Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 6570 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
01-04-2021
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
I
Assessment Year
2010-2011
Appeal Filed On
26-05-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.2129/DEL/2017 ASSESSMENT YEAR : 2010-11 DCIT CIRCLE-20(2), NEW DELHI PAN : AAHCA 5178 K VS. ACCRETIVE HEALTH SERVICES PVT. LTD., (NOW KNOWN AS R1 RCM GLOBAL PVT. LTD.) 17, SUBHASH MARG, DARYAGANJ, DELHI-110002 (APPELLANT) (RESPONDENT) CO NO.131/DEL/2017 ASSESSMENT YEAR : 2010-11 ACCRETIVE HEALTH SERVICES PVT. LTD., (NOW KNOWN AS R1 RCM GLOBAL PVT. LTD.) 17, SUBHASH MARG, DARYAGANJ, DELHI-110002 VS. DCIT CIRCLE-20(2), NEW DELHI PAN : AAHCA 5178 K (APPELLANT) (RESPONDENT) A SSESSEE BY SHRI ATUL JAIN, A.R. RE VENUE BY SHRI ARUN KUMAR YADAV, SR. D.R. DATE OF HEARING: 01 /0 4 /202 1 DATE OF PRONOUNCEMENT: 01 /0 4 /202 1 2 ORDER PER ANIL CHATURVEDI , AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE PREFERRED AGAINST THE VERY SAME ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-42, NEW DELHI DATED 12.01.2017 PERTAINING TO ASSESSMENT YEAR 2010-11. 2. ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF ACCRETIVE HEALTH CARE SERVICES INC. US (AHI) AND IS A CAPTIVE ITES BACK OFFICE SERVICE PROVIDER TO ITS PARENT COMPANY AHI. 3. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 DECLARING GROSS INCOME OF RS.14055/-. IT HAD ALSO CLAIMED DEDUCTION U/S 10AA AMOUNTING TO RS.1,54,11,231/-. NOTICE U/S 142(1) & 143(2) WERE SERVED ON THE ASSESSEE. 4. AO NOTICED THAT DURING THE YEAR, ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE). HE ACCORDINGLY REFERRED TO TPO FOR DETERMINATION OF ARMS LENGTH PRICE U/S 92CA(1) OF THE ACT IN RESPECT OF THE INTERNATIONAL TRANSACTION ENTERED BY THE ASSESSEE WITH ITS AES. THE TPO VIDE ORDER DATED 17.01.2014 PROPOSED ADDITION TO INTERNATIONAL TRANSACTIONS AMOUNTING TO RS.1,95,83,426/- AND ACCORDINGLY DIRECTED THE AO TO ENHANCE THE INCOME TO THAT EXTENT. AO THEREAFTER VIDE ORDER DATED 29.04.2014 PASSED U/S 143(3)/ 144C OF THE ACT DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT 3 RS.1,95,97,481/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 12.01.2017 IN APPEAL NO.53/15-16/CIT(A)-42 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. CIT(A) WITH RESPECT TO THE ADDITION ON ACCOUNT OF TRANSFER PRICING ISSUES, DIRECTED INCLUSION/EXCLUSION OF CERTAIN COMPARABLES FOR THE REASONS STATED IN HIS ORDER. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE LD CIT(A) HAS ERRED IN DECIDING THE EXCLUSION M/S. TCS E-SERVE LTD. AND TCS E-SERVE INTERNATIONAL LTD BY RELYING UPON HONBLE ITAT ORDER IN THE CASE OF M/S ZAVATA INDIA PVT. LTD. THE LD. CIT(A) HAS BEEN ALSO NOT ABLE TO EXAMINE IN DETAIL AND BROUGHT OUT THE FINDING ON RECORD AS HOW THE FACT OF THIS CASE IS SIMILAR TO THE CASE OF M/S ZAVATA INDIA PVT. LTD. FURTHER, AT THE TIME OF TP PROCEEDINGS, THE TAXPAYER SOUGHT TO EXCLUSION OF THESE COMPARABLE ON THE ISSUE OF FUNCTIONAL DISSIMILARITY AND RPT FILTER NOT PASSED. THE ANNUAL REPORT CLEARLY JUSTIFIES AND PASSES THE RPT FILTER AND IT IS AN ITES COMPANY. THIS HAS ALREADY BEEN DISCUSSED IN THE ORDER OF THE TPO. MOREOVER, THE LD. CIT(A) HAS ALSO ERRED BY NOT APPRECIATING THAT M/S TCS E-SERVE LTD. AND TCS E-SERVE INTERNATIONAL LTD IS FUNCTIONALLY SIMILAR TO THE TAXPAYER COMPANY AND PASSED ALL THE FILTERS APPLIED BY THE TPO HAS MENTIONED IN DETAIL AND PASSED A SPEAKING ORDER. 2. THE LD. CIT(A) HAS ERRED IN DECIDING THE EXCLUSION M/S INFOSYS BPO BY RELYING UPON HONBLE ITAT ORDER IN THE CASE OF M/S ZAVATA INDIA PVT. LTD. THE LD. CIT(A) HAS BEEN ALSO NOT ABLE TO EXAMINE THE DETAIL AND BROUGHT OUT THE FINDING ON RECORD AS HOW THE FACT OF THIS CASE IS SIMILAR TO THE CASE OF M/S ZAVATA INDIA PVT. LTD. IT IS WORTHWHILE TO MENTION HERE THAT THE HONBLE DRP HAS CONFIRMED THE INCLUSION OF THE SAID COMPARABLE IN ASSESSEES OWN CASE FOR AY 2011-12. 3. THE LD CIT(A) HAS ERRED IN DECIDING THE EXCLUSION M/S ACCENTIA TECHNOLOGIES LTD. BY RELYING UPON HONBLE ITAT ORDER IN THE CASE OF RAMP GREEN SOLUTION PVT. LTD. AY 2010-11, AMERIPRISE INDIA PVT. LTD. AY 2010-11. 4 4. FURTHER, THE TPO ITSELF IN ITS ORDER HAS JUSTIFIED THE INCLUSION OF THE SAID COMPARABLE BY VERIFYING THE P&L ACCOUNT OF THE M/S. ACCENTIA TECHNOLOGIES LTD. IT IS SEEN THAT THE COMPANY IS INTO HEALTH CARE RECEIVABLE CYCLE MANAGEMENT PREDOMINANTLY WHICH IS IN ITES. IT IS CLEAR THAT MORE THAN 86% OF THE RECEIPT IS FROM HEALTHCARE FIELD AND A SMALL PORTION IS IN CODING ACTIVITY. IT IS WORTHWHILE TO MENTION HERE THAT THE HONBLE DRP HAS CONFIRMED THE INCLUSION OF THE SAID COMPARABLE IN ASSESSEES OWN CASE FOR A.Y. 2011-12. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUND(S) OF APPAL AND/OR DELETE OR AMEND ANY OF THE GROUND(S) OF APPEAL. 5. THE ASSESSEE IN ITS CO HAS RAISED THE FOLLOWING GROUNDS: IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RELEVANT LEGAL PROVISIONS UNDER THE INCOME TAX ACT, 1961 (THE ACT), THE COMMISSIONER OF INCOME-TAX (APPEALS) -42, NEW DELHI [LD. CIT(A)] GROSSLY ERRED IN 1. UPHOLDING JURISDICTIONAL TRANSFER PRICING OFFICER (TPO)/ ASSESSING OFFICER (AO) APPROACH OF COMPUTING NET COST PLUS MARGIN (NCPM ) OF COMPARABLE COMPANIES AND THAT OF THE RESPONDENT BY INCORRECTLY CLASSIFYING GAIN/LOSS FROM FOREIGN EXCHANGE VARIATION AND PROVISION FOR DOUBTFUL DEBTS AS NON- OPERATING IN NATURE; 2. DIRECTING THE TPO/AO TO CONSIDER UNADJUSTED NCPM OF COMPARABLE COMPANIES IN-SPITE OF ALLOWING WORKING CAPITAL ADJUSTMENT TO THE RESPONDENT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE AND NOTWITHSTANDING TO EACH OTHER. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, OMIT OR SUBSTITUTE ANY OR ALL THE ABOVE CROSS-OBJECTION OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 6. ON THE DATE OF HEARING AN ADJOURNMENT APPLICATION WAS FILED BY THE DR SEEKING ADJOURNMENT TO WHICH LEARNED AR SUBMITTED THAT THE APPEAL OF THE REVENUE NEEDS TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. HE FURTHER SUBMITTED THAT IF THE APPEAL OF THE 5 REVENUE IS DISMISSED, THEN THE CO OF THE ASSESSEE WOULD BE RENDERED ACADEMIC AND WOULD NOT REQUIRE ANY ADJUDICATION. CONSIDERING THE AFORESAID REQUEST OF THE ASSESSEE, WE PROCEED TO REJECT THE REQUEST OF REVENUE FOR ADJOURNMENT AND PROCEED TO DISPOSE OF THE APPEALS. 7. BEFORE US, REVENUE HAS NOT CONTROVERTED THE SUBMISSIONS MADE BY THE ASSESSEE. 8. WE HAVE HEARD THE LD. AR AND PERUSED THE MATERIAL ON RECORD. ON PERUSING THE GROUNDS OF APPEAL RAISED BY THE REVENUE, WE FIND THAT REVENUE IS AGGRIEVED BY THE ORDER OF LEARNED CIT(A) IN RESPECT OF THE RELIEF GIVEN BY HIM. WE FIND THAT CBDT VIDE CIRCULAR NO. 3/2018 DATED 11.07.2018 HAD INCREASED THE LIMIT FOR FILING APPEAL BEFORE ITAT AT RS. 20 LAKHS. THE LIMIT FOR FILING APPEALS BEFORE ITAT AND OTHER AUTHORITIES WERE ENHANCED BY CBDT VIDE CIRCULAR NO.17 OF 2019 DATED 08.08.2019. AS PER THE AFORESAID CBDT CIRCULAR DATED 08.08.2019, NO DEPARTMENT APPEALS ARE TO BE FILED AGAINST RELIEF GIVEN BY THE LEARNED CIT(A) BEFORE THE INCOME TAX APPELLATE TRIBUNAL UNLESS THE TAX EFFECT, EXCLUDING INTEREST, EXCEEDS RS.50 LAKHS. WE FIND THAT IN THE PRESENT CASE, THE TAX EFFECT INVOLVED IS LESS THAN RS.50 LAKHS. IN THE ABSENCE OF ANY MATERIAL PLACED ON RECORD BY THE REVENUE TO DEMONSTRATE THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED BY EXCEPTIONS PROVIDED IN PARA 10 OF THE AFORESAID CBDT CIRCULAR OF 11.07.2018, WE ARE OF THE VIEW THAT THE MONETARY LIMIT PRESCRIBED BY THE INSTRUCTIONS OF THE CDBT CIRCULAR DATED 08.08.2019 WOULD 6 BE APPLICABLE TO THE PRESENT APPEAL OF THE DEPARTMENT. WE THEREFORE HOLD THE PRESENT APPEAL OF REVENUE TO BE NOT MAINTAINABLE ON ACCOUNT OF LOW TAX EFFECT. HOWEVER, IN CASE THERE IS ANY ERROR IN THE COMPUTATION OF THE TAX EFFECT INVOLVED OR IF FOR ANY REASON, THE AFORESAID CBDT CIRCULAR IS NOT APPLICABLE, IT WOULD BE OPEN TO THE REVENUE TO SEEK REVIVAL OF THE APPEAL. THUS THE APPEAL OF THE REVENUE IS DISMISSED. 9. AS FAR AS THE CO OF ASSESSEE IS CONCERNED. BEFORE US, IT IS THE SUBMISSION OF THE LEARNED AR THAT THE CO WILL BE RENDERED AS ACADEMIC IF THE APPEAL OF THE REVENUE IS DISMISSED. WE HAVE HEREIN ABOVE DISMISSED THE APPEAL OF THE REVENUE AND THEREFORE IN VIEW OF ARS CONTENTION, WE DISMISS THE CO OF THE ASSESSEE AS BEING ACADEMIC. 10. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 .04.2021 SD/- SD/- (KULDIP SINGH) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:- 01.04.2021 PY* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
