9911796707
TMI Blog2015 (7) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... his ground, but agreed with the bench that adjudicating these contention would be academic exercise. After hearing the rival contention we deem it fit to dismiss all these cases as no useful purpose would be served by adjudicating the same. Similar adjustment has been made in any other assessment years even if it is made, when the matter is not adjudicated by us, it cannot be abinding precedent. We are also informed that no penalty proceedings have been initiated in these cases. Even otherwise penalty proceedings are independent and the issues can be contested on merit. Under this circumstance we dismiss all the appeals filed both by the assessee and the revenue as academic in nature.On a query from the Bench, it transpired that in subsequent years, the TPO has accepted the Transfer Pricing study made by the assessee and the assessee is running in heaving loss up to year 2008. So the decision in either way is not going to affect the assessee. We find that the adjudication will be mere academic and thus dismissal of the appeals will not be treated as a precedent by either side in case any issues regarding the assessee is concerned. - Decided against assessee and revenue. - ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO on account of the said expenses pertaining to financial year 2000-01 especially when liability has crystallized and determined in financial year 2000-01 relevant to assessment year 2001-02 itself. Thus the said liability was not allowable for the financial year 2001-02 relevant to assessment year 2002-03 under reference. 6. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of ₹ 3,40,46,541/- ignoring the provision of section 4 of Income Tax Act 1961 mandating that income tax shall be charged for any assessment year in respect of total income of the previous year. 7. On the facts and in the circumstances of the case and in law, Ld. CIT(A)has a erred in deleting the disallowance made on account of royalty and fee technical know-how amounting to ₹ 3,40,46,541/- pertaining to financial year 2000-01 ignoring the fact that liability has definitely arisen in the accounting year and the same should have been claimed/allowed in the accounting year although the liability may have to be quantified and discharged at a future date as held in the case of Bharat Earth Movers Vs. CIT,245 ITR 428 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Company was promoted by Escorts Limited and Yamaha Motor Co. Ltd., Japan as a joint venture company in the name of Escorts Yamaha Motor Limited . Both Yamaha Motor Co. Ltd., Japan and Escorts Limited subscribed 50% of the issued share capital of the Company. Subsequently, in June 2001 Escorts Limited exited from the joint venture company, when Yamaha Motor Co., Ltd., Japan acquired hundred percent share capital of the Company through acquisition of shares from Escorts Limited. After the acquisition of hundred percent stake in the share capital of the company by Yamaha Motor Co., Ltd., Japan, the name of the Company was changed to Yamaha Motor India Private Limited . The company has now been in operation for the last seven years and has emerged as one of the leading manufacturers and exporters of Bi Wheelers in the country. For the year ended December 31, 2001 the total revenue of the company were ₹ 806.98 Crores including exports of ₹ 54.32 Crores. During the financial year ended March 31, 2002, the Company entered into certain international transactions with related parties. Majority of these international transactions were carried out on the basis of agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case it is only when the Central Government conveyed its approval to the appointment of M/s Harrisons and Crosfield Limited as managing agents by its letter dated September 2, 1957 that the appointment became effective and the Company's liability to pay the remuneration of the managing agents accrued. The position here is not that the liability had arisen earlier and its quantification only depended on the approval of the Central Government. It is true that the liability became effective from April 1, 1956, a date anterior to the relevant previous year, but that is because the Central Government chose to give its approval retrospective operation. The liability in these circumstances cannot be said to have arisen from any date prior to September 2, 1957 when the approval was given as Section 326 contains an absolute prohibition against the appointment or re-appointment of a managing agent before the approval of the Central Government was obtained. In our opinion, the position is quite clear from the terms of Section 326 and we do not consider it necessary to refer to the authorities cited by the learned counsel for either side.... Now coming to ITANo. 1790/Del-2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,07,62 ,701/- for export of spare parts According to the ld AR this adjustment has been proposed by the TPO on account of exports to Iran. In this regard it may be relevant to refer to Paper book page 20 of the TP study. The assessee has exported 3150 units of motor cycles to Iran. These motor cycles were exported in CKD form due to custom duty implications in Iran. Each unit was exported at a price of USD 733.40. The cost of this model is ₹ 31,730/-. The sale value was ₹ 11,03,27,692/- and the cost was ₹ 9,99,49,500. Thus there was a profit margin of 9.41%. This margin was better than the export of similar motor cycles to unrelated parties in Bangladesh and Sri Lanka where the margin was 8.67%. According to the ld AR the TPO ignoring the above facts has applied the gross profit margin of 30% in respect of spare parts. The only basis given by the TPO is that the assessee having declared the sale as CKD spare parts it cannot apply the margin on sale of motor cycles. This has been confirmed by the CIT(A) on the same reasoning. The action of the TPO and CIT(A) is against the facts. There is no dispute to the fact that the assessee has exported 315 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that the CIT(A) has confirmed the same in para 6.7 on page 8 of its order. According to him the contention of the assessee has been rejected arbitrarily by the ld CIT(A). The assessee has submitted the explanation received by it from YMC, Japan to justify the difference in the margin. It was submitted that margin in the case of CKD (Completely Knocked Down) part is much less as compared to independently sale of spare parts. The YMC, Japan is making sale to Norkis, Philippines whereby the ratio of CKD is more than 90% as against ratio of CKD in the case of assessee company being 10%. Margin is less because the amount of margin per unit in CKD will be more than as compared to margin per unit in the case of assessee company as explained by the following example given in the synopsis: Assumptions: Amount of total components parts; JPY 100,000. Ratio of CKD: YMl10% / NTC 90% Profit Margin: For YMl 21,4% / For NTC 14.03% Profit Margin for 1 unit: YMl: JPY 100,000*W%*21.4% = JPY2,140 NTC: JPY 100,000*90%*1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. That cost is to be taken into account while comparing the margin with Norkis Trading Co., Philippines as similar facility is not provided by YMC, Japan to Norkis Trading Co. 1.8 Further the assessee company has submitted that it has been exporting spare parts to unrelated parties and whereby it has earned a margin of 53.18%. Thus the margin charged by YMC, Japan of 21.4% is much less than the margin charged by the assessee company on sale of spare parts. 1.9 All the above issues have been totally ignored. It was submitted before the TPO that a volume discount of 2.37% will bring the margin within 5% ( ) range and no adjustment in this account is to be made. 1.10 In view of the above, the CIT(A) was not correct in confirming adjustment in arm's length price on import of spare parts ignoring the following factors:- i) Ratio of the CKD which in the case of sale by YMC, Japan to Norkis, Philippines was 90% as against 10% in the case of assessee company. This affects the profit per unit as stated hereinabove in the example. ii) Volume discount has not been considered as sales to Norkis Trading Co. was 7 times than the sale to assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % in the case of related parties and in the case of unrelated parties against the margin range between loss margins to profit margin of 94.24%. It was further submitted by the assessee that the volume discount is also an important factor while making sales to AEs. The TPO has arbitrarily rejected these evidences and made the above adjustment which has been confirmed by the CIT(A). In this regard the contention of the assessee has been totally ignored that margin varies from product to product and aggregate margin cannot be a basis for making the adjustment. This has been done despite the TPO giving a categorical finding in para 5.1.1 which reads as under- Margin appears to vary depending the type of component and no other factors appears to be relevant. The above finding has been given by the TPO on review of the list of export of various spare parts to related parties as well as unrelated parties submitted to him. Despite giving the above finding the TPO has made the adjustment which is incorrect. Secondly, the TPO has rejected the argument of volume discount which plays very important part in pricing of the spare parts. (b) Misce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspection for rust and damaged parts, special transportation boxes, etc. due to difference in technical specification of the camshafts required in India and those used in Brazil and Japan. It was further submitted that YMC, Japan is purchasing these camshafts at JPY 670 per unit and assessee has sold the same at JPY 666 and thus there is a comparable uncontrolled price and hence no adjustment is required. The TPO has arbitrarily rejected the explanation which has been confirmed by the CIT(A). The reasoning given by the TPO does not take into consideration that camshaft is product specific and having been once purchased the same can be sold back at the prices which the buyer will otherwise be paying when it will buy from the market. There being no difference in the prices i.e. JPY 670 and JPY 666, adjustment made by the TPO is unjustified and needs to be deleted. 3.0 Export of Motor Cycles - ₹ 64,39,600/-: The TPO on this account has made an adjustment of ₹ 1,32,22,520/-. The CIT(A) has reduced the same to ₹ 64,39,600. The assessee during the year has exported motor cycles to AEs as well as unrelated parties. The average gross profit mark-up ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that this approach of the TPO in applying model to model approach (that too on faulty basis) is against its own finding in respect of export of miscellaneous spare parts whereby he has applied the overall margin ignoring the actual marking on the miscellaneous items. 7. After submitting the above written synopsis by the ld counsel for the assessee, Shri Ved Jain, submitted that the assessee is a loss making unit suffering continuously loss for more than 10 years. On having making such a submission the Bench queried whether any purpose would be served if the above appeals are adjudicated subsequently when the admitted position is that the TPO has not made similar adjustment in any of the subsequent assessment years. The ld counsel for the assessee fairly admitted that the loss claimed and allowed to the assessee could not be carried forward as the period of 8 years elapsed and under those circumstances the adjudication of the issues listed in these appeals would be academic in nature. Nevertheless, he submitted that on principle, the assessee company cannot be concede such additions and on merits the assessee company has a very strong case as both the TPO as well as AO and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
