Plot No.ac7-Ac11, Sidco Industrial Estate,Thirumudivakkam, Chennai – 600 044 v. The Petitioner Is Aggrieved By The Impugned Order Dated13.10.2018 Passed By The 1[St] Respondent Deputy Commissioner Ofincome Tax, Transfer Pricing Officer For

IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 27.01.2021 PRONOUNCED ON : 02.06.2021 CORAM W.P.No.30606 of 2018and M.P.Nos.12512 of 2019 & 35686 of 2018 M/s.Bonfiglioli Transmission Private Limited,Represented by its Authorised SignatoryMr.Balaji G.A. Plot No.AC7-AC11, SIDCO Industrial Estate,Thirumudivakkam, Chennai – 600 044. ..Petitioner vs Prayer: Writ petition filed under Article 226 of theConstitution of India praying to issue a writ of Certiorari, tocall for the records comprised in the impugned order bearingFile No.B-105/TPO-1(1)/A.Y.2015-16 dated October 30, 2018 madeunder Section 92CA(3) of the Income Tax Act, 1961 for theAssessment Year 2015-16 on the file of the First Respondent,quash the same. For Petitioner : Mr.N.V.Balaji For Respondents : M/s.Hema Muralikrishnan Senior Standing Counsel The petitioner is aggrieved by the impugned order dated13.10.2018 passed by the 1[st] respondent Deputy Commissioner ofIncome Tax, Transfer Pricing Officer for the assessment year2015-16. 2.By the impugned order, it has been concluded that Arm’sLength Price (ALP) towards Corporate Service Fee was considered https://hcservices.ecourts.gov.in/hcservices/ as “Nil” thereby resulting in a downward adjustment ofRs.5,83,25,839/- towards corporate support service fees. 3.By the impugned order, the 1[st] respondent has concludedthat the petitioner had failed to substantiate receipt ofservice and demonstrate the economic and commercial benefits onaccount of the payments made to its associated enterprice. 4.The main contention of the petitioner in this writpetition is that despite a precedent on the very same issue forthe assessment year 2013-14 vide order dated 14.5.2018 inITA.No.2977/CHNY/2017, the 1[st] respondent has passed the impugnedorder dated 30.8.2018 under Section 92 CA(3) of the Income TaxAct, 1961. 5. The learned counsel for the petitioner submits thatan identical issue came up for consideration before the Tribunalin the above case in ITA.No.2977/CHNY/2017. It is submittedthat the Tribunal vide order dated 14.5.2018 inITA.No.2977/CHNU/2017 answered the issue in favour of thepetitioner with the following observation:- II. Application of TNMM: 3. The lower authorities have, in thefacts and circumstances of the case and in law,erred in incorrectly computing the operatingmargin of the appellant and those of thecomparable companies selected for benchmarkingpurposes. 4. The lower authorities have, in thefacts and circumstances of the case and in law,erred in choosing certain comparable companiesdespite such companies failing the legallyrequired parameter such as, but not limited to,functional dissimilarity, quantitative filtersand non-availability of data. 5. The lower authorities have, in thefacts and circumstances of the case and in law,erred in rejecting certain companies selectedby the appellant, on incorrect parameters. 6. The lower authorities have, in thefacts and circumstances of the case and in law,erred in not admitting the comparabilityadjustments considered by the appellant,including but not limited to, adjustment foridle capacity. 7. The lower authorities have, in thefacts and circumstances of the case, erred innot considering the supporting information and supplemental analysis regarding to the economiccircumstances and market conditions experiencedby the appellant; such as to the corroborationof capacity utilization based on manufacturingsector wide information (Reserved Bank ofIndia's Report), the analysis of profits inconnection with subsequent years, among others. 8. the lower authorities have, in thefacts and circumstances of the case and in law,erred in disregarding the arm's length analysisprepared by the appellant on the basis of cashprofit margins, based on incorrect parameters. 7. The lower authorities have, in thefacts and circumstances of the case, erred innot considering the supporting information and supplemental analysis regarding to the economiccircumstances and market conditions experiencedby the appellant; such as to the corroborationof capacity utilization based on manufacturingsector wide information (Reserved Bank ofIndia's Report), the analysis of profits inconnection with subsequent years, among others. 8. the lower authorities have, in thefacts and circumstances of the case and in law,erred in disregarding the arm's length analysisprepared by the appellant on the basis of cashprofit margins, based on incorrect parameters. 9. the lower authorities have, in thefacts and circumstances of the case and in law,erred in disregarding the financial informationand analysis provided by the appellant,including but not limited to the segmentedfinancial information, and the internal TNMManalysis submitted by the appellant. 10. The lower authorities have, in thefacts and circumstances, erred in disregardingthe relevance of the use of multiple-year datato iron but the differential impact of businesscycle between the appellant and the comparablecompanies. III. Considering corporate services availedfrom Aes as 'NIL' 11. The lower authorities have, in thefacts and circumstances of the case and in law,erred in not accepting that the corporateservices availed by the appellant are closelylinked to the appellant's business and inherentto the centralization of functions thatnormally occurs within Multinational Groups( such as the case of the Bongfiglioli Group)and have erred in not considering theaggregation approach adopted by the appellantin its TP documentation.12. The lower authorities have, in thefacts and circumstances of the case and in law,erred in considering the value of corporateservices availed as ' Nil' purportedly underthe CUP method, without bringing on record anybenchmarkingexerciseusingcomparablecompanies and as such exceeded theirjurisdiction. 13. The lower authorities have, in thefacts and circumstances of the case and in law,erred in disregarding the evidence provided bythe appellant for availing corporate servicesand has erred in concluding that notangible/direct benefits accrued to theappellant from such services. 6.The Tribunal has considered the same and the necessaryissue in para 10 is as follows:- 10.......... The services referred under 'Corporate Services' are intrinsically linked toits manufacturing and sales activity. These twoservices cannot be separately demarcated.Corporate services are the services rendered, whihhas helped the assessee in generating the businessin respect of marketing and trading. This beingso, in view of the decision of Hon'ble Delhi HighCourt in the case of CIT vs. EKL Appliances Ltd.,referred to supra, the id. Assessing Officer isdirected to allow the assessee’s claim of theCorporate Services expenditure incurred byassessee. Consequently, Grounds Nos.11 to 13of the assessee stand allowed.” 7. It is submitted that the impugned order dated 30.10.2018passed by the first respondent viz., Deputy Commissioner ofIncome Tax Transfer Price Officer (TPO) was contrary to thedecision of the Hon''ble Supreme court in Motor India Ltd., vs.DCIT (2018) 96 taxmann.com 497 (Madras.) and another decision ofthe Hon'ble Supreme Court in Motor India Ltd., vs. DCIT (2020)119 Tamann.com 302. 8.The learned counsel for the petitioner further submitsthat in the impugned order, there is no whisper about the orderof the Tribunal dated 14.05.2018, for the Assessment Year 2013-14 and therefore the impugned order passed under Section 92 C Aof the Income Tax Act, 1961 was liable to be quashed. 7. It is submitted that the impugned order dated 30.10.2018passed by the first respondent viz., Deputy Commissioner ofIncome Tax Transfer Price Officer (TPO) was contrary to thedecision of the Hon''ble Supreme court in Motor India Ltd., vs.DCIT (2018) 96 taxmann.com 497 (Madras.) and another decision ofthe Hon'ble Supreme Court in Motor India Ltd., vs. DCIT (2020)119 Tamann.com 302. 8.The learned counsel for the petitioner further submitsthat in the impugned order, there is no whisper about the orderof the Tribunal dated 14.05.2018, for the Assessment Year 2013-14 and therefore the impugned order passed under Section 92 C Aof the Income Tax Act, 1961 was liable to be quashed. 9. The learned counsel for the petitioner also submitsthat the respondent was only concerned with the value ofservices provided to an associated enterprice and the authorityto determine as to whether there was a necessity for utilizationof such service or not was only vested with the AssessingOfficer and therefore the order passed by the first respondentwas clearly without jurisdiction and therefore was liable to beset aside. 