IN THE ITAT MUMBAI BENCH ‘K’
Deputy Commissioner of Income-tax 2(1), Mumbai
Versus
CMA CGM Global India (P.) Ltd.
IT Appeal No. 5979 (Mum) of 2010
C.O. No. 130 (Mum.) of 2011
[Assessment year 2005-06]
NOVEMBER 21, 2012
ORDER
Per Bench
The revenue has preferred this appeal, against order dated 5-5-2010, passed by CIT(A)-15, Mumbai for the quantum of assessment passed under Section 143(3) r.w.s. 92CA(3) of the Act, for the assessment year 2005-06 on the following grounds :-
“1. The order of the CIT(A) is opposed to law and facts of the case.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that Transaction Net Margin Method (TNMM) is the most appropriate method in the facts of the present case and ignoring Comparable Uncontrolled Method (CUP) adopted by TPO & AO after detailed discussion with regard to Container Control Fees of Rs. 91,07,412/- and communication expenses of Rs.67,13,584/-.
3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored.”
2. The assessee has also filed Cross Objection mostly in support of the order passed by the CIT(A) in deleting the addition of Rs. 1,58,20,996/- made on account of adjustment in Arms Length Price (ALP) on various alternative grounds.
3. The facts in brief are that the assessee company CMA CGM Global India Private Limited (in short GIPL), was incorporated in September, 2003 and is a subsidiary of CMA CGM, France, which is one of the major world wide Container Shipping Lines and is a tax resident of France. The assessee company is a joint venture between CMA CGM holding 51% equity shares and Maritime Commerce Agency India Private Limited holding 49% shares. The assessee was appointed as a shipping agent of CMA CGM for undertaking its shipping business in India based upon the terms and conditions of the agency agreement dated 17th September, 2003. Prior to incorporation of the assessee, the CMA CGM had appointed Container Maritime Agencies Private Limited as its shipping agent and such agency continued upto August 2003 based on terms and conditions mentioned in the agency agreement dated 20th October, 1999. Thus, from the year 2003, the assessee is acting as a representative agent of CMA CGM in India in respect of vessels owned, operated, chartered or managed by CMA CGM. The activity performed by the assessee include freight collection, transportation of containers, etc.. It is compensated by way of commission income for various functions performed like export freight, import freight, container control fee etc. During the relevant year, the assessee was also appointed as a representative agent of ANL Singapore Pte Ltd., which is a subsidiary of ANL Container Line Pty. Ltd. Australia and is a group company of CMA CGM. Thus, ANL Singapore is also a kind of AE. The assessee has received besides commission income, container control fees and communication expenses from the two of its AEs, (i.e. CMA CGM & ANL Singapore Pte. Ltd.), which was a part of host of services rendered. During the relevant financial year, the assessee had shown its turn over at Rs.26.52 Crores with a net profit of Rs.15.13 Crores. The operating margin on the operating cost was at 133.43%. In its transfer pricing analysis, which was based mainly on Comparable Uncontrolled Method (CUP) was also corroborated with Transactional Net Margin Method (TNMM).
4. The Transfer Pricing Officer (TPO), to whom matter was referred under Section 92CA(1) by the Assessing Officer, observed that the assessee has entered into following international transactions :-
