Income Tax Appellate Tribunal - Mumbai
Lanxess India P.Ltd, Thane vs Dcit Cir 1, Thane on 10 February, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "K" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
AND
SHRI KAVITHA RAJAGOPAL (JUDICIAL MEMBER)
ITA No. 1035/MUM/2016
Assessment Year: 2011-12
Lanxess India Pvt. Ltd., Dy. CIT, Circle-1,
Lanxess House, Plot NO. Room No. 22, 6th floor, B
A/162-164, Road No. 27, Vs. Wing Asher IT Park, Road,
Wagle Estate, Opp. ITI College, 16-Z, Wagle Industrial
MIDC, Thane (West)-400 604. Estate, Thane (West)-400604.
PAN No. AACCB 3880 A
Appellant Respondent
ITA No. 1697/MUM/2016
Assessment Year: 2011-12
Dy. CIT, Circle-1, Lanxess India Pvt. Ltd.,
Room No. 22, 6th floor, B Wing Lanxess House, Plot NO.
Asher IT Park, Road, 16-Z, Vs. A/162-164, Road No. 27,
Wagle Industrial Estate, Thane Wagle Estate, Opp. ITI
(West)-400604. College, MIDC, Thane (West)-
400 604.
PAN No. AACCB 3880 A
Appellant Respondent
CO No. 89/MUM/2016
(Arising in ITA No. 1697/MUM/2016)
Assessment Year: 2011-12
Lanxess India Pvt. Ltd., Dy. CIT, Circle-1,
Lanxess House, Plot NO. Room No. 22, 6th floor, B
A/162-164, Road No. 27, Vs. Wing Asher IT Park, Road,
Wagle Estate, Opp. ITI College, 16-Z, Wagle Industrial
MIDC, Thane (West)-400 604. Estate, Thane (West)-400604.
PAN No. AACCB 3880 A
Lanxess India Pvt. Ltd. 2
ITA Nos. 1035 & 1697/M/2016 & CO No.
89/M/2016 AY 2011-12
Appellant Respondent
Assessee by : Shri Dhanesh Bafna/Chandni
Shah/Riddhi Maru
Revenue by : Ms. Samruddhi Hande, DR
Date of Hearing
He aring : 01/02/2023
Date of pronouncement
pronounce ment : 10/02/2023
ORDER
PER OM PRAKASH KANT, AM
appeals by the assessee and Revenue and cross-
These cross-appeals cross objection by the assessee are directed against final assessment order dated 28.01.2016 passed by the Ld. Dy. Commissioner of 1, Thane (in short 'the Assessing Officer') for Income-tax, Circle-1, assessment ment year 2011-12, 2011 12, pursuant to the order of Ld. Dispute Resolution Panel-1, 1, Mumbai (in short 'the DRP').
2. The grounds raised by the assessee are reproduced as under:
1. On the facts and circumstances of the case and in law, the learned Dy. Commissioner of Income Tax, Circle - 1, Thane ('the AO') / Jt. Commissioner of Income Tax, Transfer Pricing Officer - 2(3), Mumbai (the TPO') erred in making an adjustment to the arm's length price of the international transaction of export of finished goods under Manufacturing Manu segment D using Internal TMM and thereby in computing Rs.2,77.11,082/ in respect of transfer pricing adjustment of Rs.2,77.11,082/-
14,96,781/ in respect of Jhagadia Nagda Plant and Rs. 14,96,781/-
Plant.
Lanxess India Pvt. Ltd. 3 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 It is prayed that the learned AO/TO be directed to consider the international rnational transaction of the Assessee as arm's length and accordingly the transfer pricing adjustment of Rs.292,07.863/ should be deleted. Rs.292,07.863/-
The Appellant prays that the aforesaid additions be deleted.
2. On the facts and circumstances of the case and in law, la the AO erred in granting short credit for Advance Tax (Rs. 1,50,00,000/ and TDS (Rs. 44,881/-). 1,50,00,000/-) The Appellant prays that the credit for Advance Tax and TDS be granted.
3. On the facts and in the circumstances of the case and in law and in law, the AO erred in not giving effect to the rectification application letter dt. April 6, 2015 with respect to Ground no. 2 while passing the order under section 143(3) r.w.s. 144C(13) of the Act.
