Syniverse Mobile Solutions Private Limited, Hyderabad V. DCIT, Circle-16(2), Hyderabad

ITA 1416/HYD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8976 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: ABHIROOP BHARGAV
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1416/HYD/2014 : ASSESSMENT YEAR 2010 - 11 M/S. SYNIVE RSE MOBILE SOLUTIONS PRIVATE LIMITED (EARLIER KNOWN AS M/S. MACH MOBILE SOLUTIONS PRIVATE LIMITED) HYDERABAD (PAN - AABCT 4348 N ) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S/S HRI KANCHUN K A USHAL, DHANESH BAFNA & ABHIROOP BHARGAV RE SPONDENT BY : SHRI D.SUDHAKAR RAO DR DATE OF HEARING 28 . 1 .201 5 DATE OF PRONOUNCEMENT 11.2.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL FIL E D BY THE ASS ESSEE IS DIRECTED AGAINST THE ORDER OF THE D Y. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD (ASSESSING OFFICER) DATED 23.7.2014 PASSED UNDER S.143(3) OF THE ACT READ WITH THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL(DRP) UNDER S.144C(5) OF T HE ACT. 2. IN GROUNDS NO.1 TO 10 OF THE PRESENT APPEAL, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.2,61,64,283 MADE BY THE ASSESSING OFFICER/TPO ON ACCOUNT OF TP ADJUSTMENT IN RESPECT OF ITS I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 2 INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES INV OLVING THE PROVISION OF IT/ITE SERVICES. 3 . THE ASSESSEE IN THE PR E SEN T CA S E IS A COMPANY , WHICH IS ENGAGED IN THE BUSINESS OF PRO V I D ING DATA CLEARING, FINANCIAL SETTLEMENT AND B A CK - END SUPPORT SERVI C ES TO MOBILE OPERATORS. THE R ETURN O F INCOME FOR THE Y EAR UN D ER CONSIDERATION WAS FIL E D BY IT ON 11.10.2010 DECL A RING TOTAL INCOM E OF R S .6,21,34,880. DURIN G TH E COU R SE OF ASSESSMENT PROCEEDINGS, I T WAS NO T I C ED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS ENTERED INTO THE FOLLO W IN G IN T ERNATIONAL TRAN S A CTIONS WITH ITS ASSOCIATED ENTERPRISES (AES) FOR PROV I DIN G CONTRACT SOFTWARE DEVELOPMENT AND IT ENABLED BACK OFFICE SERVICES TO ITS AE . A.E. NATURE OF TRANSACTION AMOUNT (RS.) MACH S.A.R.L. PROVISION OF SOFTWARE DEVELOPMENT SERVICES 2,04,99,753 E ND 2 END VAS APS PROVISION OF SOFTWARE DEVELOPMENT SERVICES 71,54,167 MACH CONNECTIVITY APS. PROVISION OF SOFTWARE DEVELOPMENT SERVICES 41,06,236 CIBERNET CORPORATION PROVISION OF SOFTWARE DEVELOPMENT SERVICES 3,12,78,371 PROGRATOR/GATETRADE (DIVISION OF MACH APS) PROVISION OF SOFTWARE DEVELOPMENT SERVICES 2,61,79,069 CIBERNET PLC PROVISION OF ITES 2,32,16,719 MACH S.A.R.L. PAYMENT FOR OPERATIONAL AND MARKETING SERVICES 1,00,96,631 MACH S.A.R.L. PAYMENT FOR PRODUCT MANAGEMENT SU PPORT SERVICES 35,83,734 12,61,14,680 I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 3 4 . IN ORDER TO DETERMINE THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS ASSOCIATED ENTERPRISES (AE) , A REFERENCE WAS MADE BY THE ASSESSING OFFICER TO THE TRANSF ER PRICING OFFICER (TPO) UNDER S.92CA(1) OF THE ACT. IN THE TP STUDY REPORT SUBMITTED BY THE ASSESSEE, TP ANALYSIS WAS DONE SEPARATELY IN RESPECT OF TH RE E SEGMENTS, NAMELY, PROVISION OF SOFTWARE DEVELOPMENT SER V I C ES, PROVISION OF IT ENABLED SERVI C ES AND P ROCUREMENT OF SUPPORT SER V ICES, AN D THE SAME WAS CLAIMED TO B E DONE ON THE BASIS OF SEGMENTAL DETAILS /FINANCIALS . FOR TH E SOFTWARE D EVELOPMEN T SERVICES, TP ANALYSIS WAS DON E BY THE ASSESSEE BY APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM) , AS THE MOST A PPROPRIATE METHOD, TAKING OPERATING PROFIT TO OPERATING COST (OP/ O C) AS PRICE LEVEL INDICATOR (PLI) . IN TOTAL, FOURTEEN COMPARABLES WERE SELECTED BY THE ASSESSEE BY APPLYING CERTAIN FILTERS AND SINCE THE ARITHMETIC MEAN OF OP/OC OF THE SAID FOURTEEN COMPA RABLES WAS 1 4 . 03 % AS AGAINST THE OP/OC OF 1 5 % OF THE ASSESSEE IN RELATION TO ITS RELEVANT INTERNATIONAL TRANSACTIONS WITH AE S , THE PRICE CHARGED TO THE AE S IN RESPECT OF THESE TRANSACTIONS WAS CLAIMED BY THE ASSESSEE TO BE AS AT ARMS LENGTH. FOR THE TRAN SACTION S RELATING TO ITES, TP ANALYSIS WAS DONE BY APPLYING TNMM AS THE MOST APPROPRIATE METHOD AND TAKING OP/OC AS THE PRICE LEVEL INDICATOR. A TOTAL OF 14 COMP A RABLES W AS SELECTED BY THE ASSESSEE BY APPLYING CERTAIN FILTERS, AND SIN C E THE ARITHM E TIC MEA N OF OP /OC TH E SE FOURTEEN COMP A RABLES WAS 13.55% AS AGAINST OP /OC OF 31.43% OF THE ASSESSEE IN RELATION TO THE RELEVANT INTERNATIONAL TRANSACTION S WITH ITS AE S , TH E SE TR A N S ACTION S INVOLVING PROVISION OF ITES ALSO WERE CL A IM E D TO B E AS AT ARM S LENGTH. SIMILARLY, IN RESPECT O F TR A NSAC T ION S RELATING TO PRO CUREMENT OF SUPPORT SERVI C ES, TNMM WAS TAKEN AS THE MOST APPROPRI A TE METHOD WITH OP / O C AS PLI AND SIN C E THE AR ITHMETIC M EAN OF O P /OC OF TH E 12 COMP A RABLES SELECTED WAS I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 4 16% AS AGAINST 7.5% SHOWN IN R E L A TION TO TH E SE INTERNATIONAL TR A N S ACTION S WITH ASSOCIATED ENTERPRISES INVOLVING P A YMENT TOWAR D S SUPPORT SERVICES, THE SAME WERE ALSO CL A IM E D TO BE AT ARMS LENGTH. 5 . AFTER GOING THROUGH THE RELEVANT DOCUMENTS MAINTAINED BY THE ASSESSEE AND AFTER ANALY ZING THE RELEVANT TRANSACTIONS, THE TPO WAS OF THE OPINION THAT THE METHOD ADOPTED BY THE ASSESSEE FOR SELECTING THE COMPARABLES SUFFERED FROM DEFECTS AND THE SAME, THEREFORE, HAD RESULTED IN SELECTION OF INAPPROPRIATE COMPARABLES AND REJECTION OF APPROPRI ATE COMPARABLES. HE ALSO FOUND THAT THE TP ANALYSIS DONE BY TH E ASSESSEE WAS B A SED ON SEGMENTAL RESULTS, WHICH WERE NOT AUDITED. ACCOR D ING TO HIM, UNAUDITED INFORMATION COULD NOT BE TAKEN AS THE BASIS TO COMPU T E THE PROFITABILITY O F THE SEGM E N T S FOR TRANS FER PRICING ANALYSIS, AS THE SAME WAS UNRELIABLE. H E OBSERVED THAT THE ALLOCATION OF EXPENSE S , EVEN OTHERWISE , IN V OL V ED A LOT O F ASSUMPTIONS AND PRESUMPTION S AND IT WAS, TH E R E FORE, NO T POSSIBLE TO ARRIVE AT SEGMENTAL FINANCIAL S , WITHOUT GIVING ROOM FOR AN Y AMBIGUITY. HE HELD THAT IT WAS THEREFORE , B E TTER TO GO WITH TH E ENTERPRISE LEVEL MARGINS FOR THE PURPOSE OF ALP DETERMINATION UN D ER TNMM. HE ACCORDINGLY REJECTED THE TP STUDY REPO R T FURNISHED BY TH E ASSESSEE AND PROCEEDED TO CA R RY OUT HIS OWN TP ANALY SIS FOR THE PURPOSE OF DETERMINING THE ALP OF THE RELEVANT INTERNATIONAL TRANSACTIONS BY AP P LYING TNMM AT ENTERPRISE LEVEL MARGIN. IN THIS REGARD, HE CONS IDERE D THE VARIOUS OBJECTIONS RAISED BY TH E ASSESSEE TO THE NEW SEARCH CONDUCTED BY HIM FOR SELECTING THE APPROP R I A TE COM PA RABLES AND AFTER ANALYZING THE DATA BASE AND OTHER RELEVANT INFORMATION AND D O C UMENTS, TH E TPO FINALLY SELECTED THE FOLLO W IN G EIGHTEEN ENTITIES AS COMP AR ABLES WITH ARITHM E TIC MEAN OF THEIR OP/OC AT 22.69%. I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 5 SL. NO. COMPANY NAME O P/OC 1. A VANI CIMCON TECHNOLOGIES LTD. 3.39 2. CAT TECHNOLOGIES LTD. 13.04 3. COMP - U - LEARN TECH INDIA LTD. 19.96 4. E - INFOCHIPS BANGALORE LTD. 7 2 . 32 5. EVOK TECH 18.61 6. E - ZEST SOLUTIONS LTD. 22.1 7. INFOSYS TECHNOLOGY LTD. 45.44 8. KALS INFORM ATION SYSTEMS LTD. (SEG) 22.05 9. KULIZA TECH 25.92 10. L&T INFOTECH LTD. 19.97 11. MINDTREE LTD. (SEG.) 20.47 12. PERSISTENT SYSTEMS & SOLUTIONS LTD.(MERGED) 11.37 13. R.S. SOFTWARE (INDIA ) LTD. 9.88 14. SASKEN COMMUNICATION T E CHNOLOGI E S L TD. 25 .23 15. TATA ELXSI L TD. ( SEG.) 17.24 16. THINKSOFT GLOBAL SERVI C ES L TD. 11.22 17 ZYLOG SYSTEMS LTD. 18.62. 18. PERSISTENT SYSTEMS L TD. 31.57 TOTAL 408.4 AVERAGE 22.69 6 . IN ORDER TO CALCULATE TH E OP/OC OF THE ASSESSEE IN RES P ECT OF INTERNATIONAL TR A NSAC T ION S WITH ITS AE, TH E TPO APPORTIONED THE TOTAL COST PERTAINING TO AE AND NON - AE SEGMENTS ON PRO - RATA BASIS, I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 6 BASED ON THE REVENUE, AN D A CCO RDI N G LY WORKED OUT THE OP / O C AT 15.73% AS UNDER - DES CRIPTION AMOUNT (IN RS.) OPERATING REVENUE 12,34,85,961 OPERATING CO S T 10,67,04,545 OPERATING PROFIT 1,67,81,417 OP/OR(%) 13.59% OP/OC(%) 15.73% 7 . AFTER MAKING WORKING CAPITAL ADJU S TMENT OF ( - ) 3.84%, THE ARITHM E TIC MEAN MARGIN OF THE SELECTED C OMP A RABLES AT 26.53 % WAS TAKEN BY THE ASSESSING OFFICER AT ADJU S TED ARMS LENGTH MARGIN AND APPLYING THE S AME TO THE COR R ESPON D IN G O PERATING C OST OF R S .10,67,04,545, THE ARMS LENGTH P RICE OF THE INTERNATIONAL T RAN SA CTION S OF THE ASSESSEE COMPANY WITH ITS A E