Forum
Read and express views
× Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India

These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

07-06-2019, Firmenich Aromatics, Section 27i(i)(c), 234B, Tribunal Mumbai

  • amit
  • amit's Avatar Topic Author
  • Offline
  • Administrator
  • Administrator
More
1 week 4 days ago #9687 by amit
Section - 27i(i)(c), 234B, 37(1), 92, 92CA(1), 36(1)(viia)
Order Date - 07-06-2019
Favouring - Assessee Partly
Court - Tribunal Mumbai
Appellant - Firmenich Aromatics (India) Pvt Ltd
Respondent - ACIT
Justice - G Manjunatha AM & Ravish Sood JM
Citation - 619Taxpundit103
Appeal No. - ITA No. 6081/Mum/2018
Asstt. Year - 2014-15

Order

PER : G Manjunatha, AM

This appeal filed by the assessee is directed against directions of the DRP-1 , Mumbai dated 06-07-2018 issued u/s 144C(5) of the Income-tax Act, 1961, which, in turn, arises against the order of the AO / TPO passed u/s 143(3) r.w.s. 144C(1) of the Income-tax Act, 1961 and it pertains to AY 2014-15. The assessee has raised the following grounds of appeal:-

“Each of the grounds and/ or sub-grounds of the appeal are independent and without prejudice to the other:

1. Ground No. 1 — Transfer Pricing (*TP') adjustment in relation to export of finished goods

1.1. On the facts and circumstances of the case, and in law, the Hon'ble DRP has erred in upholding the action of the Ld. AO/TPO in determining the Arms' Length Price ('ALP') of the international transaction of export of finished goods at Rs. 10,35,77,048 instead of Rs. 7,16,95,346 thereby, computing a TP adjustment of Rs. 3,18,81,702.

1.2. While doing so, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred in:

(a) Disregarding the aggregation approach adopted by the Appellant thereby, rejecting the application of entity level Transactional Net Margin method ('TNMM') as the Most Appropriate Method ('MAM');

(b) Applying Comparable Uncontrolled Price ('CUP') Method as the MAM vis-a-vis the products sold to both Associated Enterprises ('AEs') and Non-AEs; and

(c) Applying two methods i.e., CUP and TNMM for benchmarking the impugned international transaction.

1.3. Without prejudice to point 1.1. and 1.2., the Hon'ble DRP/ Ld. AO/ Ld. TPO while applying CUP, erred in:

(a) Comparing the prices of products exported to AEs with the prices of products sold to Non-AEs, domestically; and

(b) Ignoring the differences on account of geog aphical market, volume of transactions, functional and risk profile and level of market while comparing the impugned international transaction with the comp rable uncontrolled transaction. The Appellant prays that the aforesaid adjustment be deleted.

2. Ground No. 2 - TP adjustment in relation to payment of royalty for use of technical know-how

2.1. On the facts and circumstances of the case and in law, the Hon'ble DRP has erred in upholding the action of the Ld. AO/ TPO in determining the ALP of royalty paid to AE for technical know how at Rs. 20,09,63,574 instead of Rs. 24,06,53,880 thereby, computing a TP adjustment of Rs. 3,96,90,306.

2.2. While doing so, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred in:

(a) Not following the orders of the earlier years wherein payment of royalty has been consistently accepted to be at arm's length, even though when there is no change in the facts;

(b) Disregarding the fact that payment of royalty is inextricably linked to entrepreneurial operations of the Appellant and therefore, it should have been benchmarked on an aggregation basis by applying TNMM as the MAM; and

(c) Applying CUP method as the MAM to determine the ALP of the impugned international transaction.

2.3. Without prejudice to point 2.1. and 2.2., while applying CUP, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred in considering the royalty agreements which were not comparable to the royalty agreement entered into by the Appellant with its AE.

The Appellant prays that the aforesaid adjustment be deleted.

3. Ground No. 3 — TP adjustment in relation to payment of interest on External Commercial Borrowing ('ECB') loan

3.1. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in upholding the action of the Ld. AO/ TPO in determining the ALP of the international transaction of payment of interest on ECB at Rs. 56,10,095 instead of Rs. 1,07,84,304, thereby computing an adjustment of Rs. 51,74,209.

3.2. While doing so, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred in:

(a) Not following a structured/ methodical search process in selecting the comparable companies for arriving at the arm's length interest rate;

(b) Not appreciating the fact that the interest paid by the Appellant on ECB loan is as per the circular issued by Reserve Bank of India ("RBI"); and

(c) Disregarding the fact that the effective rate of interest paid by the appellant is lower than the SBI Prime Lending rate ('PLR') for the relevant year.

