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ITA 1876/DEL/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2342 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINOD SHARMA SENIOR
• Assessee Lawyers: CHAVALI NARAYAN ARS
• Keywords: Transfer pricing; TDS
• Section: 92C; 244A; 234B; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU, ,, , VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI AMIT SHUKLA SHRI AMIT SHUKLA SHRI AMIT SHUKLA SHRI AMIT SHUKLA, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO. 1876/DEL/2015 1876/DEL/2015 1876/DEL/2015 1876/DEL/2015 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2010 2010 2010 2010 - -- - 11 1111 11 M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL DELIVERY S DELIVERY S DELIVERY S DELIVERY SERVICES PRIVATE ERVICES PRIVATE ERVICES PRIVATE ERVICES PRIVATE LIMITED, LIMITED, LIMITED, LIMITED, (SUCCESSOR OF NTT DATA INDIA (SUCCESSOR OF NTT DATA INDIA (SUCCESSOR OF NTT DATA INDIA (SUCCESSOR OF NTT DATA INDIA ENTERPRISE APPLICATION ENTERPRISE APPLICATION ENTERPRISE APPLICATION ENTERPRISE APPLICATION SERVICES PRIVATE LIMITED), SERVICES PRIVATE LIMITED), SERVICES PRIVATE LIMITED), SERVICES PRIVATE LIMITED), NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, BASAVANAGUDI, BASAVANAGUDI, BASAVANAGUDI, BASAVANAGUDI, BANGALORE BANGALORE BANGALORE BANGALORE 560 004. 560 004. 560 004. 560 004. PAN : AABCK7777J. PAN : AABCK7777J. PAN : AABCK7777J. PAN : AABCK7777J. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -18(2), 18(2), 18(2), 18(2), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (A PPELLANT) (RESPONDENT) ITA NO. ITA NO. ITA NO. ITA NO. 1877/DEL/2015 1877/DEL/2015 1877/DEL/2015 1877/DEL/2015 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2010 2010 2010 2010 - -- - 11 1111 11 M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL M/S NTT DATA GLOBAL DELIVERY SERVICES PRIVATE DELIVERY SERVICES PRIVATE DELIVERY SERVICES PRIVATE DELIVERY SERVICES PRIVATE LIMITED, LIMITED, LIMITED, LIMITED, NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, NO.17, SOUTH END ROAD, BASAVANAGUDI, BASAVANAGUDI, BASAVANAGUDI, BASAVANAGUDI, BANGALORE BANGALORE BANGALORE BANGALORE 560 004. 560 004. 560 004. 560 004. PAN : AABCK7777J. PAN : AABCK7777J. PAN : AABCK7777J. PAN : AABCK7777J. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -18(2), 18(2), 18(2), 18(2), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJAN VOHRA AND SHRI CHAVALI NARAYAN, ARS. RESPONDENT BY : SHRI VINOD SHARMA, SENIOR DR. DATE OF HEARING : 16.11.2020 16.11.2020 16.11.2020 16.11.2020 DATE OF PRONOUNCEMENT : 16.11.2020 16.11.2020 16.11.2020 16.11.2020 ITA NOS.1876 & 1877/DEL/2015 2 ORDER ORDER ORDER ORDER PER G.S. PANNU PER G.S. PANNU PER G.S. PANNU PER G.S. PANNU, , , , V VV VP PP P: :: : THE CAPTIONED ITA NO.1876/DEL/2015 IS AN APPEAL FI LED BY NTT DATA GLOBAL DELIVERY SERVICES PRIVATE LIMITED (AS S UCCESSOR) ARISING FROM AN ASSESSMENT MADE ON NTT DATA INDIA ENTERPRIS ES APPLICATION SERVICES PVT.LTD. BY THE DCIT, CIRCLE-18(2), NEW DE LHI DATED 27 TH JANUARY, 2015 FOR ASSESSMENT YEAR 2010-11; AND, ITA NO.1877/DEL/2015 IS AN APPEAL FILED BY NTT DATA GLO BAL DELIVERY SERVICES PVT.LTD. ARISING FROM AN ASSESSMENT MADE B Y THE DCIT, CIRCLE- 18(2), NEW DELHI DATED 27 TH JANUARY, 2015 FOR ASSESSMENT YEAR 2010- 11. 2. AT THE TIME OF HEARING, THE LEARNED REPRESENTATI VES OF THE ASSESSEE POINTED OUT THAT THE GROUNDS RAISED IN THE RESPECTIVE APPEALS ARE LIABLE TO BE DISPOSED OF EITHER IN THE LIGHT OF THE RESOLUTION OF THE SAME UNDER MUTUAL AGREEMENT PROCEDURE (MAP) BETWEEN THE COMPETENT AUTHORITIES OF INDIA AND US AND/OR IN VIE W OF THE FACT THAT THE ASSESSEE IS OPTING TO SETTLE THE DISPUTE UNDER VIVAD SE VISHWAS ACT, 2020 SCHEME. LEARNED SENIOR DR APPEARING FOR THE REVENUE HAS NOT DISPUTED THE AFORESAID POSITION SOUGHT TO BE CA NVASSED BY THE LEARNED REPRESENTATIVES. 