Income Tax Appellate Tribunal - Kolkata
Philips Electronics India Ltd., ... vs Assessee on 3 February, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - "बी", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "B", KOLKATA
(सम¢)Before ौी एन.
एन.ǒवजयकुमारन,
मारन, Ûयायीक एवं/and
सदःय,
Shri N.Vijayakumaran, Judicial
Member.
ौी सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
Shri C.D.Rao, Accountant Member
आयकर अपील संÉया /
M.A.No.05/Kol/2012
A/o ITA No.948/Kol/2009
िनधॉरण वषॅ/Assessment Year :
2003-04
-वनाम-
(अपीलाथȸ/APPELLANT ) - (ू×यथȸ/RESPONDENT)
M/s Philips Electronics India Ltd., Kolkata Versus- The D.C.I.T.,Circle-11,
(PAN: AABCP 9487 A) . Kolkata.
अपीलाथȸ कȧ ओर से/ For the Appellant: Shri A.V.Sonde
ू×यथȸ कȧ ओर से/For the Respondent: Shri P.S.Dutta
सुनवाई कȧ तारȣख/Date of Hearing : 03.02.2012.
घोषणा कȧ तारȣख/Date of Pronouncement : 09.02.2012.
आदे श/ORDER
(सी.
सी.डȣ.
डȣ.राव)
राव), लेखा सदःय
Per Shri C.D.Rao, AM
The above Miscellaneous Application has been filed by assessee to rectify the order of the Tribunal dated 11.10.2011 vide ITA No.948/Kol/2009 for assessment year 2003-04.
2. By this Miscellaneous Application the assessee wants to rectify the order of the Tribunal dated 11.10.2011 by stating as under :-
"2. Vide Ground No. 3 of the aforesaid appeal, the Applicant had raised the following objection:
"3. Use of +/- 5% range for Transfer Pricing adjustment 2
3.1 On the facts and in the circumstances of the case, the learned CIT(A) erred in not granting the benefit of +/- 5% range while computing the arm 's length price and consequent adjustment to the total income ".
3. The Hon'ble Tribunal has disposed of this ground of appeal in paragraphs 12 and 13 of its Order which reads as under:
"12. After hearing the rival submissions, and on careful consideration of the material available on record including the case laws relied upon by the assessee we are of the considered opinion that when only one price has been determined under (most appropriate method) for evaluating arm 's length price, the question of applicability of proviso 2 of section 92C(2) does not arise. Therefore assessee was not entitled to the concession of plus or minus 5% as prescribed in the said provision.
13. In the result ground no. 3 of the assessee is dismissed."
While reaching the above conclusion, the Hon'ble Tribunal has inadvertently committed the error as explained below:
i. The TPO had made transfer pricing adjustments for five categories of transactions, by comparing, inter alia, the profitability of the Applicant in different segments.
ii. However, in respect of the adjustment made for 'Import of monitors', the TPO had considered 73 companies as being comparable to the Applicant. He arrived at an arithmetic mean of the margins at gross level for these 73 companies at 14.04% in order to compute the relevant transfer pricing adjustment. iii. Section 92C(l) of the Act reads as below:
"The arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of the transaction or class of transaction...."
As is clear from the above, the arm's length price has to be determined using the most appropriate method, which can only be one method.
iv. Further, the proviso to section 92C(2) (as relevant for AY 2003-04) reads as below:
"Provided that where more than one price is determined by the most appropriate method, the arm 's length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean"
The said proviso requires a person to :
(a ) determine the most appropriate method;
(b) arrive at the different prices (i.e.. of the comparables) using the most appropriate method:
c) compute the arithmetical mean of the prices where different prices of the comparables have been determined by the most appropriate method; and
d) at the option of the assessee, vary the arithmetical mean arrived at in point number 'c' above by an amount not exceeding 5 percent.
