2015 (12) TMI 101 - AT - Income Tax

Assessee's appeal partially allowed, TNM Method dismissed, Excise duty exclusion upheld. Revenue's appeal dismissed.

Endress + Hauser Flowtec India Pvt Ltd Versus Asst. Commissioner of Income Tax and Vica-Versa

The Tribunal partially allowed the assessee's appeal regarding the TPO's adjustment, dismissed the appeal related to the TNM Method, and upheld the ... Transfer pricing adjustment - assessee challenged Transfer Pricing Officer (TPO) not allowing the adjustment of +/- 5% while computing the addition in the hands of assessee on account of arm's length price of the international transactions entered into by the assessee - Held that:- In view of proviso to section 92C(2) of the Act, no adjustment is to be made since the variation between the price paid in respect of the international transaction and the arm's length price determined by the TPO did not exceed 5%. We find merit in the plea of the assessee and benefit of proviso to section 92C(2) of the Act, can be allowed only if variation between price charged/paid in respect of international transaction and arm's length price determined by taking results of comparables cases does not exceed 5% and, in case such variation is more than 5%, then no such benefit can be allowed on standard basis. We find support from the ratio laid down by Mumbai Bench of Tribunal in Thyssenkrupp Industries India (P.) Ltd. Vs. Addl.CIT (2013 (11) TMI 930 - ITAT MUMBAI -). In view thereof, the ground of appeal raised by the assessee is allowed - Decided in favour of assessee. Excise duty paid / payable - whether was not part of the total turnover within the meaning of section 10B? - Held that:- The issue raised before us is identical to the issue before the Tribunal in assessee's own case relating to assessment year 2007-08 and following the same parity of reasoning, we uphold the order of CIT(A) in directing the Assessing Officer to exclude the Excise duty paid / payable being not part of the total turnover while computing deduction under section 10B of the Act. The grounds of appeal raised by the Revenue are thus, dismissed. Issues Involved:1. Dispute over addition of Rs. 3,58,878 by CIT(A).2. Disagreement on TNM Method application instead of RMP Method.3. Excise duty exclusion from total turnover under Section 10B.4. Adjustment of +/- 5% by TPO for international transactions.Issue 1: Addition of Rs. 3,58,878 by CIT(A):The appeals by the assessee and Revenue were against the CIT(A)'s order related to assessment year 2005-06 under section 143(3) of the Income Tax Act, 1961. The assessee contested the addition of Rs. 3,58,878 and the choice of TNM Method over RMP Method. The Tribunal found merit in the plea that the TPO did not allow a +/- 5% adjustment, as required by the proviso to section 92C(2) of the Act. The variation between the price paid and the arm's length price did not exceed 5%, thus the benefit of the proviso was allowed. The appeal by the assessee was partially allowed, and the appeal ground related to the TNM Method was dismissed.Issue 2: Excise Duty Exclusion from Total Turnover under Section 10B:The Revenue challenged the CIT(A)'s decision that Excise duty paid/payable should be excluded from the total turnover under Section 10B. The Tribunal noted that a similar issue had been addressed in the assessee's case for the assessment year 2007-08. Citing the Supreme Court's ruling in CIT Vs. Laxmi Machine Works, it was established that Excise duty should not be part of the total turnover for calculating deductions under Section 10B. Following the precedent set in the assessee's previous cases, the Tribunal upheld the CIT(A)'s order to exclude Excise duty from the total turnover. Consequently, the Revenue's appeal was dismissed.Issue 3: Adjustment of +/- 5% by TPO for International Transactions:The assessee's appeal focused on the TPO's refusal to allow a +/- 5% adjustment when computing the addition based on the arm's length price of international transactions. The Tribunal agreed with the assessee's argument that the proviso to section 92C(2) mandated no adjustment if the variation did not exceed 5%. Relying on the Mumbai Tribunal's decision in Thyssenkrupp Industries India (P.) Ltd. Vs. Addl.CIT, the Tribunal allowed the assessee's appeal on this issue.In conclusion, the Tribunal partially allowed the assessee's appeal regarding the TPO's adjustment, dismissed the appeal related to the TNM Method, and upheld the exclusion of Excise duty from the total turnover under Section 10B as per the CIT(A)'s order. The Revenue's appeal was dismissed.