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III. Direct Taxes Case Law:
1. Vipul Motors Pvt. Ltd. Vs. ACIT, I.T.A. No. 5217-18/Del/2013, Date of Pronouncement: 23.05.2018, ITAT - Delhi
Issue
Whether notice issued u/s 148 is valid if assessment or
reassessment proceedings are pending on the same subject matter with the
higher authority.
Held:- No
Brief Facts
The assessee filed its return of income for AY 2003-04 on
21.11.2003 declaring income of Rs.54,15,681. Notice u/s 153A was issued
consequent to search and seizure operation carried on 01.06.2006 asking
for details of loan received from M/S KVF Securities Pvt. Ltd. The Ld.AO
completed the assessment by making addition of principal amount of loan
Rs.1200,000 u/s 68 and interest paid on the loan Rs 15,534. On appeal
by assessee, the Ld. CIT(A) reversed the order stating that no addition
can be made in absence of any incriminating material found during the
course of search. Thereafter Dept. filed appeal before Hon’ble ITAT
which restored the mater to Ld. CIT(A) for de novo re-adjudication of
the appeal. Meanwhile department initiated reassessment proceedings u/s
148 and made same addition of Rs.12,00,000 u/s 68 and interest paid on
the loan of Rs 15,534. The assessee filed an appeal before the Ld.CIT(A)
which was dismissed. Being aggrieved the assessee has filed an appeal
before Hon’ble ITAT.
Held
The Hon’ble ITAT held that it is a settled law that if an
assessment is pending either by way of original assessment or
re-assessment proceedings, the assessing officer cannot issue a notice
u/s 148. Since in the present case the subject matter of proceedings u/s
153A, which are still pending, is same as in proceedings u/s 148, the
reassessment proceedings suffer from basic defect of the re-assessment
notice being illegal. Therefore, the re-assessment proceedings cannot be
sustained.
The appeal was held in favour of the assessee and against the revenue.
Cases Referred: -
1. Nilofer Hameed vs. ITO 235 ITR 161.
2. CIT vs. Sanjay Kumar Garg in ITA Nos. 92 to 96/2012.
3. Smt. Pushpa Rajawati vs. CIT in ITA no. 205/2015.
(Please click here for judgment)
2. Brown Forman Worldwide LLC Vs. DDIT (Int. Taxation), I.T.A.
Nos. 433 & 6139/Del/2012, Date of Pronouncement: 11.05.2018. ITAT -
Delhi
Issue
Whether functionally dissimilar companies be chosen as
comparables for determination of arm length price for an international
transaction.
Held:- No
Brief Facts
The assessee is an Indian branch of Brown Forman Worldwide LLC
(Head Office) engaged in providing Marketing support services and other
similar auxiliary sale, support/assistance services to its Head office.
The assessee reported an international transaction of ‘Provision of
marketing support services’ with transacted value of Rs.6,43,25,676/- in
Form No.3CEB. The assessee had chosen Transaction Net Margin Method
(TNMM) with the Profit level indicator (PLI) of Operating Profit/Total
Cost. The Ld. AO made reference to Ld. Transfer Pricing Officer (TPO)
for determination of arm’s length price (ALP) of the international
transaction. Eleven comparables, given by assessee whose average margin
were less than that of assessee were rejected by Ld. TPO and 14 new
comparables were chosen by Ld. TPO of which two were excluded on appeal
to Dispute Resolution Tribunal by the assessee. The AO re-worked out the
fresh PLI of comparables at 22.45% and made addition of
Rs.1,06,56,851/.
Not satisfied with the type of comparables chosen by TPO the assessee has filed an appeal before Hon’ble ITAT.
Held
The Hon’ble ITAT held that before choosing the fresh comparables or
rejecting the comparables given by assessee, it is a sine qua non that
authority should study the functional profile of the assessee which is
rendering market services on ‘cost plus basis’. As regards the issue of
comparables, the Hon’ble ITAT has specifically rejected a comparable
whose model was ‘commission’ basis clarifying that there is substantial
difference between ‘Commission” model and “cost plus basis” model. Other
comparable were also rejected on similar grounds as regards different
nature of activities. The impugned order on the issue of addition
towards transfer pricing adjustment was set aside and the matter was
remitted to the file of AO/TPO for a fresh determination of the ALP.
(Please click here for judgment)
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