In the current context, for determining the arm's length price for 'import of monitors', the TPO has considered the prices of the 73 comparable companies using the most 3 appropriate method. He has, thereafter, computed the arithmetical mean of the prices of the 73 comparable companies in line with the proviso to section 92C(2). Accordingly, the Applicant is entitled to the benefit of the proviso to section 92C(2). In view of the above, it is most respectfully submitted that, on facts, the Hon'ble Tribunal has inadvertently erred in reaching the following conclusion for the adjustment made on account 'import of monitors':
"when only one price has been determined under (most appropriate method) for evaluating arm 's length price, the question of applicability of proviso 2 of section 92C(2) does not arise. Therefore assessee was not entitled to the concession of plus or minus 5% as prescribed in the said provision."
v. The Applicant further highlights that, on similar facts, the benefit of the proviso to section 92C(2) has been allowed by various benches of the Hon'ble Tribunal, including the Jurisdictional Bench of the Hon'ble Tribunal in the case of Development Consultants Private Limited v DCIT, Circle 11 (ITA No. 79 and 80/ Kol/2008).
5. In view of the above background, it is respectfully submitted that the Hon'ble Tribunal may be pleased to suitably amend its Order to rectify the aforesaid mistake which is apparent from the record."
3. At the time of hearing the ld. Counsel for assessee has reiterated the above submissions and further pointed out different pages of paper book wherein for arriving the arm's length price in respect of import of monitors the TPO has taken the arithmetic mean of 73 companies. Hence the arm's length price determined in respect of import of monitors adjustment is requested u/s 92C(2) of the Act to be allowed.
4. On the other hand, the ld. DR appearing on behalf of the revenue relied on the orders of the Tribunal.
5. After hearing the rival submissions and on careful consideration of the materials available on record including the arguments of the ld. Counsel for assessee we consider it fit to reproduce the provision of section 92C of the Act for the impugned assessment year 2003-04 which reads as under :-
"Computation of arm's length price 92C (1) The arm's length in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant facts as the Board may prescribe namely :-4
(a) comparable uncontrolled price method;
(b) resale price method;
(c) cost plus method;
(d) profit split method;
(e) transactional net margin method;
(f) such other method as may be prescribed by the Board.
(2)The most appropriate method referred to in sub-section (1) shall be applied for determination of arm's length price, in the manner as may be prescribed :
[Provided that were more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a prie which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean."
5.1. After careful perusal of the above provisions we are of the view that when the assessee arrives the arm's length price as prescribed in sub-section (1) of section 92C i.e.(a) comparable uncontrolled price method;
(b) resale price method;
(c)cost plus method;
(d)profit split method;
(e)transactional net margin method;
(f)such other method as may be prescribed by the Board.
and in order to apply the proviso of section 92C(2) of the Act we are of the view that the assessee is entitled to +/- 5% of the arithmetic mean, if the assessee has arrived the arm's length price more than the one as specified above (a to f) of section 92C(1) of the Act then only adjustment as provided in the proviso is applicable. In this case the assessee has arrived arm's length price by applying the method on comparable uncontrolled price method. While arriving that method he has taken the average of 73 comparabale companies that does not mean that the proviso of sub-section (2) of section 92C of the Act is applicable for adjustment. Since the assessee has adopted only one method prescribed under sub-section (1) of section 92C of the Act we are of the view that there is no mistake apparent from record as pointed out by the ld. Counsel for assessee. Therefore we dismiss the Miscellaneous Application of assessee.
55. In the result the Miscellaneous Application of the assessee is dismissed.
Order pronounced in the court on 09.02.2012.
Sd/- Sd/-
एन.
एन.ǒवजयकुमारन,
मारन, Ûयाियक सदःय सी.
सी.डȣ.
डȣ.राव,
राव, लेखा सदःय,
सदःय
N.Vijayakumaran, Judicial Member C.D.Rao, Accountant Member.
(तारȣख)
तारȣख)Date: 09.02.2012.
R.G.(.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s.Philips Electronics India Ltd., 7, Justice Chandra Madhab Road, Kolkata-700020.
2 The D.C.I.T., Circle-11, Kolkata.
3. The CIT, 4. The CIT(A)-XI, Kolkata
5. DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches