Surbana International Consultants (India) Pvt.Ltd., Hyderabad V. DCIT, Cir-3(2), Hyderabad

ITA 1666/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61938 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: S RAGHUNATHAN
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Corroborative evidences
• Section: 143(3); 92D; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEM BER. ITA NO.1666/HYD/200 : ASSESSMENT YE AR:2006-07 SURBANA INTERNATIONAL CONSULTANTS (INDIA) PVT. LTD., BEGUMPET, HYDERABAD. (PAN - AACCC1442 P) V/S DCIT, CIR-3(2), IT TOWERS, AC GUARDS, HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY :. SHRI S. RAGHUNATHAN RESPONDENT BY : SHRI V. SRINIVAS DATE OF HEARING 10-7-2012 DATE OF PRONOUNCEMENT 10-7-2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER PASSED BY DISPUTE RESOLUTION PANEL, 4A, IT TOWERS, HYDERABAD PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS BEFORE US:- 2 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD. 1 ADJUSTMENT I ADDITION TO TOTAL INCOME A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED ASSESSING OFFICER ('AO') UNDER DIRECTIO NS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP'), ER RED IN MAKING AN ADDITION TO THE APPELLANT'S TOTAL INCOME OF RS. 67,239,828 BASED ON THE PROVISIONS OF CHAPTER X OF THE I NCOME-TAX ACT 1961, ('THE ACT'). 2 ASSESSMENT AND REFERENCE TO TRANSFER PRICING OF FICER ('TPO') ARE BAD IN LAW A) THE FINAL ORDER ISSUED BY THE AO, IS BAD ON FACTS A ND IN LAW, AND IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. WITHOUT PREJUDICE TO THE ABOVE, THE ORDER ISSUED BY THE AO IS BAD IN LAW INSOFAR AS THE FACT THAT THE AO DID NOT ISSU E TO THE APPELLANT, A SHOW CAUSE NOTICE, AS PER PROVISO TO SECTION 92C( 3) OF THE INCOME-TAX ACT, 1961 ['THE ACT']. B) THE AO HAS ERRED IN MAKING A REFERENCE TO THE TPO, INTER ALIA, SINCE HE HAS NOT RECORDED AN OPINION THAT ANY OF TH E CONDITIONS IN SECTION 92C(3) OF THE ACT, WERE SATIS FIED IN THE INSTANT CASE. THE AO ALSO ERRED IN NOT FOLLOWING TH E PROVISION CONTAINED IN SECTION 92CA(1) OF THE ACT. 3 DETERMINATION OF ARM'S LENGTH PRICE A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO UNDER THE DIRECTIONS ISSUED BY THE H ON'BLE DRP IS NOT JUSTIFIED IN TREATING THE INTERNATIONAL TRANSACTIONS ENTERED INTO BETWEEN APPELLANT AND ITS ASSOCIATED ENTERPRISES (' AES') AS SHAM AND CONCLUDING THE ARM'S LENGTH PRICE AS NIL I N RESPECT OF SERVICE CHARGES PAID TO ITS ASSOCIATED ENTERPRIS ES ('AES') B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE ORP ERRED BY FAILING TO CONSIDER THE DO CUMENTS FILED! SUBMISSIONS MADE BY THE APPELLANT TO SUBSTAN TIATE THE NATURE AND EXTENT OF THE ARCHITECTURAL SERVICES RECEIVED FROM ITS AES, BEFORE ISSUING THE DIRECTIONS UNDER SECTION 144C (6 ) OF THE ACT AND THEREBY CONCLUDING THAT THE ASSESSEE DID NO T FURNISH ANY DETAILS BEFORE ORP AND THAT THERE WAS NO PROOF OR EVIDENCE THAT THE AP PELLANT HAD RECEIVED ANY ECONOMIC BENEFIT FROM THE SERVICES RENDERED BY THE ASSOCIATED ENTERPRISE. C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED TPO ERRED AND THE HON'BLE ORP FURTHER E RRED IN 3 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD. UPHOLDING! CONFIRMING THE CONCLUSION OF THE TPO THA T THE APPELLANT COULD NOT SUBSTANTIATE THE NATURE AND EXTENT OF THE ARCHITECT URAL SERVICES RECEIVED FROM ITS AES WITH REFERENCE TO FU NCTIONS PERFORMED, ASSETS DEPLOYED AND RISKS UNDERTAKEN AND THE APPELLANT DID NOT DERIVE ANY COMMERCIAL BENEFIT FROM SUCH SERVICES. D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN UPHOLDING/CONFIRMING THE A CTION OF THE TPO OF DISREGARDING THE DISREGARDING THE ECONOMIC/B ENCHMARKING ANALYSIS UNDERTAKEN BY THE APPELLANT BASED ON THE CONTEMPORANEOUS DATA IN THE TRANSFER PRICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 ('THE RULES') AND THE VA RIOUS SUBMISSIONS MADE BY THE APPELLANT. E) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO/TPO ERRED BY NOT DISPOSING OFF THE APPLICATION MADE BY THE APPELLANT UNDER SECTION 154 OF THE ACT TO ARRIVE AT THE CORRECT VALUE OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE APPELLANT WITH ITS AES, PRIOR TO PASSING THE ORDER UNDER SECTION 143(3) READ WITH 144 (C)(10). 