Income Tax Appellate Tribunal - Pune
Demag Cranes & Components (India) P. ... vs Assistant Commissioner Of ... on 7 June, 2017
आयकर अपील�य अ�धकरण "बी" �यायपीठ पुणे म� ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
�ी डी. क�णाकरा राव, लेखा सद�य, एवं �ी �वकास अव�थी, �या�यक सद�य के सम�
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY,JM
आयकर अपील सं. / ITA No. 521/PUN/2015
�नधा�रण वष� / Assessment Year : 2010-11
Terex India Private Limited.
[ Successor of Demag Cranes &
Components (India) Private Limited.]
Gat No. 330,332,333,334, Nanekarwadi,
Chakan, Taluka Khed
Pune-410 501
PAN : AABCM9351Q
.......अपीलाथ� / Appellant
बनाम / V/s.
Assistant Commissioner of Income Tax,
Circle-1(2),
Pune.
......��यथ� / Respondent
Assessee by : Shri M.P Lohia &
Shri Hemen Chandariya
Revenue by : Shri Vinod Kumar
सुनवाई क� तार�ख / Date of Hearing : 01.06.2017
घोषणा क� तार�ख / Date of Pronouncement : 07.06.2017
आदे श / ORDER
PER VIKAS AWASTHY, JM
This appeal by the assessee is directed against the assessment order dated 27.02.2015 passed u/s 143(3) r.w.s 144C (13) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the assessment year 2010-11.
2ITA No. 521/PUN/2015
A.Y.2010 -11
2. The assessee company is engaged in manufacturing of material handling equipments. The activities of the assessee are classified in three segments viz. manufacturing, trading and service. The issue in present appeal is with respect to manufacturing activity. During the period relevant to assessment year under appeal, the assessee had entered into various international transactions with its AEs. Therefore, reference u/s 92CA of the Act was made to the Transfer Pricing Officer for determination of arm's length price of the transactions reported in Form- 3CEB filed by the assessee. To benchmark the transactions the assessee applied Transactional Net Margin Method (TNMM). The assessee selected four companies as comparables with average margin of 5.94%. The Transfer Pricing Officer added two more companies in the list of comparables i.e Elecon Engineering Company Pvt. Ltd. and W.M.I Cranes Ltd. The Transfer Pricing Officer computed average PLI of comparables as 12.29% against PLI of the assessee company at 1.91%. The Transfer Pricing Officer made upward adjustment of Rs. 10,51,05,420/- in respect of international transactions pertaining to manufacturing segment.
3. Aggrieved by the adjustment made by Transfer Pricing Officer, the assessee filed objection before the Dispute Resolution Panel (DRP) inter alia challenging inclusion of companies i.e Elecon Engineering Company Pvt. Ltd. and W.M.I Cranes Ltd. in the list of comparables by the TPO. The assessee further prayed for exclusion of T.R.F Ltd from the list of comparables on account of misstatements in the annual report of the said company. The DRP vide directions dated 26.12.2014 rejected the objections raised by the assessee for excluding aforesaid companies from the list of comparables. Based on the directions of DRP, impugned assessment order was passed by the Assessing Officer. Now the assessee 3 ITA No. 521/PUN/2015 A.Y.2010 -11 is in appeal before the Tribunal assailing the findings of authorities below. The assessee has raised as many as nine grounds in the appeal.
4. Shri M.P Lohia and Shri Hemen Chandariya appearing on behalf of the assessee stated at the Bar that he is not pressing grounds No. 1,2,4,5 & 6. Thus, the grounds which open for adjudication before the Tribunal are as under :
"3. Selection of inappropriate comparable companies without conducting a structured search: The DRP erred in accepting certain non-comparable companies.
7. Non grant of credit for taxes deducted at source: The DRP has erred in not granting credit for taxes deducted at source of Rs. 40,11,150/-
8. Erroneous levy of interest under section 234B of the Act : The DRP has erred in levying interest under section 234B of the Act.
9. Initiation of penalty proceedings under section 271(1) (c) of the Act : The DRP has erred in initiating penalty proceedings under section 271(1) (c) of the Act."
4.1 The ld. AR of the assessee submitted that the assessee is seeking exclusion of W.M.I Cranes Ltd and T.R.F Ltd from the list of comparables. W.M.I Cranes Ltd. is not a good comparable as extraordinary events i.e Demerger had taken place in the Financial Year 2009-10. The ld. AR contended that this fact was brought to the notice of authorities below. The Transfer Pricing Officer rejected the contention of the assessee on the ground that the period involved in post demerger is only three months, as demerger had taken place on 18.12.2009. Prior to the date of demerger, operations of the said company were not affected by demerger. The ld. AR pointed that the findings of Transfer Pricing Officer are against the facts. The ld. AR referred to Annual Report of W.M.I Cranes Ltd for Financial Year 2009-10 at page No. 383 of the paper book. The ld. AR further pointed that in the Director's Report it has been clearly mentioned that Hon'ble High Court of Judicature, Bombay has approved Demerger application of W.M.I Cranes Ltd w.e.f 1st 4 ITA No. 521/PUN/2015 A.Y.2010 -11 September, 2009. After demerger, turnover of the company has increased from Rs.1562 milions in the immediately preceding Financial Year to Rs.1711 milions in Financial Year 2009-10. Whereas, gross profit before depreciation and interest has decreased from Rs.389.83 milions in the immediately preceding Financial Year to Rs. 387.25 milions in financial year 2009-10. On account of extraordinary events i.e the demerger, the financial results of the company does not show true picture of performance of the company. Therefore, W.M.I Cranes Ltd should be excluded from the list of comparables.