2.1 The grounds raised by the Revenue are reproduced as under:
ether on the facts and in the circumstances of the 1.1 Whether case, and in law, the DRP was justifed in directing the Assessing Officer to include MIs. Microgenetic Microgeneticss Systems Pvt Health care business services Put. Ltd as Ltd & Mis. e4e Health comparables despite the fact that that 'medical transcription' and 'health care outsourcing' activities cannot be functionally comparable with the activity of providing technical support (IT) services for the purpose of installation & implementation of the Axapta ERP licenses software.
ether on the facts and in the circumstances of the 1.2 Whether case, and in lay, the DRP was justified in directing the Assessing Officer to include M/s. Jindal Intellicom Pvt. Ltd. As comparables despite the fact that 'call centre services"
functionally comparable with the activity of activity cannot be functionally providing technical support (IT) services for the purpose of installation & implementation of the Axapta ERP licenses software.
1.3 Whether on the facts and in the circumstances of the case, and in law, the DR was justified in directing the Lanxess India Pvt. Ltd. 4 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 Assessing Officer to include MIs. Jindal Intellicom Pvt. Ltd. as comparable despite the fact that there was substantial expansion of the capacity o off said comparable during the relevant year, which has direct impact on the profitability of the said comparable company during the relevant period.
2. Whether on the facts and in the circumstances of the case, and in law, the DRP erred in not confirming addition addition of Rs.
97,50,004/- in respect of unexplained differences in the credit balances of two purchase parties despite the fact that the assessee failed to explain even after repeated opportunities during the assessment proceedings. In fact the assessee could could not explain the differences even during proceedings before the DR (para 4.1 on page 16 of order of DRP.
3. The directions of the DR may be vacated and that of the Assessing Officer may be restored.
2.2 The grounds raised in the cross objection are reproduced cross-objection repr as under:
"1. On the facts and circumstances of the case, and in law, the Hon'ble DRP / Ld. AO erred in retaining Accentia Technologies Limited as comparable company in its comparability analysis which is functionally dissimilar to the cross-objecto objector / respondent.
It is therefore prayed that Accentia Technologies Limited ought to be excluded from the final set of comparable companies since it is functionally not comparable to the cross-objector objector / respondent.
case, and in law,
2. On the facts and circumstances of the case, the Hon'ble DRP / Ld. AO erred in retaining Acropetal Technologies Limited (IT segment) as comparable company in its comparability analysis which is functionally dissimilar to the cross-objector objector / respondent.
Acropetal Technologies Limited (IT It is therefore prayed that Acropetal segment) ought to be excluded from the final set of Lanxess India Pvt. Ltd. 5 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 comparable companies since it is functionally not comparable to the cross-objector objector / respondent."
respondent.
3. Briefly stated, facts of the case are that the assessee-company assessee is a subsidiary GmbH. During the year ubsidiary of Lanxess Deutschland GmbH under consideration, the assessee-company company was engaged in the business of manufacturing and trading of chemical and chemical intermediaries, through three plants located at Nagada (Madhya Pradesh), Jhagadia adia (Gujarat) and Madurai (Tamil Nadu). The assessee filed return of income on 28.11.2011 which was revised at loss of (-)) Rs.116,34,73,438/-
Rs.116,34,73,438/ on 13.09.2012. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax tax Act, 1961 (in short 'the Act') were issued and complied with. In view of various international transactions reported by the assessee, the matter of determination of arm's length price of those international transactions, was referred to the d. Transfer Pricing Officer (TPO). The Ld. TPO vide his order dated Ld. 27.01.2015 in terms of section 92CA(3) of the Act Act, proposed transfer pricing adjustment to manufacturing segment and technical support service. Under manufacturing segment, the Ld. TPO computed adjustment for Nagada plant at Rs.2,77,11,082/-
Rs.2,77,11,082/ Rs.14,96,781/-.. In this manner, total and for Jhagadia Plant at Rs.14,96,781/ adjustment to manufacturing segment was worked out at Rs.2,92,07,863/-.. The adjustment to technical support services was .1,22,69,002/-.. In this manner, the Ld. TPO proposed at Rs.1,22,69,002/ proposed total adjustment of Rs.4,14,76,865/ Rs.4,14,76,865/-.. In the Draft Lanxess India Pvt. Ltd. 6 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 Assessment Order passed on 24.03.2015, the Assessing Officer proposed the transfer pricing adj adjustment ustment computed by the Ld. TPO ion of Rs.97,50,004/-
and also proposed an addition Rs.97,50,004/ for being difference in amount of the creditors appearing in the ledger account of the assessee and ledger account of the two parties namely 'Trans Trans Tech Turnkey Pvt. Ltd.' Ray Engineering Pvt.