4 INTEREST UNDER SECTION 2348 AND 2340 OF THE ACT THE LEARNED AO HAS ERRED IN PROPOSING AND THE HON'B LE DRP HAS FURTHER ERRED IN CONFIRMING THE LEVY OF INTEREST UN DER SECTION 2348 AND 2340 OF THE ACT ON THE APPELLANT. 5 RELIEF THE APPELLANT PRAYS THAT DIRECTIONS BE GIVEN TO GRA NT ALL SUCH RELIEF ARISING FROM THE ABOVE GROUNDS AND ALSO ALL RELIEF CONSEQUENTIAL THERETO. THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY D ELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUNDS OF APP EAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. THE APPELLANT PRAYS THAT THE ADJUSTMENT IN RELATION TO TRANSFER PRICING MATTERS MADE BY THE LEARNED AO/ TPO AND UPH ELD BY THE HON'BLE DRP BE DELETED. 4 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD. 3. BEFORE US, THE ASSESSEE RAISED VARIOUS GROUNDS. WIT HOUT PREJUDICE TO THE ABOVE GROUNDS RAISED BY THE ASSESS EE IN ITS APPEAL, THE ASSESSEE PLEADED BEFORE US THAT THE ASSESSEE WA S REQUIRED TO FURNISH THE FOLLOWING INFORMATION BEFORE THE LOWER AUTHORITIES AND THE SAME WAS PRODUCED BEFORE THE LOWER AUTHORITIES ON 23 RD SEPT. 2010 THOUGH THE HEARING OF THE CASE BEFORE THE DRP WAS ON 20-9- 2010 AND THE DRP HAS PASSED THEIR ORDER ON 24-9-201 0. I) VALUE OF SERVICES RECEIVED FROM AES SEPARATELY. II) EXPENDITURE DEBITED TO THE P & L A/C TOWARDS PAYMEN T ON ACCOUNT OF SERVICES RECEIVED FROM THE AES SEPARATEL Y. III) COMPLETE DETAILS OF THE AMOUNTS OUTSTANDING IN RESP ECT OF BOTH AES WITH REFERENCE TO NATURE OF SERVICES RECEIVED, PROJECT AGAINST WHICH THE AMOUNT IS OUTSTANDING. IV) COMPLETE DETAILS OF AMOUNT DEBITED AT RS.5,40,57,81 5/- TO THE P & L A/C UNDER THE HEAD ARCHITECTURAL CONSULTANCY AN D OTHER DIRECT EXPENSES. V) COMPLETE DETAILS OF PAYMENTS MADE TO AES TOWARDS CO NSULTANCY SERVICES ALONG WITH EXTRACT OF BANK ACCOUNT THROUGH WHICH THE FUNDS ARE REMITTED OUTSIDE. VI) COMPLETE DETAILS OF AMOUNTS RECEIVABLE UNDER THE HE AD SUNDRY DEBTORS AT RS.4,49,68,914/- WITH REFERENCE TO PROJE CT AND CLIENTS FROM WHOM THESE AMOUNTS ARE RECEIVABLE. VII) DETAILS OF EXPENDITURE DEBITED UNDER THE HEAD BUSIN ESS DEVELOPMENT AT RS.54,67,052/- WITH SUPPORTING EVIDE NCE. VIII) COMPLETE DETAILS OF PROVISIONS MADE FOR DOUBTFUL DE BTS AT RS.65,90,884/- WITH SUPPORTING EVIDENCE. IX) COMPLETE DETAILS OF EXPENSES DEBITED TOWARDS BUSINE SS TOURS AND TRAVELS AT RS.12,80,619/- 5 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD. X) COPIES OF INVOICES RAISED BY CESMA CONSULTANTS, SIN GAPORE AS THE SAME ARE NOT FURNISHED. TO THIS EFFECT, HE DREW OUR ATTENTION TO THE COPY O F PAPER BOOK FILED BEFORE DRP ON 23-9-2010. THE LEARNED DR HAS NO OBJECTION IF THE MATTER IS SENT BACK TO DRP TO CONSIDER THE DISPUTE ON MERIT. 4. WE HAVE HEARD RIVAL SUBMISSIONS OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS SEEN FROM THE PAP ER BOOK FILED BEFORE US, THE ASSESSEE HAS NOT FILED THE REQUISITE INFORM ATION BEFORE THE DRP DUE TO INADVERTENCE. THE REQUISITE INFORMATION ASK ED FOR BY THE DRP HAS BEEN FILED BY THE ASSESSEE BELATEDLY AFTER COMPLETI ON OF HEARING. IN OTHER WORDS, THE INFORMATION WAS FILED ON 23 RD SEPT. 2010 THOUGH THE ASSESSMENT WAS COMPLETED ON 20-9-2010. CONSIDERATI ON OF THE REQUISITE INFORMATION FILED BY THE ASSESSEE IS IMPORTANT TO C OME TO A CONCLUSION ON THE ISSUE IN DISPUTE BY THE DRP. BEING SO, IN OUR OPINION, IT IS APPROPRIATE TO SET ASIDE THE MATTER TO DRP FOR FRESH CONSIDERAT ION. ACCORDINGLY WE REMIT THE ISSUE BACK TO DRP TO CONSIDER THE SAME IN THE LIGHT OF THE EVIDENCES MENTIONED IN PARA-3 OF THIS ORDER. 5. IN THE RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 10-7-2012. SD/- SD/- ( ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 10 TH JULY, 2012 6 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD. COPY FORWARDED TO: 1. SURBANA INTERNATIONAL CONSULTANTS (INDIA) PVT. LTD. , 6-3- 119/6, 3 RD FLOOR, KUNDANBAGH, BEGUMPET, HYDERABAD. 2. DCIT, CIR-3(2), HYDERABAD. 3. THE ADDL. CIT (TRANSFER PRICING), HYDERABAD. 4. THE DRP, IT TOWERS, AC GUARDS, HYDERABAD. 5. DEPARTMENTAL REPRESENTATIVE , ITAT, HYDERABAD JMR* 7 ITA NO.1666 OF 2010 SURBANA INTERNATIONAL CONSULTANTS (I) LTD., HYD.