HIGH COURT OF BOMBAY
Mitsui O.S.K. Lines Maritime (India) (P.) Ltd.
Deputy Commissioner of Income-tax-8(2), Mumbai
IT APPEAL NO. 426 OF 2012
JULY 17, 2012
The appeal is admitted and with the consent of the parties heard on the following substantial question of law :-
“Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in setting aside the order of the CIT (A) and remanding the matter to the AO for fresh adjudication ?”
Questions 2, 3 and 4 raised in paragraph III of the appeal would be covered by the above questions.
2. This is an appeal filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) remanding the matter to the Assessing Officer (AO) for a fresh adjudication.
The respondent had filed the appeal before the Tribunal against the order of the CIT (A) relating to A.Y. 2003-2004.
3. The appellant – assessee is in the business of ship management. The appellant renders recruiting and manning services for its foreign principals Mitsui O.S. Manning Services S.A., Panama and Mitsui O.S.K. Lines Ltd. Japan. The AO referred the transactions to the Transfer Pricing Officer (TPO), who reduced the Arm’s Length Price (ALP) by about Rs. 1.41 crores.
4. The appellant furnished a set of comparables upon analysis whereof, the TPO made the said adjustment. The AO rejected the appellant’s contentions and accepted the adjustments made by the TPO.
5. The CIT (A) held in the appellant’s favour and directed the AO to delete the said additions by about Rs. 1.41 crores made on account of the adjustment of the ALP in respect of the appellant’s international transactions with its principals.
6. Considering the order we intend passing, it is not necessary to set out in detail the approach of the TPO and the AO on the one hand and the approach of the CIT (A) on the other. In effect, the TPO and the AO ignored certain comparables including under the agreement on the ground that they pertain to loss making/continuously loss making organizations. The appellant however contended that it was necessary to consider a variety of entities, both loss making and otherwise. The appellant disputed the approach on the one hand excluding the loss making entities but considering the entities that had abnormally high profits.
The Tribunal after referring to the orders passed by the authorities and the appellant’s submissions, concluded as under :-
“13.4 The decision of the Special Bench cited above relates to A.Y. 2004-05 whereas the assessment year in the impugned case is A.Y. 2003- 04. Thus in the light of the decision of the Special Bench, the T.P. issued was in the initial stages in this year and therefore a liberal approach should be taken. Considering the totality of the facts of the case, we are of the opinion that the matter should go back to the file of the A.O. for fresh adjudication with a direction to give sufficient opportunity to the assessee to file fresh comparables of the financial year 2002-03 and make out its case properly and place all relevant facts before the tax authorities so that proper ALP can be determined in accordance with the law. We hold and direct accordingly. The ground raise by the Revenue is accordingly allowed for statistical purpose.”
7. The Tribunal does not state that the material, including the comparables, furnished by the appellant was inadequate. The department/respondent also do not contend that the comparables were inadequate. They have analyzed the same in a particular manner whereas the CIT(A) has analyzed the same in a different manner. In other words, the respondent has not contended and the Tribunal had not held that the relevant comparables are insufficient.
8. Although the order very fairly permits the appellant an opportunity of filing fresh comparables for the financial Year 2002-2003 in order to enable the appellant to make out its case properly, the appellant is willing to proceed before the Tribunal on the basis of the existing material including the comparables already furnished. It states that it does not wish to furnish any further material. In that event no purpose would be served by remanding the matter to the AO or for that matter, even before the CIT(A) for a fresh decision on the existing material. The AO and CIT(A) have already decided the same. The Tribunal has not held that it is not possible to arrive at the ALP on the basis of the existing material. The Tribunal must therefore now decide the matter. We wish to clarify that the power of the Tribunal in all respects is kept open and that the statement on behalf of the assessee does not affect the same.
9. In view of the statement on behalf of the assessee, the question of law is decided in favour of the assessee. The appeal is therefore, allowed in terms of prayer (b) which reads as under :-
“(b) This Hon’ble Court may be pleased to set aside the impugned order and direct the Tribunal to decide the appeal afresh after hearing both parties.”
No order as to costs.