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11-06-2019, Hyundai Construction, Section 144C(13), 271(l)(c), Tribunal Pune

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6 days 21 hours ago #9719 by amit
Section - 144C(13), 271(l)(c), 274
Order Date - 11-06-2019
Favouring - Assessees Partly allowed for statistical purpose
Court - Tribunal Pune
Appellant - ACIT
Respondent - Hyundai Construction Equipment (I) Pvt. Ltd.
Justice - R. S. SYAL, VP & PARTHA SARATHI CHAUDHURY, JM
Citation - 619Taxpundit135
Appeal No. - ITA No.565/PUN/2015
Asstt. Year - 2010-11

Order

PER : PARTHA SARATHI CHAUDHURY

These cross appeals preferred by the assessee as well as by the Revenue emanates from the orders of the DRP/Assessing Officer dated 23.12.2014 and 27.02.2015 for the assessment year 2010-11 respectively. These cases were heard together and since facts similar & issues common, therefore, these cross appeals are being disposed of by this consolidated order.

2. First, we would take up the assessee’s appeal in ITA No.644/PUN/2015 and the grounds of appeal are as under :-

“Based on the facts and circumstances of the case, Hyundai Construction Equipment India Private Limited (‘the Appellant’) respectfully craves leave to prefer an appeal against the order passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (the ‘Act’) by the Assistant Commissioner of Income-tax, Circle 9, Pune (the ‘learned Assessing officer’ or the ‘learned AO’ or the ‘AO’) dated 27 February 2015 (received on 16 March 2015) on the following grounds, which are independent f and without prejudice to each other :

On the facts and in circumstances of the case and in law, the learned AO has erred as under:

1 Inappropriate transfer pricing adjustment amounting to Rs 20,24,62,986 made even though all international transactions of the Appellant are at arm’s length

Erred on the facts and in circumstances of the case and in law to propose an upward adjustment amounting to Rs 20,24,62,986 to the international transactions of the Appellant pertaining to manufacturing operati ns for financial year (‘FY’) 2009-10 thereby ignoring the fact that all the international transactions of the Appellant are at arm’s length

2 Inappropriate non consideration of economic and commercial reasons for losses in the manufacturing operations of the Appellant Erred on the facts and in circumstances of the case by making transfer pric ng adjustment to the international transactions of the Appellant pertaining to manufacturing operations without considering the fact hat the losses in manufacturing operations are on account of economic and commercial reasons and not on account of transfer pricing.

3. Inappropriately selecting an additional company, BEML Limited as comparable to the Appellant for FY 2009-10 on an adhoc basis. Erred on the facts and in circumstances of the case and in law by inappropriately considering an additional company, BEML Limited as comparable to the Appellant for FY 2009-10 on an adhoc basis.

4 Inappropriately rejecting the methodology adopted by the Appellant for carrying out capacity utilization adjustment Erred on the facts and in circumstances of the case by inappropriately rejecting the methodology adopted by the Appellant for carrying out capacity utilization adjustment to the operating profit margins of comparable companies.

Without prejudice to the above, erred on the facts and in circumstances of the case by inappropriately not considering capacity utilization adjustment using alternative method.

5 Inappropriate initiation of penalty proceedings under section 271(l)(c) of the Act

Without prejudice to the above grounds of appeal, erred on the facts and in law by proposing to initiate penalty proceedings under section 274 of the Act read with section 271(1)(c) of the Act, without considering the fact that, adjustment to transfer price is on account of difference of opinion which has consequently resulted in adjustment to the income of the Appellant. Additional grounds of appeal

6 JCB India Limited, not a comparable company Based on the facts and circumstances of the case, JCB India Limited is functionally different and accordingly, should not be considered as comparable to the manufacturing operations of the Appellant for FY 2009-10.

7 Action Construction Equipment Limited, a comparable company Based on the facts and circumstances of the case, Action Construction Equipment Limited is functionally similar to the manufacturing operations of the Appellant and satisfies all qualitative and quantitative filters applied by the Appellant in its TP study for FY 2009-10, accordingly, Action Construction Equipment Limited should be considered as comparable company.

The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable your Honours to decide this appeal according to law.”

3. At the time of hearing, ld. AR of the assessee appraised the Bench that ground no.1 is general, ground no.5 is premature in nature needs no adjudication and ground nos.2, 6 & 7 are not pressed. In view of these submissions made by the ld AR, ground nos.2, 6 & 7 are dismissed as not pressed. Ground no 1 is general in nature and ground no.5 as submitted by the ld. AR is premature, hence, on these grounds no adjudication is required. The only effective grounds are no.3 and 4 before us for adjudication.

4. With regard to ground no.3, ld. AR submitted by referring to the Annual Report of the company i.e. BEML Limited is a Government Company wherein 54% of the holding is by the Government and as per the Companies Act, if more than 50% holding of a company is by the Government then it is a Government Company. Ld. AR further submitted that a Government Company cannot be made a comparable to that of the

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