ITO, New Delhi V. M/s. Copal Research (I) Pvt. Ltd., Gurgaon

ITA 1865/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4162 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 25-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Question of law
• Section: 143(3); 10B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1865/DEL/2014 ASSESSMENT YEAR : 2009-10 ITO, WARD-3(4), NEW DELHI. VS. COPAL RESEARCH (I) PVT. LTD., 6 TH FLOOR, VATIKA ATRIUM, DLF GOLF COURSE ROAD, GURGAON. PAN: AACCC1159R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANUBHAV RASTOGI, ADVOCATE DEPARTMENT BY : SHRI KUMAR PRANAV, SR. DR DATE OF HEARING : 08.01.2018 DATE OF PRONOUNCEMENT : 09.01.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (A O) ON 28.01.2014 ITA NO.1865/DEL/2014 2 U/S 143(3) READ WITH SECTION 144C(13) OF THE INCOME -TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN ITS APPE AL IS AGAINST THE DIRECTION OF THE DISPUTE RESOLUTION PANEL (DRP) TO INCLUDE M/S JINDAL INTELLICOM LTD., BY OVERLOOKING THE FACT THAT IT WA S HAVING A DIFFERENT FINANCIAL YEAR ENDING. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN PROVISION OF INFORMATION TECHNOLOGY (IT) ENABLED BACK OFFICE SUPPORT SERVICES IN THE NATURE OF CUSTOMIZED BUSINESS/FINAN CIAL RESEARCH SUPPORT TO COPAL GROUP. THE ASSESSEE HAS AN ITES AGREEMENT WITH COPAL GROUP UNDER WHICH IT PROVIDED THE ABOVE REFERRED SERVICES . THE ASSESSEE REPORTED AN INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED BACK OFFICE SUPPORT SERVICES WITH TRANSACTED VALUE OF RS.42,48,97,981/-. IN ORDER TO DEMONSTRATE THAT ITS INTERNATIONAL TRANSAC TION WAS AT ARMS LENGTH PRICE (ALP), THE ASSESSEE SELECTED CERTAIN COMPANIE S INCLUDING JINDAL INTELLICOM LTD. THE TPO EXCLUDED THIS COMPANY ON T HE GROUND THAT IT ITA NO.1865/DEL/2014 3 WAS HAVING YEAR ENDING ON 31.12.2008 AND HAD DIFFER ENT YEAR ENDING VIS- -VIS THE ASSESSEE. THE DRP DIRECTED TO INCLUDE TH IS COMPANY BY CONSIDERING THE FUNCTIONAL PROFILE MATCHING WITH TH E ASSESSEE. THE CASE OF THE REVENUE IS THAT THE DRP OVERLOOKED THE FACT THAT THE TPO EXCLUDED IT ON THE GROUND THAT JINDAL INTELLICOM LT D. WAS HAVING DIFFERENT FINANCIAL YEAR. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS HAVING FINANCIA L YEAR ENDING ON 31.03.2009. AS AGAINST THAT, THE ANNUAL REPORT OF M/S JINDALL INTELLICOM LTD., A COPY OF WHICH IS PLACED ON RECORD, IS HAVIN G CALENDAR YEAR ENDING ON 31.12.2008. 5. THE ASSESSEE INCLUDED THIS COMPANY IN ITS LIST O F COMPARABLES. HOWEVER, THE TPO ELIMINATED THE SAME ON THE GROUND THAT IT WAS FOLLOWING DIFFERENT YEAR ENDING, NAMELY, 31 ST DECEMBER AND, HENCE, WAS NOT COMPARABLE. THE LD. AR FAIRLY ACCEPTED THAT TH E ABOVE COMPANY WAS FOLLOWING CALENDAR YEAR FOR MAINTAINING ITS ACCOUNT S IN CONTRAST TO THE ASSESSEE FOLLOWING FINANCIAL YEAR ENDING 31 ST MARCH. THE LD. DR ITA NO.1865/DEL/2014 4 SUBMITTED THAT THE DATA FOR THE YEAR ENDING OF THIS COMPANY WAS NOT SIMILAR TO THAT OF ASSESSEE COMPANY AND HENCE THE S AME OUGHT TO HAVE BEEN EXCLUDED RATHER THAN RETAINING IT ON THE BASIS OF FUNCTIONAL SIMILARITIES. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL, IT IS NOTICED THAT THE ASSESSEE COMPANY I S HAVING FINANCIAL YEAR COVERING THE PERIOD 1.4.2008 TO 31.3.2009. IN THAT VIEW OF THE MATTER, A VALID COMPARISON CAN BE MADE ONLY IF THE COMPARABLE COMPANY ALSO HAS THE SAME FINANCIAL YEAR. IN THIS REGARD, WE CONSI DER IT APPROPRIATE TO NOTE THE RELEVANT PART OF SUB-RULE (4) OF RULE 10B, WHICH PROVIDES THAT: THE DATA TO BE USED IN ANALYZING THE COMPARABILITY OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANS ACTION HAD BEEN ENTERED INTO. IT IS OBVIOUS FROM THE LANGUAGE OF SUB-RULE (4) THAT THE COMPARABILITY OF AN UNCONTROLLED TRANSACTION CAN BE ANALYZED ONLY WITH THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. IN OTHER WORDS, IF THE TESTED PARTY HAS MARCH YEAR ENDING, THEN, THE COMPARABLE MUST ALSO H AVE THE DATA ITA NO.1865/DEL/2014 5 RELATING TO THE FINANCIAL YEAR ENDING 31 ST MARCH ITSELF. IF SUCH A DATA IS NOT AVAILABLE, THEN, A COMPANY ALBEIT FUNCTIONALLY COMPARABLE, DISQUALIFIES. ESPOUSING THE FACTS OF THE EXTANT CA SE, WE FIND THAT INSOFAR AS THE FUNCTIONAL COMPARABILITY OF THIS COMPANY IS CONCERNED, THE TPO HAS NOT DISPUTED THE SAME. THE ONLY REASON GIVEN FO R ITS EXCLUSION IS THE NON-AVAILABILITY OF DATA FOR THE RELEVANT FINANCIAL YEAR. 7. THE LD. AR CANDIDLY ADMITTED THAT IT IS NOT POSS IBLE TO CULL OUT RELEVANT FIGURES FOR DETERMINING THE ALP FROM THE A NNUAL REPORT OF JINDAL INTELLICOM PVT. LTD., SO AS TO COMPARE THE S AME WITH THE FINANCIAL YEAR FIGURES OF THE ASSESSEE. 8. IT IS PERTINENT TO NOTE THAT THE HON'BLE BO MBAY HIGH COURT IN CIT VS. PTC SOFTWARE (I) PVT. LTD. (2017) 395 ITR 176 ( BOM) WAS CONFRONTED WITH SIMILAR QUESTION NO. (III), RAISED BY THE REVE NUE, READING AS UNDER:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE TRIBUNAL ERRED IN EXCLUDING TRANSWORLD INFOTECH LTD., FROM THE LIS T OF COMPARABLES ONLY ON THE BASIS THAT THE SAID CONCERN HAD PREPARED FIN ANCIALS FOR THE YEAR ENDING ON JUNE, 2007 AGAINST THE FINANCIALS PREPARE D BY THE ASSESSEE ON MARCH, 2007. ITA NO.1865/DEL/2014 6 9. REJECTING THE STAND POINT OF THE REVENUE AS NOT GIVING RISE TO ANY SUBSTANTIAL QUESTION OF LAW, THE HON'BLE BOMBAY HIG H COURT HELD THAT: THE PROVISIONS OF SECTION 10B(4) OF THE RULES ARE C LEAR IN AS MUCH AS IT OBLIGES THAT THE DATA TO BE USED FOR COMPARABILITY ANALYSIS SHOULD B E OF THE SAME FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTIONS WERE ENTERED INTO BY THE TESTED PARTY. IN FACT, THIS PRI NCIPLE / MANDATE WAS APPLIED BY THE TPO WHILE CONSIDERING M/S. POWER SOF T GLOBAL SERVICES LTD. AS A COMPARABLE BECAUSE IT HAD A FINANCIAL YEA R ENDING IN SEPTEMBER, 2006 AND NOT 31ST MARCH, 2007 AS IN THE CASE OF RESPONDENT ASSESSEE. THE SAME YARDSTICK OUGHT TO HAVE BEEN APP LIED BY THE TPO WHILE CONSIDERING WHETHER TRANSWORK LTD. WAS COMPAR ABLE. THE SUBMISSION ON BEHALF OF THE REVENUE THAT THE MANDAT E OF RULE 10B OF THE RULES CAN BE IGNORED AS THE DIFFERENCE IS ONLY OF T HREE MONTHS IS WITHOUT ANY BASIS . NO SUCH LIBERTY IS GRANTED IN TERMS OF RULE 10B(4 ) OF THE RULES. 10. IN VIEW OF THE AFORE DISCUSSED LEGAL POSITION, IT IS CLEAR THAT JINDAL INTELLICOM LTD., HAVING A CALENDAR YEAR ENDING, CA NNOT BE COMPARED ITA NO.1865/DEL/2014 7 WITH THE ASSESSEE HAVING A FINANCIAL YEAR ENDING NO TWITHSTANDING THE FUNCTIONAL SIMILARITY BETWEEN THE TWO. WE, THEREFO RE, SET ASIDE THE IMPUGNED ORDER TO THIS EXTENT AND DIRECT THE EXCLUS ION OF THIS COMPANY FROM THE LIST OF COMPARABLES. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.01.201 8. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 09 TH JANUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.