DCIT 8(2), MUMBAI v. METTLER TOLEDO (I) P.LTD, MUMBAI

ITA 7642/MUM/2010 | 2004-2005
Pronouncement Date: 12-07-2013 | Result: Dismissed

Appeal Details

RSA Number 764219914 RSA 2010
Assessee PAN AABCM0779N
Bench Mumbai
Appeal Number ITA 7642/MUM/2010
Duration Of Justice 2 year(s) 8 month(s) 7 day(s)
Appellant DCIT 8(2), MUMBAI
Respondent METTLER TOLEDO (I) P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 12-07-2013
Date Of Final Hearing 20-02-2013
Next Hearing Date 20-02-2013
Assessment Year 2004-2005
Appeal Filed On 04-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL K KK K BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI . ! ! ! ! '# '# '# '# . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B. R B. R B. R B. RAMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AM AM AM AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO JM JMJM JM ./ I II I.T.A. NO.7642/MUM/2010 .T.A. NO.7642/MUM/2010 .T.A. NO.7642/MUM/2010 .T.A. NO.7642/MUM/2010 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2004-05) DCIT 8(2) R. NO. 216-A AAYAKAR BHAVAN M.K. ROAD MUMBAI-400020 % % % % / VS. M/S METTLER TOLEDO (INDIA) PVT LTD. AMAR HILL SAKI VIHAR ROAD POWAI MUMBAI-400072 ' ./ #( ./ PAN/GIR NO. :AABCM0779N ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') / APPELLANT BY : SHRI AJEET KUMAR JAIN *+') *+') *+') *+') - -- - /RESPONDENT BY : SHRI K. SHIVRAM % % % % - -- - . . . . / DT. OF HEARING : 9 TH JULY 2013 /& /& /& /& - -- -. . . . / DT.OFPRONOUNCEMENT: 12 TH JULY 2013 0 / O R D E R PER : '# . . / VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.8.2010 OF COMMISSIONER OF INCOME TAX(APPEA LS) FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) ERRED IN RESTRICT THE DISALLOWANCE OF 25 000AGAINST TOTAL DISALLOWANCE OF 6 00 054/- MADE U/S. 14A OF THE ACT (BEING 5% OF DI VIDEND INCOME OF THE YEAR UNDER CONSIDERATION)? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT (A) ERRED IN DELETING THE ADJUST MENT OF ITA NO. 7642/M/2010 METTLER TOLEDO (I) PVT. LTD. . 2 68 57 133/- MADE U/S. 92CA(3) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE?. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN TAKING AVERY INDIA A S THE ONLY CASE COMPARABLE WITH THE ASSESSEE IGNORING THE OTHER TWO COMPARABLE CASES ADOPTED BY THE T.P.O.? 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN IGNORING TPOS COMPARAB LE SET OF 3 COMPANIES WHICH WAS ALSO CONFRONTED TO THE ASSESSEE DURING THE TRANSFER PRICING PROCEEDINGS? 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN NOT CONSIDERING THE TPO S REASONS FOR REJECTING THE OTHER TWO COMPARABLES SEL ECTED BY THE ASSESSEE? 3. GROUND NO. 1 IS REGARDING DISALLOWANCE U/S 14A. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED DIVIDEND OF ` 1 20 01 080/- FROM ITS SUBSIDIARY NAMELY TURING SO FTWARE PVT. LTD. THE ASSESSING OFFICER DISALLOW 5% OF THE DIVIDEND I NCOME I.E. ` 6 00 054/- AS EXPENDITURE INCURRED FOR EARNING DIV IDEND INCOME BY INVOKING THE PROVISION OF SECTION 14A OF THE INCOME TAX ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL THE CIT(A) RESTRICTED THE DISALLOWANCE TO ` 25 000/-. 4. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. UNDISPU TEDLY THE DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE ON THE S HARES OF ITS SUBSIDIARY. THE INVESTMENT IN THE SHARES OF SUBSIDI ARY WAS MADE BY THE ASSESSEE FROM ITS OWN FUND AND NO BORROWED FUND WAS USED. EVEN THE AO HAS ALSO NOT BROUGHT OUT ANY FACTS ON R ECORD TO SHOW THAT THE ASSESSEE HAS USED ANY BORROWED FUND FOR IN VESTMENT IN THE ITA NO. 7642/M/2010 METTLER TOLEDO (I) PVT. LTD. . 3 SHARES OF SUBSIDIARY. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON HIS OWN ESTIMATED BASIS. IT IS PERTINENT TO NOTE THAT WHEN THE DIVIDEND HAS BEEN RECEIVED FROM ONE INVESTMENT AND THERE IS ONLY ONE DIVIDEND WARRANT THEREFORE THE DISALLOWAN CE RESTRICTED BY THE CIT(A) TO ` 25 000/- IN OUR VIEW IS JUST AND P ROPER KEEPING IN MIND THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCOR DINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CI T(A) QUA THIS ISSUE. 