4.2 The ld. AR placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of Cummins Turbo Technologies Limited Vs. Deputy Commissioner of Income Tax, in ITA No. 593/PUN/2015, assessment year 2010-11, decided on 28.12.2016 to emphasis that the company having extraordinary events during the relevant period should not be considered as good comparable.
4.3 The ld. AR submitted that if W.M.I Cranes Ltd. is excluded from the list of comparables, the assessee would fall within +/- 5% range, as arithmetic means of the comparables would be 3.20 % as against the operating margin of the assessee at 2.16%.
4.4 The ld. AR submitted that T.R.F Ltd was included in the list of comparables by the assessee. Subsequently, it transpired that the company had given wrong information in the Annual Report which is available in public domain. Therefore, the said company is also liable to be excluded from the list of comparables.
5. On the other hand, Shri Vinod Kumar representing the Department vehemently supported the findings of DRP and the 5 ITA No. 521/PUN/2015 A.Y.2010 -11 assessment order. The ld DR. contended that the impugned order is well reasoned and prayed for dismissing the appeal of assessee.
6. We have heard the submissions made by representatives of rival sides and have perused the order of authorities below. The only issue raised by the ld. AR of the assessee before us is with regard to exclusion of W.M.I Cranes Ltd and T.R.F Ltd. from the list of comparables. The assessee is seeking exclusion of W.M.I Cranes Ltd. from the list of comparables on account of extraordinary events viz. Demerger. A perusal of Director's Report of the said company at page No. 386 of the paper book shows that there was demerger of W.M.I Cranes Ltd w.e.f 1st September, 2009. On account of demerger, there were aberrations in the financial result of the said company. The Co-ordinate Bench of the Tribunal in the case of Cummins Turbo Technologies Limited Vs. Deputy Commissioner of Income Tax (supra) has held that where extraordinary events such as acquisitions, amalgamation, merger or demerger had taken place during the period under consideration the said company should not be considered as good comparable. While coming to such a conclusion, reliance was also placed on the decision rendered in the case of Aptara Technologies Private Limited Vs. Assistant Commissioner of Income Tax (ACIT) in ITA No. 259/PUN/2015 for assessment year 2010- 11 decided on 31.05.2016, wherein similar proposition was laid down by the Tribunal.
7. Thus, in view of the facts of the case and the decisions of Co- ordinate Bench of the Tribunal, we find merit in the submission of the assessee. Accordingly, we direct the Assessing Officer/Transfer Pricing Officer to exclude W.M.I Cranes Ltd from the list of final comparables. The ld. AR has pointed that after exclusion of W.M.I Cranes Ltd., 6 ITA No. 521/PUN/2015 A.Y.2010 -11 arithmetic mean of comparable companies would fall within +/- 5% range. Thus, in view of the statement made by ld. AR of the assessee, we are of the view that submissions made by ld. AR regarding exclusion of T.R.F Ltd. from the list of comparables has become academic. Therefore, we do not deem it necessary to take up the issue of exclusion of said company from comparables for adjudication. Accordingly, ground No. 3 raised by the assessee is partly allowed.
8. In ground No. 7, the assessee has assailed the findings of DRP in not granting credit of tax deducted at source. Without going into the merits of the issue, we direct the Assessing Officer to examine the cliam of assessee and if the assessee is found eligible for the benefit of TDS, if any, the same may be allowed, in accordance with law. Accordingly, ground No. 7 is allowed for statistical purposes.
9. In ground No. 8, the assessee has assailed the findings of Assessing Officer in levying interest under section 234B of the Act. Interest u/s 234B of the Act is mandatory and consequential; accordingly, the ground No. 8 is dismissed.
10. In ground No. 9, the assessee has assailed the findings of DRP in initiating penalty proceedings under section 271(1)(c) of the Act. The ground raised by the assessee is premature. Hence, the same is dismissed, as such.
11. In the result, appeal of the assessee is partly allowed in the aforesaid terms.
Order pronounced on Wednesday, the 7th day of June, 2017.
Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /Vikas Awasthy) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 7th June, 2017. 7 ITA No. 521/PUN/2015 A.Y.2010 -11 SB
आदे श क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
1. अपीलाथ� / The Appellant.
2. ��यथ� / The Respondent.
3. The CIT(A)-11, Pune.
4. The CIT-11, Pune.
5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, "बी" ब�च, पुणे / DR, ITAT, "B" Bench, Pune.
6. गाड� फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, सहायक पंजीकार /Assistant Registrar आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.