Ltd. and 'Ray Ltd.' Against the draft assessment o order, rder, the assessee filed objection before the Ld. DRP. The Ld. DRP after considering the submission of the assessee, on the issue of adjustment to manufacturing segment followed finding of the Ld. DRP for immediately preceding 2010-11. In respect of adjustment to technical assessment year i.e. 2010 support service, the Ld. DRP admitted additional evidence under Income tax Rules, 1962 (in short 'the Rules') and Rule 46 of the Income-tax after considering report from AO/TPO, accepted three comparables Systems Ltd., E4e Healthcare Business namely Microgenetics Systems Services Pvt. Ltd. and Jindal Intellicom Pvt. Ltd. The Ld. DRP also accepted inclusion of the certain comparables by the Ld. TPO including Accentia Technologies Ltd. and Acropetal Technologies Ltd. The Ld. DRP deleted th the e addition for difference in credit companies. Pursuant to the direction of the Ld. DRP balance of two companies.
dated 15.12.2015, the Ld. Assessing Officer passed impugned assessment order, wherein he upheld the transfer pricing adjustment to manufacturing segment whereas transfer pricing adjustment in respect of technical support service was deleted. The Lanxess India Pvt. Ltd. 7 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 addition in respect of discrepancy/difference in credit amount of two parties was also deleted pursuant to the direction of the Ld. DRP.
4. impugned assessment order passed by the Aggrieved with the impugned Ld. Assessing Officer, Officer the parties are before us by way of cross cross-
appeals and cross-objections.
objections.
5. Before us, the Ld. Counsel of the assessee has filed a paper book in two volumes.
6. As regard to the ground No. 1 of the the appeal of the assessee, the Ld. Counsel of the assessee submitted that issue-in-dispute issue is covered by the order of the Tribunal for assessment year 2010-11 2010 in ITA No. 971/M/2015. The Ld. DR also could not controvert this fact.
7. submission of the parties on the issue We have heard rival submission issue-in- dispute and perused the relevant material on record. Before the Ld. TPO, the assessee computed transfer pricing adjustment by way of comparing margins of segment of export sales to third parties with segment of export sales to associated enterprises enterprises, in respect of the each plant whereas the Ld. TPO compared the margin of non-AE's non segment (export as well as domestic sales sales) with the segment of export to AE's.. We find that the Ld. DRP following its predecessor uphold the Ld. TPO observing as under:
Lanxess India Pvt. Ltd. 8 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 Since there is no change in the facts of the case, "Since following the decision of the DRP in the case of the assessee for A.. 2010 - 11 objection of the assessee is hereby rejected. So far as our alternative plea of the assessee seeking range benefit prescribed under section 92C(2) of the IT Act is concerned, we are not in agreement with the working made by the assessee. The suo motto adjustments made by the assessee have been considered as part of operating income in this working which is incorrect. The TO has correctly worked out the adjustments required to be made under TNMM and after giving set off for the adjustments made by the assessee on its own, the TO has arrived at the correct amount of final adjustments. Therefore, alte rnative plea alternative of the assessee is also rejected."
rejected.
7.1 2010 11, the Tribunal (supra) We find that in assessment year 2010-11, has rejected this approach of the Ld. DRP and directed to accept comparison of margin using internal TNMM for comparison of export sales made to AE's with the export sales made to 3rd parties (non-AE's).
