TaxTMI 
TaxTMI 
2013 (10) TMI 871
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessing officer to consider the current year data for conducting the Transfer pricing, instead of the preceding two years data available on the Public domain. This is despite the fact that the current year data of the comparables is not available on the Public domain, till the due date of filing the Income Tax return. Further proviso to Rule 10B(4) lays down that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. 4. The determination of Arm's Length Price at Rs.6,32,98,266/- against the declared value of Rs.5,47,15,000/- is unjust and arbitrary." 3. The facts of the case are that the assessee is a private limited company which is in the business of manufacturing and trading of home decorative items, cutlery, tableware etc. made from brass, aluminium, stainless steel and iron. Admittedly, the assessee is an associated enterprise of Michael Aram Inc., USA. The goods manufactured by the assessee in India are supplied to its associated enterprise viz., Michael Aram Inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eved by the order of the CIT(A), is in appeal before us. 7. At the time of hearing before us, the assessee's argument was two fold - (i) it is contended by the learned counsel that the CIT(A) was not justified in rejecting the use of multi year data in TP study by the assessee. He stated that Rule 10B(4) of the Income-tax Rules, which is the guideline for determining arm's length price, prescribed the use of multi year data. Therefore, the CIT(A) should not have rejected the use of multi year data in the TP study. In support of this contention, he relied upon the decision of ITAT in the case of TNT India P.Ltd. Vs. ACIT - [2012] 15 ITR (Trib) 263 (ITAT Bang-A). (ii) the rejection of two comparables by the CIT(A). It was stated by the learned counsel that the CIT(A) rejected three comparables viz., Hitkari China Ltd., Innovative Tech Pack Ltd. and S & Y Mills Ltd. The assessee does not have much grievance against rejection of S & Y Mills Ltd. because, admittedly, they are in different product than the product being manufactured by the assessee. However, it is contended that the learned CIT(A) was not justified in rejecting the two comparables considered by the assessee in its TP ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of home decorative. He, therefore, submitted that the order of learned CIT(A) should be sustained. 9. We have carefully considered the submissions of both the sides and perused the material placed before us. The first argument of the assessee was with regard to use of multi year data for determining the arm's length price. Rule 10B of the Income-tax Rules provides the procedure for determination of arm's length price under Section 92C. Sub-rule (4) thereof reads as under:- "(4) The data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into : Provided that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared." 10. From the above, it is evident that as per Sub-rule (4), the data to be used in analyzing the comparability of an uncontrolled transaction shall be the data relating to FY in which the international transa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner (Appeals)." 11. From a reading of the above decision, it is evident that the said case supports the case of the Revenue rather than the assessee. In view of the above, we do not find any infirmity in the order of learned CIT(A) in rejecting the use of multi year data by the assessee in its TP study and considering the data of the financial year in which the international transaction took place. 12. The assessee has also disputed the rejection of two comparables viz., Hitkari China Ltd. and Innovative Tech Pack Ltd. In this regard, the finding of learned CIT(A) reads as under:- "7.1.3 As regards rejection of Hitkari China Ltd. is concerned, I uphold the TPO's action because, as per provision of Rule 10B(4), only same year data is to be taken in which the International Transaction taken place. As we are doing the comparability analysis for A.Y. 2004-05 and since the data for this year was not available in the public domain hence, TPO is right in rejecting the appellant's action of using the Data for A.Y. 2002-03 for the purpose of comparability. 7.1.6 As regard Innovative Tech Pack Ltd., I uphold the TPO's action because the function performed by the appellant and by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e also home appliances and the goods manufactured by the assessee are also home appliances and, therefore, they are comparable with each other. After considering the arguments of both the sides, we are unable to agree with the learned counsel. The assessee is manufacturing home decoratives with the use of brass, aluminium, stainless steel and iron etc. The manufacturing of plastic bottles cannot be compared with manufacturing of home decorative items. Moreover, learned CIT(A) has further pointed out that in the case of Innovative Tech Pack Ltd., its entire capital was eroded due to continuous losses and its net worth as on 1st April, 2003 was (-) Rs. 6.13 crores while as on 31st March, 2004, it was (-) Rs. 6.81 crores. Therefore, when Innovative Tech Pack Ltd. did not have sufficient funds to carry on the business, naturally, its performance cannot be compared with the other companies. It was contended by the learned counsel that Innovative Tech Pack Ltd. had sufficient funds through debt. However, when any entity had eroded its entire net worth and it is in negative, then naturally, its debt would be proportionately too high and, therefore, it cannot be considered as a company com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e available hence, in the absence of such details I uphold the action of the AO in adding the sum of Rs.1,12,064 under section 2(24)(x) read with 36(1)(va)." 18. Though at the time of hearing before us it is stated by the learned counsel that all the payments were made during the financial year, however, it seems that no such claim was made before the Assessing Officer. Before the CIT(A) also, the assessee did not furnish these details. The assessee has not relied upon these decisions before the Assessing Officer. Therefore, he had no occasion to examine the assessee's case in the light of the decision of Hon'ble Jurisdictional High Court or Hon'ble Supreme Court. We, therefore, set aside the order of the Assessing Officer on this point and restore the matter to the file of the Assessing Officer and direct him to examine this issue afresh in the light of the above pronouncements of Hon'ble Jurisdictional High Court as well as Hon'ble Apex Court. ITA No.1055/Del/2013: 19. This appeal by the Revenue is against the cancellation of penalty of Rs. 31,19,450/- levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961. 20. The facts of the case are th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in the case of Commissioner of Income-tax Vs. Zoom Communication P.Ltd. - 327 ITR 510. 23. We find that the Hon'ble Jurisdictional High Court in the case of Zoom Communication P.Ltd. (supra) relied upon by the learned DR considered the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra) and held as under:- "In the case of Reliance Petroproducts P.Ltd. [2010] 322 ITR 158 (SC), the addition made by the Assessing Officer in respect of the interest claimed as a deduction under section 36(1)(iii) of the Act was deleted by the Commissioner of Income-tax (Appeals) though it was later restored, by the Tribunal, to the Assessing Officer. The appeal filed by the assessee against the order of the Tribunal was admitted by the High Court. It was, in these circumstances, that the Tribunal came to the conclusion that the assessee had neither concealed the income nor filed inaccurate particulars thereof. In recording this finding, the Tribunal felt that if two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. This, however, is not the factual position in the case before us. The facts of the prese....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it. In the absence of any details from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee-company and how it could also have escaped the attention of the auditors of the company." 24. Thus, after considering the decision in the case of Reliance Petroproducts Pvt.Ltd. (supra), it was stated by the Hon'ble Jurisdictional High Court that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee but if the claim, besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) would come into play. However, the facts in the case of the assessee are altogether different. The assessee has not made any claim for deduction which is found to be not allowable by the Assessing Officer. As we have already noted earlier, the assessee is manufacturing home decorative items, cutlery, tableware etc. which are being supplied to its associated enterprise viz., Michael Aram Inc., USA. Since the transaction of sale between the assessee and associated enterprise was international transaction, the matter was referred to TPO for determining the....