10. For the failure to follow the order passed for theAssessment Year 2013-14 during the Assessment Year 2015-16 bythe Tribunal, while passing the impugned order, the decisions ofthe Courts in the following cases were invited:-i)Union of India vs. Kamalakshi FinanceCorporation Ltd., (1992) 1992 taxmann.com 16(SC)ii)East India Commercial Co., Ltd.,Calcutta vs. Collector of Customs, Calcutta,(1983) 13 ELT 1342 (SC)iii)HDFC Bank Ltd., vs. Deputy Commissionerof Income Tax2(3) Mumbai, (2016) 67 taxmann.com42 Bombayiv)Vodafone India Services Pvt.Ltd., vs.Union of India through the Secretary, Ministryof Finance & Others, (2014) Taxcorp(DT) 58662(BOMBAY)v)Voest-Alpine Ind.Gmbh vs. Income TaxOfficer, (2002) 122 Taxman 413 (Calcutta) 11.It is therefore submitted that as a lower authority ofthe Income Tax Department, the 1[st] respondent was bound by orderdated 14.5.2018 in ITA.No.2977/CHNY/2017 of the Tribunal. 12.The learned counsel for the petitioner submits that asper the decision of the Supreme Court in Union of India vs.Kamalakshi Finance Corporation Ltd., (1992) 1992 taxmann.com 16(SC= 1995(91) ELT 433 (SC), the principles of judicialdiscipline requires that the orders of the higher appellateauthority should be followed unreservedly by the subordinateauthorities. 13.It is further submitted that merely because the order ofthe appellate authority was not acceptable to the Departmentitself was held to be an objectionable phrase and was thesubject matter of an appeal can furnish no ground for notfollowing it unless its operation has been stayed or suspendedby a competent Court. 14.It is submitted that though the order of the Tribunal hasnow been appealed, it is no ground for not following the same inabsence of the stay by the Court. 15. It is further submitted that the 1[st] respondent TransferPricing Officer is only concerned with the determination of thevalue of the service and the payments made for the purpose ofcomputation of the Income Tax and was really not concerned withthe issue as to whether the service for which amounts were paidnecessary or unnecessary. It is submitted that these are to be https://hcservices.ecourts.gov.in/hcservices/ determined only by the Assessing Officer and not by the 1[st]respondent Transfer Pricing Officer. 14.It is submitted that though the order of the Tribunal hasnow been appealed, it is no ground for not following the same inabsence of the stay by the Court. 15. It is further submitted that the 1[st] respondent TransferPricing Officer is only concerned with the determination of thevalue of the service and the payments made for the purpose ofcomputation of the Income Tax and was really not concerned withthe issue as to whether the service for which amounts were paidnecessary or unnecessary. It is submitted that these are to be https://hcservices.ecourts.gov.in/hcservices/ determined only by the Assessing Officer and not by the 1[st]respondent Transfer Pricing Officer. 16.Defending the impugned order passed by the respondent,the learned counsel for the IT Department submits that the writpetition is liable to be dismissed on the ground of alternateremedy. It is submitted that the statutory remedy against theimpugned order is available inasmuch as consequent the impugnedorder of the first respondent, the 2[nd] respondent will pass adraft assessment order incorporating the content of the order ofthe 1[st] respondent/Transfer Pricing Officer and the petitionercan approach the Dispute Resolution Panel against the same underSection 144C of the Income Tax Act, 1961. Only after disposalof the appeal of the petition or case by the Dispute ResolutionPanel and after giving the order of the Dispute ResolutionPanel, a draft order of the 2[nd] respondent becomes the finalassessment order. 17.It is further submitted that it is open to the petitionerto file an appeal before the Income Tax Appeal after receivingfinal assessment order passed by the 2[nd] respondent. It istherefore submitted that the writ petition is liable to bedismissed. 18.As far as the decision of the Income Tax AppellateTribunal in its order dated 14.05.2018 for the assessment year2013-14 is concerned, the learned counsel for the IT departmentsubmits that these an order of the Dispute Resolution Paneldated 27.09.2017 as a consequence of Transfer Pricing Officerpassed under Section 92 CA dated 28.10.2016 for the sameassessment order came to be challenged. It has beencategorically stated in Section 92 CA order that the findingsand discussions made in the order was appealable only inrespect of reference received for the Assessment Year 2013-14and not for subsequent Assessment years. 