AE's). The relevant finding of the Tribunal (supra) is reproduced as under:
"11. We have considered the rival submissions and perused the material on record. The only grievance raised by the Appellant before DRP was that while applying internal TMM for benchmarking the international transactions of export of goods from Thane Plant, the TO had compared OP/OC from total sales to AEs (i.e. domestic sales as well as export sales) non-AEs with the OP/OC of export sales which stood at 11.90% with from Thane Plant which stood at 3.56%. It was contended on behalf of the Appellant that the segment of export to AEs should have been compared with the non AEs since the data was segment of export to non-AEs available and the margins were not disputed. Under TNMM broad similarity in FAR is acceptable since the net margins, which are tested, are more tolerant to the Lanxess India Pvt. Ltd. 9 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 differences. Contention of the Appellant before Assessing Officer and DR was that exports made to different geographical llocation to non-AEsAEs could be considered to benchmark export sales to AEs by adopting internal TNMM method since the transactions undertaken with the AEs and Non-AEs Non AEs were in the same industry, and had high level of similarity with respect to products, cost ofof goods sold, manufacturing processes, etc. In our view, the DRP erred in adopting the aforesaid reasoning given by the Appellant to include even the domestic sales made by the Appellant for benchmarking the export sales made to AEs from Thane Plant. Accor dingly, we set aside the transfer Accordingly, pricing addition of IN 54,62,391/-
54,62,391/ and direct
TPO/Assessing re compute ALP of the
O/Assessing Officer to re-compute international transaction of export of goods from Thane Plant by taking OP/OC of the export sales to nonnon-AEs.
aforesaid directions, Ground No. 1 raised In view of the afor by the Appellant allowed.
allowed."
7.2 Since, the issue-in-dispute issue dispute in the year under consideration is identical to issue in assessment year 2010-11, 2010 therefore, respectfully following the finding of the Tribunal (supra) on the e direct the Ld. AO/TPO for computing the issue-in-dispute, we transfer pricing adjustment to the manufacturing segment for each plant separately using internal TNMM as most appropriate method, comparing the margin of export sales to third parties with t he export sales the AE's. The ground of appeal of the assessee is accordingly allowed for statistical purposes.
8. s.. 2 and 3 of the appeal were not pressed by the The ground Nos assessee as the Ld. Counsel submitted that necessary relief has ted by the Assessing Officer in rectification already been granted Lanxess India Pvt. Ltd. 10 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 Nos.. 2 & 3 of the appeal of the proceedings. Accordingly, the ground No assessee are dismissed as infructuous.
9. In ground Nos.. 1.1 to 1.3 of the appeal of the Revenue, the inclusion of three comparables Revenue is agitated by way of inclusion namely Microgenetics Systems Ltd., E4e Healthcare Business Services Pvt. Ltd. and Jindal Intellicom Pvt. Ltd.
10. Brief facts qua the issue dispute are that during the year issue-in-dispute under consideration, the assessee provided technical support sup services to its associated enterprises and received payment of benchmarked the international Rs.7,02,74,760/-.. The assessee benchmark transaction of technical support services using the Transaction Net Margin Method ('TNMM') and taking operating profit/operating profit/operatin cost (OP/OC) as the profit level indicator (PLI). The assessee applied certain filters which were partly rejected by the Ld. TPO. The Ld. TPO characterized as the assessee has providing Information Technology enabled Services (ITeS services). The Ld. TPO rejected comparables selected by the assessee and chosen his own comparables and mean margin of those comparables was worked out to 35.8% as against assessee's margin of 15%. The list of final comparables and their margin is reproduced as under:
"7.6 Hence that final comparables of the TPO are as under:
Sl. No. Name of the comparable Margins Margin Comparable (%) as per Lanxess India Pvt. Ltd. 11 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 OP/TO
1. Accentia Technologies Ltd. 29.18% TPO
2. Acropetal Technologies Ltd. (Segmental) 23.95% TPO
3. TCS e-Serve Serve Ltd. 69.31% TPO
4. Infosys BPO Ltd. 17.86% TPO Mean 35.08 TPO Assessee's Margin 15.00 The mean margin of 35.08% as per the departmental the assessee."
