CRM Services India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1161/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6587 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 27-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Transfer pricing; International transaction; Additional evidence; Wholly owned subsidiary
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. SUCHITRA KAMBLE , JM ITA NO. 1161/DEL/2015 : ASSTT. YEAR : 2010-11 CRM SERVICES INDIA PVT. LTD., 220, VINOBHA PURI, LAJPAT NAGAR- II, NEW DELHI-110024 PAN-AABCC6211B VS DY. COMMISSIONER OF INCOME TAX CIRCLE-3(1), C.R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. NEER AJ JAIN, ADVOCATE REVENUE BY : SH. SANJAY I. BARA, CIT DR DATE OF HEARING : 21.05.2018 DATE OF PRONOUNCEMENT : 27.7.2018 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 28.1.2015 PASSED BY THE AO UNDER SECTION 143(3) READ WITH SEC TION 144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO THE ACT). 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. THAT THE ASSESSING OFFICER / DISPUTE RESOLUTION PAN EL (DRP) ERRED ON FACTS AND IN LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 1 44C/143(3) OF THE INCOME- TAX ACT, 1961 (THE ACT) AT AN INCOME OF RS. 9,80, 28,905 AS AGAINST INCOME OF RS.8,75,02,380 RETURNED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS. 1,05,26,525 ALLEGEDLY ON ACCOUNT OF THE DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACT ION OF PAYMENT OF ROYALTY OF RS.1,93,77,390 HOLDING THAT THE APPELLANT WAS NOT R EQUIRED TO PAY ROYALTY IN RESPECT OF SERVICES PROVIDED TO THE ASSOCIATED ENTE RPRISE. 2.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN HOLDING THAT IN ITA NO. 1161/DEL/2015 2 TERMS OF INTANGIBLE AND PROPRIETARY PROPERTY AND L ICENSING AGREEMENT (THE AGREEMENT) DATED 02-01-2002, ROYALTY WAS REQUIRED TO BE PAID ONLY ON THE PROPORTIONATE SALES MADE TO UNRELATED THIRD PARTIES . 2.2 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ENTIRE REVENUES OF THE APPELLANT ARE FROM SALE OF SERVICES TO THIRD PARTIES - WHETHER SUCH THIRD PARTIES ARE DIRECT CUS TOMERS OF THE ASSESSEE OR CUSTOMERS OF THE ASSOCIATED ENTERPRISE, AND ACCORDI NGLY ROYALTY WAS PAYABLE ON THE TOTAL REVENUE. 2.3 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS AND I N LAW IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS. 1,05,26,525 UNDERTAKING C OST BENEFIT ANALYSIS TO DETERMINE THE ARMS LENGTH PRICE OF PAYMENT OF ROYAL TY WITHOUT APPRECIATING THAT COST-BENEFIT ANALYSIS IS NOT A PRESCRIBED METH OD UNDER RULE 10B OF INCOME TAX RULES, 1963. 