SYSCOM CORPORATION LTD, MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 1683/MUM/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9326 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 22-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2014
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Transfer pricing; International transaction; Revised return

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI , BEFORE SHRI I. P. BANSAL, J M & SHRI R.C.SHARMA , A M ITA NO. 1683 / MUM/20 1 4 ( ASSESSMENT YEAR : 20 09 - 1 0 ) SYSCOM CORPORATION LIMITED 714, RAHEJA CHAMBERS, 213 NARIMAN POINT, MUMBAI - 400021 VS. DCIT, CIRCLE - 3(3), MUMBAI PAN/GIR NO. : A A BCS 2000 C ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI SASHI TULSIYAN /REVENUE BY : SHRI N.K.CHAND DATE OF HEARING : 5 TH MARCH , 201 5 DATE OF PRONOUNCEMENT 13 TH MAR CH ,2015 O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 22 - 2 - 2013 FOR THE ASSESSMENT YEAR 20 09 - 2010 , IN THE MATTER OF ORDER PASSED U/S. 14 4C ( 5 ) OF THE ACT . 2. AT THE OUTSET, LD. AR PLACED ON RECORD THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008 - 09, WHEREIN MOST OF THE ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL BY REJECTING ASSESSEES GROUND FOR RESTORING THE MATTER BACK TO THE FILE OF AO. THE ASSE SSEE ALSO SUBMITTED GROUND - WISE CHART SO AS TO INDICATE THE RELEVANT PARA IN THE ORDER OF THE TRIBUNAL BY WHICH GROUNDS TAKEN BY THE ASSESSEE ARE COVERED. HE FURTHER SUBMITTED THAT GROUNDS NO.1,3&4 ARE GENERAL GROUND, THEREFORE, DO NOT REQUIRE ANY ADJUDICA TION. HE FURTHER ITA NO.1683/14 2 SUBMITTED THAT GROUNDS NO.6, 7, 8, 10, 17 & 18 ARE NOT COVERED B Y THE ORDER OF THE TRIBUNAL, HOWEVER, DID NOT PRESS GROUND NOS. 6,7,8,10 & 17, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 3. WITH REGARD TO GROUND NO.18, HE SUBMITTED T HAT DUE CREDIT HAS NOT BEEN GIVEN BY THE AO WITH REGARD TO TDS AMOUNTING TO RS.17,90,408, ACCORDINGLY IT WAS PRAYED THAT THIS GROUND SHOULD BE RESTORED TO THE FILE OF AO FOR VERIFICATION AND DECID ING THE ISSUE AFRESH. 4. COPY OF THE ORDER OF THE TRIBUNAL A S WELL AS CHART SUBMITTED BY LD. AR WAS GIVEN TO THE LD. DR FOR HIS COMMENTS, IF ANY. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008 - 0 9, AND FOUND THAT GROUND NO.2 HAD BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE AFTER HAVING THE FOLLOWING OBSERVATIONS AT PARA NO.7 : - 7. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE OBJECTION OF THE ASSESSEE AGAINST THE REFERENCE MADE TO THE TPO U/S 92CA(1) OF THE INCOME TAX ACT. 6. GROUND NO.5 IS WITH REGARD TO REJECTING M/S PUNJAB COMMUNICATION LTD. FROM THE LIST OF COMPARABLES. THE TRIBUNAL HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE AFTER HAVING FOLLOWING OBSERVATIONS AT PARA 20 : 20. IN VIEW OF THE ABOVE DISCUSSION AND FACT AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE PUNJAB COMMUNICATION LTD. WHICH IS SUFFERING PERSISTENCE LOSS YEAR AFTER YEAR FOR LAST FOUR YEARS CANNOT BE CONSIDERED AS GOOD COMPARABLE FOR THE PURPOSE OF DETERMINATION OF AL P. 7 . GROUND NO.9 IS WITH REGARD TO CONSIDERING M/S GEMINI COMMUNICATIONS LTD. AS A COMPARABLE. THE TRIBUNAL IN ASSESSEES OWN ITA NO.1683/14 3 CASE, HAS RESTORED BACK THE ISSUE TO THE FILE OF AO VIDE PARA 18, WHICH READS AS UNDER : - 18. IT IS CLEAR FROM THE FINDINGS OF THE DRP THAT M/S GEMINI COMMUNICATION WAS PART OF THE TP STUDY OF THE ASSESSEE BUT WHILE SELECTING THE COMPARABLES THE ASSESSEE HAS NOT INCLUDED THE SAID COMPANY IN THE LIST OF COMPARABLES WITHOUT GIVING ANY SPECIFIC REASONS FOR NOT INCLUDING IN THE COMPA RABLE LIST. THUS, THE ASSESSEE HAS NOT EXPLAINED ANY REASON IN THE TP STUDY FOR