Income Tax Appellate Tribunal - Mumbai
Acit 14(1)(2), Mumbai vs Gia India Laboratory Pvt. Ltd., Mumbai on 9 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL "K" BENCH, MUMBAI
BEFORE SHRI SHAMIM YAHYA, A.M AND SHRI RAVISH SOOD, J.M
IT(TP)/1558/2015
&
C.O No. 112/Mum/2015
( नधा रण वष / Assessment Year:2010-11)
ACIT-14(1)(2), Mumbai M/s Gia India Laboratory Pvt. Ltd. 10th
460, 4th Floor, Aaykar Bhawan, बनाम/ Floor, Trade Centre, Bandra Kurla
Mumbai - 400 020. Complex, Bandra East, Bandra(W),
Vs.
Mumbai-400 051.
थायी ले खा सं . /जीआइआर सं . /PAN No. AAICS0137P
(अपीलाथ /Appellant) : ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri. Rajesh Damor, D.R
यथ क ओर से/Respondent by : Shri. Jehangir D. Mistri, A.R
सन
ु वाई क तार ख / : 05.11.2018
Date of Hearing
घोषणा क तार ख / : 09.11.2018
Date of Pronouncement
आदे श / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the revenue is directed against the order passed by the Assessing Officer (for Short 'A.O') under Sec. 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (for short 'Act'), dated 30.01.2015. The revenue assailing the order passed by the A.O pursuant to the directions of the Dispute Resolution Panel-III, Mumbai(for short 'DRP'), dated 30.01.2015 has raised before us the following grounds of appeal :
"1. On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel erred in deleting adjustment of Rs. 5,49,05,677/- on account of intra-group services as the assessee did not furnish any evidence in respect of services having been rendered and passing non speaking order.
2. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.
3. The appellant prays that the order of the CIT(A) on the above ground be set-
aside and that of the assessing officer be restored."
2. Briefly stated, the assessee company which is engaged in the business of grading of diamonds, coloured stones, gems, pearls and other precious stones had filed its return of income for A.Y 2010-11 on 05.10.2010, declaring total loss of Rs. 6,21,29,504/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
3. In the course of the assessment proceedings a reference under Sec. 92CA(1) was made to the Addl. CIT, Transfer Pricing Range 1(5), Mumbai (for short 'TPO') on 23.11.2011 for determining the 'Arms Length Price' (for short 'ALP') of the international transactions of the assessee. The TPO vide his order passed under Sec. 92CA(3) of the Act, dated 29.01.2014 made an adjustment of Rs. 5,49,05,677/- towards the ALP of the 'Management services' availed by the assessee from its foreign AE. Subsequently, the A.O made an addition of Rs. 5,49,05,677/- to the total income of the assessee in his draft assessment order passed under Sec. 143(3) r.w.s 144C(1) of the Act, dated Nil.
4. Aggrieved, the assessee filed his objections with the Dispute Resolution Panel-III, Mumbai (for short 'DRP'). The DRP by its order dated 02.12.2014 issued directions for deletion of the Transfer Pricing adjustment of Rs. 5,49,05,677/- made by the TPO. The A.O as per the directions of the DRP deleted the Transfer Pricing adjustment of Rs. 5,49,05,677/-, and vide his assessment order under Sec. 143(3) r.w.s 144C(13), dated 30.01.2015 assessed the income at a loss of (Rs. 2,63,18,627/-) and the 'Book profit' under Sec. 115JB at Rs. 36,55,75,196/-.
5. The revenue being aggrieved with the order passed by the A.O under Sec. 143(3) r.w.s 144C(13) has carried the matter in appeal before us. Further, the assessee is also before us as a cross-objector. The ld. Authorised representative (for short 'A.R') for the assessee Shri. Jehangir D. Mistri, Senior counsel, at the very outset submitted that the assessee had as on 07.05.2018 entered into an unilateral Advance Pricing Agreement (for short 'APA') with the Central Board of Direct Taxes (for short "CBDT") (Copy placed on record). The ld. A.R drew our attention to Appendix-1- Para 1(b)(ii) of the 'APA' (Page 11-12 of the agreement). It was submitted by the ld. A.R, that as per the 'APA' the international transaction for availing of 'Management Services' by the assessee from its Associate Enterprise ('AE') for the previous year 2009-10 was to be considered to be at arms length, if the payment made by the applicant in respect of such transaction during the said year did not exceed an amount of Rs. 8,22,38,141/-. The ld. A.R submitted that the assessee had as per the mandate of Sec. 92CD r.w Rule 10RA(2) filed the modified 'return of income' for the rollback year under consideration on 31.08.2018. In the backdrop of the aforesaid facts the ld. A.R submitted that as per Rule 10RA(5) of the Income-tax Rules, 1963 it was obligatory on the part of the revenue to withdraw the present appeal.