2.3 THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS AND IN LAW IN APPLYING CUP METHOD FOR BENCHMARKING THE TRANSACTION OF PAYMENT OF ROYALTY WITHOUT PLACING ON RECORD ANY COMPARABLE DATA FOR COMPARISO N. 2.5 THAT THE ASSESSING OFFICER/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE TRANSACTION OF PAYMENT OF ROYALTY HAS ALRE ADY BEEN BENCHMARKED APPLYING TNM METHOD AS THE MOST APPROPRIATE METHOD AND ACCORDINGLY, NO ADJUSTMENT IS REQUIRED TO BE MADE ON THIS ACCOUNT. 2.6 WITHOUT PREJUDICE, THAT THE ASSESSING OFFICE R/DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PAYMENT OF ROYALTY WAS MA DE IN RESPECT OF SALE OF SERVICES TO THE CUSTOMERS OF THE ASSOCIATED ENTERPR ISE IN TERMS OF THE AGREEMENT AND WAS INCURRED WHOLLY AND EXCLUSIVELY F OR PURPOSES OF BUSINESS. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE TRANSFER PRICING ADJUSTMENT OF RS. 1,5,26,525/- MADE BY THE AO ON ACCOUNT OF THE DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERNAT IONAL TRANSACTIONS RELATING TO PAYMENT OF ROYALTY. THE ASSESSEE ALSO MOVED AN APPL ICATION FOR ADMISSION OF THE ADDITIONAL EVIDENCES UNDER RULE 29 OF THE INCOM E TAX (APPELLATE TRIBUNAL) RULES, 1963, STATING THEREIN AS UNDER:- RE: APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENC E IN TERMS OF RULE 29 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULE S, 1963. IT IS RESPECTFULLY SUBMITTED AS UNDER: ITA NO. 1161/DEL/2015 3 THE PRESENT APPEAL HAS BEEN FILED BY THE APPLICANT, CRM SERVICES INDIA PVT. LTD., A WHOLLY OWNED SUBSIDIARY COMPANY OF TP USA INC. (TP USA), ENGAGED IN THE BUSINESS OF PROVIDING VOICE-BASED CALL CENTRE SERVI CES TO THE CUSTOMERS. IN THE AFORESAID APPEAL, THE APPLICANT HAS CHALLENG ED THE ACTION OF THE ASSESSING OFFICER/ DISPUTE RESOLUTION PANEL IN HOLDING THAT I N TERMS OF INTANGIBLE AND PROPRIETARY PROPERTY LICENSING AGREEMENT (THE AGR EEMENT) DATED 02-01-2002 ENTERED BY THE APPLICANT WITH ITS ASSOCIATED ENTERP RISE, ROYALTY WAS REQUIRED TO BE PAID ONLY ON THE PROPORTIONATE SALES MADE TO UNRELA TED THIRD PARTIES. THE APPLICANT CRAVES LEAVE TO PLACE ON RECORD ADDEN DUM TO INTANGIBLE AND PROPRIETARY PROPERTY AND LICENSING AGREEMENT (HEREI NAFTER REFERRED TO AS THE ADDENDUM), BY WAY OF ADDITIONAL EVIDENCE. THE SAID ADDENDUM EFFECTIVE 02 ND JANUARY, 2002 SEEKS TO SET OUT IN UNEQUIVOCAL AND U NAMBIGUOUS TERMS, THE UNDERSTANDING BETWEEN THE PARTIES AND THE ACTUAL CO NDUCT OF BUSINESS AS UNDERTAKEN BETWEEN THEM. THE REASONS FOR FILING THE AFORESAID DOCUMENT AS AD DITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963 (THE RULES) ARE BRIEFLY STATED HEREUNDER: IN TERMS OF THE FOREIGN COLLABORATION AGREEMENT DAT ED 02-01-2002 ENTERED INTO WITH TP USA, THE APPLICANT PROVIDES SERVICES TO CUSTOMER S OF TP USA IN DIFFERENT PARTS OF THE WORLD THROUGH ITS FACILITY SITUATED IN INDIA. I N TERMS OF THE FOREIGN COLLABORATION AGREEMENT, THE APPLICANT PROVIDE VOICE BASED CALL C ENTRE SERVICES TO THIRD