INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I": NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
AND
SHRI A. T. VARKEY, JUDICIAL MEMBER
ITA No. 5375/Del/2011
(Assessment Year: 2007-08)
Bombardier Transportation India ACIT
Ltd., 3rd Floor, B-Wing, Circle-3(1)
Somdutt Chambers-I, Vs. New Delhi
Bhikaji Cama Place,
New Delhi
PAN: AAACA5584C
(Appellant) (Respondent)
Appellant by : S.D. Kapila, Adv,
Respondent by : Peeyush Jain, CIT DR
ORDER
PER A. T. VARKEY, JUDICIAL MEMBER
Brief fact of the case is that the assessee company (BTIL) is a part of
Bombardier Group and is engaged in manufacturing of transportation
solution ranging from regional aircrafts and business jets to rail transportation
equipment, system & services.. It is associated with the Indian Railways as a
component supplier for propulsion and signaling system. In the propulsion
business, BTIL manufactures traction/auxiliary converters, vacuum circuit
electronics and tabs changers in its facilities in Gujarat. In the signaling
business, the company is engaged in the supply and installation of signaling
equipment.
2. The Income declared by BTIL was at Rs.70.050 crores, Income assessed
u/s 143(3)/ 144C 78.75 crores , TP adjustment Rs. 8.58 crores
3. The international transactions entered into, by the assessee are
tabulated below:-
Page No. 2
Nature of transaction Method Total value of
selected Transactions
(Rs)
Import of raw material, components and TNMM 11,037,600
finished goods
Provision of software services TNMM 36,465,954
Availing of administrative and intermediary - 85,813,076
services
Reimbursement of expenses by Bombardier - 932,213
India
Write off of balance - 28,73,000
4. TPO accepted the value of all international transactions except
administration and intermediary services received from Bombardier Group &
Bombardier Switzerland.
5. The Transportation business of Bombardier Group is headquartered in
Germany and is further split into following key sub-divisions:-
The Locomotive Division (LOC)
Mainline & Metros (MLN)
Propulsion (PPC)
Bogies (BOG)
Light Rail Vehicles (LRV)
London Underground Project(LUP)
Rail Control Systems (RCS)
Bombardier Transportation North America (BTNA)
Services (SER)
Total Transit System Division(TTS)
Swiss HUB:-
The worldwide management activities for each of above- mentioned
sub-divisions are centralized in departments known as HUBs.
Bombardier Switzerland is the HUB entity Propulsion (PPC) and houses
heads for various functional areas like procurement, engineering
operations, quality, marketing and finance, each catering to the
worldwide PPC business. These functional heads monitor and supervise
operations of local PPC site like Bombardier India at division level and
Page No. 3
provide them regular assistance. An agreement has been executed for
such services between Bombardier Switzerland and Bombardier India
and named as services agreement. (at pg. 284IVol.-I)
Bombardier Canada:-
Bombardier Canada, being the Headquarter entity for the Bombardier
group is responsible for management and coordination between
Aerospace and Transportation business and respective Sub-divisions
(HUBs) in respect of all strategic and operational issues and provides
the global policies. procedures, administrative support services etc. For
availing these centralized administrative and intermediary services, a
service agreement was executed between Bombardier Canada and
Bombardier India along with other group entities. (at pg. 427 IV 01.-11)
6. At the outset the ld AR raises violation of natural justice by the
authorities below and took our attention to Grounds no. 5 to 7 raised by it
which are as follows:-
"5. The ld TPO erred by not providing the Appellant an adequate
opportunity of being heard before concluding that the appellant has
not derived any benefits from the services availed from its associated
enterprises, which is against the principles of natural justice.
6. The Hon'ble Dispute Resolution Panel (DRP) erred in its findings
that no cost allocation information was provided by the Appellant and
same is factually incorrect.
7. The Hon'ble DRP erred in sustaining TPO's order by ignoring the
detailed evidence submitted to it, substantiating the nature of intra-
group services availed by the Appellant and corresponding benefits
derived there from."
7. The ld AR submitted that, the assessment proceedings of the assessee
began in November 2009. However, the learned TPO only issued a show
cause notice to the assessee in September 2010 and provided the assessee
less than 4 working days to prepare a response for the same. The ld AR further
submitted that it was time consuming to comply with the detailed request of
the TPO. However, the learned TPO failed to appreciate this fact and even
though he had sufficient time to issue the show cause notice before hand, he
Page No. 4
preferred to issue notice only at the last stage of assessment proceedings
and didn't provide sufficient opportunity to the assessee to submit the
complete details/information as requested in the show cause notice and
went ahead and passed the order. Thereafter the assessee submitted the
additional information before the DRP as the same could not be submitted
before the TPO due to paucity of time as stated above. However according
to the ld AR, the DRP has failed to consider the evidence including the cost
benefit analysis submitted before the TPO and voluminous evidence
submitted before it. And according to the ld AR, the DRP's finding that the
appellant did not provide allocation key for allocation of costs by the AEs
was wrong and these were specifically provided to the TPO & DRP. And
according to the ld AR, neither the TPO, nor the DRP have questioned the
veracity of the fact as to whether the Swiss & Canada AE rendered services
to the assessee. However, in the impugned order they have surmised that
these services are incidental, duplicative and not necessary for the appellant
to carry on its business. So according to the ld AR, because of non-
consideration of relevant evidence by DRP and due to the lack of
opportunity to produce the documents to substantiate its claim before the
TPO, has resulted in failure by the said authorities to consider the significance
of the services rendered by the AE ; and also they made no attempt to
appraise their market value or benefit derived by the appellant.