19.The learned counsel for the respondent also referred tothe impugned order dated 30.10.2018 of the 1[st] respondent whereinalso it is stated that the order impugned was only withreference to the assessment year 2015-16 and not for thesubsequent assessment year. It is further submitted that theargument of the learned counsel for the petitioner that theorder of the respondent can be revised under Section 263 of theAct cannot be countenanced as Section 263 applies only againstan order passed by the Assessing Officer. 20.By way of rejoinder, the learned counsel for thepetitioner submits that the respondents cannot improvise thecase in the counter. In this connection, a reference was madeto the decision of the Hon’ble Supreme Court in Mohinder SinghGill vs. Chief Election Officer (1978) 1 SCC 405, wherein inpara 8 it has been held that the orders are not like old wine becoming better as they grow older. Para 8 which was reliedreads as under:- 8. By way of re-joinder to the submissionof the learned counsel for the petitioner, therespondent drew my attention to the counter ofthe respondent, wherein it held as under :- 20.By way of rejoinder, the learned counsel for thepetitioner submits that the respondents cannot improvise thecase in the counter. In this connection, a reference was madeto the decision of the Hon’ble Supreme Court in Mohinder SinghGill vs. Chief Election Officer (1978) 1 SCC 405, wherein inpara 8 it has been held that the orders are not like old wine becoming better as they grow older. Para 8 which was reliedreads as under:- 8. By way of re-joinder to the submissionof the learned counsel for the petitioner, therespondent drew my attention to the counter ofthe respondent, wherein it held as under :- The learned senior counsel submitted thatthe so-called ‘ reasons to believe stated in theimpugned proceedings are sought to besupplemented by new reasons stated in thecounter affidavit which according to the learnedsenior counsel is not permissible in view of thelaw laid down by the Hon’ble Supreme Court ofIndia. The Hon’ble Supreme Court in the caseof Mohinder Singh Gill vs. Chief ElectionCommission (1978) 1 SCC 405 has laid down inparagraph 8 as follows:- The second equally relevant matter is thatwhen a statutory functionary makes an orderdated on certain grounds, its validity must bejudged by the reasons so mentioned and cannot besupplemented by fresh reasons in the shape ofaffidavit or otherwise. Otherwise, an orderbad in the beginning may, by the time it comesto Court on account of a challenge , getvalidated by additional grounds later broughtout. We may here drew attention to theobservations of Bose,J., in Commissioner ofPolice vs. Gordhandas Bhanji AIR 1952 SC 16. Public orders, publicly made, in exerciseof a statutory authority cannot be construed inthe light of explanations subsequently given bythe officer making the order of what he meant,or of what was in his mind, or what he intendedto do. Public orders made by public authoritiesare meant to have public effect and are intendedto effect the actings and conduct of those towhom they are addressed and must be construedobjectively with reference to the language inthe order itself.Orders are not like old wine becomingbetter as theygrow older”. 21.I have considered the arguments advanced by the learnedcounsel for the petitioner and the learned counsel for therespondent. Payments made during each of the assessment year maydiffer. Therefore, the orders passed by the Tribunal in respectof reference made against an order passed under Section 92C(A) https://hcservices.ecourts.gov.in/hcservices/ for a particular assessment year is not binding for thesubsequent assessment years. The decision of the Supreme Courtin Union of India vs. Kamalakshi Finance Corporation Ltd.,(1992) 1992 taxmann.com 16 cannot be quoted as an authority toquash the impugned order of the 1[st] respondent. There theorder of the Assistant Collector’s was set aside by theAppellate Collector and the matter was remitted back to theAssistant Collector to pass a speaking order. 22.Instead of following the said order of the AppellateCollector, there the Assistant Collector reiterated the orderwhich had been set aside. It was in that context the decisionof the Hon’ble Supreme Court made the above observations. 23.In this case, the assessment years are different and thetransactions are different and the nature of payments aredifferent. During the assessment year 2013-14 the issue waspertaining to certain payments made to the associatedenterprises alone. Whereas the impugned order there areindications that there are adjustments of payments made for theservices received and services provided to the associatedenterprises. Therefore, it cannot be said that the said orderof the Tribunal was binding for the assessment year in question. 