PARTIES, WHICH ARE CUSTOMERS OF TP USA, VIZ., WASHINGTON MUT UAL, TELUS, SAN-DISC, ETC. IT WOULD BE APPRECIATED THAT THE ASSOCIATED ENTERPR ISE OF THE APPLICANT, TP USA SOLICITS BUSINESS FROM VARIOUS CUSTOMERS (THIRD PA RTIES), WHICH BUSINESS IS THEN PERFORMED BY THE APPLICANT IN INDIA. FOR THE SERVIC ES RENDERED TO SUCH CLIENTS OF TP USA, THE APPLICANT RECEIVES PAYMENT FROM TP USA. IN TERMS OF THE COLLABORATION AGREEMENT, TP USA, IN ADDITION TO PROVIDING MARKETING, INFORMATION TECHNOLOGY AND SYSTEMS SUPPO RT TO THE APPLICANT COMPANY AND TRAINING TO THE EMPLOYEES, WOULD PROVIDE MANAGE MENT SUPPORT AND ON-SITE TECHNICAL ASSISTANCE AND TRAINING TO ENSURE INTERNA TIONAL STANDARD OF SERVICE. FURTHER, IN TERMS OF PARAGRAPH 5 OF THE FOREIGN COL LABORATION AGREEMENT DATED 02- 01-2002, TPUSA PAYS TO THE APPLICANT FOR THE VOICE BASED CALL CENTRE SERVICES ON THE BASIS OF HOURLY RATES AGREED IN ADVANCE FOR EACH OF THE CLIENTS OF TPUSA, TO WHOM SERVICE IS PROVIDED. THE APPLICANT HAS ALSO ENTERED INTO AN INTANGIBLE AND PROPRIETARY PROPERTY AND LICENSING AGREEMENT (THE AGREEMENT) DATED 02-01- 2002 WITH TPUSA, TELEPERFORMANCE GROUP INC., A DALEWARE CORPORATION, (TGI) AND SR TELEPERFORMANCE, A COMPANY INCORPORATED IN FRANCE ( SRTP). THE SAID AGREEMENT PROVIDES THE APPLICANT LICENSE TO USE CERTAIN INTAN GIBLE PROPERTY, KNOW-HOW, CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SERVICES, ET C. ON PAYMENT OF ROYALTY. ITA NO. 1161/DEL/2015 4 ACCORDINGLY, IN TERMS OF THE AFORESAID AGREEMENT, T HE APPLICANT HAD, DURING THE RELEVANT PREVIOUS YEAR, PAID ROYALTY OF RS. 1,05,26 ,525 AFTER CERTAIN DEDUCTIONS AS PROVIDED IN THE AGREEMENT) TO TP USA, FOR WORK DONE FOR 3 RD PARTY CLIENTS OF TPUSA. THE TRANSFER PRICING OFFICER (TPO) BENCHMARKED TH E INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY, TAKING THE ALP AT NIL, ALLEGEDL Y CONCLUDING THAT NO BENEFIT IS RECEIVED BY THE APPLICANT FROM USE OF SUCH BRAND NA ME AND TECHNOLOGY. ARGUMENTS ON MERITS OF THE SAID ADJUSTMENT HAVE BEEN ADDRESSE D IN THE OBJECTIONS FILED BEFORE THE HONBLE PANEL. HONBLE DRP, IN ITS DIRECTIONS DATED 16.12.2014, HO WEVER, HAS HELD THAT ROYALTY IS ALLOWED TO BE PAYABLE BY THE APPLICANT ONLY IN RESP ECT TO SERVICES RENDERED TO UNRELATED THIRD PARTIES HOLDING AS UNDER: (I) THE ROYALTY AMOUNT PAYABLE TO AE IS PROPORTION ATELY ONLY TO SALES TO THIRD PARTIES AND NOT TO PAYABLE IN RESPECT OF SALES TO A ES. IN THIS REGARD, YOU ARE DIRECTED TO FURNISH: (A) THE DETAIL OF ROYALTY PAID TO THE AE DURING THE YE AR. (B) THIS ROYALTY APPORTIONED IN THE RATIO OF REVENUE R ECEIPT OF THE TAXPAYER FROM AE AND NON AE. SUBMIT ALSO EVIDENCES IN RESPEC T OF SALES RECEIPT FROM AE AND NON-AE. HON'BLE DRP, IN ITS DIRECTIONS INTERPRETED THE FOLL OWING CLAUSES OF THE ROYALTY