Income Tax Appellate Tribunal - Chennai
Intimate Fashions (India) Pvt. Ltd., ... vs Dcit Corporate Circle 2(2), Chennai on 16 March, 2018
आयकर अपील
य अ धकरण, 'डी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
ी अ ाहम पी.जॉज , लेखा सद"य एवं ी जॉज माथन, या'यक सद"य केसम(
SHRI ABARAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER
रोक या चका सं / S.P. No.89/Chny/2018
(in I.T.A. No.2985/Chny/2017)
'नधा रण वष / Assessment Year : 2013-14
रोक या चका सं / S.P. No.118/Chny/2018
(in I.T.A. No.472/Chny/2017)
'नधा रण वष / Assessment Year : 2012-13
&
आयकर अपील सं./ITA No.2985/Chny/2017
'नधा रण वष / Assessment Year : 2013-14
आयकर अपील सं./ITA No.472/Chny/2017
'नधा रण वष / Assessment Year : 2012-13
M/s Intimate Fashions (India)
Private Ltd., The Deputy Commissioner of
517-519, Thirupporur-Kottamedu v. Income Tax,
High Road, Corporate Circle - 2(2),
Nandhivaram Village, Chennai - 600 034.
Kanchipuram District,
Guduvancheri - 603 202.
PAN : AAACI 2706 C
(Petitioner & Appellant) (Respondent)
-ाथ क क. ओर से /Petitioner by: Shri N. Venkatraman, Sr. Advocate
Shri N.V. Balaji, Advocate
-0यथ1 क. ओर से/Respondent by : Ms. S. Vijayaprabha, JCIT
सन
ु वाई क. तार
ख/Date of Hearing : 16.03.2018
घोषणा क. तार
ख/Date of Pronouncement : 16.03.2018
2 S.P. No.89 & 118/Chny/18
आदे श /O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
These are Stay Petitions filed by the assessee in its appeals in I.T.A. No.2985/Chny/2017 and I.T.A. No.472/Chny/2017 for the assessment years 2013-14 and 2012-13.
2. Shri N. Venkatraman, Sr. Advocate represented on behalf of the assessee and Ms. S. Vijayaprabha, JCIT represented on behalf of the Revenue.
3. It was submitted by the Ld. A.R. that the issue in the appeals was in respect of the transfer pricing adjustment made by the A.O. in respect of the commission payments made to M/s Triumph International Overseas Ltd., USA. It was submitted that the issue was squarely covered by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case in I.T.A. No.1163/Mds/2014 dated 10.04.2017 for the assessment year 2009-10. It was a submission that as the issue has already been decided by the co-ordinate Bench of this Tribunal in the assessee's own case in an earlier assessment year wherein the issue has been restored to the file of the A.O. for re-adjudication, the assessee may be granted stay of recovery of the disputed tax. It was a submission 3 S.P. No.89 & 118/Chny/18 that for the both the assessment years under consideration, the issue was identical. It was a submission that the assessee has no objection if the appeals of the assessee are taken up and disposed of in line with the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 2009-10 referred supra.
4. In reply, the Ld. D.R. vehemently opposed the Stay Petitions. It was, however, submitted that if the appeals were being disposed of following the decision of co-ordinate Bench of this Tribunal in the assessee's own case, for the assessment year 2009-10, the Revenue did not have any serious objection.
5. We have considered the rival submissions. As submitted by the Ld. A.R., it is noticed that the issues in the appeals are squarely covered by the decision of co-ordinate Bench of this Tribunal in the assessee's own case for earlier assessment year, therefore, the appeals filed by the assessee are taken up for hearing along with the Stay Petitions and disposed of by this order.