NON - INCLUSION OF GEMINI COMMUNICATION IN THE LIST OF COMPARABLES. THOUGH, THE ASSESSEE HAS RAISED AN OBJECTION BEFORE THE DRP THAT THE SAID COMPANY IS IN A DIFFERENT BUSINESS W HICH INCLUDES SERVICES AND SOLUTION OF VARIOUS NATURES TO TELECOM COMPANIES. THE LD. DR, ON THE OTHER HAND, POINTED OUT THAT THE SAID COMPANY HAS SHOWN COST OF MATERIAL IN THE PROFIT AND LOSS ACCOUNT WHICH HAS BEEN COUNTERED BY THE LD. AR BY REFERRING THE NOTES ON ACCOUNT AND THE ANNUAL REPORT TO SHOW THAT THE COST OF MATERIAL RELATES TO THE VALUE OF IMPARTED MATERIAL CONSUMED IN PROVIDING SERVICES. ALL THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE AUTHORITIES BELOW WHILE DECIDING THE ISSUE OF COMPARABILITY B ECAUSE THE MAIN THRUST OF THE ARGUMENT OF THE ASSESSEE AGAINST THE INCLUSION OF GEMINI COMMUNICATION WAS SUPER NORMAL PROFIT EARNED BY THE SAID COMPANY. THEREFORE, NEITHER THE GROUND OF FUNCTIONAL NON - COMPARABILITY WAS SERIOUSLY RAISED BY THE ASSESSEE NOR IT WAS PROPERLY EXAMINED BY THE AUTHORITIES BELOW. ACCORDINGLY IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE OF FUNCTIONAL COMPARABILITY OF M/S GEMINI COMMUNICATION TO THE RECORD OF THE TPO FOR PROPER EXAMINATION AND ADJUDICATION. WE MAY CLARIFY THAT IF ONLY A SEGMENT OF THE BUSINESS OF M/S GEMINI COMMUNICATION IS FOUND AS COMPARABLE TO THE ASSESSEE THEN THE SEGMENTAL RESULTS MAY BE CONSIDERED FOR DETERMINATION OF ALP. 8 . GROUND NO.11 WAS NOT PRESSED, THEREFORE, THE SAME IS DISMISSED IN LIMINE. 9 . GR OUND NO.12 IS WITH REGARD TO ALLOWING ADJUSTMENT OF WORK ING CAPITAL EMPLOYED BY THE ASSESSEE VIS - - VIS COMPARABLES COMPANIES , WAS RESTORED BACK BY TRIBUNAL TO THE FILE OF TPO AFTER HAVING FOLLOWING OBSERVATION AT PARA 25 : - 25. GROUND NO. 9 IS REGARDING ADJUSTMENT FOR DI FFERENCE IN WORKING CAPITAL. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS FILED ITA NO.1683/14 4 THE DETAILS OF WORKING CAPITAL ADJUSTMENT AT PAGE NO. 150 OF THE PAPER BOOK. WE FIND THAT THE TRANSFER PRICIN G OFFICER HAS NOT EXAMINED THE DETAILS FOR THE PURPOSE OF WORKING CAPITAL ADJUSTMENT IF ANY TO BE MADE IN RESPECT OF THE COMPARABLES. THE CLAIM OF THE ASSESSEE WAS TURNED OUT BY THE TPO ON THE GROUND THAT IN THE TELECOMMUNICATION INDUSTRY THERE IS LONG GES TATION PERIOD AND THE FLOW OF REVENUE ON SALE IS GENERALLY SLOW AND TARDY. SINCE THE ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE AUTHORITIES BELOW, THEREFORE, WE REMIT THIS ISSUE TO THE RECORD OF THE TPO TO PROPERLY EXAMINE THE CLAIM OF THE ASSESSEE VIS - A - VIS THE DETAILS FILED BY THE ASSESSEE AND THEN DECIDE THE SAME AS PER LAW. 10 . GROUND NO.13 WITH REGARD TO ADOPTING A FLAWED APPROACH BY USING A SINGLE YEAR DATA AS AGAINST MULTIPLE YEAR DATA USED BY THE ASSESSEE, WAS DECIDED AGAINST THE ASSESSEE AFTER H AVING THE FOLLOWING OBSERVATION AT PARA 26, WHICH READS AS UNDER : - 26. GROUND NO. 10 IS REGARDING USING SINGLE YEAR DATA AS AGAINST MULTI YEAR USED BY THE ASSESSEE. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON REC ORD. IN ORDER TO DETERMINE THE ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION, IT HAS TO BE COMPARED WITH UNCONTROLLED AND UNRELATED TRANSACTION BY USING THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BE EN ENTERED INTO. IT IS STIPULATED UNDER RULE 10B(4) R.W.S RULE 10D(4) THAT CONTEMPORANEOUS INFORMATION AND DOCUMENTS SHOULD BE CONSIDERED AS FAR AS POSSIBLE FOR THE PURPOSE OF COMPARING UNCONTROLLED TRANSACTION WITH THE INTERNATIONAL TRANSACTION. THEREFORE , THE COMPARABILITY OF AN UNCONTROLLED AND UNRELATED TRANSACTION WITH THE INTERNATIONAL TRANSACTION HAS TO BE TESTED BY USING CURRENT YEAR DATA. ONLY WHEN THE CURRENT YEAR DATA DOES NOT GIVE A TRUE PICTURE OF THE AFFAIRS AND RESULTS OF THE COMPARABLES DUE TO EXISTENCE OF SOME ABNORMAL CIRCUMSTANCES, THE MULTI YEAR DATA CAN BE CONSIDERED. WHEN THERE IS NO SUCH ABNORMAL OR EXCEPTIONAL CIRCUMSTANCES/FACTS EXIST FOR THE YEAR UNDER CONSIDERATION WHICH COULD HAVE AN INFLUENCE ON THE RESULTS AS WELL AS ON THE DETE RMINATION OF TRANSFER PRICES THAN THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO SHALL BE USED. ACCORDINGLY WE DO NOT FIND ANY FORCE OR SUBSTANCE IN THIS GROUND OF THE ASSESSEE'S APPEAL. THE SAME IS DIS MISSED. ITA NO.1683/14 5 11 . GROUND NO.14 WITH REGARD TO CONSIDERING DATA NOT AVAILABLE AT THE TIME OF FILING TRANSFER PRICING RETURN, WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE AFTER HAVING FOLLOWING OBSERVATION AT PARA 29 : - 29. ACCORDINGLY, WE DO NOT FIND ANY ER ROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. FURTHER THERE IS NO FETTER ON THE POWERS OF THE TPO IN GATHERING MORE RELEVANT INFORMATION, DOCUMENTS ETC. WHILE DETERMINING THE ARM'S LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSAC TION. HENCE, WE REJECT/DISMISS THIS GROUND OF THE ASSESSEE. 12 . GROUND NO.15 WITH REGARD TO NOT APPLYING THE PROVISO TO SECTION 92C(2) OF THE ACT AND NOT ALLOWING ASSESSEE THE BENEFIT OF UPWARD VAR IATION OF 5% IN DETERMINING ALP, WAS REMANDED BACK TO THE FILE OF TPO AFTER HAVING FOLLOWING OBSERVATION AT PARA 30 : - 30. GROUND NO. 12 IS REGARDING THE BENEFIT OF PROVISO TO SECTION 92C(2) OF THE INCOME TAX ACT. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE BENEFIT OF PROVISO TO SECTION 92C(2) IS AVAILABLE ONLY WHEN THE PRICE OF INTERNATIONAL TRANSACTION OF THE ASSESSEE IS WITHIN THE TOLERANCE RANGE OF 5% OF THE ALP COMPUTED BY TAKING THE ARITHMETIC MEAN OF MORE THAN ONE PRICE. THUS, IT IS CLEAR THAT THE BEN EFIT UNDER THE PROVISO TO SECTION 92C(2) IS AVAILABLE ONLY AS A TOLERANCE RANGE AND NOT AS A STANDARD DEDUCTION. ACCORDINGLY, WE DIRECT THE AO/TPO TO ALLOW THE BENEFIT OF THE PROVISO IF THE PRICES OF THE INTERNATIONAL TRANSACTION OF THE ASSESSEE ARE WITHIN THE TOLERANCE RANGE OF 5% OF THE ARITHMETIC MEAN OF MORE THAN ONE COMPARABLE PRICES. 13 . GROUND NO.1 6 WITH REGARD TO RESTRICTING THE ADJUSTMENT TO THE INCOME OF THE ASSESSEE TO THE QUANTUM OF ITS INTERNATIONAL TRANSACTIONS , WAS REMANDED BACK TO THE FIL E OF TPO AFTER HAVING THE FOLLOWING OBSERVATION AT PARA 31 : - 31. GROUND NO. 13 IS REGARDING THE ADJUSTMENT ON ACCOUNT OF TRANSFER PRICING ONLY TO THE QUANTUM OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. D R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POINT THAT THE ADJUSTMENT IF ANY ON ACCOUNT OF TRANSFER PRICING ITA NO.1683/14 6 SHALL BE RESTRICTED ONLY TO THE INCOME FROM INTERNATIONAL TRANSACTION AND NOT TO THE INCOME OF THE ASSESSEE AT ENTI TY LEVEL. ACCORDINGLY THE AO/TPO IS DIRECT TO RESTRICT THE ADJUSTMENT ONLY TO THE QUANTUM OF ITS INTERNATIONAL TRANSACTION. 14 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008 - 09, WE DISMISS THE GROUND NO.2, 5, 11, 13 & 14, HOWEVER, GROUNDS NO. 9,12,15 & 16 ARE RESTORED BACK TO THE FILE OF TPO IN TERMS OF THE DIRECTION ISSUED BY THE TRIBUNAL IN ITS ORDER F OR THE ASSESSMENT YEAR 2008 - 09. 15 . WITH REGARD TO GROUND NO .18, WE RESTORE THE MATTER BACK TO THE FILE OF A O TO VERIFY THE REVISED RETURN AND TO CONSIDER AS PER LAW CREDIT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 17,19,408/ - . WE DIRECT ACCORDINGLY. 1 6 . I N THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 /03/ 201 5 . SD/ - SD/ - ( ) ( I. P. BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 13 /03/ 201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6 . GUARD FILE. //TRUE COPY//