AGREEMENT WHILE SUSTAINING ADDITION MADE BY THE TPO . THE SAID CLAUSES READS AS UNDER: 3. ROYALTY PAYMENT 3.1 COMPENSATION: A. PAYMENT OF ANNUAL ROYALTY. SUBJECT TO SECTION 3.2 B ELOW, AS CONSIDERATION FOR THE RIGHTS GRANTED UNDER THIS AGR EEMENT, TP INDIA SHALL PAY TO TP USA AN ANNUAL ROYALTY (THE ROYALTY ) PAYABLE IN MONTHLY INSTALMENTS IN AN AMOUNT EQUAL TO TWO PERCE NT (2%) (THE ROYALTY RATE) OF THE AGGREGATE ACCUMULATED GROSS R EVENUES OF TP INDIA. THE ROYALTY SHALL BE PAID TO TP USA WITHIN T EN (10) DAYS FOLLOWING THE END OF EACH MONTH, BASED UPON THE AGG REGATE ACCUMULATED GROSS REVENUES OF TP INDIA FROM THE IMM EDIATELY PRECEDING MONTH AND ANY OF THE AGGREGATE ACCUMULATE D GROSS REVENUES OF TP INDIA FROM ANY OTHER PRIOR MONTHS WI TH RESPECT TO WHICH THE ROYALTY HAS NOT BEEN PAID. AT THE TIME TH E ROYALTY IS PAID, TP INDIA SHALL ALSO PROVIDE SUCH DOCUMENTATION OF T HE AGGREGATE ACCUMULATED GROSS REVENUES OF TP INDIA IN THE FORM OF THE ROYALTY NOTICE. ANY UNPAID ROYALTIES SHALL ACCRUE AND BE PA YABLE BY TP INDIA ITA NO. 1161/DEL/2015 5 AS SOON AS CASH IS AVAILABLE. THE PARTIES HEREBY AG REE THAT NO DIVIDENDS SHALL BE DECLARED OR PAID BY TP INDIA IF ANY ROYALTIES REMAIN UNPAID AND OUTSTANDING. THE TERM ACCUMULATED GROSS REVENUES IN CLAUSE 3.1 IS DEFINED IN CLAUSE 1.1 OF THE AGREEMENT AS UNDER: 1.1 ACCUMULATED GROSS REVENUES ACCUMULATED GROSS REVENUES SHALL MEAN THE GROSS R ECEIPTS FROM SALES OF SERVICES IN THE TERRITORY BY TP INDIA TO T HIRD PARTIES LESS CUSTOMARY DEDUCTIONS, INCLUDING: (A) TRANSPORTATION CHARGES, INCLUDING INSURANCE: (B) SALES OR EXCISE TAXES, CUS TOMS, DUTIES, TARIFFS, AND ANY OTHER GOVERNMENTAL CHARGES IMPOSED ON THE PRODUCTION, IMPORTATION, EXPORTATION, USE, OR SALE OF THE SERVICES; (C) QUANTITY AND CASH DISCOUNTS ALLOWED; (D) RETURN S; AND (E) ALLOWANCES OF CREDITS TO CUSTOMERS. CLAUSE 1.15 OF THE AGREEMENT DEFINES THE TERM THIR D PARTY AS FOLLOWS: 1.15 THIRD PARTY OR THIRD PARTIES THIRD PARTY OR THIRD PARTIES SHALL MEAN ANY ENT ITY OTHER THAN A PARTY TO THIS AGREEMENT OR AN AFFILIATE. FROM A CONJOINT READING OF THE AFORESAID CLAUSES, D RP CONCLUDED THAT THE APPLICANT IS OBLIGED TO MAKE PAYMENT OF ROYALTY TO TP USA FOR USE OF THE TELEPERFORMANCE TRADE MARK AND LOGO. ACCORDINGLY, ROYALTY PAID TO TP USA QUA REVENUES RECEIVED FROM TP USA FROM SALE OF SERVICES ON THE GROUND THAT THE SAME NOT BEING PART OF SALE OF SERVICES TO THIRD PARTIES DID NOT FORM PART OF ACCUMULATED GROSS REVENUES AND ACCORDINGL Y NO ROYALTY WAS PAYABLE WITH RESPECT TO SUCH SALE OF SERVICES. THE DRP, HOWEVER, IT IS RESPECTFULLY SUBMITTED, DID NOT CORRECTLY APPRECIATE THE BUSINESS OF THE APPLICANT AND THE MODUS OPERAND I FOLLOWED BY THE PARTIES TO THE AGREEMENT. IT IS RESPECTFULLY SUBMITTED THAT IN THE CASE OF