S WAS WORK E D OUT BY HIM AT R S .13,50,13,260 AS AGAINST THE P R ICE OF R S .12,34,85,951 CHARGED BY THE ASSESSEE. THE DIFFERENCE OF R S .1,15,27,299 ACCORDIN G LY WAS WORKED OUT BY TH E TPO AS THE TP ADJU S TMENT THAT IS REQUIRED TO BE MADE IN RESPECT OF THE RELEVA NT INTERNATIONAL TRA NSA CTION S O F TH E ASSESSEE WITH ITS AE. 8 . WHEN THE ADDIT I ON ON ACCOUN T OF TP ADJU S TMENT WAS P R OPO S ED TO B E MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME O F THE ASSESSEE IN TH E DRAFT ASSESSMENT, OBJECTION S W E RE RAISED BY THE ASSESS EE BEFORE THE DISPUTE RESOLUTION PANEL WHI C H INTER ALIA INCLUDED THE OBJECTIONS OF THE ASSESSEE IN RESPECT OF REJ E CTING ITS TP STUDY REPORT , BASE D ON SEGMENTAL FINANCIAL S , BY TH E TPO HOLDING THAT THE SAME W E RE NO T RELIABLE. TH E SE OBJ E CTION S RAISED BY TH E ASSESSEE WERE FOUN D TO B E NO T SUSTAINABLE BY THE D RP, BAR R ING ONE OBJ EC TION RAISED BY TH E ASSESSEE FOR THE INCLUSION OF INFOSYS I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 7 T E CHNOLOGIES L TD. AS COMP AR ABLE BY THE TPO. TH E DRP ACCORDINGLY DIRECTED THE AO / TPO TO RECOMPUTE TH E ALP OF THE IN T ERNATIONAL T R A N S AC T ION S OF TH E ASSESSEE WITH ITS ASSO C IATED EN T ERPRISES BY EXCLUDIN G INFOSYS T EC HNOLOGIES L TD. FROM T HE LI S T OF FINAL COMP AR ABLES. AS PER THE DIRECTION S O F THE D RP, THE ASSESSING OFFICER / TPO REC O MPU T ED THE ARM S LENGTH P R ICE OF THE IN T ERN A TIO N AL TR A NS AC T ION S O F THE ASSESSEE WITH ITS AES AT R S .13 , 35,83,419 AND AC C O RD INGLY AN ADDITION OF R S .1, 00, 97,458 WAS MADE BY THE ASSESSING OFFICER TO THE TOTAL IN C OM E O F TH E ASSESSEE ON ACCOUN T O F TP ADJU S TM E NT IN RESPECT OF RELEVANT INTERNATIONAL TR A NSACTION S O F THE ASSESSEE INVOL V IN G THE PROV IS ION OF IT /IT E SERVICES TO ITS ASSOCIATED ENTERPRISES , IN THE ASSESSMENT COMPL E TED UN D ER S.143 ( 3) READ WITH S.144C(5) OF THE ACT. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RE CORD. AS RIGHTLY SUBMI T TED BY THE LEARNED COUNSEL FOR THE ASSESSEE, SEGMENTAL DETAILS TAKEN BY THE ASSESSEE IN ITS TP ANALYSIS CANNOT BE REJ E CTED MERELY ON THE GROUN D THAT THEY ARE UNAUDITED , AS DON E B Y THE TPO AND THIS PO SI TION DULY SUPPO R TED BY SEVERAL DECISION S OF THE TRIBUNAL I S NOT DISPUTED EVEN BY TH E LEARNED DEPARTMENTAL REPRESENTATIVE. HE HOWEVER, HAS SUBMI T TED THAT THE SEGMENTAL DETAILS AND FINANCIALS WE RE REJ E CTED BY THE TPO NOT M E RELY ON THE BASIS OF UNAUDITED ASPE C T, BUT HE HAS ALSO GIVEN CERT AIN SPECI F I C REASONS, SUCH AS ASSUMPTION S AN D PRESUMPTIONS IN V OL V ED IN TH E ALLOCATION OF VARIOUS EXP E N SE S BETWEEN DIFFERENT SEGMENTS. HE HAS ALSO CONTEN D ED THAT THE DIFFERENT SEGMENTS OF THE ASSESSEE COMPANY ARE HETEROGENEOUS AND IN ORD E R TO RELY UPON TH