Case Law Details
Brief of the case:
ITAT held in Sumitomo Corporation India Pvt. Ltd. Vs. DCIT that if the case of assessee was decided in the earlier assessment years and if the facts and circumstances were same as in the previous years ,then in the current year also same basis for assessment should be adopted. As in the above case, in the earlier assessment years the case of assessee was decided comparing the percentage of commission earned from non-AE transactions and AE transactions considering the same to be suitable appropriate internal comparable. So as in the current year also all the facts and circumstances were same, so the method which was adopted in the past years, the same method should be adopted as an appropriate internal comparable.
Facts of the case:
Assessee had filed its return of income at Rs 6,13,95,092/- but AO made addition of Rs 1,04,95,90,066/-
And mad total income at Rs.1,11,09,85,160/- . The reason for making addition was the wrong method for calculating transactions at arm’s length price. Moreover the AO was comparing the trading transactions with non-trading transactions of the assesse as assesse was involved in trading transactions with Non-AE and commission based transactions with AE.
Contention of the assesse:
Assessee was of the view that Ld. AO/DRP/TPO had grossly erred in making an addition of Rs.1,04,95,90,066/- on account of alleged understatement of arm’s length price (ALP) in respect of indenting transaction on which the assessee earned commission income from its Associate Enterprises (for short ‘AE’) by completely overlooking and ignoring the findings of the Tribunal for the earlier three preceding years i.e. for AYs. 2007-08, 2008-09 and 2009-10, despite the fact that the facts and circumstances of the instant assessment year under consideration were similar and identical to the preceding three assessment years and no distinguishing facts were brought on record by the authorities below to take a contrary view as such.
Further assesse contended that the rate of commission from non-AE was 1.71 % but the rate of commission from AE was 1.83% which was higher than the commission income earned form the non-associated enterprises.
Contention of the revenue:
Revenue was of the view that the addition should be made on account of alleged understatement of arm’s length price in respect of indenting transaction on which it earned commission income from associated enterprises.
Further the price taken for calculating the commission income from associated enterprises was low so addition should be made.
Held by ITAT:
ITAT held after considering the facts and circumstances of preceding A.Y 2007-08, 2008-09 and 2009-10 that the percentage of commission from transactions with non-AE was at arm’s length price under the indenting business segment. The ITAT also observed that the percentage of commission earned from AE transaction is higher than the commission earned from the non AE transactions in the indenting business segment, therefore, no further addition in this regard is required.
Appeal of assesse was allowed.