TH E APPLICANT, TP USA SOLICITS BUSINESS FROM VARIOUS CUSTOMERS (THIRD PARTIES), WH ICH BUSINESS IS THEN PERFORMED BY THE APPLICANT IN INDIA. FOR THE SERVIC ES RENDERED TO THIRD PARTIES, WHO ARE CLIENTS OF TP USA, THE APPLICANT R ECEIVES PAYMENT FOR THE SERVICES RENDERED TO SUCH THIRD PARTIES FROM TP USA . SINCE THE SERVICES ARE RENDERED TO THIRD PARTIES, NOTWITHSTANDING THAT THE REVENUES ARE RECEIVED FROM TP USA, THE SAME ARE CONSIDERED AS PART OF ACCUMUL ATED GROSS REVENUES ON WHICH ROYALTY IS CALCULATED. ITA NO. 1161/DEL/2015 6 IT WOULD THEREFORE BE APPRECIATED THAT ROYALTY IS T O BE PAID BY THE APPLICANT ON DIRECT SALES BY THE APPLICANT TO THIRD PARTIES A S WELL SALES TO THIRD PARTIES (WHO ARE CUSTOMERS OF TP USA) FOR AND ON BEHALF OF TP USA. IN OTHER WORDS, THE ENTIRE REVENUES OF THE APPLICANT ARE FROM SALE OF SERVICES TO THIRD PARTIES - WHETHER SUCH THIRD PARTIES ARE DIRECT CUSTOMERS OF THE APPLICANT OR CUSTOMERS OF TP USA TO WHOM SERVICES ARE DIRECTLY RENDERED BY THE APPLICANT. IT WOULD BE APPRECIATED THAT THE PARTIES TO THE AGR EEMENT, VIZ., TP USA AND THE APPLICANT ARE AD IDEM THAT ROYALTY NEEDS TO BE PAID ON SALE OF SERVICES RENDERED BY THE APPLICANT TO THIRD PARTY CUSTOMERS OF TP USA. IN THE UNDERSTANDING OF THE TWO CONTRACTING PARTIES, IT WA S ALWAYS THE INTENTION THAT ROYALTY HAS TO BE PAID FOR USE OF INTANGIBLE PROPER TY, KNOWHOW, CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SERVICES, ETC. WITH R ESPECT TO ENTIRE SALE REVENUES OF THE APPLICANT, INCLUDING SALES TO THIRD PARTY CUSTOMERS OF TP USA FOR WHICH REVENUE IS RECEIVED FROM TP USA. IT IS AC CORDINGLY NOT OPEN TO THE REVENUE TO SIT IN JUDGMENT AND INTERPRET THE AGREEM ENT IN A MANNER DIFFERENT FROM WHAT WAS INTENDED AND AGREED BETWEEN THE PARTI ES. THEREFORE, THE PARTIES IN ORDER TO SET OUT IN UNEQU IVOCAL AND UNAMBIGUOUS TERMS, THE UNDERSTANDING AND THE REAL INTENTION OF THE PARTIES TO THE AGREEMENT, HAVE POST FACTO ENTERED INTO THE ADDENDU M TO THE INTANGIBLE AND PROPRIETARY PROPERTY AND LICENSING AGREEMENT DATED 02-01-2002 WITH TPUSA, WHICH IS EFFECTIVE RETROSPECTIVELY, I.E. FRO M 02-01-2002, PROVIDING AS UNDER: 1.15 THIRD PARTY OR THIRD PARTIES THIRD PARTY OR THIRD PARTIES SHALL MEAN ANY ENT ITY OR ENTITIES TO WHICH TP INDIA HAS RENDERED SERVICES EITHER DIRECTL Y OR INDIRECTLY THROUGH AND AFFILIATE BUT SHALL EXCLUDE DIRECT SERV ICES TO AND FOR THE INDIVIDUAL BENEFIT OF A PARTY TO THIS AGREEMENT OR AND AFFILIATE. IN THE AFORESAID CIRCUMSTANCES, BY WAY OF THE PRESE NT PETITION, THE ADDENDUM TO THE INTANGIBLE AND PROPRIETARY PROPERTY AND LICENSING AGREEMENT ENTERED INTO BY THE APPLICANT WITH TPUSA IS BEING PLACED FOR THE FIRST TIME BEFORE THE HONBLE TRIBUNAL AS ADDITIONA L EVIDENCE. THE AFORESAID AGREEMENT IS ESSENTIAL TO CORRECTLY APPRECIATE THE EFFECTIVE UNDERSTANDING AND THE REAL INTENTION OF THE PARTIES TO THE AGREEMENT. THE SAME IS BEING PLACED ON RECORD TO REBUT THE CONCLUSION ARBITRARILY ARRIVED AT BY THE LOWER AUTHORITIES ON A WRONG INTERPRETATION OF THE TERMS OF THE AGREE MENT WITHOUT REGARD TO THE ACTUAL CONDUCT OF BUSINESS. YOUR HONOURS KIND ATTENTION IS INVITED TO THE DECI SION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. TEXT HUNDRE D INDIA PVT. LTD.: 239 ITA NO. 1161/DEL/2015 7 CTR 263. IN THAT CASE, THEIR LORDSHIPS HELD THAT RU LE 29, PERMITTING THE TRIBUNAL TO ADMIT ADDITIONAL EVIDENCE IS MADE TO EN ABLE THE TRIBUNAL TO ADMIT ANY ADDITIONAL EVIDENCE WHICH WOULD BE NECESSARY TO DO SUBSTANTIAL JUSTICE IN THE MATTER. THEIR LORDSHIPS FURTHER OBSERVED THAT T HE VARIOUS PROCEDURES, INCLUDING THAT RELATING TO FILING OF ADDITIONAL EVI DENCE, IS HANDMADE FOR JUSTICE AND JUSTICE SHOULD NOT BE ALLOWED TO BE CHOKED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OMISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE. THE RELEVANT OBSERVATIONS OF THE COURT ARE REPRODUC ED HEREUNDER: 13. THE AFORESAID CASE LAW CLEARLY LAYS DOWN A NEA T PRINCIPLE OF LAW THAT DISCRETION LIES WITH THE TRIBUNAL TO ADMIT ADDITION AL EVIDENCE IN THE INTEREST OF JUSTICE ONCE THE TRIBUNAL AFFIRMS THE OPINION THAT DOING SO WOULD BE NECESSARY FOR PROPER ADJUDICATION OF THE MATTER. THIS CAN BE DONE EVEN WHEN APPLICATION IS FILED BY ONE OF THE PARTIES TO THE APPEAL AND IT NEED NOT TO BE A SUO MOTO ACTION OF THE TRIBUNAL. THE AFORESAID RULE IS MADE ENABLINS THE TRIBUNAL TO ADMIT THE ADDITIONAL EVIDENCE IN ITS DISCRETION IF THE TRIBUNAL HOLDS THE VIEW THAT SUCH ADDITIONAL EVIDENCE WOULD BE NECESSARY TO DO SUBSTANTIAL JUSTICE IN THE MATTER. IT IS WELL SETTLED THAT THE PROCEDURE I S HANDMADE OF JUSTICE AND JUSTICE SHOULD NOT BE ALLOWED TO BE CHOKED ONLY BEC AUSE OF SOME INADVERTENT ERROR OR OMISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE AT THE APPROPRIATE STAGE. ONCE IT IS FOUND THAT THE PARTY INTENDING TO LEAD E VIDENCE BEFORE THE TRIBUNAL FOR THE FIRST TIME WAS PREVENTE D BY SUFFICIENT CAUSE TO LEAD SUCH AN EVIDENCE AND THAT THIS EVIDENCE WOULD HAVE MATERIAL BEARING ON THE ISSUE WHICH NEEDS TO BE DECIDED BY THE TRIBUNAL AND ENDS OF JUSTICE DEMAND ADMISSION OF SUCH AN EVIDENCE, THE TRIBUNAL CAN PAS S AN ORDER TO THAT EFFECT. (EMPHASIS SUPPLIED). RELIANCE IS ALSO PLACED IN THAT REGARD ON THE FOLLO WING DECISIONS: CIT V. HEWLETT PACKARD INDIA: 314 ITR 55 (DEL HC) CIT V. CHANDRA KANT SAHU BHAI: 202 TAXMAN 262 (DEL HC) CIT V. BETTERWAYS FINANCE: ITA 995 OF 2009 (DEL HC) JATIA INVESTMENT CO V. CIT: 206 ITR 718 (CAL HC) ELECTRA (JAIPUR) LTD V. IAC: 26 ITD 236 (DEL ITAT) Y. W. C. A. OF INDIA VS IAC: 29 ITD 620 (DEL ITAT) THE APPLICANT, IT