8. And therefore the ld AR, prays that the issues may be remanded back
to the file of the TPO/ DRP for fresh adjudication for violation of natural justice.
9. The ld DR supported the orders of the authorities below.
10. We have heard both the parties and perused the records. We find that
though the assessment proceedings in the instant case began in November,
2009, TPO issued show-cause notice to the assessee only in September 2010
directing it to submit details and supporting documents, which are admittedly
voluminous and requires reasonable time for collecting and producing the
same. However we find that the TPO issued the said show cause notice on
20th September 2010, directing the assessee to submit the entire documents
asked by him before 27th September 2010, by which the assessee only got 4
Page No. 5
working days to comply the same. Since it was practically impossible to
submit the entire documents, the assessee submitted whatever it could
before the TPO who passed orders without considering the documents which
ought to have been looked into by him provided sufficient time was granted
to the assessee. Thereafter we find that the assessee filed all the said relevant
documents asked by the TPO before the DRP. The data and documents
submitted before the TPO and DRP is tabulated below:-
11. The table below show date and details of the documents filed before
TPO/DRP:-
S. Sequence Date Ref.
No.
1. TPO issued notice u/s 92CA (2) and 92D (3) 7.10.2009
2. Assessee files documents under rule I OD 5.11.2009 Pg1-268/Vol-I
along with other documents with the TPO.
3. Assessee appears and tiles submissions on 3.3.2010 Pg 269-270/Vol-I
queries on segmental accounts of BTIL &
allocation of expenses
4. Add relating information in response to 20.04.2010 Pg 271-275/Vol-I
factual queries by TPO about AEs &
allocation keys.
5. TPO first time requires documentary 22.09.2010 Pg.50/Appeal Memo
evidence to justify payment for everyone of (Pg. 38/ objections)
the services rendered by the AEs. The
evidence to be furnished within 4 days
excluding 25th & 26th September, being
Saturday & Sunday (objection 4 & 5)
6. The assessee furnished explanation with
sample evidence. TPO closes proceedings
27.09.2010 Pg. 276-297/ Vol-I
with further opportunity (particulars of
samples at Annexure-I
7. Cost Allocation keys:-
1) Vide letter dt. 27.9.2010 furnished to TPO Pg.276-278/ Vol-I
2) Nature and allocation of cost of service Pg.42/AM
and allocation keys explained to DRP Pg. 20/ Objections
11.10.2010
(Ground no. 6) Pg.46/AM
a) (Swiss Hub) Pg.24/ Objections
b) Canada H.O, Pg.898/Vol.-III
3) Allocation Keys again provided to DRP
8. Cost allocation of services provided to Pg. 452-457/Vil-III
Group entities world-wide
Page No. 6
9. 27.01.2010 Pgs.383/Vol-II
Pg.30/appeal Memo
The assessee files objections with the DRP, (Pg 19/objections)
inter alia, furnishing:
a) Written submission DRP Pg.41/Appeal Memo
b) Explanation justifying the TP analysis of (Pg.19/Objections)
the Pgs.385-424/Vol-II)
assessee and objecting to TPO rejecting it
without basis. (objection no. 3) Pg.48/Appeal Memo
c) Analysis of significance of the impugned (Pg. 26/objections)
services and their benefit to the Appellant's
business (objection no. 2) Pg. 438-877/Vol-II
d) Cost Benefit analysis along with additional (particulars of each
evidence establishing actual rendering of documents as per
services, by the AEs essential to the appellant index at Annexure-2
for running its business efficiently. ' Pg. 897-900/Vol-II
i) service rendered by Canada HO, benefit Pgs. 880-1028/Vol-II
derived, allocation keys applied and actual (Index giving
cost allocation world-wide to all AEs. particulars of each
documents at
Annexure-3)
12. However, we on a perusal of the impugned orders find that the DRP
has not considered the aforesaid evidences including the cost benefit
analysis, the details of the service rendered by Canada HO, benefits derived,
allocation keys and actual cost-allocation work wide to AE's (Pg. 438-877
Volume-II and Page 897-900/ Vol-II and other documents relevant to
adjudicate the issues before it.
13. In the aforesaid facts and circumstances, we find force in the
submission of the ld AR, that sufficient opportunity was not given to the
assessee to furnish the requisite details and documents to answer the queries
raised by the TPO. At any rate 4 working days is insufficient to produce the
voluminous documents necessary for answering the queries raised by the TPO
along with supporting documents. Thus we find that the TPO's order was
vitiated for violation of natural justice and we also find that the DRP has also
not gone into the evidence filed before it by the assessee. Therefore we set-
aside the impugned orders of the authorities below and remand the matter
for fresh adjudication, with a direction to the AO/TPO to pass order afresh
Page No. 7
after taking into consideration the evidence furnished by the assessee and
after giving reasonable opportunity to the assessee.
14. The appeal is allowed for statistical purposes.
Order pronounced in the open court on 05.09.2014.
-Sd/- -Sd/-
(R.S. SYAL) (A. T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:05/09/2014
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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