23.In this case, the assessment years are different and thetransactions are different and the nature of payments aredifferent. During the assessment year 2013-14 the issue waspertaining to certain payments made to the associatedenterprises alone. Whereas the impugned order there areindications that there are adjustments of payments made for theservices received and services provided to the associatedenterprises. Therefore, it cannot be said that the said orderof the Tribunal was binding for the assessment year in question. 24.That apart, the challenge to the impugned order ispremature. The petitioner has options under the Act toapproach the Dispute Resolution Panel and if such was orders arepassed the order, liberty is always available by way ofstatutory appeal before the income tax appellate Tribunal. 25.This view is fortified by the decision of the DivisionBench of this Court in Hyundai Motor India Ltd., vs. DeputyCommissioner of Income Tax, (2018) 96 taxmann.com 497, whereinit was held as under: 23.Considering the above Judgments of theApex Court, this Court is of an opinion thatthe writ petition has not established thatthere is a violation of principles of naturaljustice nor there is an error apparent onrecord. No exceptional circumstances havebeen established in the present writ petition. If at all, the writ petitioner is aggrieved inrespect of the fixing of average rate ofroyalty payment, then it is left open to themto approach the Disputes Resolution Panel andthereafter, if they are further aggrieved inrespect of the fixing of average rate ofroyalty payment, then they are liberty toapproach’ the ITAT” constituted for the purposeof adjudicating the issues. This being theefficacious remedy available under the statute for the writ petitioner, there is no reason toentertain a writ petition under Article 226 ofthe Constitution of India , so as to adjudicatethe merits and the demerits now raised beforethis Court in the present writ petition inrespect of fixing of average rate of royaltypayment. 26.The leaned counsel for the respondent has relied on thedecision of the Hundai Motor India Ltd., vs. DeputyCommissioner of Income Tax, (2020) 119 taxmann.com 302,(Madras), wherein it was the appeal of the assessee wasdismissed and held as under:- 10. In the instant case, the onlyquestion which arises for our consideration anddecision is whether the High Court wasjustified in interfering with the order passedby the Assessing Authority under Section 148 ofthe Act in exercise of its jurisdiction underArticle 226 when an equally efficaciousalternate remedy was available to the assesseeunder the Act”. “ 16. Statutory remedy:- When in a fiscal statute, hierarchy ofremedy of appeals are provided, the party hasto exhaust them instead of seeking relief byinvoking the jurisdiction of this Court underArticle 226 of the Constitution of India and asheld in Commissioner of Income Tax and Othersvs. Chhabil Dass Agarwal, (2014) 1 SCC (603),the Court will have to take into considerationof the legislative intent enunciated in theenactment in such cases. It is not as if thealternative remedy is neither efficacious noreffective”. 27.Therefore, I am not convinced with the present writpetition. Accordingly, this writ petition is dismissed. Nocosts. Consequently, connected Miscellaneous Petitions areclosed. -s/d- Assistant Registrar(CO) True Copy Sub-Assistant Registrar kkd To 1.The Deputy Commissioner of Income Tax, Transfer Pricing Officer – 1(1), 5[th] Floor, Tower – 1, BSNL Building, No.16, Greams Road, Chennai – 600 006. Transfer Pricing Officer – 1(1), 5[th] Floor, Tower – 1, BSNL Building, No.16, Greams Road, Chennai – 600 006. 2.The Deputy Commissioner of Income Tax, Corporate Circle 1 (2), Chennai. Corporate Circle 1 (2), Chennai. 27.Therefore, I am not convinced with the present writpetition. Accordingly, this writ petition is dismissed. Nocosts. Consequently, connected Miscellaneous Petitions areclosed. -s/d- Assistant Registrar(CO) True Copy Sub-Assistant Registrar kkd To 1.The Deputy Commissioner of Income Tax, Transfer Pricing Officer – 1(1), 5[th] Floor, Tower – 1, BSNL Building, No.16, Greams Road, Chennai – 600 006. Transfer Pricing Officer – 1(1), 5[th] Floor, Tower – 1, BSNL Building, No.16, Greams Road, Chennai – 600 006. 2.The Deputy Commissioner of Income Tax, Corporate Circle 1 (2), Chennai. Corporate Circle 1 (2), Chennai. +1 CC to M/s. Hema Muralikrishnan, Advocate sr 27374 +1 CC to Mr.N.V. Balaji, Advocate sr 27377. W.P.No.30606 of 2018and M.P.Nos.12512 of 2019& 35686 of 2018RP(CO)SP(05/07/2021)