (B)/15 & CO No.15(B)/16 assessee’s own case in A. Y. 2008 -09, we restore this matter back to the file of AO/TPO for fresh decision with same directions as were given by the tribunal in A. Y. 2008 – 09. Regarding C.O. of the assessee, it was fairly conceded by the learned AR of the assessee that if the dispute raised in the appeal of the revenue is restored to AO/TPO with the same directions as were given by the tribunal in A. Y. 2008 – 09 then the issues raised by the assessee in the C.O. will be of academic interest only and no separate adjudication is called for at the present stage. We hold accordingly.
In the result, the appeal of the revenue is allowed for statistical purposes and C.O. of the assessee is dismissed.
(Order was pronounced in the open court on the date mentioned on the caption page)