ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
IN THE INCOME TAX APPELLATE TRIBUNAL
"L" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member
and Shri Amit Shukla, Judicial Member
ITA No.8134/Mum/2010
(Assessment year: 2008-09)
Ingram Micro (India) Exports Vs. Dy. Director of Income Tax
Pvt. Ltd, 205 Kallang Bahru, (International Taxation)-3(1)
Level I.M. Singapore-339341 Scindia House, Ballard
Estate,Mumbai 400038
(Appellant) (Respondent)
Assessee by: Shri J.D.Mistri, Mr.Nishant
Thakkar, & Mr. K.K.Ved
Department by: Shri Narender Kumar, CIT DR
Date of Hearing: 31/01/2013
Date of Pronouncement: 07/02/2013
ORDER
Per B. Ramakotaiah, A.M.
This is an appeal by assessee company who is a resident of
Singapore, contesting the action of AO and the DRP on the issue of
holding that assessee has a permanent establishment in India and
without prejudice the profits attributable to the PE in India were
determined arbitrarily by estimating the business income at 90% of
the business profits and also non consideration of details placed on
record, levy of interest etc. in its six grounds of appeal raised.
2. At the outset the learned Counsel requested for restoring the
appeal afresh to the file of AO on the reasons stated by him without
going to the merits of the case about the PE and the attribution of
profits. The reasons for request for restoration are that the
jurisdictional Commissioner was on the Dispute Resolution Panel
which heard the objections filed by assessee against the draft
assessment order. Following the principles laid down by the Hon'ble
Uttarakhand High Court in the case of Hyundai Heavy Industries
Ltd. Vs. Union of India, 201 Taxmann.com 237 followed by ITAT in
the case of Lionbridge Technologies (P) Ltd. Vs. Deputy
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ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
Commissioner of Income-tax, Range 8(2) 51 SOT 40 (Mum) and
Huntsman International (India) (P.) Ltd. Vs. Additional
Commissioner of Income-tax 10(3), 54 SOT 35 on the reason of
possible bias/conflict of interest, the Ld.counsel objected to the
presence of jurisdictional CIT on the DRP panel. In support the
learned Counsel placed on record the posting order of Mrs. Poonam
Dutt as DIT (IT) who was the jurisdictional Commissioner not only
at the time of passing the draft assessment order but also part of
DRP and at the time of final order. Therefore, the first objection is
with reference to the above issue.
3. The next objection is that the contention of assessee that
Indian entity has been appropriately remunerated at arms length
separately by way of rebates/incentives paid to Indian entity Ingram
Micro (India) Pvt. Ltd directly by various vendors, supported by
various documents placed on record, which were rejected by the AO
without examination and not considered by the DRP inspite of
raising objections on this issue. He has mentioned that this aspect
has to be examined by AO. The third reason is that the learned
DDIT erred in not giving opportunity for cross examining the
individuals whose statements were recorded during the search and
seizure operations and relied upon by Revenue, the request of which
was made before the authorities in the proceedings, but not
considered.
4. In support of the above contentions, the learned Counsel
placed on record the orders of the posting of the jurisdictional
Commissioner, the papers submitted to AO/DRP on the above
issues and request for cross examination which were not
considered. In view of this, the learned Counsel's submission was
that the order be restored to the file of AO for fresh consideration
without going to the merits of the grounds raised on which detailed
submissions are required. The learned Counsel also placed on
record certain documents in the form of financial statements of
Ingram Micro (India) Pvt. Ltd for the year ended March, 2008 and its
extracts and draft orders in support of the contentions about the
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ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
rebates/incentives received from the Indian vendors on all the sales
made through the Singapore Company, stating that these
documents were directed by the bench of ITAT earlier to file.
5. The learned DR objected to the filing of new documents as
directed by the ITAT, when the ITAT is only directed to file only the
order of the assessment of the Indian Company. Further, he also
objected to the contentions of the learned Counsel on the possibility
of bias of the jurisdiction on the reason that assessee has not raised
any additional grounds and therefore, following the principles laid
down in the case of Dresdner Bank Ag in ITA No.2962/Mum/2004
dated 16.01.2013, this plea of assessee cannot be accepted.
Further, with reference to the contentions that the rebates and
incentives were passed on to the Indian Companies, he referred to
the segmental profits stated by the assessee company to submit
that if the entire profits were passed on to the Indian Company as
stated by the learned Counsel, how there are further substantial
profits in the hands of the Singapore Company, as disclosed in
accounts.
6. With reference to the objection that the cross examination
was not allowed, he has referred to the orders of AO that the entire
documents placed on record were taken during the search/survey
and nowhere this issue was raised. Further, it is also submitted
that assessee has not undertaken any FAR analysis and has not
gone through the TP provisions to determine the Arms Length Price
and relied on the decision of the Hon'ble Delhi High Court in the
case of Rolls Royce Singapore (P.) Ltd. Vs. Assistant Director of
Income-tax, 13 Taxmann.com 81, dated 30.8.2011 to contend that
assessee cannot agitate if he has not undertaken the FAR analysis.