The Appellant prays that the aforesaid adjustment be deleted.

4. Ground No . 4 - TP adjustment in relation to availing of Information Systems ('IS') services

4.1. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in upholding the action of the Ld. AO/ Ld. TPO in determining the ALP of the international transaction of payment of IS service charge at Rs. 8,24,93,129 instead of Rs. 10,46,55,437 thereby disallowing the claim pertaining to internal cost of IS charge amounting to Rs. 2,21,62,308,

4.2. While doing so, the Hon'ble DRP/ Ld. AO/ Ld. TPO grossly erred in:

(a) Determining the ALP of the international transaction of payment of internal cost of IS charge as 'Nil' purportedly applying 'Other method' as per the provisions of Rule loAB of the Income-tax Rules, 1962;

(b) Ignoring that the Appellant had supported the claim with appropriate evidences; and

(c) Rejecting the comparability analysis conducted by the Appellant in the TP study report to determine the ALP of the impugned international transaction. The Appellant prays that the aforesaid adjustment be deleted.

5. Group. cLNo. 5 - Adjustment in relation to employees' contribution to Provident Fund

5.1. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in upholding the action of the Ld AO in disallowing employees' contribution to Provident Fund of Rs. 14,98,505 paid within the due date for filing the income-tax return for the year under consideration.

The Appellant prays that the aforesaid adjustment be deleted.

6. Ground No. 6 — Adjustment in relation to 'Other Miscellaneous EG expenses'

6.1. On the facts and circumstances of the case and in law, the HonTale DRP erred in upholding the action of the Ld. AO in disallowing "Other Miscellaneous EG expenses" of Rs. 2,15,229 relating to write off of rent deposits made by the Appellant either for office use of the Appellant or on behalf of its employees by considering such expenses as not related to the business of the Appellant.

The Appellant prays that the aforesaid adjustment be deleted.

7. Ground No. 7 - Initiating penalty proceedings under section 27i(i)(c) of th Act

On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 27i(i)(c) of the Act for furnishing inaccurate particulars of income.

8. Ground No. 8 - Levy of interest under section 234B and 2340 of the Act On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 2346 and 2340 of the Act. The Appellant prays that the consequential interest be deleted.”

2. The brief facts of the case are that the assessee, M/s Firmenich Aromatics (I) Pvt Ltd, is an Indian company which was incorporated in January

Click to view and download Full Free Judgement of Firmenich Aromatics (India) Pvt Ltd vs. ACIT

Unable to display Google Map.




Please Log in or Create an account to join the conversation.

Time to create page: 0.106 seconds

If You Appreciate What We Do Here On TaxPundit, You Should Consider:

We are thankful for your never ending support.

Latest Analysis - High Courts

BEST CYBERCITY (INDIA) PVT. LTD. vs ITO

BEST CYBERCITY (INDIA) PVT. LTD. vs ITO

BEST CYBERCITY (INDIA) PVT. LTD. vs ITO Read More
PUNEET SHARMA vs UNION OF INDIA & ORS

PUNEET SHARMA vs UNION OF INDIA & ORS

PUNEET SHARMA vs UNION OF INDIA & ORS Read More
CIT vs HONDA CARS INDIA LTD.

CIT vs HONDA CARS INDIA LTD.

CIT vs HONDA CARS INDIA LTD. Read More
PCIT vs. ROYAL AND SUN ALLIANCES IT SOLUTIONS (INDIA) PVT. LTD.

PCIT vs. ROYAL AND SUN ALLIANCES IT SOLUTIONS (INDIA) PVT. LTD.

PCIT vs. ROYAL AND SUN ALLIANCES IT SOLUTIONS (INDIA) PVT. LTD. Read More
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36

Forum Features

Latest Case Laws
Latest Case Laws are instantly updated in the Forum into their respective section
Latest from CBDT
Latest Circulars, Notifications, Orders etc. from CBDT is updated in the Forum
Ask Experts
You can ask questions to the community
Support
Support queries are either replied via mail or in the Forum so that others can be benefited
Press Releases
Latest Press Notes and Press Releases are updated in the Forum
Connect with Members
You can connect with our community members by replying to their queries

Recommended Articles

 

SITE INFORMATION

All content herein is the copyright of Taxpundit. No images, text, or any other content may be, reproduced or redistributed without the express written consent of Taxpundit.

All Rights Reserved. All Content Copyright.

Newsletter

Subscribe to our newsletter and stay updated on the latest developments and special offers!

Company Master Data Since 1900. More than 1.75 Million Records. Register/Login to get FREE access. Read more
Toggle Bar