comparables is applied in the case of the 10.1 The Ld. TPO then worked out adjustment of Rs.122,69,022/-
Rs.122,69,022/ as under:
"7.7 Adjustment: The OP/TC of Technical Support services is 15.00% is lesser than that OP/TC of 35.08% earned by comparable companies. The OP/TC of the software development segment is outside the 5% range available under the regulations. It can thus be concludedd that the international transactions of the assessee are not at arm's length price, and therefore an adjustment of Rs. 1,22,69,002 /- / is made as per the below working:
Working of TP adjustment Particulars P&L A/c ALP @ 35.05% Revenue 7,02,74,760 8,25,43,762 Total Cost 6,11,07,316 6,11,07,316 Operating Profit 91,67,444 2,14,36,446 OP/TC 15.00% 35.08% International Transaction (IT) 7,02,74,760 Arm's Length Price 8,25,43,762 ITx1.05 8,66,70,950 ITx0.95 7,84,16,574 Adjustment 1,22,69,002 In view of the above, the assessee will suffer an Rs.1,22,69,002/ in respect of fees adjustment of Rs.1,22,69,002/- received by provision of ITES."
ITES.
Lanxess India Pvt. Ltd. 12 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12
11. Before us, the dispute is in respect of three comp comparables admitted by the Ld. DRP, as additional evidence interalia namely Microgenetics Systems Ltd., E4e Healthcare Business Services Pvt. Ltd. and Jindal Intellicom Pvt. Ltd.
11.1 Regarding Microgentics Systems Ltd., the Ld. DRP rejected the contention of the Ld. TPO for rejection on the ground of turnover of the assessee being seven times, as TPO himself observed that the high turnover is no criteria for rejection of a company. As regard objection of company engaged in the medical transcription services, the he Ld. DRP accepted that the company as engaged in ITeS industry.
12. We have heard rival submission of the parties on the issue-in-
issue dispute and perused the relevant material on record. Before us, the Ld. DR could not controvert medical transcription is one of the stream of ITeS Industry as included for the purpose of Safe Harbor Rules i.e. Rule10TA ule10TA of the Income Income-tax Rules. The he relevant part of the Rule is reproduced as under:
"10TA(e) information technology enabled services"
means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely:
i. back office operations:
ii. call centres or contact centre services: iii. data processing and data mining: iv. insurance claim processing;
v. legal databases:
Lanxess India Pvt. Ltd. 13 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 vi. creation and maintenance of medical transcription excluding medical advice;
advice;
vii. translation services;
viii. payroll;
ix. remote maintenance, x. revenue accounting xi. support centres xii. website services:
xiii. data search integration and analysis; xiv. remote education excluding education content development; or xv. clinical database management services excluding clinical trials.
but does not include any research and development services whether or not in the nature of contrac research and development services."
services.
12.1 We also agree with the contention of the Ld. Counsel of the assessee that 'Accentia Accentia Technology Tech Ltd.' which is engaged in providing medical transcription has been accepted by the Ld. TPO comaparable then the AP/TPO is not for exclusion of as valid comaparable, Microgenetics as justified, there is no reason to object inclusion of Microgenetics on the ground of being engaged in the medical transcription services i.e. functional dissimilarity.. We accordingly, accordingly uphold the finding of the Ld. DRP on the issue issue-in-dispute.
dispute.
12.2 Regarding E4e Healthcare Business Services Pvt. Ltd. also the Ld. DRP has rejected the objection of the Ld. TPO of functionally objection dissimilarity being engaged in the healthcare services. We have heard rival submission of the parties on the issue issue-in-dispute and perused the relevant material on record. In view of our finding on Microgenetics Pvt. Ltd., the contention of the Ld. the comparable Microgenetics Lanxess India Pvt. Ltd. 14 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 DR of functionally dissimilarity are rejected and finding of the Ld. DRP on the issue-in-dispute dispute is upheld.
12.3 Regarding Jindal Intellicom Pvt. Ltd.
Ltd., finding of the Ld. DRP is reproduced as under:
"Jindal Intellicom Pvt. Ltd.:
The TPO in its remand report rejected this company on the ground that it is engaged only in call centre services. Further the company did major expansion and increased its capacity by 45% which is one of the extraordinary events. The assessee has argued that call centre services are covered under the definition fITS industry as mentioned in the safe harbour rules. The assessee has also argued that mere expansion of the capacity cannot be a reason to exclude a functionally comparable company.
company. The TO has also not demonstrated that the expansion in capacity has any impact on the profit/loss of the company.
