CG Actaris Electricity Management Pvt. Ltd., New Delhi v. ACIT, New Delhi

ITA 4627/DEL/2011 | 2007-2008
Pronouncement Date: 23-10-2013 | Result: Allowed

Appeal Details

RSA Number 462720114 RSA 2011
Assessee PAN ANRPS7986B
Bench Delhi
Appeal Number ITA 4627/DEL/2011
Duration Of Justice 2 year(s) 4 day(s)
Appellant CG Actaris Electricity Management Pvt. Ltd., New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 23-10-2013
Date Of Final Hearing 23-10-2013
Next Hearing Date 23-10-2013
Assessment Year 2007-2008
Appeal Filed On 19-10-2011
Judgment Text
I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I BENCH NEW DELHI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER AND SHRI C.M. GARG JUDICIAL MEMBER ITA NOS. 4627/DEL/2011 & 6107/DEL/2012 A.YRS. : 2007-08 & 2008-09 M/S ITRON METERING SOLUTIONS INDIA PVT. LTD. (FORMERLY KNOWN AS CG ACTARIS ELECTRICITY MANAGEMENT PRIVATE LIMITED) 507 BHIKAJI CAMA BHAVAN NEW DELHI 110 066 (PAN : ANRPS7986B) VS. D CIT CIRCLE - 3 (1) NEW DELHI ASSESSEE BY : SH. VISHAL KALRA & MS. VRINDA TULSHAN ADVOCATES. DEPARTMENT BY : SH. PEEYUSH JAIN CIT(DR) & SH. YOGESH KUMAR VERMA CIT(DR) ORDER ORDER ORDER ORDER PER PER PER PER BENCH BENCH BENCH BENCH THESE APPEALS FILED BY ASSESSEE ARE DIRECTED AGAIN ST THE ORDERS OF THE LD. ASSESSING OFFICER PASSED U/S. 143(3)/144 C OF THE I.T. ACT FOR THE ASSTT. YEAR 2007-08 & 2008-09 RESPECTIVELY. 2. AT THE THRESHOLD WE NOTE THAT ONE COMMON GROUND RAISED IN THESE APPEALS BY THE ASSESSEE IS THAT LD. DRP ERRED IN LAW AND ON FACTS BY SUMMARILY REJECTING THE APPELLANTS OBJECTI ONS AND DISREGARDING THE MATERIAL PLACED ON RECORD THEREBY N OT FOLLOWING THE PROCEDURE LAID DOWN U/S. 144C(5) 144C(6) & 144C(7) OF THE I.T. ACT. I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 2 3. M/S ITRON METERING SOLUTIONS INDIA PRIVATE LIMITED ( FORMERLY KNOWN AS CG ACTARIS ELECTRICITY MANAGEMENT PRIVAT E LIMITED) WAS INCORPORATED ON JANUARY 1 1993 AS A 51:49 JOINT VEN TURE BETWEEN SCHLUMBERGER INDUSTRIES FRANCE AND CROMPTON GREAVES LIMITED TO MANUFACTURE AND TRADE IN ELECTRICITY METERS. THE ASSE SSEE IS PRIMARILY ENGAGED IN TRADING OF ELECTRICITY METERS. IT IMPORTS ELECTRICITY METERS FROM ITS ASSOCIATED ENTERPRISES FOR RESALE TO THIRD PARTIES IN INDIA. THE ASSESSEE WAS ENGAGED IN THE FOLLOWING INTERNATIONA L TRANSACTIONS:- - PURCHASE OF ELECTRICITY METERS FOR RESALE; - AVAILING OF MANAGEMENT SERVICES; - PAYMENT OF INTEREST ON EXTERNAL COMMERCIAL BORROW INGS; AND - REIMBURSEMENT OF EXPENSES. 3.1 FOR ASSTT. YEAR 2007-2008 THE TPO MADE AN ADJUST MENT OF RS. 43 91 757/- U/S. 92CA. FURTHERMORE FOR ASSTT. YEAR 2008-09 THE TPO MADE AN ADJUSTMENT OF RS. 3 16 71 377/- U/S. 92CA. T HE ASSESSEES OBJECTIONS BEFORE THE LD. DRP WERE REJECTED AND LD. DRP AFFIRMED THE ACTION OF THE LD. TPO. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE AGAINST TH E ABOVE ORDERS. 5. VARIOUS GROUNDS OF APPEAL HAS BEEN RAISED. ONE COMMON GROUND RAISED IS THAT LD. DRP ERRED IN LAW AND ON FACTS BY SUMMARILY REJECTE D THE APPELLANTS OBJECTIONS AND DISREGARDING THE MATER IAL PLACED ON RECORD THEREBY NOT FOLLOWING THE PROCEDURE LAID DOW N U/S. 144C(5) 144C(6) & 144C(7) OF THE I.T. ACT. SINCE THE FACTS ARE IDENTICAL WE I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 3 ARE ADJUDICATING THIS ISSUE RAISED IN THE APPEALS W ITH REFERENCE TO THE FACTS OF ASSTT. YEAR 2008-09. 5.1 IN THE YEAR ENDED MARCH 31 2008 THE ASSESSEE E ARNED A GPM OF 13.38% (AFTER CONSIDERING THE DIRECT EXPENSES). CO NSIDERING FUNCTIONAL AND RISK PROFILE AND THE COMPARABLE DATE OF FIVE COMPANIES RPM USING GROSS PROFIT MARGIN (GPM) AS PLI WAS SELECTED AS THE MOST APPROPRIATE METHOD BY THE ASSESSEE. THE WEIGHTED G PM OF COMPARABLES COMPUTED BY ASSESSEE AND SUBMITTED TO TPO RANGED FROM 3.49% TO 29.34% WITH AN ARITHMETIC MEAN OF 14.14% A S AGAINST 13.38% OF THE ASSESSEE FOR THE YEAR ENDING 31.3.200 8. THUS IT WAS CONCLUDED BY THE ASSESSEE THAT ITS INTERNATIONAL TR ANSACTION RELATING TO IMPORT OF ELECTRICITY METERS FOR RESALE IS AT THE AR MS LENGTH. 5.2 THE ASSESSEE ALSO AVAILED MANAGEMENT SERVICES FR OM ITS ASSOCIATED ENTERPRISES AS PART OF INTRA GROUP SERVI CES. THE FEE WAS CHARGED ON BASIS OF COST ALLOCATIONS BASED ON TURNO VER WITH AN APPROPRIATE MARK UP. CONSIDERING THE FUNCTIONAL AND RISK PROFILE OF THIS TRANSACTION AND THE AVAILABLE COMPARABLE DATA ASS ESSEE CHOSE THE TNMM WITH NET OPERATING PROFIT MARGIN BASED ON COST (N CP) AS THE PLI AS THE MOST APPROPRIATE METHOD. FURTHER FOR THE PURPOSES OF TESTING THE ARMS LENGTH NATURE OF THE INTERNATIONAL TRANSACTIONS RELATING TO RECEI PT OF MANAGEMENT SERVICES THE OVERSEAS ASSOCIATED ENTERPR ISES WERE TAKEN AS THE TESTED PARTIES BY THE ASSESSEES AND A SEARCH WAS CONDUCTED ON AN INTERNATIONAL DATABASE ONESOURCE GLOBAL BUSINESS BROWSER (IN THE EUROPEAN REGION). THIS SE ARCH YIELDED A SET OF 12 COMPANIES PROVIDING SERVICES THAT ARE BRO ADLY COMPARABLE TO THE MANAGEMENT SERVICES RECEIVED BY ASS ESSEE. I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 4 THEIR ARITHMETIC MEAN WAS 13.61%. SINCE ASSESSEE HAD PAID AE S @ OF 6.567% OVER THEIR ALLOCATED COSTS AND SINCE THE MARK UP WAS MUCH LOWER THAN AL RATE IN EUROPE OF OTHER MANA GEMENT PROVIDERS IT WAS CONSIDERED AT ARMS LENGTH BY THE ASSESSEE. 5.3 THE ASSOCIATED ENTERPRISES OF ASSESSEE INCURRED CERTAIN EXPENSES ON BEHALF OF THE ASSESSEE. SUCH EXPENSES WERE IN R ELATION TO TRAVEL TESTING CHARGES REPAIR OF METERS AND BANK GUARANTEE COSTS. ACCORDING TO THE ASSESSEE SINCE THESE WERE PURE REIMBURSEMENT WITHOUT ANY MARK-UP IN CONSIDERATION OF SECTION 92(3) OF THE AC T AND CIRCULAR 14/2001 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) SAME WERE CONSIDERED TO BE IN COMPLIANCE WITH THE ARMS L ENGTH PRINCIPLE. 5.4 TPO DID NOT ACCEPT THE METHODOLOGY ADOPTED BY TH E ASSESSEE FOR BENCHMARKING OF ITS INTERNATIONAL TRANSACTIONS AND S UBSEQUENTLY MADE AN UPWARD ADJUSTMENT OF INR 31 671 377/- TO THE TOTAL INCOME OF THE ASSESSEE. S.NO. DESCRIPTION OF TRANSACTION METHOD VALUE (IN RS.) 1. IMPORT OF ELECTRICITY METERS RPM 305 845 912 2. AVAILING OF MANAGEMENT SERVICES TNMM 6106853 3. INTEREST OF EXTERNAL COMMERCIAL CUP 23051 42 BORROWINGS 4. INTEREST OF ECB CUP 4370153 TPO REJECTED RPM AS THE MOST APPROPRIATE METHODOLOGY FO R THE BENCHMARKING OF INTERNATIONAL TRANSACTION OF PUR CHASE OF ELECTRICITY METERS AND THEIR SUBSEQUENT RE-SALE. I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 5 6. AGAINST THE ABOVE ORDER OF THE LD. TPO ASSESSEE FILED COMPREHENSIVE OBJECTIONS AND SUBMITTED VARIOUS DETAIL S BEFORE THE LD. DRP CONTESTING THE ACTION OF THE LD. TPO. THE LD. DRP DID NOT DEAL WITH THE ASSESSEES OBJECTIONS AND THE DETAILS AND DOCUMENTS SUBMITTED BEFORE IT. IT REFERRED TO THE TPOS OBSERV ATIONS AND SUMMARILY REJECTED THE ASSESSEES OBJECTION AND AFFIR MED THE ACTION OF THE TPO. 7. NOW WE FIND THAT THE ASSESSEE IS PLEADING THAT L D. DRP SHOULD HAVE PASSED A PROPER AND SPEAKING ORDER DEALING WIT H THE OBJECTIONS AND SUBMISSIONS OF THE ASSESSEE. IN THIS REGARD LD . COUNSEL OF THE ASSESSEE REFERRED TO THE DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF VODAFONE ESSAR LTD. VS. DRP & O THERS 340 ITR 353 (DEL.) WHEREIN IT WAS HELD THAT WHEN A QUASI-JUDICIAL AUTHORITY DEALS WITH A LIS IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL OF THE MAT TER. AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORD ER IS CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. THE ORDER DATED SEPTEMBER 30 2010 PASSED BY THE DIS PUTE RESOLUTION PANEL WAS QUASHED AND THE MATTER WAS REMAN DED TO THE SAME AUTHORITY TO ADJUDICATE AFRESH. I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 6 8. REFERRING TO THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT TH E MATTER IN THESE CASES SHOULD BE REMITTED BACK TO THE FILE OF THE LD . DRP TO CONSIDER THE DETAILS SUBMISSIONS AND OBJECTIONS OF THE ASSES SEE AND PASS A SPEAKING ORDER. LD. COUNSEL IN THIS REGARD FURTHER SUBMITTED THAT THE DRP SHOULD BE DIRECTED TO CONSIDER THE VARIOUS CASE LAWS ON THE IMPUGNED SUBJECT WHICH HAVE COME RECENTLY. 9. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT REBUT T HIS CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE. HOWEVER HE SUBMITTED THAT IF THE MATTER IS REMITTED TO THE FILE OF THE LD. DRP IT SHOULD BE AN UNFETTERRED DIRECTION TO THE LD. DRP TO CONSIDER THE ISSUE AFRESH. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IT IS A SETTLED LAW THAT APP ELLATE ORDERS EVEN IN ADMINISTRATIVE CASE SHOULD BE CONSISTENT WITH THE R ULE OF NATURAL JUSTICE. IN OUR CONSIDERED OPINION IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE RATIO EMANATING FR OM THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT WE FIND THA T INTEREST OF JUSTICE IN THIS CASE WILL BE SERVED IF THE MATTER IS REMITTED TO THE FILE OF THE LD. DRP. LD. DRP IS DIRECTED TO CONSIDER THE ISSUE AFRESH AND PROPERLY DEAL WITH THE OBJECTIONS AND SUBMISSIONS OF THE ASSESSEE BY WAY OF PASSING A SPEAKING ORDER. NEEDLESS TO ADD THAT THE ASSESS EE SHOULD BE I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 7 GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD AND THE VARIOUS OTHER CASE LAWS WHICH ARE NOW AVAILABLE ON THE SUBJECT SHO ULD BE CONSIDERED BY THE LD. DRP. WE HOLD AND DIRECT ACCORDINGLY. 11. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23/10/2013 U PON CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [C.M. GARG C.M. GARG C.M. GARG C.M. GARG] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 23/10/2013 SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. DIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES I.T.A. NOS. 4627/DEL/2011 & 6107/DEL/2012 8