TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1978
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....ted Enterprises (AE) towards charter hire of dredgers by applying Comparable Uncontrolled Price (CUP) method as the most appropriate method and selecting Transactional Net Margin Method (TNMM) as the most appropriate method. 4. Brief facts are, the assessee is a foreign company incorporated in Netherland. It has set-up a Project Office in India to execute dredging contracts in India. It is stated, the assessee is carrying on dredging activity in India for more than 20 years. In previous year relevant to the assessment year under dispute, the assessee undertook various international transactions with its overseas Associated Enterprise (AE) including charter hire of dredgers. In the year under consideration, the assessee paid charter hire / lease rental of Rs. 302,78,03,783. Out of the ten dredgers used for executing dredging contracts in India in the year under consideration, six dredgers were under hire by the assessee from the assessment year 2010-11. The assessee benchmarked the charter hire / lease rentals paid to the AE for hiring the dredgers on the basis of a valuation certificate obtained from Van Woerkom, Nobels& Ten Veen and claimed the charter hire / lease rentals paid t....
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....e method to benchmark the transaction. The Transfer Pricing Officer, however, did not find merit in the submissions of the assessee. He observed, benchmarking of charter hire / lease rental is simply based on the valuation report which has no scientific basis but is merely on assumption and conclusion drawn by a third party without any supporting evidence. Further, he observed, for benchmarking the transaction for the impugned assessment year, CIRIA norms of 2009, cannot be applied. Further, he observed, the assessee failed to substantiate that the valuation report is a valid CUP for determining the arm's length price. As regards assessee's contention that in the preceding assessment years similar valuation report from the independent valuer was accepted as a valid CUP, the Transfer Pricing Officer observed, principle of res judicata does not apply to tax proceedings. In the aforesaid premises, the Transfer Pricing Officer rejected the benchmarking done by the assessee under CUP method and proceeded to determine the arm's length price of the international transaction by applying TNMM at entity level which resulted in upward adjustment of Rs. 161,70,50,636, to the arm's ....
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....on. However, the Transfer Pricing Officer noticing that the basis for valuation in the valuation certificate is CIRIA Norms 2005, called upon the assessee to do valuation as per CIRIA Norms 2009. The learned Authorised Representative drawing our attention to the valuation certificate of the independent valuer placed in the paper book submitted, the valuer has made the valuation as per CIRIA norms and made adjustments for inflation using appropriate indexation as of 1st January 2010 provided under CIRIA norms. He submitted, the valuer has applied the same formula on the basis of which the Transfer Pricing Officer in the earlier assessment years had directed the assessee to make the valuation. The learned Authorised Representative submitted, in case of assessee's wholly owned subsidiary Van Oord India Pvt. Ltd., which also regularly hires dredgers from the AEs, the arm's length price of the charter hire charges is always benchmarked by using CIRIA norms and the Department has accepted it over the years. He submitted, even, in the impugned assessment year also in case of Van Oord India Pvt. Ltd, the valuation done by the independent valuer as per CIRIA norms has been accepted as a....
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..... Further elaborating, he submitted, the valuation report does not represent the actual rate as the valuer himself has stated that the rates are indicative. Further, drawing our attention to the order of the Transfer Pricing Officer, learned Departmental Representative submitted, the assessee did not furnish details which prevented the Transfer Pricing Officer from verifying whether the valuation done by the independent valuer is as per the actual rate. Therefore, he submitted, if the bench is of the opinion that the arm's length price of the hire charges / lease rentals are to be determined on the basis of CIRIA norms, let the issue be restored back to the Assessing Officer / Transfer Pricing Officer for re-adjudication with a direction to the assessee to furnish all the details. 11. We have considered rival submissions and perused the material on record. As could be seen from the facts on record, in the year under consideration, the assessee has paid an amount of Rs. 302,78,03,783, to its AEs towards hire charges / lease rentals for charter hire of 10 dredgers. The assessee has benchmarked the aforesaid transactions with the AEs by selecting CUP method, wherein, the valuatio....
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....mula as per CIRIA Norms 2005. Ultimately, the Transfer Pricing Officer having found that charter hire charges paid by the assessee to the AEs is at arm's length as per CIRIA Norms 2009, made no further adjustment. It is relevant to observe, in case assessee's Indian subsidiary, viz, Van Oord India Pvt. Ltd., the Transfer Pricing Officer has consistently accepted the benchmarking of charter hire charges as per valuation done on the basis of VG Bouw / CIRIA Norms, which is evident from the orders passed by the Transfer Pricing Officer for the assessment year 2011-12, a copy of which is placed in the paper book. 14. Interestingly enough, out of 10 dredgers hired by the assessee for the impugned assessment year, two dredgers were partly hired by the aforesaid Indian subsidiary and in the course of proceedings under section 92CA(3) of the Act, the Transfer Pricing Officer has accepted the valuation report of the independent value as a valid CUP and treated the international transaction relating to payment of charter hire charges to be at arm's length price. It is also relevant to observe, the Transfer Pricing Officer in both the cases is the same. Thus, from the aforesaid facts....
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....i judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction." 16. The same view has been expressed in other decisions as well. In case of the present assessee also, the material facts permeating through different assessment years are more or less identical as the terms and conditions on which the dredgers are hired have not changed. That being the case, applying the rule of consistency, a different view cannot be taken in the impugned assessment year with regard to the benchmarking of lease rentals paid for charter hire of dredgers by applying CUP method. For the aforesaid reasons, we allow the grounds raised by the assessee with a direction to the Assessing Officer / Transfer Pricing Officer to accept the benchmarking done by the assessee under CUP method after v....