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27-11-2018, Komet Precision Tools, Section 144C, 36(1)(viii), Tribunal Bangalore
This appeal by the assessee is directed against the assessment order dt.28.11.2013 passed under Section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (in short 'the Act') in pursuant to the directions of the Dispute Resolution Panel (in short ‘DRP’) dt.19.11.2013 for the Assessment Year 2009-10.
2. The assessee has raised the following grounds :
3. Ground Nos.1 to 4 are general in nature and have not been pressed by the assessee. Accordingly, no specific adjudication is required.
4. Ground Nos.5 & 6 are regarding Transfer Pricing Adjustment .
5. The assessee is a company engaged in the business of manufacturing and trading of high technology precision cutting tools. The assessee is a wholly owned subsidiary of Komet Group GmbH, Germany. The financial results and international transactions reported by the assessee are reproduced by the Transfer Pricing Officer (TPO) in paras 2.2 & 2.3 as under :
“ 2.3 International Transactions (as mentioned in the 92CE Report) Thus the assessee has entered into the international transactions in two segments viz. manufacturing and trading of precision cutting tools. The TPO accepted the manufacturing segment transaction of the assessee at arm’s length and therefore the dispute involved in this appeal is only with respect to the trading segment. The assessee is importing the goods from Associated Enterprises (AEs) and reselling the same in the domestic market. The assessee has applied Resale Price Method (RPM) as Most Appropriate Method (MAM) for bench marking its transactions. The TPO rejected the RPM applied by the assessee and instead applied TNMM as MAM.
6. The learned Authorised Representative of the assessee has submitted that the TPO has accepted the RPM as MAM for the subsequent assessment year and therefore only for the year under consideration the TPO has rejected the RPM as MAM which is not justified when no distinguishing facts exist for the year under consideration. In support of his contention, he has relied upon the decision of Hon'ble Bombay High Court in the case of ITO Vs. Loreal India Pvt. Ltd. 276 CTR 484. The learned Authorised Representative thus contended that he assessee is purchasing finished goods from AE and resale to unrelated party without adding any value in the product. Therefore the resale price method is one of the prescribed method under the TP Rules and is appropriate in the facts and circumstances of the case. He has referred to the TPO order for the Assessment Year 2011 12 wherein the TPO vide order dt.27.01.2015 has accepted the TP Study Analysis of the assessee based on the RPM. Thus the learned Autho ised Representative has contended that the TPO is not justified in rejecting the method when this method was accepted in the subsequent assessment year.
7. On the other hand, the learned CIT Departmental Representative has submitted that the assessee is a trader and not the distributor therefore the decision relied upon by the assessee is not applicable in the facts and circumstances of the present case. He has further contended that in the subsequent assessment year, the TPO has not discussed the issue of MAM and therefore it cannot be applied as a res judicata on this assessment year. He has relied upon the orders of the authorities below.
8. We have considered the rival submissions and relevant material on record. The assessee in the trading segment is importing the goods from its AE and selling the same to the third party without any value addition. This fact of selling the goods imported from the AE without any value addition has not been disputed by the revenue before us. Further it is also not in dispute that for the Assessment Year 2011-12, the TPO has accepted the RPM as MAM for the purpose of bench marking the international transactions in trading segment. Therefore the TPO ought to have been maintained the consistency and finality of the matter while deciding the issue of MAM to be applied for the purpose of determining the ALP when the facts relating to the issue are identical for the year under consideration as well as for the Assessment Year 2011-12. Neither the TPO nor the learned Departmental Representative has pointed out any distinguishing facts to justify the rejection of RPM as MAM when the same method has been accepted by the TPO for the Assessment Years 2011-12 & 2013-14. The Hon'ble Bombay High Court in the case of ITO Vs. Loreal India Pvt. Ltd. (supra) while considering the issue has held in para 7 as under :