IS RESPECTFULLY SUBMITTED, IN THE COURSE OF THE PROCEEDINGS BEFORE THE TPO AND DRP FILED SEVERAL DOCUMENTS AND MADE ELABORATE SUBMISSIONS IN SUPPORT OF ARMS LENGTH PRICE OF INT ERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY TO THE ASSOCIATED ENTERPRISE. IT IS RESPECTFULLY SUBMITTED THAT IT WAS ONLY ON THE RECEIPT OF THE DIRECTION OF DRP THA T THE APPLICANT CAME TO KNOW ABOUT THE ADVERSE INFERENCES SOUGHT TO BE DRAWN BY THE DRP. THE APPLICANT ITA NO. 1161/DEL/2015 8 THEREAFTER, IN ORDER TO REBUT THE INFERENCE DRAWN B Y THE LOWER AUTHORITIES, HAS ENTERED IN THE ADDENDUM TO THE INTANGIBLE AND PROPR IETARY PROPERTY AND LICENSING AGREEMENT WHICH SET OUT IN UNEQUIVOCAL AN D UNAMBIGUOUS TERMS, THE UNDERSTANDING AND THE REAL INTENTION OF THE PARTIES TO THE AGREEMENT, WHICH IS NOW SOUGHT TO BE PLACED ON RECORD AS ADDITIONAL EVI DENCE. IT IS RESPECTFULLY SUBMITTED THAT THE AFORESAID ADD ITIONAL EVIDENCE IS RELEVANT TO APPRECIATE THE SUBSTANCE OF THE ARRANGEMENT BETWEEN THE APPLICANT AND ASSOCIATED ENTERPRISES, WHICH GOES TO THE ROOT OF T HE MATTER FOR DETERMINING THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION OF ROYALTY. IT WOULD ALSO BE APPRECIATED THAT THIS IS THE FIRST APPEAL BEFORE THE HONBLE TRIBUNAL AGAINST THE IMPUGNED ASSESSMENT ORDER. IT IS, THEREFORE, RESPECTFULLY PRAYED THAT, IN TERMS OF DISCRETION VESTED IN YOUR HONOURS IN RULE 29 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES 1963, THE AFO RESAID PAPERS/DOCUMENTS PLACED ON RECORD BY WAY OF ADDITIONAL EVIDENCES MAY KINDLY BE ADMITTED AND TAKEN INTO CONSIDERATION WHILE ADJUDICATING THE ABO VE APPEAL. THE APPLICANT TRUSTS THAT ITS REQUEST SHALL BE ACCE DED TO. 4. DURING THE COURSE OF HEARING, THE LEARNED COUNS EL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVE RED VIDE ORDER DATED 14.5.2018 OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CAS E IN ITA NOS. 5930/DEL/2012 AND 1630/DEL/2014 FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. COPY OF THE SAID ORDER WAS FU RNISHED WHICH IS PLACED ON RECORD. 5. IN HIS RIVAL SUBMISSIONS, THE LEARNED CIT DR ALT HOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORES AID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL FOR THE EARLIER ASSESSMENT YEARS 2008-09 AND 2009-10 IN THOSE YEARS ALSO ASSES SEE FURNISHED THE ADDITIONAL EVIDENCES AS HAS BEEN DONE IN THE YEAR UNDER CONSID ERATION. THIS BENCH OF THE ITA NO. 1161/DEL/2015 9 ITAT IN ASSESSEES OWN CASE FOR THE AFORESAID ASSES SMENT YEARS 2008-09 AND 2009-10 WHILE DECIDING THE IDENTICAL ISSUE IN ITA N OS. 5930/DEL/2012 AND 1630/DEL/2014 HAS RESTORED THE ISSUE BACK TO THE FI LE OF THE AO / TPO. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 7.1 TO 9 WHICH READ AS UNDER:- 7.1 AS FAR AS THE ASSESSEES PLEA REGARDING ADJUST MENT IN RESPECT OF ROYALTY IS CONCERNED, WE HAVE DULY CONSIDERED THE ASSESSEES A PPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH HAS BEEN FILED UNDER RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 AND LOOKING TO THE FACTS AND CIRCUMSTANCES, IT IS OUR CONSIDERED OPINION THAT THIS ADDENDUM TO THE AGREEMENT GOES TO THE VERY ROOT OF THE MATTER AND IT WILL SUITABLY ASSIST THE LOWER AUTHORITIES DID NOT HAVE THE BENEFIT OF EXAMINING THIS DOCUMENT, THE MATTER HAS TO BE NECESSARILY RESTORED TO THE FILE OF THE ASSESSING OFFICER / TPO FOR DECIDING THE ISSUE OF ROYALTY AFRESH AFTER DULY CONSIDERING THIS AGREEMEN T AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. AC CORDINGLY, GROUND NO. 17 IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. 7.2 SINCE THE LD. AR HAS STATED THAT IF GROUND NOS. 3 AND 17 ARE DECIDED IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS WILL BECO ME ACADEMIC IN NATURE, WE ARE NOT PROCEEDING TO HEAR THE ARGUMENTS OF EITHER OF THE PARTIES ON THE REMAINING GROUNDS AT THE PRESENT MOMENT. WE, HOWEVE R, NOTE THAT THE ASSESSEE WILL BE AT LIBERTY TO RAISE THESE GROUNDS AGAIN BEF ORE THE TRIBUNAL AT A FUTURE DATE, IF IT IS SO REQUIRED. 8. IN THE RESULT, THE ASSESSEES APPEAL ITA NO. 593 0/DEL/2013 STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR DIRECTIONS AS CONTAINED IN THE PRECEDING PARAGRAPHS. 9. COMING TO THE ASSESSEES APPEAL IN ITA NO. 16 30/DEL/2014, SINCE WE HAVE ALREADY ADMITTED ADDITIONAL EVIDENCE IN RESPECT OF THE ISSUE PERTAINING TO ALP OF ROYALTY IN ASSESSMENT YEAR 2008-09, ON IDENTICAL REASONING, WE ADMIT ADDITIONAL EVIDENCE IN THIS YEAR AS WELL. SINCE THE LOWER AUTHORITIES DID NOT HAVE THE BENEFIT OF EXAMINING THIS DOCUMENT, THE MA TTER HAS TO BE NECESSARILY RESTORED TO THE FILE OF THE ASSESSING OFFICER / TPO FOR DECIDING THE ISSUE OF ROYALTY AFRESH AFTER DULY CONSIDERING THIS AGREEMEN T AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. 7. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 14.5.2018 FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 IN ASS ESSEES OWN CASE. THE ITA NO. 1161/DEL/2015 10 ISSUE UNDER CONSIDERATION IN THE PRESENT CASE RELAT ING TO PAYMENT OF ROYALTY IS ALSO SET ASIDE TO THE FILE OF THE AO / TPO TO BE AD JUDICATED AFRESH IN ACCORDANCE WITH LAW BY KEEPING IN VIEW THE DIRECTIONS GIVEN IN THE AFORESAID REFERRED TO ORDER DATED 14.5.2018. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE COURT ON 27/07/2018) SD/- SD/- (SUCHITRA KAMBLE) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 27/07/2018 SH COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 25.07.2018 PS 2. DRAFT PLACED BEFORE AUTHOR 26.07.2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. ORDER UPLOADED ON 27.7.2018