Income Tax Appellate Tribunal - Mumbai
Dresser Rand India P.Ltd, Mumbai vs Addl Cit Rg 6(2), Mumbai on 9 November, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER
ITA No.7723/Mum./2012
(Assessment Year : 2008-09)
Dresser-Rand India Private Limited
Lotus Business Park, 11th Floor
Veera Desai Road
Off. Andheri-Link Road ................ Appellant
Opp.Fun-Republic
Andheri(W), Mumbai-400 053
PAN - AACD9897P
v/s
Addl.CIT, Range-6(2)
Room No.512, 5th Floor
Aaykar Bhawan ................ Respondent
M.K.Road, Mumbai-400 020
ITA No.1127/Mum./2014
(Assessment Year : 2009-10)
Dresser-Rand India Private Limited
Lotus Business Park, 11th Floor
Veera Desai Road
Off. Andheri-Link Road ................ Appellant
Opp.Fun-Republic
Andheri(W), Mumbai-400 053
PAN - AACD9897P
v/s
DCIT,Circle-6(2)
Room No.504, 5th Floor
Aaykar Bhawan ................ Respondent
M.K.Road, Mumbai-400 020
2
Dressers-Rand India Private Limited
ITA No.1068//Mum./2014
(Assessment Year : 2009-10)
DCIT,Circle-6(2)
Room No.504, 5th Floor
Aaykar Bhawan ................ Appellant
M.K.Road, Mumbai-400 020
v/s
Dresser-Rand India Private Limited
Lotus Business Park, 11th Floor
Veera Desai Road
Off. Andheri-Link Road ................ Respondent
Opp.Fun-Republic
Andheri(W), Mumbai-400 053
PAN - AACD9897P
Revenue by : Shri Kanhiya Lal Kanak, DR
Assessee by : Shri Nitesh Joshi, AR
Date of Hearing - 21.10.2020 Date of Order - 09.11.2020
ORDER
PER SAKTIJIT DEY. J.M. Captioned appeals arise out of final assessment orders passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short 'the Act') in pursuance to directions of learned Dispute Resolution Panel (DRP)-1, Mumbai. While appeal for Assessment Year 2008-09 is by the assessee alone, there are cross appeals for Assessment Year 2009-10.
ITA no.7723/Mum./2012 (Assessee's Appeal for Assessment Year 2008-09) 3 Dressers-Rand India Private Limited
2. In ground No.1 to 4, the assessee has challenged additions made of Rs.4,44,07,733/- on account of transfer pricing adjustment on cost contribution charges paid to the overseas Associated Enterprises (AEs).
4. Briefly stated, the assessee, a resident company, is engaged in the business of manufacturing of various types of process gas compressors including reciprocating compressors. As stated by the Assessing Officer, the assessee also supplies parts and provide services to the oil and gas sectors where its compressors are used. The assessee had entered into a cost contribution agreement with its AE Dressers-Rand Group Inc. USA under which certain services were rendered to the assessee. Towards rendering of such services, the assessee paid an amount of Rs.4,44,07,733/- during the year to the AE. The Transfer Pricing Officer (TPO) while examining the arm's length nature of such transaction ultimately concluded that the arm's length price (ALP) of such transaction has to be determined as ''Nil''. Accordingly, he made adjustment of the entire amount of Rs.4,44,07,733/-. The learned DRP after considering the submissions of the assessee allowed 50% of the amount paid. In other words, learned DRP determined the ALP of the cost contribution charges paid to AE at Rs.2,22,03,867. Before us, Shri Nitesh Joshi, learned Counsel for the assessee submitted that for settling the dispute relating to this issue, the assessee had applied for Mutual Agreement Procedure (MAP). He submitted, ultimately this dispute has been resolved under MAP by determining the ALP at Rs.3,33,05,800/-, thereby, proposing an adjustment of Rs.1,11,01,933/-. Thus, he submitted, in view of the agreement reached under MAP proceeding, the assessee has withdrawn ground No.1 to 4. The learned Departmental Representative agreed with the aforesaid submissions of the assessee. In view of the submissions made by the learned counsels appearing for the parties, we dismiss grounds No.1 to 4 as not pressed.
4Dressers-Rand India Private Limited
5. In ground No.5 and 6, the assessee has challenged the addition made of Rs. 3,47,360/- on account of transfer pricing adjustment to the payment made towards field supervision services.
6. Briefly stated, during the year under consideration, the assessee had rendered certain services to its AE termed as field services and received an amount of Rs.58,07,858/- after providing discount @15%. The TPO, while determining the ALP of such services rendered to AE held that the discount allowed is not at arm's length and accordingly made adjustment of Rs.3,47,360/-. The learned DRP also upheld the adjustment made by the TPO.
