Mondelez India Foods Private Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that the determination of Arm’s Length Price (ALP) without applying any methods as prescribed under section 92C(1) of the Income Tax Act by the TPO is not tenable in law.
Facts- The assessee Mondelez India Foods Private Ltd (formerly known as Cadbury India Limited) is a subsidiary of Cadbury Overseas Ltd UK which holds 58.63% and Cadbury Mauritius Ltd which holds 38.97% of the equity shareholding while the balance 2.41% equity shareholding is held by Indian public company comprising of various shareholders.
The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions with its Associated Enterprises, a reference was made to the Transfer Pricing Officer (TPO) to determine the arm’s length price of the international transaction of the assessee with its Associated Enterprises (AE). The TPO, vide order dated 27/01/2015 proposed a total adjustment of Rs. 199,53,59,553/-. AO passed the draft assessment order incorporating the TP adjustment.
The DRP gave marginal relief to the assessee with respect of depreciation claimed on marketing know-how and sustained the TP adjustment as well as the other additions / disallowance made by AO. The assessee is in appeal before the Tribunal against the final order of assessment passed pursuant to the directions of the DRP.
Conclusion- In assessee’s own case it is held that The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an adjustment had to be made. The -burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed ‘price’ of such transaction and thereafter ask whether it is an ALP. If the answer to that is in the negative the TP adjustment should follow.
Held that the determination of ALP without applying any methods as prescribed under section 92C(1) by the TPO is not tenable. We notice that the TPO has computed the TP adjustment towards global services rendered by Cadbury Holdings Limited also in the same way by applying adhoc estimation of salary cost and man hours. Therefore our decision with respect regional service fee paid to Cadbury Enterprises Pte Ltd., is equally applicable to the current issue under consideration also. Therefore considering the decisions of the coordinate bench in assessee’s own case for AY 2009-10 and in the case of Kodak India Private Ltd., (supra) we hold that the TP adjustment towards global services rendered by Cadbury Holdings Limited be deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals are against the final order of assessment passed by DCIT-5(1)(2), Mumbai under section 143(3) read with section 144C(13) of the Income-tax (in short, ‘the Act’) dated 20/01/2016 for A.Ys. 2011-12 & 2012-13. The common issues contended by the assessee in both the assessment years through various grounds are as tabulated below:-