E FINANCIALS OF SUCH SEGMENTS FOR THE TP ANALYSIS, IT IS ALWAYS BETTER TO HAVE THE SAME DULY AUDITED. HE HAS CONTENDED THAT ALTHOUGH THERE IS NO L E GAL I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 8 REQUIREMENT TO GET THE SEGMENTAL FINANCIALS AUDITED, IT IS ALWAYS PREFERABLE FOR ESTABLISHIN G THE RELIA BIL I TY. 10. WE ARE UNABLE TO ACCEPT TH E CON T ENTION S O F THE LEARNED DEPARTMENTAL REPRESENTATIVE. AS SUBMI T TED BY THE LEARNED COUN S EL FOR THE ASSESSEE, DIRECT OVERHEADS ATTRIBU T ABLE TO THE RESPECTIVE SEGMENTS WERE D ULY ALLOCATED BY TH E ASSESSEE TO THE SAI D SEGMEN TS AND EVEN FOR INDIRECT OVERHEADS, ALLOCATION WAS DONE BY APPLYING APPROPRIATE ALLOCATION KEYS. IT IS ALSO OBSERVED IN THIS REGARD THAT THERE WAS NO OBJECTION SPECIFICALLY RAISED BY THE TPO IN HIS ORDER TO SHOW THAT ANY SUCH ALLOCATION KEY ADOPTE D O R APPLIED BY TH E ASSESSEE WA S WRONG OR UNREASONABLE . AS REGA R DS THE OBJ E CTION OF THE RE VENUE THAT THE AL L OCATION OF O V ERHEADS AND WORKING OF ANY SEGMENTAL FINANCIALS IN THE ABSENCE OF SEPARATE BOOKS OF ACCOUNT INVOLVE ASSUMP T IONS AND PR E SUMPTION S , IT IS PERTINENT TO NOTE THAT EVEN THE TPO ALLOCATED THE O V ERHEADS IN TH E R ATIO O F SAL E S TO WO R K OUT TH E OP /OC OF THE AE SEGMENT , W HICH ITSELF INVOLVE D ASSUMP T ION S AND PRESUMPTIONS. WE TH E R EF ORE, FIND M E RIT IN THE CON T ENTION S O F THE LEARNED COUN S EL FOR THE ASSES SEE THAT THERE IS NO POINT IN RE J ECTING THE EN T IRE SEGMENTAL DETAILS WHEN THE SEGMENTAL ACTIVITIES ARE DIFFERENT AND SP E CI FIC AL L O C ATION KEYS ARE GIVEN FOR ALLOCATING THE IN D I RE CT EXPENSES BETWEEN DIFFERENT SEGMENTS. IN TH E SE FACTS AND CIRCUMSTANCES, WE A RE OF THE VIEW THAT I T IS INCUMBENT UPON TPO TO EXAMI NE THE SEGM E N T AL DETAIL S AF T ER VERIFYING THE ALLOCATION O F DIRECT AND I ND I R ECT EXPENSE MADE BY THE ASSESSEE WITH REFERENCE TO THE RESPECTIVE ALLO CA TI O N KEYS AND IF ON SUCH EXAMINATION/VERIFICATION, IT I S FOUND THAT T HE SEGMENTAL FINANCIALS ARE NO T RELIABLE, HE COULD REJECT THE SAME BY GIVING SP E CI F IC REASONS. OTHER W I S E, IF TH E AL L OCATION OF OVERHEAD IS BY AND LARGE FAI R AND REASONABLE AND THE SEGMENTAL RESULTS CAN BE FAIRLY AND APPROPRIATELY ADJUSTED, BY CHANGING /ADJUSTING THE ALLOC AT ION, THE TPO, IN OUR OPINION, SHOU L D I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 9 MAKE S UCH ADJU S TM E N T S AND DO THE TR A NSFER P RICING ANALYSIS ON TH E BASIS OF SUCH ADJU S TED SEGMENTAL FIN AN CIALS, INSTEAD OF REJ E CTING THE SAME STRAIGHT AWAY. W E , TH E R EF OR E , REMIT THIS ISSU E TO THE FILE O F THE AO/TPO TO DECI D E THE SAME AFRESH AFTER EX A MI N ING/VERIFYING THE SEGMENTAL FIN AN CIA L S OF THE ASSESSEE AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE . GROUN D S NO.1 TO 10 ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 1 1 . THE N EX T ISSUE INVOLVED IN GROUNDS NO.11 AND 12 RELATES TO THE ADDITION OF RS.1,60,66,825 MADE TO THE TOTAL IN C OM E O F TH E ASSESSEE BY WAY OF TP ADJUSTMENT ON ACCOUNT OF INTEREST ATTRIBUTABLE TO THE E X CESS CREDIT PERIOD ALLOWED BY THE A SSESSEE TO ITS ASSO C I A TED ENTERPRISE. 12. AS NOTICED BY THE AO/TPO, THE ASSESSEE COMPANY HAD SHOWN RECEIVABLES OF RS.8,41,67,205 FROM I T S ASSOCIATED ENTERPRISES. AFTER TAKING IN T O CONSI DE RATION CERTAIN SPECIFIC INSTANCES OF E X CESSIVE C REDIT PERIOD ALLOW ED BY THE ASSESSEE COMPANY TO ITS ASSOCIATED ENTERPRISES, THE TPO WAS OF THE OPINION THAT THE ASSESSEE, FROM AN INDEPENDENT PARTY IN AN ARMS LENGTH SITUATION , WOULD HAVE RECEIVED ITS FUN D S WITHIN THE CREDIT PERIOD ALLOWED AND IF NO T , WOULD HAVE NORMALLY CH A RGED INTEREST FOR THE DELAY. RELIANCE IN THIS REGARD WAS PLACED BY HIM ON THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF LOGI X M I C RO SY S TEMS L TD. (42 S OT 525 ) , WHEREIN IT WAS HELD BY T H E TRIBUNAL THAT REASONABLE PERIOD SHOULD BE P ROVIDED AS INTEREST - FREE PERIOD AND NO INTEREST SHOULD BE CALCULATED FOR SUCH REASONABLE PERIOD. ACCORD I NGLY , TAKING ON E MON T H AS A RE A SONABLE PERIOD OF CREDIT, THE TPO CALCULATED INTEREST ATTRIBUTABLE TO THE DELAYED PAYMENTS RECE I VED BY THE ASSESSEE F R OM ITS ASSOCIATED ENTERPRISES AT RS. 1, 60,66,825 AND WORKED OUT THE TP ADJU S TM E NT REQUIRED TO BE MADE ON THIS ISSUE TO I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 10 THAT EXTENT . T HE DISPUTE RESOLUTION PANEL OVERRULED THE OBJECTION RAISED BY TH E ASSESSEE FOR THIS TP ADJUSTMENT PROPOSED BY THE ASSESSING OF FICER IN THE DRAFT ORDER AND HELD THAT NO IN T ERFER E NCE WITH THE ORDER O F TH E ASSESSING OFFICER/ TPO ON THIS ISSUE WAS CALLED FOR. ACCO RD INGLY, THE ADDITION OF RS .1 , 60,66,825 WAS MADE BY THE ASSESSING OFFICER ON THIS ISSUE TO THE TOTAL INCOME OF THE ASSESSEE IN THE FINAL ASSESSMENT MADE BY HIM, VIDE HIS ORDER DATED 29.10.2013. 13 . WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT ALTHOUGH RELIANCE WAS PL A CED BY THE TPO ON TH E DECISION OF TH E TRIBUNAL IN TH E C A S E OF L OGI X MICROSYSTEMS L TD. (SUPRA) WHEREIN IT WAS HELD TH AT A REASONABLE PERIOD SHOULD BE PROVIDED AS INTEREST FREE PERIOD, H E HAS NO T GIVEN ANY BASIS WHATSOEVER TO TAKE SUCH REASONABLE PERIOD O F CREDIT IN TH E CA S E OF ASSESSEE A S ON E MON T H. ALTHOUGH THERE WERE NO CREDIT TERMS SPECIFICALLY AGREED BETWEEN BY THE PARTIES AND THERE WAS ALSO NO DEFINITE CREDIT POLICY FOLLOWED BY THE ASSESSEE AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, T HE REASONABLE PERIOD OF CREDIT , IN OUR OPINI ON, SHOULD B E TAKEN ON THE BASIS OF COMPARABLE IN S TANCES. IN THIS RE G ARD, IT IS PERTI NE NT TO NOTE THAT CREDIT W A S BEIN G OFFERED BY THE ASSESSEE COMP A NY EVEN IN THE CA S E OF NON - AE TRANS A CTIONS AND TH E S E INTERNAL COMPARABLES THUS W E RE AVAILABLE FOR THE COMP ARAB ILITY ANALYSIS. AS AGREED BY THE LEARNED REPR E SENTATIVES OF BOTH THE SIDES, THE AVERAGE CREDIT PERIOD OFFERED BY THE ASSESSEE IN THE NON - AE TR A NSAC T ION S CAN B E TAKEN AS THE CREDIT PERIOD OFFERED IN AN ARMS LENGTH SITUATION. I N THIS REGARD, THE LEARNED COUN S EL F OR THE ASSESSEE HAS SUBMITTED THAT THE AVERAGE CREDIT PERIOD OFFERED BY THE ASSESSEE TO ITS AE, GOING BY THE QUANTUM OF RE CE IVABLES AT THE END OF THE Y E AR UN D ER CONSIDERATION VIS - - VIS CORRESPONDING TURNOVER, IS THE SAME AS I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 11 OFFERED TO THE NON - AES . THE LEARNED DEPARTMENTAL REPRESENTATIVE , HO W EVER , HAS CON T EN D ED T H A T THIS MATER REQUI R ES VERIFICATION AND THE ASSESSING OFFICER MAY B E ALLO W ED TO WORK OUT THE AVERAGE CREDIT PERIOD ACTUALLY OFFERED BY THE ASSESSEE IN CA S E OF NON - AE TR A NSAC T ION S AND COM PARE THE SAME WITH THE CREDIT PERIOD ALLOWED BY THE ASSESSEE IN THE CA S E OF AE TR A N S AC T IONS. WE FIND MERIT IN THI S CO N TENTION OF THE LEARNED AUTHORISED REPRESENTATIVE. THIS ISSUE IS AC C O R DI N GLY REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER/ TPO WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER TAKING INTO CONSIDERATION THE CR E DIT PERIOD OFFERED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES VIS - A - V I S THE AVERAGE CREDIT PERIOD OFFERED BY IT TO NON - ASSOCIATED ENTERPRISES AND AFTER GIVING SUFFICIENT OPPORTUN ITY OF HEARING TO THE ASSESSEE. GROUNDS NO.11 AND 12 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 14 . THE I S SUE S INVOL V ED IN GROUND N O.13 REL A TING TO L E VY OF INTEREST UN D ER S. 2 34B AND S. 234C ARE CONSEQUENTIAL I N NATURE AND THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLO W CONSEQUENTIAL RELIEF TO TH E ASSESSEE ON TH ESE ISSUE S . 1 5 . IN THE RESULT, APPEAL O F TH E ASSESSEE IS TREATED AS ALLOWED FOR STATI S T I CAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 11 TH FEBRUARY, 2015 SD/ - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER D T/ - 11 TH FEBRUARY , 2015 I TA NO. 1416/H YD/20 14 M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED, HYDERABAD 12 COPY FORWARDED TO: 1. M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED (EARLIER KNOWN AS M/S. MACH MOBILE SOLUTIONS PRIVATE LIMITED), ILABS CENTRE, LOBBY FLOOR, PLOT LNO.18, MADHAPUR, HYDERABAD 500 081. 2 . DY. COMMISSIONER OF INCOME - TAX 16(2), HYDERABAD 3. 4. DISPUTE RESOLUTION PANEL, HYDERABAD DIRECTOR GENERAL OF INCOME - TAX, INTERNATIONAL TAXATION, HYDERABAD 500 004. 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S