Functional profile of a company cannot be that of a trader if it does not bear the risk associated with owning inventory

Last updated: 09 October 2021

Save Share

Quick Summary

The Income Tax Appellate Tribunal has ruled that a company cannot be considered a trader if it does not bear the risks associated with owning inventory. The tribunal emphasised that a company operating on an assured return model with minimal risk should not be treated as a trader. This decision follows the binding precedent set by the Delhi High Court.

Court :
ITAT Delhi

Brief :
This appeal by the assessee is preferred against order dated 29.06.2021 framed u/s 143(3) r.w.s 144C(13) r.w.s 144B of the Incometax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Y. 2016-17.

Citation :
ITA No. 907/DEL/2021 [A.Y 2016-17]

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘I-1’ BENCH,
NEW DELHI (THROUGH VIDEO CONFERENCING]
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND
SHRI LALIET KUMAR, JUDICIAL MEMBER
ITA No. 907/DEL/2021 [A.Y 2016-17]

Ikea Services India Pvt. Ltd.

Unit No. 421, DLF Tower -A,

Jasola District Centre, South Delhi, New Delhi

The A.C.I.T. Circle - 12 (2)

New Delhi

Date of Hearing : 28.09.2021
Date of Pronouncement : 01.10.2021
Assessee by : Shri Kanchan Kaushal, Adv.
Shri Ravi Sharma, Adv
Revenue by : Shri Surenderpal, CIT- DR
ORDER

This appeal by the assessee is preferred against order dated 29.06.2021 framed u/s 143(3) r.w.s 144C(13) r.w.s 144B of the Incometax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Y. 2016-17.

2. The representatives of both the sides were heard at length, the case records carefully perused. Judicial decisions brought to our notice duly considered Briefly stated, the facts of the case are that the appellant company is a 100% subsidiary of Ingka Pro Holding BV Netherlands and is primarily engaged in the provision of sourcing support services to its Associated Enterprises [AEs]. The appellant operates on an assured return revenue model undertaking minimal/limited risk, making the services of the appellant having least complex operations and bears lesser share of risks.

3. The TPO has not accepted the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Li & Fund [supra] solely on the ground that an appeal has been recommended before the Hon'ble Apex Court. In our considered view, when the operation of the decision of the Hon'ble Jurisdictional High Court has not been suspended or stayed, it was mandatory upon the TPO to follow the binding decision of the Hon'ble Jurisdictional High Court.

4. In the result, the appeal of the assessee in ITA No. 907/DEL/2021 is allowed.
The order is pronounced in the open court on 01.10.2021.

Please find attached the enclosed file for the full judgement