DCIT, New Delhi v. M/s. Alcatel South Asia Ltd., Gurgaon

ITA 1615/DEL/2012 | 2004-2005
Pronouncement Date: 25-11-2014 | Result: Allowed

Appeal Details

RSA Number 161520114 RSA 2012
Assessee PAN AACCA8667N
Bench Delhi
Appeal Number ITA 1615/DEL/2012
Duration Of Justice 2 year(s) 7 month(s) 20 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Alcatel South Asia Ltd., Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted I
Tribunal Order Date 25-11-2014
Date Of Final Hearing 04-09-2014
Next Hearing Date 04-09-2014
Assessment Year 2004-2005
Appeal Filed On 04-04-2012
Judgment Text
I.T.A. NO.: 1615/DEL/12 ASSESSMENT YEAR 2004 - 05 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI I BENCH NEW DELHI [CORAM: PRAMOD KUMAR (ACCOUNTANT MEMBER) AND C . M . GARG (JUDICIAL MEMBER) ] I.T.A. NO .: 1615 /DEL/12 ASSESSMENT YEAR 2004 - 05 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) NEW DELHI .APPELLANT VS. AL CATEL SOUTH ASIA LIMITED . RESPONDENT (NOW KNOWN AS ALCATEL LUCENT INDIA PVT LTD) 15 TH FLOOR TOWER CYBER GREEN DLF CITY PHASE III GURGAON 122 004 PAN: AACCA8667N APPEARANCES BY: YOGESH KUMAR VERMA FOR THE A PPELLANT HIMANSHU SHEKHAR SINHA FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 31 ST JANUARY 2012 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2004 - 05 . 2. GRIEVANCE RAISED BY THE ASSESSING OFFICER IS THAT THE CIT(A) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION ON ACCOUNT OF THE ARMS LENGTH P RICE. I.T.A. NO.: 1615/DEL/12 ASSESSMENT YEAR 2004 - 05 PAGE 2 OF 4 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEVER WE DECIDE IN THE CASE OF DCIT VS ALCATEL INDIA LIMITED (ITA NO. 962/DEL/12; ASSESSMENT YEAR 2003 - 04) WHICH WE HAD HEARD ALONG WITH THIS APPEAL WILL APPLY MUTATIS MUTANDIS IN THIS APPEAL AS W ELL AS MATERIAL FACTS AND CIRCUMSTANCES OF THE CASE IS THE SAME. 4. VIDE OUR ORDER OF EVEN DATE WE HAVE IN THE CASE OF ALCATEL INDIA LTD (SUPRA) HELD AS FOLLOWS: 3. TO ADJUDICATE ON THIS APPEAL ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF ALACTEL FRANCE AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DISTRIBUTION OF TELECOM EQUIPMENT AND RENDERING OF SERVICES. DURING THE RELEVANT FINANCIAL PERIOD THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIO NAL TRANSACTIONS WITH ITS AES. THE ASSESSEES BUSINESS IS IN VARIOUS SEGMENTS NAMELY (A) MANUFACTURING (B) TRADING. (C) SOFTWARE (D) TECHNICAL SERVICES (E) INFO GATHERING (F) MARKETING AND (G) OTHERS. WHILE (A) (C) (D) (E) (F) SEGMENTS WERE DOING BUS INESS ONLY WITH AES AND SEGMENT (G) WAS DOING BUSINESS WITH NON AES I.E. INDEPENDENT ENTERPRISES IN SEGMENT (B) I.E. TRADING THE ASSESSEE WAS DOING BUSINESS WITH THE AES AS WELL AS NON AES. IN THE COURSE OF PROCEEDINGS BEFORE THE TPO THE TRANSFER PRI CING APPROACH OF THE ASSESSEE SO FAR AS MANUFACTURING SEGMENT WHEREIN THE ASSESSEE HAD USED CUP AND TNMM AND TRADING SEGMENT WHERE THE ASSESSEE HAD EMPLOYED RPM WAS REJECTED. THE TPO ADOPTED THE TNMM IN RESPECT OF THESE SEGMENTS. IT IS NOT REALLY NECES SARY TO REFER TO THE REASONS OF REJECTING THE METHODS OF ASCERTAINING THE ALP AS EMPLOYED BY THE ASSESSEE AS THERE IS NO DISPUTE NOW ON THAT ASPECT OF THE MATTER. THE ISSUE IN