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04-09-2019, Goodyear South Asia Tyres, Section 92C, 144C, 92CA(3), Tribunal Pune

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1 week 2 days ago #10710 by amit
Section - 92C, 144C, 92CA(3), 271(1)(c), 115JB
Order Date - 04-09-2019
Favouring - Assessee
Court - Tribunal Pune
Appellant - Goodyear South Asia Tyres Pvt. Ltd.
Respondent - ACIT
Justice - SUSHMA CHOWLA, JM & D. KARUNAKARA RAO, AM
Citation - 919Taxpundit40
Appeal No. - ITA No.1068/PUN/2016
Asstt. Year - 2011-12

Order

PER : SUSHMA CHOWLA, JM

Both the appeals filed by assessee are against separate orders of ACIT, Circle-1, Aurangabad, dated 22.03.2016 and 25.01.2017 relating to assessment years 2011-12 and 2012-13 passed under section 143(3) r.w.s. 92C & 144C of the Income-tax Act, 1961 (in short „the Act‟).

2. Both the appeals of same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.

3. First, we shall take up appeal in ITA No.1068/PUN/2016, relating to assessment year 2011-12, wherein the following grounds of appeal have been raised:-

The grounds s ated hereunder are independent of, and without prejudice to one another:

Ground No.1

1. Based on the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP'), and the Ld. Assessing Officer ('AO'), following the directions of Ld. DRP, erred in confirming the addition of Rs.13,80,07,776/- to the total income of the Appellant, on account of transfer pricing ('TP') adjustment under section 92CA(3) of the Act by rejecting the TP analysis conducted by the Appellant. The Appellant prays that the TP analysis conducted by the Appellant be accepted and consequently the TP adjustment of Rs.13,80,07,776/- be deleted.

Ground No.2

2. On the facts and in the circumstances of the case, and in law, the Ld. DRP and Ld. AO, following the directions of the Ld. DRP, erred in determining the arm's length price of the international transaction pertaining to payment of regional service charges ('RSC') (except IT services) by the Appellant to its associated enterprise ('AE') as 'Nil' as against Rs.13,80,07,776/- determined by the Appellant.

The Appellant prays that the book value of the international transaction be accepted to be the arm's length price of the said transaction.

Ground No.3

3. On the facts and in the circumstances of the case, and in law, the Ld. DRP and Ld. AO, following the directions of the Ld. DRP, erred in determining the arm's length price of the international transaction of payment of RSC as 'Nil', without identifying any valid comparable uncontrolled transaction. The Appellant prays that the method selected by the Appellant ought to be accepted, and the TP adjustment made by the Ld. AO and confirmed by the Ld. DRP, without any (reference to comparable uncontrolled transaction ought to be deleted.

Ground No.4

4. On the facts and in the circumstances of the ca e, and in law, the Ld. DRP and the Ld. AO, following the directions of the Ld DRP, erred in making the TP adjustment on account of payment of RSC ignoring that:

4.1. The Appellant had supported the claims with appropriate evidences;

4.2. The Appellant had submitted the write-ups on nature of services received and benefits derived therefrom;

4.3. The Appellant had submitted cost allocation working along with certificate issued by Independent accounting firm confirming that the cost allocation was as per RSC agreement;

4.4. There was commercial rationale and expediency in availing the services from the AEs; and

4.5. The Appellant is not required to establish the benefits arising out of the said services.

The Appellant therefore prays that the TP adjustment made by the Ld. AO and confirmed by the Ld. DRP, ought to be deleted.

Ground No. 5

5. On the facts and in the circumstances of the case, and in law, the Ld. DRP and the Ld. AO, following the directions of the Ld. DRP, have erred in disregarding the fact that the transaction of payment of RSC has been accepted to be at arm's length in the prior years, and by adopting a contrary approach in the current assessment year without bringing on record any new facts to support the change in the treatment.

The Appellant therefore prays that a consistent approach be followed considering that there are no changes in the facts of the case, and accordingly, the TP adjustment made by the Ld. AO and confirmed by the Ld. DRP, ought to be deleted.

Ground No.6

6. On the facts and the circumstances of the case, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act. The Appellant prays that the penalty proceedings ought to be dropped.

4. Though the assessee has raised various grounds of appeal, but the issue which is raised vide said grounds of appeal is against determination of arm's length price of international transactions pertaining to payment of Regional Service Charges (RSC), except IT support services by the assessee to its associated enterprises at Nil as against ₹ 13,80,07,776/- determined by assessee. The assessee has raised grounds of appeal No 1 to 5 in this regard in assessment year 2011-12. The other issue which is raised by assessee vide ground of appeal No.6 is initiation of penalty proceedings, which is premature and the same is dismissed as such.

5. Briefly, in the facts of the case, the assessee was engaged in the business of manufacturing of Good Year branded medium, commercial truck tyres, wire built Radial Tyres, Road Tyres and Rear Farm Tyres. For the year under consideration, the assessee had filed return of income declaring Nil income after set off of brought forward unabsorbed depreciation. The assessee had shown book profits under section 115JB of the Act at ₹ 50,76,66,109/-. The case of assessee was selected for scrutiny. The Assessing Officer noted that the assessee had entered into international transactions with its associated enterprises and made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) to determine arm's length price of purchase, sale and services availed by assessee company. The TPO in this regard noted various business transactions and tabulated the same under para 4 of his order. The assessee in addition to transactions with its

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