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11-06-2019, KSB, Section 253(1)(a), 250(7), 144C(1), 234B, Tribunal Mumbai

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3 months 1 week ago #9732 by amit
Section - 253(1)(a), 250(7), 144C(1), 234B, 234C, 234D, 144C(15), 271(1)(c)
Order Date - 11-06-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - KSB Limited
Respondent - ACIT
Justice - M.Balaganesh AM & Ravish Sood JM
Citation - 619Taxpundit148
Appeal No. - ITA Nos 2719 to 2722/Mum/2018
Asstt. Year - 2004-05, 2006-07 to 2008-09

Order

PER : M.Balaganesh

The present appeals filed by the assessee are directed against the respective orders passed by the CIT(A)-56, Mumbai for A.Y. 2004-05, 2006-07, 2007-08 and 2008-09, dated 31.01.2018, which in turn arises from the respective orders passed by the A.O under Sec. 143(3) r.w.s 92CA r.w.s 254 of the Income Tax Act, 1961 (for short ‘I.T. Act’) for the aforementioned years. As a common issue is involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first advert to the appeal filed by the assessee for A.Y. 2004-05. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal:

“Based on the facts and circumstances of the case, KSB Limited (earlier known as “KSB Pumps Limited”) (hereinafter referred to as the Appellant') respectfully craves leave to prefer an appeal under section 253(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as 'Act'), against the order dated 31st January, 2018 (received by the Appellant on 05th March, 2018) passed by the Commissioner of Income Tax (Appeals) - 56 (hereinafter referred to as the „Hon‟ble CIT(A)‟) under section 250(7) of the Act, on the following grounds, which are independent of and without prejudice to each other.

On the facts and in the circumstances of the case and in law, the Hon‟ble CIT(A) and consequentially the learned Assessing Officer (hereinafter referred to as the 'learned AO‟)/ learned Transfer Pricing Officer (hereinafter referred to as the 'learned TPO') have:

1. erred in making an addition to the total income of the Appellant on account of transfer pricing adjustment of INR 63,60,732 in respect of its international transactions pertaining to payment of commission to its Associated Enterprise ('AE');

2. erred in not following the order of the Hon‟ble Tribunal, and thereby exceeding his jurisdiction in remand proceeding and hence entire order should be quashed;

3. erred in not accepting the fresh benchmarking analysis undertaken by the Assessee applying Comparable Uncontrolled Price ('CUP') as the most appropriate method for benchmarking international transaction of payment of commission using external comparable data, as directed by Hon‟ble ITAT, while remanding the matter;

4. erred in rejecting the use of AE as the tested party for the purpose of benchmarking the international transaction pertaining to payment of commission, without appreciating the present facts and without providing any cogent reasons for the same;

5. erred in applying certain inappropriate filters for rejection of comparable agreements selec ed by the Assessee while benchmarking the transaction of payment of commission as per the direction of the Hon‟ble ITAT;

6. erred i not appropriately applying the principles of CUP method for the purpose of determination of ALP of the international transaction of payment of commission wherein considered the internal group transfer pricing policy, which is controlled transaction, for benchmarking the international transaction of payment of commission:

7. erred in rejecting comparable agreements identified by the Appellant in the fresh benchmarking analysis conducted by Appellant with respect of international transaction pertaining to payment of commission;

8. Without prejudice to above, erred in not considering the fact that the Central Government of India has approved the agreement with respect to appointment of Singapore AE as the sole selling agent i.e commission to be paid for availing such services, thereby, such approval would constitute CUP and thereby satisfying arm's length principle;

9. erred in directly passing the final assessment order under section 143(3) of the Act, without passing the draft assessment order as applicable in case of Assessee being 'eligible Assessee' as per section 144C(1) of the Act, thereby entire order which not in consonance of the Act should be quashed;

10. erred on the facts and in circumstances of the case and in law by levying interest under section 234B of the Act, without considering the fact that the addition on account of transfer pricing is due to the difference of opinion and as at the due date of payment of advance tax by no means the Appellant could have estimated such adjustments and consequential tax on such adjustment;

11. erred on the facts and in circumstances of the case and in law by proposing to levy interest under section 234C;

12. erred on the facts and in circumstances of the case and in law by proposing to levy interest under section 234D;

13. erred in initiating penalty proceedings u/s 271(1)(c) of the Act.

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 the Honourable Income Tax Appellate Tribunal to decide this appeal according to law. Each of the above ground of appeal is independent and without prejudice to the other grounds of appeal preferred by the Appellant.”

2. Briefly stated, the assessee which is engaged in the business of manufacturing and sale of pumps and valves had filed its return of income for A.Y. 2004-05 on 30.10.2004 declaring total income of Rs. 29,40,89,523/-. Subsequently, the assessee had filed a revised return of income on 30.03.2005 declaring an income of Rs.30,37,37,152/-. Thereafter, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the I.T. Act.

3. During the course of the original assessment proceedings the A.O made a reference to the Transfer Pricing Officer (for short ‘TPO’) under Sec. 92CA(1) of the I.T Act. In the course of the proceedings it was observed by the TPO that the assessee had entered into 14 international transactions, which as per the T.P study report were claimed as being at arm’s length. It was observed by the TPO that the assessee had not separately considered the international transactions and had benchmarked the same by adopting the ‘Transactional Net Margin Method’ (for short ‘TNMM’). The TPO except for the international transaction of payment of commission by the assessee to its ‘Associate Enterprise’ (for short ‘AE’) in Singapore, namely M/s KSB Singapore (Asia Pacific) Pte. Ltd., accepted the remaining international transactions of the assessee. It was observed by the TPO,

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