In an appeal before Mumbai, ITAT, Nivea India Private Ltd. vs. DCIT, Mumbai [ITA No.121/M/2013, decided on 21.08.2017], briefly, the assessee being an Indian subsidiary of Beiersdorf AG (BAG). BAG was founded in Hamburg in 1882 and is a Global group of branded consumer goods. The assessee was engaged in marketing and distribution of Nivea products in India, filed its return of income for relevant AY on 31.10.2007 declaring total income at Rs. Nil. Along with the return of income, the assessee furnished report under Form-3CEB. The assessee in report under Form 3CEB reported international transaction with its Associated Enterprises. Thus, the Assessing Officer(AO) made reference under section 92CA(1) of the Income Tax Act, 1961(for short ‘the Act’) to Transfer Pricing Officer (TPO) for computation of Arm’s Length Price (ALP) in relation to international transaction.
In addition to the original ground of appeal, the assessee raised the following additional grounds of appeal:
“On the facts and in the circumstances of the case, the overseas associated enterprises being the least complex of the entities involved in supply of raw materials, packing materials and semi finished goods to the Appellant, which entered into the transaction in the capacity of low-risk manufacturers had to be taken as tested parties for the purpose of benchmarking analysis; and the price at which such products were supplied by the overseas associated enterprises i.e. mark-up of 4% on full cost being less than arm’s mark-up as per the fresh benchmarking analysis carried out by the Appellant, the transaction of the import of such product by the Appellant (aggregating to Rs. 7,51,51,003) may be held to be at arm’s length.”
The learned AR argued the assessee was entitled to raise additional ground of appeal before the Tribunal, even though the claim had not been made either before Income-tax Officer/AO or the First Appellate Authority. It was further argued that the additional ground of appeal raised by assessee was purely legal in nature. All the facts related with the additional ground of appeal, were available on record. On the other hand, learned DR for the Revenue strongly opposed the admission of addition ground of appeal at the second appellate stage.
The learned Members of the ITAT, Mumbai observed that undisputedly the name of the AE’s, nature of relationship with AE, and the brief description of business carried by the AE with assessee for functional analysis and benchmarking related with its AEs were on record in the report under Form 3CEB. Though the complete details were not ascertainable from the record relied by the assessee. Though, the details related with the foreign AE’s were available in the additional evidence filed by the assessee, which had not been relied by learned AR for the assessee while making submission on additional ground of appeal. The learned Members also considered the objections of the revenue that additional ground raised by the assessee should not be admitted at this stage. After considering, the submission of revenue, they were of the view that approach in such matters should be different, when the Revenue seeks to fasten liability before the Tribunal. The reasons are that the Tribunal is the last fact-finding authority and the assessee has no other avenue to raise its grievances so far as facts are concerned. In case, on the facts and in the law, ultimately if it is discovered that assessee is not liable to tax, the Revenue cannot have grievances. The Article 265 of the Constitution of India provides that no tax should be levied and collected except by authority of law. In case, if ultimately the assessee is found to be liable to tax, the assessee will compensate the revenue in term of interest on the tax liability. The learned Members were of the view that fundamental principle laid down by Hon’ble Apex Court in case of National Thermal Power Corporation Ltd vs. CIT  (229ITR 383) is that there can be no tax liability without the authority of law and the principal will hold good all points of time.
In view of the factual and legal discussion, the learned Members were of the view that whole intent and purpose of the transfer pricing provision is first select the most appropriate comparable/ tested party and thereafter, by applying the most appropriate method to determine arm’s length price(ALP). Considering, the fact that assessee has not raised the issue related with the selection of comparable as AE’s either before the transfer pricing officer or before first appellate authority, and has raised the issue for the first time before the Tribunal by way of additional ground of appeal. Thus, considering the material available on record and the factual and legal discussion, the learned Members admitted the additional ground of appeal raised by assessee and were inclined to restore this issue raised in the additional ground to the file of AO/TPO for examining issue afresh. It was held that the AO/TPO shall decide the issue after considering all the material available on record in accordance with the law. The AO/ TPO shall decide the issue by calling the information and documents from the assessee as well as by making his own inquiry in the data base or otherwise. Needless to say that AO/ TPO shall afford reasonable opportunity to the assessee before deciding the issue. The assessee was also directed to cooperate with the AO/ TPO in providing all necessary information and documents and not to seek adjournment without any proper and valid reasons. With these observations the additional ground of appeal raised by assessee was allowed.