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10-05-2019, Timken Engineering, Section 133(6), 92C(2), Tribunal Bangalore

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3 months 6 days ago #9433 by amit
Section - 133(6), 92C(2), 10B, 80HHE, 37(1)
Order Date - 10-05-2019
Favouring - Partly
Court - Tribunal Bangalore
Appellant - Timken Engineering & Research India Pvt. Ltd.
Respondent - DCIT
Justice - ARUN KUMAR GARODIA AM & LALIET KUMAR JM
Citation - 519Taxpundit196
Appeal No. - IT(TP)A No.1339/Bang/2010
Asstt. Year - 2007-08

Order

PER : ARUN KUMAR GARODIA

Out of this bench of five appeals, one appeal for Assessment Year 2006-07 is by the assessee and there are two cross appeals for each of two Assessment Years 2007-08 and 2008-09 filed by the assessee and revenue. In Assessment Year 2006-07, the appeal of the assessee is directed against the assessment order dated 15.09.2010 passed by the AO u/s. 143(3) r.w.s. 144C of the IT Act as per the directions of the DRP. For Assessment Year 2007-08, the appeal of the assessee and revenue are directed against the order of ld. CIT(A)-IV, Bangalore dated 12.03.2012 and for Assessment Year 2008-09, the cross appeals are directed against the order of ld. CIT(A)-IV, Bangalore dated 10.01.2013. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.

2. First we take up the appeal of the assessee for Assessment Year 2006-07. As per the revised and additional grounds of appeal filed by the assessee, there are 24 grounds of appeal including additional ground no. 24. The same read as under. (In conformity with Rule 8 of Income-tax Appellate Tribunal Rules. 1963)

1. That the learned Assessing Officer ('AO') and the learned Dispute Resolution Panel('Panel') erred in upholding the rejection of Transfer Pricing (TP) documentation bythe learned Additional Director of Income-tax (Transfer Pricing Officer - II) ('TPO')and thereby erred in not appreciating that the Appellant had prepared the TPdocumentation bona fide and in good faith and conducted the comparable analysisbased on the detailed Functional, Asset and Risk analysis performed with duediligence and the data available at the time of conducting the comparability analysis.[corresponding to ground 1]

2. That the learned AO and the learned Panel erred both in facts and law in confirmingthe action of the learned TPO, thereby enhancing the transfer price by INR60,464,651(consisting of INR 37,514,814 in respect of Software DevelopmentServices segment, INR 16,138,576 in respect of IT enabled Servicessegment, andINR 6,811,261 in respect of Contract R&D Services segment) and holding thatthe international transactions of the Appellant with its associated enterprises ('AEs')do not satisfy the arm's length principle envisaged under the Act. correspondingto ground 2]

3. That the learned AO and the learned Panel erred both in facts and law in notconsidering the submission and evidences put forward by the Appellant during thecourse of assessment proceedings before the learned TPO and the learned Panelwith regards to the wrong computation of margins of below mentioned comparablecompanies selected by the learned TPO, and in selectively agreeing to amend themargins of one of the comparable companies viz. Megasoft
Limited.[corresponding to ground2.1]

4. That the learned AO and the learned Panel erred both in facts and law in upholdingthe act of the learned TPO of collecting selective information of the companies byexercising power granted to him under section 133(6) of the Act, that was notavailable to the Appellant in the public domain and relying on the same forcomparability purposes in denial of natural justice to be observed in the assessmentproceedings. [corresponding to ground 2.2]

5. That the learned AO and the learned Panel erred both in facts and law indisregarding application of multiple year/ prior year data as used by the Appellant inthe TP documentation and holding that current year (i.e. Financial Year 2005-06)data for comparable companies should be used despite the fact that the same wasnot necessarily available to the Appellant at the time of preparing the TPdocumentation, and in doing so have grossly erred in interpreting the requirementof 'contemporaneous' data in the Rules to necessarily imply current year/ singleyear (i.e. FY 2005-06) data and expecting the Appellant to perform act ofimpossibility in terms of being able to use data subsequently available (i.e. duringaudit proceedings). [corresponding to ground 2.3, 2.3.1 & 2.3.2]

6. That the learned AO and the learned Panel erred both in facts and law in upholdingthe rejection of comparability analysis of the Appellant in the TP documentation andconfirming the comparability analysis as adopted by the learned TPO in the TPOrder by applying additional filters (i.e. RPT filter of 25% instead of 15% asapplied by the Appellant) and introduction of the below mentioned companiesas comparables that are either functionally dissimilar or have differing asset base and risk profile, and also 'rejection of other potentially comparable companies. [corresponding to ground 3]

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