ITAT BANGALORE BENCH ‘A’
Festo Controls (P.) Ltd.
Versus
Deputy Commissioner of Income-tax, Circle 11(3), Bangalore
IT (TP) APPEAL NO. 969 (BANG.) OF 2011
[ASSESSMENT YEAR 2007-08]
JANUARY 4, 2013
ORDER
N.V. Vasudevan, Judicial Member
This is an appeal by the assessee against the order dated 23.09.2011 passed by the Dy. Commissioner of Income-tax, Circle 11(3), Bangalore u/s. 144C of the Income-tax Act, 1961 [hereinafter referred to as “the Act” in short”].
2. The grounds of appeal raised by the assessee reads as follows:-
1. The order of the learned AO and directions of the Hon’ble DRP are based on incorrect interpretation of law and therefore are bad in law.
2. On the facts and in the circumstances of the case and in law and based on the directions of DRP, the learned AO erred in assessing the total income at Rs. 507,107,387 as against returned income of Rs. 484,241,580/- computed by the Appellant.
3. The learned AO/Transfer Pricing Officer (“TPO”) erred in making an addition of Rs. 22,865,807 to the total income of the appellant on account of adjustment in the arm’s length price (“ALP”) of one of the international transactions entered by the appellant with its associated enterprises.
4. The learned AO/TPO have erred, in law and in facts, by not accepting the transfer pricing analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, conducting a fresh economic analysis for the determination of the ALP for the impugned international transaction, and holding that the Assessee’s impugned international transaction is not at arm’s length.
5. The learned AO/TPO have erred, in law and in facts, by concluding that the Appellant has not been able to prove substantially that the SAP services have actually been rendered to it, that the Appellant has not derived any economic benefit from the SAP services received from the AE, and thereby holding that the ALP of the SAP service charges is Nil. The Hon’ble DRP, in turn, has erred by overlooking the Appellant’s objections on the subject and in concluding that the benefit derived by the Appellant was remote or indirect.
6. The learned AO/TPO have erred, in law and in facts, by incorrectly and unilaterally applying the Comparable Uncontrollable Price (“CUP”) method for determining the ALP of the impugned international transaction and in not providing the Appellant with an opportunity for evaluating the results of the new economic analysis undertaken before passing the transfer pricing order.
7. The learned AO/TPO have erred, in law and in facts, by concluding that the impugned international transaction is merely a means to siphon off profits from India.
8. The learned AO erred in levying interest of Rs. 112,245 and Rs. 840,878 u/s 234C and 234D of the Act respectively.
9. The learned AO erred, in law and in facts, in initiating penalty proceedings u/s 271(1)(c) of the Act.
The Appellant submits that each of the above grounds is independent and without prejudice to one another.
The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.
3. The assessee is a company. It is engaged in the business of manufacture and trading of pneumatic equipment. The assessee entered into international transactions with its Associated Enterprise (“AE”). Following are the international transactions entered into by the assessee with its AE, who are all non-residents.