We have considered the facts of the case and the submissions made. We agree that mere capacity expansion cannot be a reason to reject an olherwise functionally comparable company. The company is functionally comparable and has passed all TPO filters. TO is directed to accept it as comparable. The objection is therefore accepted accepted."
13. We have heard rival submission of the parties and per perused the relevant material on record. The objection of the Ld. DR that call centre activity cannot be characterized as ITeS is rejected in view of safe harbor Rules (reproduced above), where call centre activity is activity Therefore, we agree with the finding included as one of ITeS activity.
of the Ld. DRP that company cannot be rejected for comparison on Lanxess India Pvt. Ltd. 15 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 uphold the finding of the Ld. DRP on this ground. Accordingly, we uphold the issue-in-dispute.
dispute.
13.1 In view of the above discussion, the ground No. 1.1 to 1.3 of the appeal ppeal of the Revenue are dismissed.
14. As regard to ground No. 2 of the appeal of the Revenue is concerned, we find that the Ld. Assessing Officer in draft assessment order worked out negative difference of Rs.97,50,004/ Rs.97,50,004/-
in ledger of two parties, s reproduced as under:
parties which is "5. Issue of discrepancies found on verification by issuing notices u/s 133(6) of the I.T. Act, 1961:
The assessee company has claimed expenses by debiting to Profit & Loss account under that head purchases expenses. The authorized representative furnished the partywise details giving name, address and amount. To verify the genuineness and reasonableness of these transactions, notices u/s 133(6) of the Act, were sent to certain parties. The analysis of the responses received from var ious parties various wass done and a letter issued to the assessee company vide letter dated 03.02.2015 to reconcile the same with their books of accounts and produce the parties alongwith the documentary evidences to prove the genuineness of transactions. The letter letter dated 03.02.2015 is reproduced below:
Kindly refer to the above.
2. During the course of assessment proceedings to verify the genuineness of Sundry creditors as shown by you, information u/s 133(6) of the I.T. Act, was called creditors on test check basis.
for from some of the creditors Details of the same are tabulated as under:
Sr. No. Name of the Party Reply Sundry Sundry Difference Lanxess India Pvt. Ltd. 16 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 (Creditor) Received Balance as balance as per the per reply of assessee the party
1. Grasim Industries Yes 3,44,83,559 Closing Ltd. balance not
2. Crescent Organics Yes 3,42,33,938 3,42,31,435 2,503 Pvt. Ltd.
3. Trans Tech Turnkey No 2,07,71,597 --
Pvt. Ltd.
4. Jupiter Dyechem Yes 1,51,11,000 1,54,41,840 (-)3,30,840 Pvt.
5. H.J. Arochem (P) Yes 1,10,79,478 1,00,06,359 10,73,119 Ltd.
6. Grasim Industries Yes 86,23,085 1,27,02,374 (-)40,79,289 Ltd. S. F.
7. Philips Carbon Yes 77,21,250 25,17,322 42,03,928 Black Ltd.
8. Time Technoplast No 70,04,093 --
Ltd.
9. Noble Resources No 67,94,167 --
and Trading Pvt.
Ltd.
10. Turbomach India Yes 67,29,890 69,85,000 Pvt. Ltd.
11. Onshore No 36,94,367 --
Construction Co.
Pvt. Ltd.
12. Abhilasha Tex No 34,08,543 --
Chem Pvt. Ltd.
13. ICICI Lombard Returned 34,08,543 --
General Insurance back
Co. Ltd.
14. Poonam Enterprises Returned 31,70,030 --
back
15. Bayer Cropscience Yes 28,46,734 31,40,115 (-)2,93,381
Ltd.
16. Acord Shipping Yes 15,13,107 17,79,355 (-)2,66,248
Agencies (India) Pvt.
Ltd.
17. Cox and Kings India No 14,32,475 28,21,763 (-)13,89,288
Ltd.
18. Ray Engineering No 13,08,718 52,08,888 (-)39,00,170
Pvt. Ltd.
19. Hindustan Yes 12,99,444 --
Chemicals Co.
20. Paras Commercial No 10,13,971 --
Centre Pvt. Ltd.
Lanxess India Pvt. Ltd. 17
ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 As discussed above, you are requested to kindly reconcile the same along with supporting necessary documents on or before 10/02/2015 positively.