6. A perusal of the assessment orders in the present case clearly shows that the A.O. for the relevant assessment years under dispute has treated the ALP of the commission payments at NIL and 4 S.P. No.89 & 118/Chny/18 consequently, the entire commission paid by the assessee to M/s MAS Intimates Pvt. Ltd. and M/s Triumph International overseas Pvt. Ltd. has been adjusted and the addition made. A perusal of the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 2009-10 referred to supra shows that the co-ordinate Bench of this Tribunal in paras 4 and 5 of its order in pages 8 to 12, has held as follows:-
"4. Aggrieved by the order of the Assessing Officer u/s. 143(3) r.w.s. 144(C)(13) of the Act in pursuance of DRP directions the assessee has filed an appeal before the Tribunal. Before us, the Ld. AR argued the grounds on the Transfer Pricing adjustments that the DRP confirmed the ALP on commission paid to the AE's as Nil. The Ld. AR submitted that such commission was allowed earlier in the assessment year 2001-02 and there is no disallowance of commission by the Revenue for the assessment years 2002-03 to 2007-08. The Ld. AR referred to the agency Commission agreement on transactions with the joint venture companies on commission payments. The Ld. AR drew attention to the Page No. 179 of the paper book, where the details of shareholders of joint venture partners holding stakes were explained as under:
S.No Company Name Name of Shareholding Address of shareholders pattern shareholders
1. Triumph Triumph Wholly owned Promenadenstrasse International International subsidiary 24 Bad Zurzach, Overseas Private Spiesshofer & 5330 Switzerland Limited, Vaduz, Braun KG Liechtenstein
2. MAS Intimates MAS Holdings Wholly owned Aitken Spence, Private Limited, Private subsidiary Tower II, No. 315 Sri Lanka Limited Va, Colombo, Srilanka 5 S.P. No.89 & 118/Chny/18
3. MAST Industries Limited Wholly owned Three Limited Inc, USA Brands Inc subsidiary Parkway, P.O. Box 16000, Columbus, Ohio, USA The Ld. AR prayed that the assessee company availed services from the AE's and commission was paid and further assessee has adopted CUP method as transaction method which is not disputed and prayed for deletion of addition. Contra, the Ld. DR relied on the orders of the Assessing Officer and DRP and submitted that the commission was not allowed by the Ld. AO as no proper details were submitted and also no evidence was produced in respect of services availed from the AE's and opposed to the grounds.
5. We heard the rival submissions, perused the material on record and judicial decisions cited. The sole crux of the issue that the Ld. TPO has made disallowance of the commission payment as there is no evidence produced and only statements were provided on availing services through E-mail correspondence and the sales commission is paid based on the agreement and the Ld. TPO has accepted these facts and has not doubted the documents but only the nature of services availed. We find strength in the arguments of Ld. AR and the commission is paid for the purpose of business wholly and exclusively based on the turnover. We found similar disputed issue was considered in assessee own case by the co-ordinate bench of this Tribunal in ITA No. 2427/Mds/2005 for the assessment year 2001-02 dated 27.03.2007, where the Tribunal has remitted the disputed issue to be re-examined by the Assessing Officer as held at Para 9 of the order as under:
" 9. Last issue related to the maintenance of disallowance of commission of Rs. 1,82,06,482/-.
10. We have heard the rival submissions. The assessee is a manufacturer of ladies lingerie and foundation garments. The shares of the assessee company are held 1/3rdl each by M/s. Mast Industries, USA.
M/s. Triumph International. Germany and M/s. Mas International Pvt Ltd., Sri Lanka. Assessee entered into an agreement with M/s. Triumph International. an international company engaged in the marketing of lingerie, for marketing the goods. It was' stipulated that every year M/s. Triumph International will get the information on yearly projections assessee could make the annual capacity plan for the subsequent year. It. was also agreed that M/s. Triumph. International: will fill up the capacity 6 S.P. No.89 & 118/Chny/18 of the factory by giving the actual orders every month. M/s. Triumph International also gave projections fat the rest of the year by way of reservations by coordinating with the customers depending upon the market trend to facilitate the production planning department to plan the actual capacity on, an on-going basis. M/s. Triumph also did designing the product to suit the customer requirements, checking on the design suggested by the customer and giving alterations to suit the customer. It also did the market research independently on the new styles with regard to designs.
