ADVANCE POWER DISPLAY SYSTEMS LTD, MUMBAI v. DCIT CIR 8(1), MUMBAI

ITA 5148/MUM/2014 | 2006-2007
Pronouncement Date: 28-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 514819914 RSA 2014
Assessee PAN AAACA5970G
Bench Mumbai
Appeal Number ITA 5148/MUM/2014
Duration Of Justice 2 year(s) 2 month(s) 16 day(s)
Appellant ADVANCE POWER DISPLAY SYSTEMS LTD, MUMBAI
Respondent DCIT CIR 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted K
Tribunal Order Date 28-10-2016
Assessment Year 2006-2007
Appeal Filed On 11-08-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND RAM LAL NEGI JUDICIAL MEMBER ITA NO. 5148 /MUM/20 14 : (A.Y : 2006 - 07 ) ADVANCE POWER DISPLAY SYSTEMS LTD. UNIT NO. 8 SDF I SEEPZ ANDHERI (E) MUMBAI 400 096 ( APPELLANT ) PAN : AAACA5970G VS. DCIT CIRCLE - 8(1) MUMBAI (RESPONDENT) ASSESSEE BY : SHRI Y.P. TRIVEDI & MS. USHA DALAL REVENUE BY : SHRI N.K. CHAND DATE OF HEARING : 24/10 /2016 DATE OF PRONOUNCEMENT : 28 / 10 /2016 O R D E R PER G.S. PANNU AM : THIS APPEAL BY THE ASSESSEE IS ARISING FROM THE ORDER PASSED BY THE ASSESSING OFFICER GIVING EFFECT TO THE DIRECTIONS OF DISPUTE RESOLUTION PANEL (DRP) DATED 24.03.2014 WHICH HAS BEEN PASSED AS A CONSEQUENCE OF THE ORDER OF TRIBUNAL IN ITA NO. 7504/MUM/2010 DATED 29.11.2013 IN THE CASE OF THE ASSESSEE FOR INSTANT ASSESSMENT YEAR 2006 - 07 ITSELF . THE TRIBUNAL IN ITS ORDER DATED 29.11.2013 (SUPRA) HAD RESTORED THE MATTER TO THE FILE OF DRP WITH CERTAIN DIRECTIONS. THE DRP VIDE ITS ORDER DATED 24.03.2014 DIRECTED THE ASSESSING OFFICER IN TERMS OF PROVISIONS OF SC. 144C(13) OF THE ACT AND T HE ASSESSING OFFICER WHILE 2 ADVANCE POWER DISPLAY SYSTEMS LTD. ITA NO. 5148/MUM/2014 GIVING EFFECT TO THE AFORESAID DIRECTIONS OF DRP VIDE ORDER DATED 12.05.2014 RETAINED AN ADJUSTMENT OF RS.4 22 64 601/ - ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AS AGAINST AN ADDITION OF RS.5 34 00 000/ - MADE AT THE EARLIER STAGE OF ASSESSMENT. NOT BEING SATISFIED WITH THE ORDER OF ASSESSING OFFICER ASSESSEE IS IN APPEAL BEFORE US ASSAILING THE TRANSFER PRICING ADJUSTMENT OF RS.4 22 64 601/ - RETAINED BY THE ASSESS ING OFFICER. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS ALONGWITH THE MEMO OF APPEAL AS WELL AS THREE ADDITIONAL GROUNDS OF APPEAL ALSO AND ALL THE GROUNDS REVOLVE AROUND THE EFFICACY OF THE TRANSFER PRICING ADJUSTMENT OF RS.4 22 64 601/ - RETAINED BY T HE ASSESSING OFFICER ON ACCOUNT OF INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. HOWEVER AT THE TIME OF HEARING LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WOULD BE SATISFIED IF THE FOLLOWING ADDITIONAL GROUND OF APPEAL NO. 2 IS TAKEN - UP FOR CONSIDERATION : - 2. WHILE WRONGLY CALCULATING REVISED PLI OF COMPARABLE NAMELY CIRCUITS SYSTEMS (INDIA) LTD FROM 13.84% TO 14.06% AFTER GIVING EFFECT OF DRP ORDER (DRP HAS DIRECTED TO RECALCULATE PROFITA BILITY OF COMPARABLE FINALLY SELECTED AS PER THE ORDER BY SEEING THAT WHEREVER AN IDENTIFIABLE CLAIM OF DEPRECIATION ON TOOLS & EQUIPMENTS HAS BEEN MADE AS PER SCHEDULE XI RATES THE SAME SHOULD BE ADJUSTED TO BRING IT TO THE RATE OF 10% AND PLI WORKED ACC ORDINGLY) AND 3. ACCORDING TO THE LEARNED REPRESENTATIVE THE ASSESSING OFFICER WHILE PASSING THE IMPUGNED ORDER HAS MADE AN ERROR WHILE CARRYING OUT THE DIRECTIONS OF DRP DATED 24.03.2014 WITH REGARD TO THE ADJUSTMENT TO BE MADE IN THE MARGIN OF COMPARA BLE CONCERNS ON ACCOUNT OF 3 ADVANCE POWER DISPLAY SYSTEMS LTD. ITA NO. 5148/MUM/2014 ACCELERATED DEPRECIATION CLAIMED BY SUCH COMPARABLE CONCERNS. IN THIS REGARD OUR ATTENTION HAS BEEN DRAWN TO PARA 10 OF THE ORDER OF DRP DATED 24.03.2014 WHICH READS AS UNDER : - 10. AS REGARDS THE CLAIM OF ADJUSTMENT FOR ACCE LERATED DEPRECIATION THE ASSESSEE HAS REFERRING TO NOTE 1(II) OF NOTES TO ACCOUNT IN SCHEDULE Q CLAIMED BEFORE US THAT IN ITS ACCOUNTS DEPRECIATION HAS BEEN PROVIDED FOR CERTAIN ITEMS AT RATES DIFFERENT THAN THE SCHEDULE XIV RATES. IT CLAIMED THAT FOR CERTAIN TOOLS AND EQUIPMENTS AND PLANT AND MACHINERY DEPRECIATION HAS BEEN CLAIMED AT 10% INSTEAD OF 5.38%. THE ASSESSEE CLAIMED THAT IN THE CASE OF THE COMPARABLES TAKEN BY THE TPO THE RATES OF DEPRECIATION ADOPTED BY THEM ARE AS PER SCHEDULE XIV RATE S AND HENCE AN ADJUSTMENT IS WARRANTED ON THIS ACCOUNT. IN THIS REGARD THE ASSESSEE HAS WORKED OUT THE EXTRA DEPRECIATION CHARGED DUE TO DIFFERENCE IN THE RATE OF DEPRECIATION OF TOOLS AND EQUIPMENTS AT RS.74 47 695/ - . 10.1 WE HAVE PERUSED THE BALANCE S HEETS OF THE COMPARABLES AND FIND THAT ALL THE COMPARABLES HAVE APPLIED SCHEDULE XIV RATES FOR WORKING OUT DEPRECIATION IN THEIR ACCOUNTS. THIS FACT HAS ALSO NOT BEEN DISPUTED BY THE TPO IN HIS ORDER. FURTHER ON THE BASIS OF ANNUAL ACCOUNTS OF THE ASSES SEE IT IS AN ESTABLISHED FACT THAT IT HAS CHARGED DEPRECIATION FOR CERTAIN TOOLS AND EQUIPMENTS @ 10% INSTEAD OF 5.38%. THOUGH IN ASSESSMENT YEAR 2009 - 10 THIS PANEL HAS TAKEN A DIFFERENT VIEW ON THE ISSUE OF ADJUSTMENT IN THE ASSESSEES CASE WE FIND TH AT THE HONOURABLE ITAT IN THE CASE OF THE ASSESSEE FOR AY 2008 - 09 (CONSOLIDATED ORDER PASSED WITH AY 2006 - 07) HAS INTERPRETED RULE 10B TO HOLD THAT ADJUSTMENTS CAN ONLY BE MADE IN THE CASE OF THE COMPARABLES AND NOT IN THE CASE OF THE TESTED PARTY. ACCOR DINGLY THE TPO IS DIRECTED TO RECALCULATE THE PROFITABILITY OF ALL THE COMPARABLES FINALLY SELECTED AS PER THIS ORDER TO SEE THAT WH ER EVER IN THE CASE OF COMPARABLES AN IDENTIFIABLE CLAIM OF DEPRECIATION ON TOOLS AND EQUIPMENTS HAS BEEN MADE AS PER THE SCHEDULE XIV RATES THE SAME SHOULD BE ADJUSTED TO BRING IT TO THE RATE OF 10% AND PLI WORKED OUT ACCORDINGLY. THE TPO IS DIRECTED ACCORDINGLY TO WORK OUT THE NET 4 ADVANCE POWER DISPLAY SYSTEMS LTD. ITA NO. 5148/MUM/2014 PROFIT MARGIN OF THE COMPARABLES AND THEREAFTER WORK OUT THE NECESSARY ADJUSTMENTS. 4. THE LEARNED REPRESENTATIVE FURTHER SUBMITTED THAT ASSESSEE WOULD BE SATISFIED IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER/TPO FOR WORKING OUT THE CORRECT ADJUSTMENT IN THE MARGIN OF COMPARABLES ON ACCOUNT OF ACCELERATED DEPRECIATION. A T THE TIME OF HEARING THE LEARNED REPRESENTATIVE FOR THE ASSESSEE ALSO FURNISHED AN ILLUSTRATIVE CHART SHOWING THE CORRECTED CALCULATION OF PROFIT MARGIN OF COMPARABLES AFTER MAKING ADJUSTMENT FOR ACCELERATED DEPRECIATION AS PER DRP DIRECTIONS WHICH ACCO RDING TO HIM IS IN VARIATION WITH THE CALCULATION DONE BY TPO/ASSESSING OFFICER WHILE GIVING EFFECT TO THE DIRECTIONS OF DRP DATED 24.03.2014. 5. ON THE AFORESAID LIMITED PLEA OF ASSESSEE THE LD. DR APPEARING FOR THE REVENUE HAD NO OBJECTION AND ACCORDIN G TO HIM THE MATTER CAN BE SENT BACK TO ASSESSING OFFICER/TPO FOR PROPER VERIFICATION. 6. IN VIEW OF THE AFORESAID CONVERGENCE OF RIVAL STANDS THE CAPTIONED APPEAL IS DISPOSED OF BY ADVERTING TO THE AFORESAID LIMITED PLEA OF ASSESSEE BASED ON THE ABOVES TATED GROUND OF APPEAL. OSTENSIBLY THE DRP HAD APPRECIATED THAT THE MARGIN OF ASSESSEE HAS BEEN CALCULATED AFTER DEBITING OF DEPRECIATION AT RATE S DIFFERENT THAN THE RATE S PRESCRIBED IN SCHEDULE XIV OF COMPANIES ACT 1956 WHICH WAS FOLLOWED BY THE COMPA RABLE CONCERNS WHILE CALCULATING THEIR MARGINS. THEREFORE THE DRP DIRECTED THAT WHEREVER THE COMPARABLE CONCERNS HAVE APPLIED THE RATE S PRESCRIBED IN SCHEDULE XIV FOR WORKING OUT 5 ADVANCE POWER DISPLAY SYSTEMS LTD. ITA NO. 5148/MUM/2014 DEPRECIATION THE REQUISITE ADJUSTMENTS BE MADE AND ONLY THE RESULTANT ADJU STED MARGIN OF THE COMPARABLES BE COMPARED WITH THE MARGIN OF ASSESSEE. BEFORE US THE LIMITED PLEA OF ASSESSEE IS THAT THERE IS AN ERROR MADE BY ASSESSING OFFICER/TPO WHILE CARRYING OUT THE SAID DIRECTIONS AND THAT THE MATTER BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR PROPER VERIFICATION. THE AFORESAID POINT INVOLVES A PURE APPRECIATION OF FACTUAL AFFAIRS AND THEREFORE THE MATTER IS RESTORED BACK TO FILE OF ASSESSING OFFICER/TPO TO EXAMINE THE PLEA OF ASSESSEE ON ITS MERITS. NEEDLESS TO MENT ION THE ASSESSING OFFICER/TPO SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THE AFORESAID LIMITED ASPECT AS PER LAW. 7. ALL THE OTHER GROUNDS RAISED BY THE ASSESSEE BEFORE US ARE RENDERED INFRUCTUOUS IN VIEW OF THE PRAYER OF ASSESSEE TO CONSIDER THE ABOVESTATED GROUND OF APPEAL NO. 2 AND THE SAME ARE NOT BEING DEALT WITH . 8. RESULTANTLY APPEAL OF ASSESSEE IS PARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 T H OCTOBER 2016. SD/ - SD/ - ( RAM LAL NEGI ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI DATE : 2 8 T H OCTOBER 2016 * SSL * 6 ADVANCE POWER DISPLAY SYSTEMS LTD. ITA NO. 5148/MUM/2014 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R K BENCH MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T MUMBAI