It was further submitted that the entire income earned by the
Singapore Company was from the operations from India and so PE
profits were attributed at 90% after analyzing the voluminous
documents. Tt was the learned DR's submission that there is no
need to set aside the issue to the file of the DRP/AO and the issue
can be decided on merits.
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ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
7. Countering the contentions of the learned DR, the learned
Counsel submitted that non-adherence to the principles of natural
justice, non examination of the contention of Indian entity being
remunerated at arms length and not providing the cross
examination form the very basis of the order which require
reconsideration by AO. With reference to the objection that assessee
has not raised any additional ground, he relied on the Rule 11 of
the ITAT Rules and the principles laid down in the case of Amines
Plasticizers Ltd. Vs. Commissioner of Income-tax, 223 ITR 173 and
in the case of Assam Carbon Products Ltd. Vs. Commissioner of
Income-tax, 224 ITR 57. Since this issue goes to the root of the
jurisdiction and also examination on facts, it was only prayer that
the matter may be restored to the file of AO for fresh examination.
With reference to the objections raised by the DR that the FAR
analysis was not done and transfer pricing procedure not
undertaken, the learned Counsel referred to the paper book from
pages 173 to 270 to submit that the FAR analysis was undertaken
and these matters were before AO and the DRP. It was further
submitted that AO did not make any TP reference. Since the issue
of jurisdiction itself was raised, the prayer is for restoring to AO for
fresh examination of all the issues.
8. We have considered the contentions raised by both the
parties. As seen from the orders placed on record, the first objection
with reference to possible bias on the part of the jurisdictional
Commissioner cannot be rejected outright, as the jurisdictional
Commissioner is part of the DRP which rejected assessee
objections. Various Benches of ITAT, following the principles laid
down by the Hon'ble High Court of Uttarakhand in the case of
Hyundai Heavy Industries Ltd. Vs. Union of India, 201
Taxmann.com 237, is setting aside the orders of the DRP with a
direction to reconstitute the DRP without the jurisdictional
Commissioner and pass fresh orders. Therefore, on first objection
itself the order has to be set aside to the file of the DRP.
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ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
9. However, the plea is to restore to the file of AO as the other
two issues regarding appropriately remunerating Indian entity at
arms length and allowing the cross examination of the persons
whose statement was recorded and used against assessee are to be
undertaken by AO. Even though AO was seized of the matter of
receiving rebates/incentives from the Indian vendor Companies,
there seems to be no detailed examination of assessee's contentions
on the basis of the letters filed from the vendors. AO rejected the
contentions as the said rebate was not shown as the income by the
Singapore Company and also not shown as expenditure. Prima
facie, there seems to be justification in assessee's contention that
the entire rebate/ incentives on the sales made in India are directly
passed on to the Indian company and no part of it was received by
the Singapore Company. There is also justification in the DR's
contentions that if the Indian entity was appropriately remunerated
at arms length, there cannot be any further profit in the Singapore
Company on the Indian operations. However, these aspects require
fresh examination on the basis relevant agreement/understanding if
any and details of incentives received and profit attribution which
was to be done after examination of facts. Therefore, we are of the
opinion that the matter should be restored to the file of AO, without
going into the issue of PE/ attribution of profits. AO is directed to
give an opportunity to assessee for cross examining persons whose
statements are used against assessee. The statements have been
recorded from the Indian personnel and might have been examined
with reference to the Indian Company, however, assessee's
contention that being a foreign company, it has a right to cross
examine the persons who gave statements cannot be denied. It is
already on record that assessee has made the request before AO as
well as the DRP on this issue. Therefore, we direct AO to allow the
assessee to cross examine the individuals whose statements were
recorded and were relied upon by the Revenue so that assessee can
contest/justify/accept the statements.
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ITA No.8134 of 2010 Ingram Micro (India) Exports Pvt Ltd Mumbai
10. In view of this, accepting the request of the learned Counsel,
we set aside the orders of AO and DRP and restore the entire
assessment to the file of AO, leaving the issues contested now open
for examination at a later time, if required. Since the entire
assessment was restored to the file of AO, there is no need to
discuss the issue of PE and attribution of profits now, which may
have to be considered when it arises in the re-assessment
procedure. With these observations and directions, we set aside the
orders of AO and the DRP and restore the entire assessment
procedure to the file of AO for doing it afresh. Assessee is free to
submit the relevant documents and make contentions and AO is
also free to make necessary inquires before finalizing draft order.
DRP which should be without the jurisdictional CIT/DIT, should
also consider the objections, if any, raised by assessee by examining
the facts and legal principles and issue necessary directions in this
regard.
11. In the result, appeal filed by assessee is allowed for statistical
purposes.
Order pronounced in the open court on 7th February, 2013
Sd/- Sd/-
(Amit Shukla) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 7th February, 2013.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, " L" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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