11. Learned counsel for the assessee did file some documents to demonstrate the volume of services rendered by M/s. Triumph International. Assessee had paid commission or Rs. 2,27,06,482/- calculated at the rate of 5% for the .export sales which included marketing expenses. It was alleged that this is normal payment respect of foreign marketing expenses and has been permitted by the Reserve Bank of India.
12. However, the AO felt that only Rs. 45,00,000/- could be allowed. Accordingly, he disallowed the balance of Rs. 1,82,06,482/-. To justify the addition, AO stated in the order that the assessee did not have any trade mark right or patent right on the manufactured products to enhance its business in future on the brand name being, built. The products are sold to Ml/s. Mast Industries M/s. Triumph International and its branch in Hongkong were serving the assessee. The quantum of commission paid by the assessee was not in proportion to the services rendered by M/s. Triumph International. The reason is that the entire product manufactured by the assessee was sold to M/s. Mast Industries, which is holding 1/3rd share of the assessee company. Thus M/s. Triumph International was not spending any energy or time for getting customers for the assessee. The only customer is M/s. Mast Industries. AO, did ask the assessee to file details of styles provided by M/s. Triumph International. There were only 22 styles introduced in the year whereas the commission paid was Rs. 2,27,06,482/-. It was also alleged before the AO that if a marketing office is maintained by the assessee in New York, the cost would be more than the commission paid by the assessee. AO negatived this nrgul11cllt on the ground that products are sold to a shareholder only. The benefits listed by the assessee accrued only to the' shareholders and not to outsiders. Therefore, there was no need for having a marketing office abroad.
13. It appears that the AO did not examine the documents. It is necessary to see with exactitude what services were rendered by M/s. Triumph International to the assessee and in the context of those services whether the commission was reasonable or not. If it is not reasonable adequate grounds must be given for treating it unreasonable. It appears that the documents produced before us were not considered by the AO. 7 S.P. No.89 & 118/Chny/18 We therefore in the interest of justice set aside the impugned order oh this count and restore to the file of the AO with direction to decide it de novo in accordance with law after providing it de novo in accordance with law after providing adequate opportunity to the assessee of being heard." We respectfully following the co-ordinate bench decision and in the interest of justice, we remit the disputed issue to the file of the Assessing Officer to decide the matter afresh based on the available supporting material and evidence and the assessee shall be provided adequate opportunity of hearing to substantiate its claim before passing the order on merits and allowed the ground of the assessee for statistical purpose."
7. As it is noticed that the main issue in the present appeals is squarely covered by the co-ordinate Bench of this Tribunal in the assessee's own case for assessment year 2009-10 referred to supra, respectfully following the decision of the co-ordinate Bench of this Tribunal the said issue is restored to the file of the A.O. for re- adjudication on identical lines as in I.T.A. No.1163/Mds/2014 dated 10.04.2017 for the assessment year 2009-10.
8. Other grounds have also been raised in the appeals filed by the assessee. However, no arguments have been placed in respect of these grounds and consequently, they stand dismissed as not argued.
9. In the result, both the appeals of the assessee stand partly allowed for statistical purposes. Consequently, the Stay Petitions filed by the assessee for both the assessment years stand dismissed as infructuous.
8 S.P. No.89 & 118/Chny/18
Order pronounced in the open court on 16th March, 2018 at Chennai.
sd/- sd/-
(अ ाहम पी.जॉज ) (जॉज माथन)
(Abraham P. George) (George Mathan)
लेखा सद"य/Accountant Member या'यक सद"य/Judicial Member
चे नई/Chennai,
th
6दनांक/Dated, the 16 March, 2018.
Kri.
आदे श क. -'त8ल9प अ:े9षत/Copy to:
1. -ाथ क/Petitioner 2. -0यथ1/Respondent
3. आयकर आयु;त (अपील)/CIT(A) 4. आयकर आयु;त/CIT
5. 9वभागीय -'त'न ध/DR 6. गाड फाईल/GF.