6. The ld. A.R in order to fortify his contention that the payment made by the assessee applicant in respect of the international transaction of availing of management services from its AE for the previous year 2009-10 was in conformity with the amount mentioned in the agreement, took us through Page 31 of the order of the TPO wherein the amount in respect of the management services was mentioned at Rs. 8,22,38,141/-. However, a perusal of the order of the TPO revealed that at Page 39 the amount in respect of the management charges was stated to be Rs. 8,22,46,172/-. On being confronted with the said discrepancy, it was averred by the ld. A.R that there appeared to be some mistake on the part of the TPO in mentioning the amount at Rs. 8,22,46,172/-. In order to dispel the doubts emerging therefrom, the ld. A.R drew our attention to Page 5 - Para 5.2 of the order passed by the DRP wherein the total payment made by the assessee to its AE for the provision of the management services was stated to be Rs. 8,22,38,141/-. The ld. Departmental representative (for short 'D.R') submitted that the appeal of the revenue be treated as withdrawn, subject to the verification of the facts by the A.O.
7. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the APA, dated 07.05.2018. We find that the APA covers the year under consideration i.e previous year 2009-10 on the issue of determining of the arms length price of the management services availed by the assessee from its foreign AE during the year. As agreed upon amongst the authorised representatives of both the parties the present appeal of the revenue is treated as withdrawn, subject to verification of the facts on the part of the A.O.
8. The appeal of the revenue as observed by us hereinabove is dismissed as withdrawn.
C.O No.112/Mum/2015(Arising from ITA No. 1558/Mum/2015) A.Y 2010-11
9. The assessee has raised before us the following effective grounds of cross objections:
" 1.0. Re: Non-allowance of depreciation on market research expenses of Rs. 23,50,000/- :
1.1 The Assessing Officer has erred in not following the directions of the Dispute Resolution Panel.
1.2 The assessee humbly submits that considering the facts and circumstances of its case and the law prevailing on the subject, it is entitled to depreciation on the market research expenses as directed by the Dispute Resolution Panel.
1.3 The assessee submits that the Assessing Officer be directed to allow the depreciation on market research expenses as directed by the Dispute Resolution Panel."
10. The ld. A.R submitted that the A.O while framing the assessment under Sec. 143(3) r.w.s 144C(13) has failed to give effect to the directions of the DRP. The ld. A.R drawing our attention to Page 7- Para 8 of the DRP order submitted, that though the A.O was specifically directed to allow depreciation on the capitalised value of the market research expenses after making necessary verifications, however he has failed to comply with the said directions. Per contra, the ld. D.R did not controvert the said contention raised by the ld. counsel for the assessee.
11. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. In the course of the proceedings before the DRP the assessee had sought depreciation on the written down value of the market research expenses. It was submitted by the assessee before the DRP that in the immediately preceding year i.e A.Y 2009-10 depreciation was allowed on the amount of the market research expenses of Rs. 23,50,000/- by treating the same as a capital asset. We find that the DRP observed that the claim of the assessee that it was allowed depreciation on the market research expenses in A.Y 2009-10 was in order. In the backdrop of the aforesaid facts the DRP had directed the A.O to grant depreciation to the assessee on the market research expenses, after making necessary verifications on facts. However, we find that the A.O while framing the assessment had omitted to give effect to the aforesaid direction of the DRP. We thus, in terms of our aforesaid observations restore the issue as regards grant of depreciation on the market research expenses to the file of the A.O, for giving effect to the direction of the DRP in the said context.
12. The cross-objection filed by the assessee is allowed for statistical purposes.
Order pronounced on the open court on 09.11.2018 Sd/- Sd/-
(SHAMIM YAHYA) (RAVISH SOOD)
ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई Mumbai; %दनांक .11.2018
Ps. Rohit Kumar
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आय&
ु त(अपील) / The CIT(A)-
4. आयकर आयु&त / CIT
5. 'वभागीय *त*न+ध, आयकर अपील य अ+धकरण, मुंबई /
DR, ITAT, Mumbai
6. गाड. फाईल / Guard file.
स या'पत *त //True Copy//
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील"य अ#धकरण, मुंबई / ITAT,
Mumbai