5. GROUND NO. 2-5 IS REGARDING DELETION OF TP ADJU STMENT MADE BY THE TPO. THE ASSESSEE IS A COMPANY AND ENGAGED I N THE BUSINESS OF MANUFACTURING MARKETING SALES AND SERVICES OF RANGE OF WEIGHING EQUIPMENTS. DURING THE YEAR UNDER CONSIDER ATION IT HAS CARRIED OUT INTERNATIONAL TRANSACTION WITH ITS ASSO CIATES ENTERPRISES FOR PURCHASE OF GOODS IMPORT OF FINISHED GOODS AND OTHER SERVICES. THE ASSESSEE HAS SELECTED ONE COMPANY NAMELY AVERY INDIA LTD. AS A COMPARABLE TO BENCH MARK ITS INTERNATIONAL TRANSA CTION BY APPLYING TNMM AS MOST APPROPRIATE METHOD. THE ASSES SEE HAS USED VARIOUS RATIOS AS PLI INCLUDING NET PROFIT/SALES FO R BENCH MARKING ITS TRANSACTION WITH THE COMPARABLE. THE ASSESSEE HAS C OMPUTED THE PROFIT MARGIN OF THE COMPARABLE BY USING PLI NET PR OFIT/SALES AT 5.45% IN COMPARISON TO THE ASSESSEES OWN MARGIN (N ET PROFIT/SALES) AT ` 11.29%. HENCE THE ASSESSEE CLAIMED THAT ITS I NTERNATIONAL TRANSACTIONS ARE AT ARMS LENGTH PRICE. THE TPO FOU ND THAT ONLY ONE COMPARABLE IS NOT SUFFICIENT AND PROPER AND ACCORDI NGLY HE HAS ADDED TWO MORE COMPARABLES NAMELY FLEX ENGINEERING LTD. AND ITA NO. 7642/M/2010 METTLER TOLEDO (I) PVT. LTD. . 4 MANUGRAPH INDIA LTD. THUS THE TPO HAS COMPUTED THE ARITHMETIC MEAN OF THREE COMPARABLES BY USING OP/SALES AS PLI AND ARRIVED THE ALP AT 9.60% IN COMPARISON TO THE ASSESSEES OPERAT ING MARGIN (OP/SALES) AT 6.18%. ACCORDINGLY THE TPO MADE AN A DDITION OF ` 58 57 133/- TO THE PRICE OF INTERNATIONAL TRANSACTI ONS BEING PURCHASE OF RAW MATERIALS. ON APPEAL THE CIT(A) HAS REJECTED THE TWO COMPARABLES ADDED BY THE TPO AND TOOK ONLY ONE COMP ARABLE NAMELY AVERY INDIA LTD. SELECTED BY THE ASSESSEE W HOSE PROFIT MARGIN BY USING PLI AS OP/SALE IS AT 7.70% IN COMPA RISON TO THE ASSESSEES OPERATING MARGIN AT 6.18%. THE REVENUE I S AGGRIEVED BY THE ORDER OF THE CIT(A) WHEREBY TWO COMPARABLES ADD ED BY THE TPO FOR COMPUTATION OF ALP WERE DELETED. 6. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS REPORTED THE FOLLOWI NG INTERNATIONAL TRANSACTIONS: SL. NO. PARTICULARS A.E. AMOUNT METHOD ADOPTED 1. PURCHASE OF COMPONENTS VARIOUS AES 4 88 67 220 TNMM 2. COMMISSION INCOME AND REINVOICED SERVICE VARIOUS AES 1 29 07 686 TNMM 3. PURCHASE OF DEMO PRODUCTS AND OTHERS VARIOUS AES 22 21 310 TNMM 7. AS WE HAVE NOTED ABOVE THE ASSESSEE USED NET PRO FIT/SALES AS PLI AND TNMM AS MOST APPROPRIATE METHOD FOR BENCH-M ARKING ITS INTERNATIONAL TRANSACTION. THE ASSESSEE SELECTED ON LY ONE ITA NO. 7642/M/2010 METTLER TOLEDO (I) PVT. LTD. . 5 COMPARABLE NAMELY AVERY INDIA LTD. AND COMPUTED TH E NET PROFIT/SALE AT 5.455 IN COMPARISON TO THE ASSESSEE S NET PROFIT/SALE AT 11.29%. THE TPO HAS ADDED TWO MORE COMPARABLES AND WORK OUT THE ARITHMETIC MEAN OF THE COMPARABLES MARGIN BY US ING OP/SALE AS PLI AS UNDER: PARTICULARS OP/SALES AVERY INDIA LTD 7.70% FLEX ENGINEERING LTD 9.71% MANUGRAPH INDIA LTD 11.41% VERAGE ARITHMETIC MEAN 9.60% 8. THUS THE TPO HAS ARRIVED THE ARITHMETIC MEAN OF THE OPERATING MARGIN OF COMPARABLES AT 9.60% IN COMPARI SON TO THE ASSESSEES OPERATING MARGIN AT 6.18%. AT THE OUTSET WE NOTE THAT THE PRICE OF THE INTERNATIONAL TRANSACTION OF THE A SSESSEE IS WITHIN THE TOLERANCE RANGE OF 5% OF THE ALP COMPUTED BY TH E TPO. THEREFORE WITHOUT GOING INTO THE ISSUE OF JUSTIFIC ATION OF REJECTING THE TWO COMPARABLES BY THE CIT(A) WE FIND THAT EVE N IF THE ALP DETERMINED BY THE TPO IS ACCEPTED NO ADJUSTMENT CAN BE MADE IN VIEW OF THE PROVISO TO SECTION 92C(2) OF THE INCOME TAX ACT. THE OTHER ISSUES RAISED BY THE REVENUE BECOMES INFRUCTU OUS AND ACADEMIC IN NATURE WHEN NO ADJUSTMENT CAN BE MADE E VEN ON THE BASIS OF THE ARMS LENGTH PRICE DETERMINED BY THE T PO BECAUSE OF THE REASON THAT THE PRICE OF INTERNATIONAL TRANSACT ION IS WITHIN THE TOLERANCE RANGE OF 5% AS PER THE PROVISO TO SECTION 92C(2). ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSUE. ITA NO. 7642/M/2010 METTLER TOLEDO (I) PVT. LTD. . 6 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 2 TH JULY 2013 0 - /& 1 2%3 12 TH # - 4 SD/- SD/- ( . ) (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( '# ) $ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 12 TH JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI