Case Laws Analysis
Followed on Pr. CIT v. Luwa India (P) Ltd. 2021 TaxPub(DT) 3580 (Karn-HC)
Followed on Adama India (P) Ltd. v. Dy. CIT 2021 TaxPub(DT) 3033 (Hyd-Trib)
Supported in Greatship (India) Ltd. v. Dy. CIT 2021 TaxPub(DT) 1983 (Mum-Trib)
Followed on Danisco India (P) Ltd. v. DCIT 2020 TaxPub(DT) 4156 (Del-Trib)
Followed on Reckitt Benckiser (I) (P) Ltd. v. DCIT 2020 TaxPub(DT) 2536 (Kol-Trib)
Relied on Barco Electronic Systems (P) Ltd. v. Dy. CIT 2019 TaxPub(DT) 4890 (Del-Trib)
Relied on Tata BlueScope Steel Ltd. v. Dy. CIT 2019 TaxPub(DT) 2094 (Pune-Trib)
Relied on Amadeus India (P) Ltd. v. ACIT 2019 TaxPub(DT) 1738 (Del-Trib)
Followed on Pr. CIT v. Frigoglass India (P) Ltd. 2018 TaxPub(DT) 4384 (Del-HC)
Relied on on Benetton India (P) Ltd. v. DCIT 2017 TaxPub(DT) 4717 (Del-Trib)
Relied on Kadimi Tool Manufacturing Co. (P) Ltd. v. DCIT 2017 TaxPub(DT) 4326 (Del-Trib)
Followed on Taegu Tec India (P.) Ltd. v. Dy. CIT 2017 TaxPub(DT) 1951 (Bang-Trib)
Followed on Herbalife International India (P.) Ltd. v. Asstt. CIT 2017 TaxPub(DT) 1157 (Bang-Trib)
Relied on IWM Constructions (P.) Ltd. v. Asstt. CIT 2016 TaxPub(DT) 3653 (Hyd-Trib)
Followed on 3M India Ltd. v. Addl. CIT 2016 TaxPub(DT) 2964 (Bang-Trib)
Relied on Lumax Industries Ltd. v. DCIT 2016 TaxPub(DT) 2029 (Del-Trib)
Relied on Micro Ink Ltd. v. Addl. CIT 2015 TaxPub(DT) 5007 (Ahd-Trib)
Relied on Knorr-Bremse India (P) Ltd. v. Asstt. CIT 2015 TaxPub(DT) 4683 (P&H-HC)
Relied on Johnson Matthey India (P) Ltd. v. Dy. CIT 2015 TaxPub(DT) 4297 (Del-HC)
Applied on CIT v. Cotton Naturals (I) Pvt. Ltd. 2015 TaxPub(DT) 1361 (Del-HC)
Distinguished on Ushodaya Enterprises Ltd. v. Asstt. CIT 2015 TaxPub(DT) 0935 (Hyd-Trib)
Followed on TNS India (P.) Ltd. v. Asstt. CIT 2014 TaxPub(DT) 2349 (Hyd-Trib)
Followed on Dy. CIT v. Air Liquide Engineering India (P) Ltd. & Vice Versa 2014 TaxPub(DT) 1948 (Hyd-Trib)
Followed on Social Media India Ltd. v. Asstt. CIT 2014 TaxPub(DT) 0017 (Hyd-Trib)
Followed on Lumax Industries Ltd. v. Asstt. CIT 2013 TaxPub(DT) 2823 (Del-Trib)
Referred on Festo Controls (P.) Ltd. v. Dy. CIT 2013 TaxPub(DT) 0807 (Bang-Trib)
Relied S.A. Builders Ltd. v. CIT & Anr. 2007 TaxPub(DT) 0834 (SC)
Relied Sassoon J. David & Co. (P) Ltd. v. CIT 1979 TaxPub(DT) 1025 (SC)
Relied CIT v. Rajendra Prasad Moody 1978 TaxPub(DT) 1028 (SC)
Relied CIT v. Walchand & Co. (P) Ltd. 1967 TaxPub(DT) 0323 (SC)
Relied Eastern Investments Ltd. v. CIT 1951 TaxPub(DT) 0110 (SC)
 
The Tax Publishers2012 TaxPub(DT) 2071 (Del-HC) : (2012) 345 ITR 0241 : (2012) 250 CTR 0264 : (2012) 209 TAXMAN 0200 : (2012) 071 DTR 0345

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALPReference to TPO--Assessee a public limited company, filed returns of income declaring losses in it. AO noticed that there were international transactions entered into by assessee during relevat previous years and accordingly invoked the provisions of section 92CA(3) of Act and referred the question of determination of ALP to Transfer Pricing Officer (TP)). TPO noticed there were 13 types of international transactions entered into by assessee in previous year 2003-04 TPO accepted all of them to be arm's length transactions, except payment of brand fee/royalty. TPO further noticed that as assessee has been incurring huge losses year after year, considered payment of brand fee/royalty to be unjustified, and added back the said payment to the total income of assessee. Accordingly AO for both the years under appeal disallowed and added back the brand fee/royalty payment made bty assessee while completing assessment under section 143(3) of the Act. CIT(A) held that royalty/branchfer payment for acquisition of use of technical know-how was incurred for genuine business purposes and should be allowed even if assessee had sufered cotinuous losses in the business. Losses were partly due to internal and external factors and if there was a financial crunch then assessee should have discontinued to payemnt of brand fee/royalty. On further appeal by revenue Tribunal also conferred the view of CIT(A). Held: Full justification supported by facts and figures to demonstrate that increase in the employees' cost, finance charges, administratice expenses, depreciation cost and capacity increase have contributed to the continuous losses.

Income Tax Act, 1961 Section 92CA

Income Tax Rules, 1962 Rule 10B(10(a)

IN THE DELHI HIGH COURT

SANJIV KHANNA & R. V. EASWAR JJ.

CIT v. Ekl Appliances Ltd.

ITA Nos. 1068 & 1070 of 2011

29 March, 2012

Appellantby : Kamal Sawhney, Senior Standing Counsel and Amit Shrivastava, Advocate

Respondent by : V.P. Gupta, Bassant Kumar and Anuj Bansal, Advocates

JUDGMENT

R.V. Easwar J.

In these appeals filed under section 260A of the' Income-tax Act, 1961 ('the Act', for short), the Commissioner of Income-tax challenges the common order passed by the Income-tax Appellate Tri'bunal ('the Tribunal', for short) on 11-2-2011, for the assessment years 2002-03 and 2003-04.

2. The appeals arise this way. The assessee is a public limited company engaged in the business of manufacturing of refrigerators, washing machines, compressor and spares thereof and also trading all these items and microwave ovens, dish washers, cooking ranges, air-conditioners and spares thereof. In respect of the assessment years 2002-03 and 2003-04, it filed returns of income declaring losses amounting to Rs. 148,23,80,117 and Rs. 1,14,59,660 respectively. The assessing officer noticed that there were international transactions entered into by the assessee during the relevant previous years and accordingly invoked the provisions of section 92CA(3) of the Act and referred the question of determination of the arms length price ('ALP', for short) to the Transfer Pricing Officer ('TPO', for short). The Transfer Pricing Officer examined the matter in considerable detail and noticed that AB Elec-trolux, Sweden, held 76 per cent, of the assessees equity as on 31-3-2002, and out of the balance, 26 per cent, was held by the local joint venture partners and the balance 18 per cent, was held by the public. He noted that the turnover of the assessee for the assessment year 2003-04 amounted to Rs. 440.97 crores including trading sales of Rs. 48.29 crores pertaining to goods partly imported from the associated enterprises and also purchased locally. The major international transactions undertaken by the assessee were also noticed by him and he has listed the same at page 2 of the order passed by him on 20-3-2006, under section 92CA(3) of the Act. It is noticed from the order that there are 13 types of international transactions entered into by the assessee in the previous relevant year 2003-04. The Transfer Pricing Officer accepted all of them to be the arms length transactions, except the payment of brand fee/royalty of Rs. 3,42,97,940. The corresponding figure for the assessment year 2002-03 is Rs. 3,99,51,000. We may clarify that the Revenue has filed before us the order passed by the Transfer Pricing Officer for the assessment year 2003-04 on 20-3-2006, but the order passed by the Transfer Pricing Officer for assessment year 2002-03 has not been made available. This, however, is not material because it is common ground that the facts and the controversy arising in both the assessment years are the same so far as the arms length price is concerned. Reverting to the order of the Transfer Pricing Officer, he considered the payment of brand he/royalty by the assessee to the associated enterprise, namely, AB Electrolux, Sweden under an agreement dated 1-10-1998, to be unjustified.

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