Income Tax Appellate Tribunal - Delhi
Gap International Sourcing (India) ... vs Dcit, Circle-10(1), New Delhi on 11 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : I-1 : NEW DELHI
BEFORE SHRI R.S. SYAL, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No.6340/Del/2017
Assessment Year : 2013-14
GAP International Sourcing Vs. DCIT,
(India) Pvt. Ltd., Circle-10(1),
Unit No.201, DLF South Court, New Delhi.
District Centre, Saket,
New Delhi. -110017.
PAN: AACCG3437E
(Appellant) (Respondent)
Assessee By : Shri Rahul K. Mitra, CA
Department By : Shri Sanjay I Bara, CIT, DR
Date of Hearing : 10.04.2018
Date of Pronouncement : 11.04.2018
ORDER
PER R.S. SYAL, VP:
This appeal filed by the assessee is directed against the final assessment order dated 6.9.2017 passed by the Assessing Officer (A.O.) u/s ITA No.6340/Del/2017 143(3) read with section 144C of the Income-tax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 2013-14.
2. The assessee is aggrieved against the transfer pricing addition of Rs.228,39,70,724/- in respect of the international transaction. Briefly stated, the facts of the case are that the assessee is a wholly owned subsidiary of GIS Inc. and its business activities is to facilitate sourcing of apparels merchandise from India. It essentially acts as a sourcing support service provider for GAP group. The key activity performed by the assessee include support to GAP group companies in identification and evaluation of vendors, provision of assistance to vendors in procurement of raw material, provision of assistance to vendor in designing, inspection and quality control, coordination with vendors to ensure delivery of goods to GAP group as per schedule. The assessee reported certain international transactions and specified domestic transactions in the specified Form. The Assessing Officer referred the matter of determination of ALP of the transactions to the TPO. The assessee employed the Transactional Net Margin Method (TNMM) as the most appropriate method. Certain comparable companies were chosen. The TPO rejected the assessee's 2 ITA No.6340/Del/2017 Transfer pricing study. He used three companies as comparable with average OP/TC at 3.28%. By applying this arm's length margin, he computed the amount of transfer pricing adjustment at Rs.228,39,70,724/-. No relief was allowed by the DRP. This is how the Assessing Officer, in the final assessment order, made addition of Rs.228.39 crore against which the assessee has come up in appeal before the Tribunal.
3. We have heard both the sides and perused the relevant material on record. It is seen that the question of determination of the ALP of the international transactions for earlier years of the assessee came up for consideration before the Tribunal. Vide order dated 17.05.2016, the Tribunal in ITA No.1077/Del/2016, for the assessment year 2011-12, has followed the judgment of the Hon'ble jurisdictional High Court in Li & Fung (India) Pvt. Ltd. vs. CIT (2014), 361 ITR 85 (Del) and held that the assessee is not into buy and sell, rather, it is facilitator/service provider and its compensation model at ALP would not be commission for FOB cost for goods sourced from India, rather, it is entitled to cost plus remuneration and not a commission based remuneration. These observations have been made in para 16 of the Tribunal order, whose copy has been placed on record. 3 ITA No.6340/Del/2017 Thereafter, in para 20, the Tribunal restored the matter to the TPO with a direction to find out proper comparables and determine the ALP of the international transaction afresh. Similar view has been taken by the Tribunal in assessee's own case for assessment year 2012-13, being the immediately preceding assessment year. A copy of such order dated 13.06.2017 in ITA No.929/Del/2017 has been placed on record.
4. The ld. DR, though supported the impugned order, but, candidly accepted that the facts and circumstances of the instant year are mutatis mutandis similar to those of the preceding years. Respectfully following the precedent, we set aside the impugned order and remit the matter to the file of Assessing Officer/TPO for a fresh determination of the ALP of the international transactions in the light of the directions given by the Tribunal in its order for the earlier years referred to above. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings.
4 ITA No.6340/Del/2017
5. The only other ground raised in this appeal against not allowing of depreciation on computer peripherals was not pressed by the ld. AR. The same is, therefore, dismissed as not pressed.
6. In the result, the appeal is partly allowed for statistical purposes.
The order pronounced in the open court on 11.04.2018.
Sd/- Sd/-
[SUCHITRA KAMBLE] [R.S. SYAL]
JUDICIAL MEMBER VICE PRESIDENT
Dated, 11th April, 2018.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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