DISPUTE IS WITH REGARD TO THE PROFITABILITY OF THE NON AE SEGMENTS. IN THE CO URSE OF APPLYING THE TNMM AND PREPARATION OF SEGREGATED RESULTS FOR MANUFACTURING AND TRADING ACTIVITY THE TPO REDUCED THE COMPONENTS RELATABLE TO ENTIRE SEGMENT (C) (D) (E) AND (F) FROM OVERALL PROFITS. WHAT WAS THUS LEFT OUT WAS PROFITS OF SEGMENT (A) PROFITS OF SEGMENT (B) AND PROFITS OF SEGMENT (G) ON WHICH PLI AS PER THE TNMM WAS APPLIED. THE ASSESSEE WAS AGGRIEVED OF THIS COMPUTATION INASMUCH AS WHILE SEGMENT (A) CONSISTED OF ALL INTRA AE TRANSACTIONS SEGMENT (B) PARTLY CONTAINED THE TRANSACTIONS W ITH NON AES EVEN ON WHICH TNMM WAS APPLIED AND SEGMENT (G) WHICH ONLY HAD TRANSACTIONS WITH NON AES ON WHICH ALSO THE TNMM WAS APPLIED. THE CONTENTION OF THE ASSESSEE WAS THAT TNMM CANNOT BE APPLIED IN RESPECT OF TRANSACTIONS WITH NON AES. IN APPEAL THE CIT(A) HAS ACCEPTED THIS CONTENTION AND RESTRICTED THE TNMM APPLICATION ONLY IN RESPECT OF THE INTERNATIONAL TRANSACTIONS WITH THE AES. ITS ON THIS BASIS THAT THE IMPUGNED RELIEF OF RS 19 32 00 000 HAS BEEN GIVEN. THE ASSESSING OFFICER IS NOT SATISFIED A ND IS IN APPEAL BEFORE US. I.T.A. NO.: 1615/DEL/12 ASSESSMENT YEAR 2004 - 05 PAGE 3 OF 4 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. IN PRINCIPLE THE ISSUE IS NO LONGER RES INTEGRA . IT IS WELL SETTL ED LEGAL POSITION THAT THE ALP ADJUSTMENTS CAN ONLY BE MADE IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH THE AES AND CANNOT EXTEND TO THE TRANSACTIONS WITH NON AES. THERE ARE LARGE NUMBER DECISIONS OF THE COORDINATE BE NCHES INCLUDING IN THE CASE OF ALST OM PROJECTS INDIA LTD VS ACIT [26 ITR (TRIB) 322] HOLDING SO. IN THE CASE OF CIT VS STRATEX NETWORKS INDIA PVT LTD (354 ITR 304) HONBLE JURISDICTIONAL HIGH COURT HAS ALSO ACCEPTED THIS POSITION. LEARNED DEPARTMENTAL REPRESENTATIVE EVEN AS VEHEMENTLY RE LYING UPON THE STAND OF THE TPO DOES NOT DISPUTE THIS LEGAL POSITION BUT HE CONTENDS THAT THE FACTUAL ELEMENTS EMBEDDED IN THIS CONTENTION AT LEAST ON COMPUTATION ASPECT NEED TO BE VERIFIED BY THE TPO. THAT IS ONLY ARITHMETICAL PART GIVING EFFECT TO THI S PRINCIPLE. WE SEE NO HARM IN THIS EXERCISE. 6. IN VIEW OF THE ABOVE DISCUSSIONS WE DEEM IT FIT AND PROPER TO UPHOLD THE STAND OF THE CIT(A) IN PRINCIPLE BUT REMIT THE MATTER FOR THE LIMITED PURPOSES OF VERIFYING THE COMPUTATION OF EXCLUDING TRANSACTIO NS WITH NON - AES IN CALCULATING THE ALP REQUIRED TO BE MADE UNDER THE TNMM METHOD. TO THIS EXTENT THE MATTER IS RESTORED TO THE FILE OF THE TPO. 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US. RESPECTFULLY FOLLOW ING THE SAME WHILE WE UPHOLD THE STAND OF THE CIT(A) IN PRINCIPLE WE REMIT THE MATTER TO THE FILE OF THE TPO FOR LIMITED FACTUAL VERIFICATION ON THE LINES AS ABOVE. TO THIS LIMITED EXTENT THE MATTER STANDS RESTORED TO THE FILE OF THE TPO. 6 . IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCE D IN THE OPEN COURT TODAY ON 25 TH DAY OF NOVEMBER 2014. SD/XX SD/XX C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI 25 TH DAY OF NOVEMBER 2014 I.T.A. NO.: 1615/DEL/12 ASSESSMENT YEAR 2004 - 05 PAGE 4 OF 4 COPIES TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME T AX APPELLATE TRIBUNAL ACT DELHI BENCHES NEW DELHI