Income Tax Appellate Tribunal - Delhi
Glencore India Pvt. Ltd., New Delhi vs Acit, New Delhi on 7 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I-1" NEW DELHI
BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI: JUDICIAL MEMBER
ITA no. 5368/Del/2010
Asstt. Yr: 2006-07
Glencore India Pvt. Ltd., Vs. ACIT Circle 12(1),
806, Meghdoot, 94, Nehru Place, New Delhi.
New Delhi.
PAN: AAACG 3787 B
( Appellant ) (Respondent)
Department by : Shri Tarandeep Singh CA
Assessee by : Ms. Archana Sharma Avasthi CIT(DR)
Date of hearing : 26/11/2016.
Date of order : 07/01/2016.
ORDER
PER S.V. MEHROTRA, A.M:
This appeal, preferred by the assessee, is directed against the assessment order dated 12.10.2010 u/s 143(3)/ 144C, pursuant to DRP directions dated 22.9.2010 u/s 144C of the Income-tax Act, 1961. Grounds of appeal raised are as under:
1. That on facts and in law the orders passed by the Assessing Officer [hereinafter referred as the "AO"] / Dispute Resolution Panel [hereinafter referred as the "DRP"] / Transfer Pricing Officer [hereinafter referred as the "TPO"] are bad in law and void ab-initio.2
ITA 5368/Del/2010 1.1 That on facts and in law, the assumption of jurisdiction by the AOITPO/DRP to determine Arm's Length Price is bad in law and void ab-initio.
1.2 That on facts and in law, the DRP erred in rejecting the grounds of objections raised \ before it without recording proper reasons for such rejection and by passing a non speaking order.
2. That on facts and in law the AOIDRP erred in making/upholding an addition of Rs 8,55,92,971/- under Chapter- X of the Income Tax Act, 1961
3. That on facts and in law the DRP erred in upholding the rejection of CUP as the Most Appropriate Method for the purpose of benchmarking the international transactions pertaining to import of pulses.
3.1 That on facts and in law the TPO/DRP also erred in rejecting/ upholding the comparable data furnished by the assessee in form of Secondary CUP.
3.2 That on facts and in law the TPO/DRP erred in holding/upholding that it was not possible to make reasonable adjustments to the CUP data furnished by the assessee.
4. Without prejudice, on facts and in law the TPO/DRP erred in holding/upholding TNMM as the most appropriate method for the purpose of benchmarking the international transactions pertaining to import of pulses.
4.1 That on facts and in law while applying TNMM the TPOIDRP erred in:
(a) not conducting a proper FAR analysis of the comparables selected by him.
(b) not applying proper filters for the purpose of comparable identification.3
ITA 5368/Del/2010
(c) rejecting the comparable data submitted by the assessee vide submissions dated 23rd October 2009.
(d) computing the average operating margins of the comparables at 5.61 % as against 1.76% computed by the assessee.
(e) treating the domestic transactions undertaken by the assessee with unrelated parties as international transactions.
(f) applying the alleged arm's length margin of 5.61 % to a turnover of Rs 160,71,65,7711- (including domestic turnover of pulses).
5. Without prejudice, on facts and in law while applying TNMM the TPOIDRP erred in comparing the operating margins of the assessee with the mean operating margins of the alleged comparables.
6. That without prejudice on facts and in law the AO/DRP erred in not granting the benefit for adjustment of the Arms Length Price ("ALP") by ± as per the proviso to section 92C(2).
7. That on the facts and in law the AO erred in not allowing a deduction on account of
(i) advances written off of Rs 20,245/-.
(ii) club expenses of Rs 55,975/-.
8. That on the facts and circumstances of the case and in law, the AOIDRP erred in charging interest u/s 234B of the Act.
2. Brief facts of the case are that the assessee in the relevant assessment year was engaged in the business of providing consultancy service in commodity resources like coal, crude oil, superior kerosene oil, metals, 4 ITA 5368/Del/2010 grains mainly to Stafford AG and its clients. During the year, it had commenced operations in respect of trading in commodities including futures, through its authorized brokers, at the National Commodities & Derivatives Exchange of India & Multi Commodities & Derivatives Exchange of India under the name 'Glencore Grain India Division'. The assessee had filed return declaring business loss of Rs. 4,80,58,657/-. The AO had made a reference u/s 92CA(1) to ld. TPO to determine ALP in respect of following international transactions undertaken by the assessee with its AEs:
S. No. Description of transaction Value (In Rs.)
1. Import of traded goods 2,219,956,150
2. Export of traded goods 36,618,761
3. Debit note of shortage against purchase 14,297,895
4. Consultancy services 189,395,907
3. Ld. TPO noticed that assessee had used CUP as the most appropriate method for benchmarking international transactions of import and export of traded commodities to and from its AEs. In regard to imparting of consultancy support service to its AEs, assessee had used TNM method and PLI of OP/OE to benchmark international transactions. Ld. TPO, after considering various submissions of assessee, finally concluded that TNMM would be applied for the purpose of bench marking of international transactions. He, accordingly, determined the PBIT/ sales of various comparables in para 10 of his order at 5.61% as against the margin shown by the assessee at .284% and computed the adjustment at Rs. 8,55,92,971/-. The assessee had filed detailed objections and had also advanced submissions before ld. DRP which are placed on record.
5ITA 5368/Del/2010
4. Ld. DRP, however, without considering all these objections and submissions confirmed the ld. TPO's action.
5. The assessee had pointed out that the computation of average operating margins in respect of 15 alleged comparables was factually incorrect. The detailed submissions were filed on various other aspects also but ld. DRP has not at all considered the same. Under such circumstances, we are constrained to set aside the assessment order passed in pursuance to the directions of ld. DRP and restore the matter back to the file of ld. DRP for de novo consideration of assessee's detailed objections/ submissions, filed before ld. DRP. Needless to say that assessee will be provided reasonable opportunity of being heard while disposing of its objections.
6. In the result, assessee's appeal is allowed for statistical purposes. Order pronouncement in open court on 07/01/2016.
Sd/- Sd/- (BEENA PILLAI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/01/2016. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi.