TaxTMI 
TaxTMI 
2019 (10) TMI 136
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....cy. For the assessment year 2008-09, the assessee filed its return of income on 28th February 2009, declaring total income of Rs. 4,17,34,690. Similarly, for the assessment year 2009-10, the assessee filed its return of income on 26th September 2009, declaring total income of Rs. 5,53,32,310. In the course of assessment proceedings for the aforesaid two assessment years, the Assessing Officer noticing that the assessee had entered into international transactions with its overseas Associated Enterprises (AEs) made a reference to the Transfer Pricing Officer for determining the arm's length price of such transactions. After examining the nature of transactions, the documents on record as well as submissions of the assessee, the Transfer Pricing Officer proposed adjustment to the arm's length price of provisions of business support service in both the assessment years. On the basis of orders passed by the Transfer Pricing Officer, the Assessing Officer framed draft assessment orders incorporating the adjustment suggested by the Transfer Pricing Officer. Against such draft assessment orders, the assessee filed objections before learned DRP. However, learned DRP did not find me....
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....r 2008-09 was passed on 29th August 2018, which is beyond the period of limitation prescribed under section 153(2A) r/w its 4th proviso, as it stood prior to its amendment by Finance Act, 20016. He submitted, similarly for the assessment year 2009-10, the final assessment order in pursuance to the direction of the Tribunal was passed on 9th October 2018. Thus, he submitted, the impugned assessment orders are clearly barred by limitation. The learned Counsel for the assessee submitted, even by the time the Assessing Officer passed the draft assessment orders for the aforesaid assessment years, the limitation period of 24th months had already expired. Thus, he submitted, the assessment orders having been passed beyond the period of limitation prescribed under section 153(2A) of the Act are invalid in law, hence, should be quashed. In support of such contention, learned Counsel relied upon the following decisions:- i) Nokia India Pvt. Ltd. v/s DCIT, [2017] 85 taxmann.com 291 (Del.); ii) Instruments & Control Company v/s CCIT, [2012] 83 CCH 149 (Guj.); iii) CIT v/s Bhan Textile Pvt. Ltd., [2008] 300 ITR 176 (Del.); iv) Citicorp Finance India Ltd. v/s ACIT, ITA no.3610 & 3611/ M....
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....ithin the time of receipt of directions of the DRP, they cannot be considered to be barred by limitation. 8. We have considered rival submissions and perused material on record. We have also carefully applied our mind to the decisions relied upon. For deciding the issue at hand, we have to take note of certain dates and events which have a crucial bearing on the issue:- Sl. no. Dates Events 1. 14.01.2015 Common order passed by the Tribunal disposing off the appeals for the A.Y. 2008-09 and 2009-10. 2. 04.03.2015 Order passed by the Tribunal was received by the Principal Commissioner of Income Tax. 3. 30.11.2017 Draft assessment order passed for the A.Y. 2008-09. 4. 04.12.2017 Draft assessment order passed for A.Y. 2009-10. 5. 29.08.2018 Final assessment order passed for the A.Y. 2008-09. 6. 09.10.2018 Final assessment order passed for A.Y. 2009-10. 9. From the aforesaid dates and events, the crucial date which have to be taken note of are the date of receipt of order passed by the Tribunal in the O/o the learned Principal Commissioner of Income Tax, which is 4th March 2015, and the dates of final assessment orders passed for the assessment years ....
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....ety, still, the provisions of section 153(2A) of the Act would be applicable. Since, in the said case the final assessment order was not passed within the period of limitation prescribed under section 153(2A) of the Act, the High Court quashed it. The Tribunal, Pune Bench, in Honeywell Automation India Ltd. (supra), expressed similar view. Even, the other decisions cited by the learned Counsel for the assessee support the aforesaid view. It is relevant to observe, in the course of hearing of appeal, the learned Departmental Representative had sought the indulgence of the Bench to furnish a report from the Assessing Officer with regard to the applicability of the limitation prescribed under section 153(2A) of the Act. In the report dated 19th July 2019, though, the Assessing Officer has clearly admitted that the order of the Tribunal was received by the learned Principal Commissioner of Income Tax on 4th March 2015, however, he has stated that the assessment order having been passed within the stipulated time from the date of receipt of the directions of the DRP, they are not barred by limitation. In our view, the aforesaid contention of the Revenue is without merit. When the statut....
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....ompany initially entered into an agreement in the year 1993 with German Express Shipping Agency (GESA) for availing business support services. The said agreement continued till the year 2006 and was terminated on 31st December 2006, after incorporation of the assessee company in India. With advent of the assessee company, the agency agreement was entered into between Hapag-Lloyd AG and the assessee effective from 1st January 2007, under which the assessee acts as a captive service provider to Hapag-Lloyd AG in booking shipments required to be moved from one location to another and to provide support services in relation to freight collection, vehicle husbandry, transportation of container in India. Though, the agreement between Hapag-Lloyd AG and GESA was terminated in 31st December 2006, however, considering the long standing relationship with GESA and its involvement with Hapag-Lloyd AG in India and the commercial consideration attached to it, it was decided to phase out GESA's involvement in a transitional manner once the assessee becomes completely equipped to render services to Hapag-Lloyd AG for all territories in India. Keeping this in view, the agency agreement between the....
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.... Officer determined the arm's length price of the business support services provided by the assessee to the AE, which resulted in transfer pricing adjustment of Rs. 22,36,67,342. The assessee challenged the addition made on account of the aforesaid adjustment before learned DRP. However, after rejection of the objections by learned DRP, final assessment order was passed confirming the addition made in the draft assessment order. Against the final assessment order so passed, the assessee preferred appeal before the Tribunal. While disposing off assessee's appeal in ITA no.1134/Mum./2015, dated 27th February 2017, the Tribunal following its earlier order passed for the A.Y. 2008- 09 and 2009-10, restored the issue to the Assessing Officer for deciding the issue afresh in the light of the directions of the Tribunal. In pursuance to the directions of the Tribunal, the Assessing Officer again made a reference to the Transfer Pricing Officer for determining the arm's length price of the business support services provided to the AE. In the fresh order passed under section 92CA(3) of the Act, the Transfer Pricing Officer again applied price charged by GESA to the assessee under th....
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....her, he pointed out the following functional and risk differences which completely rules out adoption of sub-agency agreement with GESA as internal CUP. Functional differences Functions/ activities Agreement between Hapag India and Hapag AG Sub-agency agreement between Hapag India and German Express Territories Responsible for the entire territory of India. Hapag India has not appointed sub-agent for the following regions and performs the support activities on its own: * Mumbai * Nhava Sheva * Delhi * Dadra (ICD) * Tutlakabad (ICD) * Patparganj (ICD) * Chennai Responsible for regions other than the regions specifically handled byHapag India on its own, some of which include: * Tuticorin * Pipavav * Mundra * Kandla * Vishakhapatnam Provision of feeder services Responsible for organising of loading/ discharging activities with respect to Hapag AG‟s vessels as well as feeder vessels. The relevant extract of the agency agreement is reproduced as under: "Article 2 - Services to be rendered by "the Agent" 2.1...organisation of loading/ discharging activities for vessels of "The Line" and/ or feeder vessels serving under a contract with "....
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....evant extract of the sub-agency agreement is reproduced below: Article 4 - Collection of sea/ inland freights and charges 4.2 "The Sub-Agent" undertakes to provide "The Line" with a bank guarantee for sea/ inland freights and/ or other charges collected or not collected from customers through "The Sub-Agent" but due to "The Line" as may be required by the "The Agent". All cost incurred in order to obtain a bank guarantee shall be covered by "The Line". Credit risk The Appellant does not bear the credit risk German Express is required to remit money irrespective of whether the same has been collected. Thus, German Express assumes the risk of default of payment by customers. It is respectfully submitted that the Appellant does not bear any credit risk in relation to the transaction of provision of business support services to its AE (i.e., it is remunerated for its functions regardless of collection of freight from the customers). As against this, the remuneration payable to German Express is contingent upon the receipt of freights from customers. Accordingly, in a scenario that the customers do not honor the payments under their contract, the risk is borne by German Expre....
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....tted, even the sub- agency agreement was determined in March 2010, after which there was no relationship even between the assessee and GESA. He submitted, even between January 2007 and March 2010, there is no direct relationship between Hapag-Lloyd AG and GESA and no payment has been made by Hapag-Lloyd AG to GESA. Therefore, the Transfer Pricing Officer was totally wrong in considering the sub- agency agreement with GESA as internal CUP. He submitted, though, the Tribunal had not ruled out applicability of external CUP, however, the Transfer Pricing Officer himself has not been able to find out any external CUP. He submitted, in such circumstances, benchmarking done by the assessee applying TNMM has to be accepted. Further, he submitted, in subsequent assessment years, the Transfer Pricing Officer has himself accepted benchmarking of the assessee under TNMM with same set of comparables. Thus, he submitted, adjustment made to the arm's length price of business support services should be deleted and the benchmarking of the assessee under TNMM should be accepted. In support, he relied upon the following decisions:- i) Bhopal Sugar Industries v/s ITO, [1960 40 ITR 618 (SC); ii....
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....374/Mum./2014, the Tribunal dealt with the issue and restored it back to the Assessing Officer for deciding afresh keeping in view the decision of the Tribunal in UCB India Pvt. Ltd. v/s ACIT, [2009] 121 ITD 131 (Mum.). Relevant observations of the Tribunal are as under:- "6. We have considered the rival submissions as well as relevant material on record. Upto 31/12/2006 GESA was providing the services for booking shipments to HLAG under agency agreement of 1993. GESA was charging a certain percentage on the freight turnover as commission apart from fixed charges @ US$ 10 per inland box. Other fee is as per RBI guidelines as well a fee for consignment delivery and bill of lading. 6.1 On the other hand the assessee was appointed as agent w.e.f. 01/01/2007 and is remunerated for the services rendered to AE at cost plus 10% mark-up. The assessee was also authorized by the AE HLAG to appoint GESA as sub-agent for providing services for certain territories of India and the entire territory of Nepal. The sub-agent is remunerated on the same basis as it used to receive the commission under 1993 agreement. The assessee benchmarked its international transactions by adopting TNMM as most....
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....tion and cannot be applied in exclusion of current year data. In other words, in the case of existence of exceptional circumstances the prior two years data along with current year data can be used. Once the GESA ceases to be agent of HLAG w.e.f. 31.12.2006, then in the absence of current/contemporary data / uncontrolled price, the price of prior year cannot be considered for determination of ALP in relation to international transaction entered in current year. 6.2 The another aspect of considering the said price between GESA and assessee as internal CUP is that it does not satisfy the basic ingredient of a transaction between an unrelated party and associate enterprise of the assessee in the parity of the services provided by the assessee to the AE. United Nations Practical Manual on Transfer Pricing for Developing Countries has discussed the comparable uncontrolled price (CUP) in para6.2.1.1 as under :- "6.2.1.1 The comparable Uncontrolled Price (CUP) Method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances. T....
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....otal has to be compared with the ALP. The assessee received the price for providing the service as per the agency agreement. Therefore, the service provided by the assessee to the AE are closely interlinked and price of one part is dependent on the price of the other part. Therefore, the entire services provided by the assessee has to be treated as one international transaction for the purpose of determining the ALP. 6.2.4 In view of the above discussion, as well as the facts and circumstances of the case, we set aside the issue to the record of TPO/AO, to decide the same afresh, by considering in the light of the above observation as well as the decision of this Tribunal in the case of UCB India Pvt. Ltd. vs. ACIT dated February 06, 2009 (2009-TII-02- ITAT-MUM-TP) ITA No.428 & 429/Mum/2007 for assessment years 2002-03 and 2003- 04(supra). 19. A careful reading of the observations of the Tribunal reproduced above would make it clear that the Tribunal had clearly and categorically observed that the price received by GESA under the sub- agency agreement cannot be applied as internal CUP to determine the arm's length price of business support services provided to the AE. The ....