7. The learned counsel for the assessee submitted, the amount received towards field services includes an amount of Rs.23,74,162/- received from the AE in USA. He submitted, the ALP of the said transaction was determined at Rs.25,16,157/-. He submitted, the assessee has invoked MAP procedure in respect of the transactions with USA, AE and ultimately an adjustment of Rs.1,41,995/- has been proposed under MAP. The learned counsel further submitted, since the transactions with the USA, AE is under MAP, the assessee would not contest the adjustment made to that extent. However, he submitted, insofar as balance amount of Rs.2,05,365/- is concerned, the issue is squarely covered by the decision of the Tribunal in assessee's own case in AY 2006-07. In this context he drew our attention to the relevant observations of the Tribunal. The learned Departmental Representative relied upon by the observations of the TPO and learned DRP.
8. Having considered rival submissions, we find, while considering identical issue in assessee's own case in Assessment Year 2006-07, the 5 Dressers-Rand India Private Limited Tribunal in ITA No. 8753/Mum/2010, dated 07/09/2011 has accepted the price charged by the assessee to the AEs towards provision of field services after allowing discount to be at arm's length. In this context, we reproduce the observations of the Tribunal hereunder:-
11. The next adjustment of Rs 4,70,000, on the ground that the assessee ought not to have allowed discount of 10% to AEs, is also equally devoid of any merits.
We have noted that the assessee has followed the TNMM for determination of ALP and the Assessing Officer has not even disputed TNMM being most appropriate method on the facts of this case. The question of applying CUP, even if that be so, can only arise when TNMM is rejected. Even under CUP method, it is not necessary that all sales must take at the same price. There can always be variations of prices for the same product or services on valid grounds, such as quantum of business, risk factors, marketing efforts needed etc. When assessee is dealing with an AE, at least there are no commercial risks, no marketing costs and there could be several other factors as well justifying a normal discount as the assessee could indeed go to many important customers. It hardly needs to be emphasized that even in independent business situations granting discount is a normal occurrence, and unless the Assessing Officer demonstrates that the discount so allowed would not have been allowed in an arm's length situation, ALP adjustment cannot be made in respect of the same. We are alive to the fact that the discount is allowed by the virtue of status as associated enterprise, but that is not a material factor; in our considered view, the material factor is whether such a discount of 10% is an arm's length discount i.e. a discount which is given even in a situation in which an enterprise is dealing with independent enterprise. There is nothing on record ITA No.8753/Mum/2010 Assessment year: 2006-07 to even suggest that such a discount is not an arm's length discount, or that discounts have not been allowed under any other situations. In view of these discussions, and bearing in mind entirety of the case, we delete the impugned disallowance of Rs 4,70,000 as well.
9. Facts being identical, respectfully following the aforesaid decision of the co-ordinate bench, we delete the addition of Rs.2,05,365/-, which is not covered under the MAP proceedings. These grounds are partly allowed.
10. In ground No.7, the assessee has challenged disallowance of cost contribution charges u/s 37(1), section 40A(2)(b) and section 40A(i) of the Act.
11. Briefly stated, though, the amount in dispute in the aforesaid ground was added to the income of the assessee on account of transfer pricing 6 Dressers-Rand India Private Limited adjustment, however, the Assessing Officer made alternative disallowances of the amount under the aforesaid provisions. At the time of hearing, the learned counsel for the assesse submitted, since, in the final assessment order no such disallowance was made by the Assessing Officer and in the order giving effect to the MAP proceedings, the Assessing Officer has allowed deduction of Rs.3,33,05,800/-, the assessee practically has no grievance.
12. Considering the fact that no separate disallowance on the issues raised in the present ground has been made by the Assessing Officer, the ground raised by the assessee has become redundant, hence dismissed.
13. In ground No.8, the assessee has challenged the addition of Rs. 22,36,615/- on account of adjustment of unutilized CENVAT credit to closing stock by invoking the provision of Section 145A of the Act.
14. The learned counsel for the assessee submitted, identical issue arising in assessee's own case in preceding assessment years has been restored to the Assessing Officer. He submitted, similar view may be taken in the impugned assessment year as well.
15. The learned Departmental Representative agreed with the aforesaid submissions of the assessee.
16. Having considered rival submissions, we find that while deciding identical issue in assessee's own case in AY 2007-08 in ITA No. 5412 and 5435/Mum/2014, dated 10/08/2020, the Tribunal has restored the issue to the Assessing Officer observing as under:-
5.4 As rightly pointed out by Ld. AR, we find that Tribunal in assessee's own case for AY 2006-07, ITA No.8753/Mum/2010 order dated 07/09/2011 followed its earlier order for AY 2001-02 dated 07/02/2008 and vide para 20, remitted the matter back to the file of Ld. AO for redoing the computation in accordance with order for AY 2001-02. Facts being pari-materia the same, we restore the matter back to the file of Ld. AO on similar lines to redo the computations in accordance 7 Dressers-Rand India Private Limited with earlier years as per the directions of the Tribunal. Resultantly, this ground stand allowed for statistical purposes.
17. Facts being identical, respectfully following the aforesaid decision of the Tribunal, we restored the issue to the Assessing Officer with similar direction. This ground is allowed for statistical purpose.
18. In ground No. 9, the assessee has challenged additions of Rs.42,383/- made on the basis of Annual Information Return (AIR).
19. During the assessment proceedings, the Assessing Officer on the basis of information available on record found that the assessee has not offered income to the extent of Rs.42,383/-, details of which are as under:-
Sr. Name of the Party Amount as per Amount as per Difference No. AIR (Rs.) books (Rs.) (Rs.) 1 Century Textiles 8,652 Nil 8,652 & Industries Ltd.
2 Uttar Gujarat Vij 30,120 Nil 30,120 Company Ltd.
3 Eastern 54,212 51,050 3,162 Electrolysers Ltd.4 Hindustan 2,35,654 2,35,564 449
Petroleum Corp.Ltd.
Total 42,383
20. Alleging that the assessee has failed to reconcile the difference in income offered as per books of account and income received by the assessee as per AIR information, the Assessing Officer added back the amount of Rs.42,383/-. Learned DRP also sustained the addition.
21. The learned counsel for the assessee drawing our attention to the reconciliation statements and other details placed in the paper book submitted, during the year under consideration, the assessee had 8 Dressers-Rand India Private Limited absolutely no dealing with Century Textiles and Industries Limited and Uttar Gujarat Vij Company Ltd. As regards Eastern Electrolysers Ltd, learned counsel for the assesee submitted, the assessee has raised invoices of Rs. 51,050/- during the year. Therefore, he submitted, the assessee having properly reconciled the difference with supporting evidence, no addition should have been made. As regards, Hindustan Petroleum Corporation Ltd., the learned counsel submitted, the assessee is unable to reconcile the difference.
22. The learned Departmental Representative submitted, since, the Assessing Officer received specific information showing non disclosure of income by the assessee and the assessee failed to reconcile the same, addition made was justified.
23. We have considered rival submissions and perused material on record. As could be seen from the facts on record, the disputed addition is on account of difference in income shown as per books of account and income received as per AIR information. However, it is the specific case of the assesee that during the year under consideration, it had no dealings with Century textiles and Industries Pvt.Ltd. and Uttar Gujarat Vij Company Ltd. On perusal of facts on record, we find that aforesaid claim of the assessee has not at all been enquired into by the Assessing Officer by making enquiry with the concerned parties. Further, assessee's contention that during the year under consideration invoices of Rs.51,050/- was raised on Eastern Electrolysers Ltd. has not at all been enquired into by the Assessing Officer. When the assessee has furnished evidence to reconcile the difference and claims that there is no such income was earned by it, the Assessing Officer was duty bound to make proper enquiry to ascertain the correctness of assessee's claim. Without making any enquiry, the Assessing Officer cannot make the additions. More so, when the assessee has disclosed huge turnover and has also offered substantially high 9 Dressers-Rand India Private Limited income. That being the case, it cannot be expected that the assessee would not disclose such a petty amount. However, it is a fact on record that the assessee was unable to reconcile the difference of Rs.449/- on account of income received from Hindustan Petrolium Corporation Ltd. In view of the above, we sustain addition only to the extent of Rs.449/- and delete the balance amount. This ground is partly allowed.
24. In the ground No.10, the assesee has challenged part disallowance of depreciation claimed on Uninterrupted Power Supply (UPS) by treating it as plant and machinery.
25. Briefly the facts are, in the return of income filed for the year, assessee claimed depreciation at 60% on UPS by treating it as part of computer. The Assessing Officer, however, restricted the claim of depreciation to15% by treating it as plant and machinery. The learned DRP also agreed with the decision of the Assessing Officer.
26. The learned counsel for the assessee submitted, UPS being a part of computer system, without which the computer cannot work, should be allowed depreciation @60%. In support of such contention he relied upon the following decisions:-
PCIT vs Goa Tourism Development Ltd. 2019 102 Taxman.com 437 (Bom.) DCIT vs Sarswath Infotech Ltd. ITA No. 6722/Mum/12 dated 15/01/2014.
