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09-01-2019, Airport Retail, Section 4o(a)(ia), 194H, Tribunal Mumbai

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5 months 1 week ago #8325 by amit
Section - 4o(a)(ia), 194H, 274, 271(1)(c), 92B, 144C(3)(a)
Order Date - 09-01-2019
Favouring - Partly
Court - Tribunal Mumbai
Appellant - Airport Retail P. Ltd.
Respondent - DCIT
Justice - MAHAVIR SINGH JM & MAHAVIR SINGH AM
Citation - 119Taxpundit121
Appeal No. - I.T.A. No.4816/Mum/2015
Asstt. Year - 2010-11

Order

PER : RAMIT KOCHAR

This appeal, filed by assessee, being ITA No. 4816/Mum/2015, is directed against appellate order dated 30.03.2015 passed by learned Commissioner of Income Tax (Appeals)-55, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2010-11, the appellate proceedings had arisen before learned CIT(A) from the assessment order dated 04.03.2014 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) r.w.s. 144C(3)(a) of the Income-tax Act, 1961 (hereinafter called “the Act”) for AY 2010-11, which assessment order was passed by the AO in pursuant to the order dated 15.01.2014 passed by learned Transfer Pricing Officer(hereinafter called the “the TPO”) u/s 92CA(3) of the 1961 Act.

2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-

“1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) - 55 erred in confirming the
adjustment of Rs 5,87,35,794/- made by the Learned Deputy. Commissioner of Income-Tax Circle -8(1), ('Ld. AO') towards the international transaction of import of finished goods for resale.

The Appellant prays that the aforesaid adjustment be deleted.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in making a disallowance of Rs. 1,05,53,740/- by applying the provisions of section 4o(a)(ia) of the Income Tax Act , 1961 ('the Act') being charges paid for processing of credit card transactions on the alleged ground that the Appellant was liable to deduct tax at source on such amount as per provision of section 194 H of the Act.

3. On facts and circumstances of the case and in law, the Ld. CIT(A) erred in making a disallowance of Rs 95,75,838/- applying the provision of section 40(a)(ia) of the Act being charges paid for collection and deposit of foreign exchange by authorised money collector/ exchanger into the Appellant's EEFC account on the alleged ground that the Appellant was liable to deduct tax at source on such amount as per the provision section 194 H of the Act.

4. On the facts and in the circumstances of the case and in law, the Ld AO erred in initiating penalty proceedings under Section 274 read with Section 271(1)(c) of the Act.

5. The Appellant craves leave to add, to delete or alter the above grounds of appeal.”

3. The brief facts of the case are that the assessee company is in the business of retail trade and operation of duty free shops at airports in India. The assessee had entered into an international transactions within the meaning of Section 92B of the 1961 Act with its Associated Enterprises(AE) as defined u/s. 92A of the 1961 Act, the matter was referred by the AO u/s. 92CA to Transfer Pricing Officer to compute Arms Length Price of international transactions entered into by the assessee with its AE by selecting most appropriate method(MAM) as prescribed u/s. 92C of the 1961 Act to compute the income from international transaction having regard to Arms Length Price(ALP) as defined u/s. 92 of the 1961 Act.

4. The assessee has reported following international transactions in Form no. 3CEB for AY 2010-11, as under:- The AO observed that the assessee has earned gross profit margin of 58.01% and net profit margin of -8.55% . The AO observed that the assessee has purchased finished goods to the tune of Rs. 48.70 crores
from its Associated Enterprise(AE) i.e. Alfa Group entities to resell the same at the retail shops setup by the assessee in India. The assessee adopted Resale Price Method(RPM) and Profit Level Indicator(PLI) was Gross Profit/Sales(GP/Sales). The assessee selected itself as tested party and eleven comparables were identified by assessee with PLI of 24.87% , while assessee own PLI was 58.01% and thus, it was concluded by the assessee in its TP study report that international transaction entered into by the assessee are at Arms Length Price. The assessee had submitted before TPO that it is reseller of products and does not add substantial value to the goods by physically altering them. The assessee submitted before the TPO that the RPM measures the value of functions performed and is ordinarily appropriate in cases involving the purchase and resale of tangible goods/services in which the buyer/seller does not addsubstantial value to the goods by physically altering them. Thus, the assessee pleaded before the TPO that the RPM should be considered as the most appropriate
method(MAM) in case of the assessee.

5. The TPO after going through the contentions of the assessee held that Transactional Net Margin Method(TNMM) is the most appropriate method to compute ALP and to benchmark the international transaction entered into by the assessee with its AE. While arriving at this decision, the TPO was also guided by the

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