The authorized representative of the assessee company has attended on 10.02.2015 and filed the reconciliation in respect of certain parties vide submissions dated 10.02.2015 and 19.03.2015.
After going through the submissions of the assessee, it is seen that in two cases in which the notices u/s 133(6) of the I.T. Act, 1961 were sent on the addresses furnished by the assessee company, there are negative differences i.e. party has confirmed more amount than shown by the assessee company. The total amount of such transactions are summarized as under:
Sr. Name of Sundry Creditors Balance as per ce as per the Balance Differences No. the assessee reply of the party
1. Trans Tech Trunkey Pvt. 20,771,597 26,621,431 -5,849,834 Ltd.
2. Ray Engineering Pvt. Ltd. 1,308,718 5,208,888 -3,900,170 Total Negative differences -9,750,004 Although the assessee company has established the identity of these two parties, it has failed to establish the genuineness of the transactions to the extent of Rs.97,50,004/ . Therefore, the transactions are Rs.97,50,004/-.
considered as not genuine to the extent of discrepancies found. Hence, the differ ence amounts of Rs.97,50,004/-
difference Rs.97,50,004/ is added to the income of the assessee company as income from undisclosed sources. Penalty proceedings u/s 271(1)(c) of the Act, are hereby initiated separately for furnishing inaccurate particulars of income.
income."
14.1 The Ld. DRP however deleted the addition observing as under:
"4.3 Discussion and Directions of DRP:
We have considered the submission made by the assessee and the reasons recorded by the AO. We arelof the opinion that in this case no addition was called for because there are only two possible reasons for a creditor showing more amount as receivable from Lanxess India Pvt. Ltd. 18 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12 the assessee than shown by the assessee. The first possibility is that some payment made by the assessee is not reflected in the books of the creditor for the money has been diverted somewhere else and shown as payment to the creditor. In this case since the source of money is explained no addition may be called for. The second nd possibility is that some bill raised by the creditor has not been recorded by the assessee in its books of account. In this situation also, no addition is called for because there is no allegation of any unexplained payment for the expenditure. Accordingly, Accordin addition of Rs.97,50,004/ 97,50,004/- made by the AO is hereby deleted."
deleted.
15. We have heard rival submission of the parties on the issue issue-in-
dispute and perused the relevant material on record. It is undisputed that balances appearing in the ledger account of the assessee in respect of those two parties and balances of the assessee in the ledger accounts of those two respective parties, parties are different. The Ld. DRP has presumed possible reasons for differences however this is the issue of verification from those two parties as to the reason for the difference in balances and the onus was on the assessee to reconcile those differences. The Assessing Officer also did not make effort by way of inquiring from those parties for the reasons of difference. In the facts and circumstances, c we feel appropriate to restore this issue back to the file of the Assessing Officer for verifying from those parties for the reason of discrepancy in the ledger balance appearing in the books of account of the assessee and then decide the issue in accordance with law.
issue law The ground No. 2 is accordingly allowed for statistical purposes.
Lanxess India Pvt. Ltd. 19 ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12
16. As far as ground raised in the cross objection are concerned cross-objection the Ld. Counsel of the assessee submitted that in case finding of the Ld. DRP on the inclusion of the three comparables namely Microgenetics Systems Ltd., E4e Healthcare Business Services Pvt. Ltd. and Jindal Intellicom Pvt. Ltd. is accepted then he would not cross objection. Since, we have upheld the press the ground of cross-objection. order of Ld. DRP in respect of those comparables, the ground of objection of the assessee are accordingly dismissed as cross-objection infructuous.
17. In the result, the appeal of the assessee and Revenue are partly allowed objection of the lowed for statistical purposes and cross-objection assessee is dismissed.
ed.
Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 10/02/2023.
02/2023.
Sd/- Sd/--
(KAVITHA
KAVITHA RAJAGOPAL)
RAJAGOPAL OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 10/02/2023
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
Lanxess India Pvt. Ltd. 20
ITA Nos. 1035 & 1697/M/2016 & CO No. 89/M/2016 AY 2011-12
6. Guard file.
BY ORDER, //True Copy// Assistant Registrar) (Assistant Registrar ITAT, Mumbai