27. The learned Departmental Representative submitted, UPS cannot be considered as a part of computer as it can be used on standalone basis, since, it supplies continues power in case of power failure.
28. We have considered rival submissions and perused the material available on record. It is noticed, in the case of PCIT vs Goa Tourism Development Ltd. the Hon'ble Jurisdictional High court has held that UPS 10 Dressers-Rand India Private Limited being a part/accessory of computer is eligible for depreciation at 60%. The same view has been expressed by the Hon'ble Delhi High court in case of CIT vs Orient Ceramics and Indstries Ltd. as referred to in the decision of the Tribunal in case of DCIT vs M/s. Sarswath Infotech Ltd. (supra). In view of the ratio laid down in the judicial precedents referred to above, we allow assessee's claim of depreciation on UPS @ 60%. This ground is allowed.
29. In the result, appeal is partly allowed.
ITA no.1127/Mum./2014 (Assessee's Appeal for A.Y. 2009-10)
30. In ground no.1 to 4 are identical to ground no.1 to 4 of ITA no. 7723/Mum/2012. Following our discussions and decision therein, we dismiss these grounds as not pressed.
31. Issue raised in ground no.5 is identical to the issue raised in ground no.5 and 6 of ITA No.7723/Mum/12. Following our discussions and decision therein, we delete the addition of Rs. 10,80,065/-. The balance addition of Rs. 5,38,937/- is sustained as it is covered under MAP proceedings. This ground is partly allowed.
32. Issue raised in ground no. 6 and 7 are identical to ground no. 7 of ITA No. 7723/Mum/2012. Considering the submission of learned counsel for the assessee that the assessee has no grievance as such, as, the Assessing Officer has not made any disallowance in the final assessment order, these grounds are dismissed as not pressed.
33. In ground no. 8, assessee has challenged the addition made of Rs. 2,91,32,770/- on account of adjustment of unutilized CENVAT credit to closing stock. This ground is identical to ground no.8 of ITA No. 11 Dressers-Rand India Private Limited 7723/Mum/2012. Following our decision therein, we restore the issue to the Assessing Officer with similar direction.
34. In ground no.9 the assessee has challenged addition of Rs. 1,12,423/- on account of AIR information.
35. We have heard the parties and perused the material available on record. It is noticed, during the assessment proceedings, the assessee had furnished reconciliation statement clearly stating that during the year under consideration, the assessee had no dealing with the concerned parties. However, without making any enquiry the Assessing Officer has added back the amount. When the assessee claims that he has not entered into any transaction with the concerned parties, the least the Assessing Officer could have done is to ascertain the correctness of assessee's claim by making enquiry with the concern parties. The Assessing Officer having not done so, the addition cannot be sustained. Further, looking at the huge turnover and substantially high income declared by the assessee, it is not at all believable that the assessee would suppress such a small amount. Accordingly, we delete the addition.
36. In ground no.10, the assessee has challenged depreciation allowed at 15% on UPS by treating it as plant and machinery. This ground is identical to ground No.10 of ITA No. 7723/Mum/2012. Following our decision therein, we allowed assessee's claim of depreciation at 60%.
37. This appeal is partly allowed.
ITA no.1068/Mum./2014 (Revenue's Appeal for A.Y. 2009-10) 12 Dressers-Rand India Private Limited
38. In ground No.1, the revenue has challenged the decision of the learned DRP in determining the ALP of the cost contribution charges at 50% of the amount paid. In view of our decision in ground No.1 to 4 of ITA No. 7723/ Mum/12 and ITA No. 1127/Mum/2014, this ground has become infructuous, hence, dismissed.
39. In ground No.2, the assessee has challenged direction of learned DRP with regard to the addition made of unutilized CENVAT credit to the closing stock. This ground is identical to the ground No.8 of ITA No. 1127/Mum/2014. Since, while considering the said ground, we have restored the issue to the Assessing Officer, there is no need for separate adjudication for this ground. Accordingly, this ground is dismissed.
40. In the result, the appeal is dismissed.
41. To sum-up, assessee's appeals are partly allowed and revenue's appeal is dismissed.
Order pronounced in the open court on 09.11.2020
Sd/- Sd/-
MANOJ KUMAR AGGARWAL SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 09.11.2020
13
Dressers-Rand India Private Limited
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Kasarla Thirumalesh
Sr. Private Secretary
Assistant Registrar
ITAT, Mumbai