3. IN ORDER TO IMPART COMPLETENESS TO THE ORDER, WE PROCEED TO DISPOSE OF THE CAPTIONED APPEALS AS UNDER. 4. INSOFAR AS ITA NO.1876/DEL/2015 IS CONCERNED, TH E GROUNDS OF APPEAL AS REVISED/MODIFIED READ AS UNDER :- (I) TRANSFER PRICING ADJUSTMENT MADE TO THE TRANSA CTIONS ENTERED WITH ASSOCIATED ENTERPRISES (AES) IN UNIT ED STATES (US) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, ITA NOS.1876 & 1877/DEL/2015 3 1. THE LEARNED AO ERRED IN COMPLETING THE ASSESSMEN T PROCEEDINGS BY ADMITTEDLY NOT GIVING EFFECT TO THE DIRECTIONS OF THE HONBLE DRP UNDER SECTION 144C(5) OF THE ACT AND THEREBY VIOLATING THE PROVISIONS OF SECTION 144C(13) OF THE ACT. SINCE THE IMPUGNED ORDER DOES NOT TAKE INTO ACCOUNT ALL THE DIRECTIONS OF THE HONBLE DRP, THE SAME IS BAD IN LAW AND VOID AB INITIO. 2. THE LEARNED AO/TRANSFER PRICING OFFICER (TPO) ERRED IN MAKING AN ADDITION OF INR 10,90,63,748 TO THE TO TAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE SOFTWARE DEVELOPMENT SERV ICES TRANSACTION ENTERED BY THE APPELLANT WITH ITS AES I N US; 3. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH PROVISIONS OF THE INCO ME-TAX ACT, 1961 (THE ACT) READ WITH THE INCOME-TAX RULE S, 1962 (THE RULES), AND MODIFYING THE SAME FOR DETERMINA TION OF ARMS LENGTH PRICES (ALP) OF THE IMPUGNED TRANSAC TION TO HOLD THAT THE SAME IS NOT AT ARMS LENGTH. 4. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y DETERMINING THE ARMS LENGTH MARGIN/PRICE USING ONL Y FY 2009-10 DATA, WHICH WAS NOT AVAILABLE TO THE APPELL ANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOC UMENTAL REQUIREMENTS; 5. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y REJECTING THE SUPPLEMENTARY/ALTERNATE ECONOMIC ANAL YSIS USING INTERNAL TNMM AS SUBMITTED BY THE APPELLANT. 6. THE LEARNED AO/TPO ERRED IN REJECTING CERTAIN COMPARABLE BY APPLYING THE FOLLOWING QUANTITATIVE A ND QUALITATIVE FILTERS : (A) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT APPLYING THE UPPER TURNOVER FILTER AS A COMPARABILI TY CRITERION; (B) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E . COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 3 1 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PER IOD OTHER THAN 12 MONTHS); ITA NOS.1876 & 1877/DEL/2015 4 (C) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT ON ACCOUNT OF SHOWING DIMINISHING REVENUE S TREND; (D) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EMPLOYEE COST GREATER THAN 25 PERC ENT OF TOTAL COST AS A COMPARABILITY CRITERION; (E) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EXPORT EARNINGS LESS THAN 75 PERCE NT OF OPERATING REVENUES AS A COMPARABILITY CRITERION; 7. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y ACCEPTING/REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA. 8. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y COMMITTING COMPUTATIONAL ERRORS IN THE IMPUGNED TP ORDER; 9. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y NOT MAKING SUITABLE ADJUSTMENTS ON ACCOUNT OF DIFFERENC ES IN THE RISK PROFILE OF THE APPELLANT VIS-A-VIS THE COM PARABLES, WHILE CONDUCTING COMPARABILITY ANALYSIS; 10. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY COMPUTING THE ARMS LENGTH PRICE WITHOUT GIVING BEN EFIT OF +/- 5 PERCENT UNDER THE PROVISO TO SECTION 92C OF T HE ACT; (II) TRANSFER PRICING ADJUSTMENT MADE TO THE TRANSA CTIONS ENTERED WITH NON-US AES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 11. THE LEARNED AO ERRED IN COMPLETING THE ASSESSME NT PROCEEDINGS BY ADMITTEDLY NOT GIVING EFFECT TO THE DIRECTIONS OF THE HONBLE DRP UNDER SECTION 144C(5) OF THE ACT AND THEREBY VIOLATING THE PROVISIONS OF SECTION 144C(13) THE ACT. SINCE THE IMPUGNED ORDER DOES NO T TAKE INTO ACCOUNT ALL THE DIRECTIONS OF THE HONBLE DRP, THE SAME IS BAD IN LAW AND VOID AB INITIO. 12. THE LEARNED AO/TRANSFER PRICING OFFICER (TPO) ERRED IN MAKING AN ADDITION OF INR 1,53,38,839 TO THE TOT AL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ITA NOS.1876 & 1877/DEL/2015 5 ARMS LENGTH PRICE OF THE SOFTWARE DEVELOPMENT SERV ICES TRANSACTION ENTERED BY THE APPELLANT WITH ITS NON-U S ASSOCIATED ENTERPRISES; 13. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH PROVISIONS OF THE INCO ME-TAX ACT, 1961 (THE ACT) READ WITH THE INCOME-TAX RULE S, 1962 (THE RULES), AND MODIFYING THE SAME FOR DETERMINA TION OF ARMS LENGTH PRICES (ALP) OF THE IMPUGNED TRANSAC TION TO HOLD THAT THE SAME IS NOT AT ARMS LENGTH. 14. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY DETERMINING THE ARMS LENGTH MARGIN/PRICE USING ONL Y FY 2009-10 DATA, WHICH WAS NOT AVAILABLE TO THE APPELL ANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; 15. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING THE SUPPLEMENTARY/ALTERNATE ECONOMIC ANAL YSIS USING INTERNAL TNMM AS SUBMITTED BY THE APPELLANT 16. THE LEARNED AO/TPO ERRED IN REJECTING CERTAIN COMPARABLE COMPANIES BY APPLYING THE FOLLOWING QUANTITATIVE AND QUALITATIVE FILTERS: (A) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT APPLYING THE UPPER TURNOVER FILTER AS A COMPARABILI TY CRITERION; (B) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E . COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 3 1 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PER IOD OTHER THAN 12 MONTHS); (C) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT ON ACCOUNT OF SHOWING DIMINISHING REVENUE S TREND; (D) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EMPLOYEE COST GREATER THAN 25 PERC ENT OF TOTAL COST AS A COMPARABILITY CRITERION; ITA NOS.1876 & 1877/DEL/2015 6 (E) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EXPORT EARNINGS LESS THAN 75 PERCE NT OF OPERATING REVENUES AS A COMPARABILITY CRITERION; 17. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY ACCEPTING/REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA. 18. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY COMMITTING COMPUTATIONAL ERRORS IN THE IMPUGNED TP ORDER; 19. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT MAKING SUITABLE ADJUSTMENTS ON ACCOUNT OF DIFFERENC ES IN THE RISK PROFILE OF THE APPELLANT VIS-A-VIS THE COM PARABLES, WHILE CONDUCTING COMPARABILITY ANALYSIS; 20. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY COMPUTING THE ARMS LENGTH PRICE WITHOUT GIVING BEN EFIT OF +/- 5 PERCENT UNDER THE PROVISO TO SECTION 92C OF T HE ACT; (III) CORPORATE TAX AND OTHER GROUNDS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 21. THE LEARNED AO HAS ERRED, IN LAW AND FACTS, IN DETERMINING THE TOTAL INCOME OF THE APPELLANT AT IN R 32,57,31,280 AND THE TOTAL TAX AND INTEREST PAYABLE (AS REDUCED BY THE TAX DEDUCTED AT SOURCE AND ADVANCE T AX) BY THE APPELLANT AT INR 6,70,62,860. 22. THE LEARNED AO HAS ERRED IN LAW AND FACTS, IN N OT GRANTING FULL CREDIT IN RESPECT OF TDS AND ADVANCE TAX CLAIMED BY THE APPELLANT; 23. THE LEARNED AO HAS ERRED IN LEVYING INTEREST OF INR 2,46,17,984 UNDER SECTION 234B OF THE ACT. 5. IT HAS BEEN EXPLAINED BEFORE US THAT INSOFAR AS THE DISPUTE MANIFESTED IN GROUND OF APPEAL NOS.1 TO 10 RELATING TO THE TRANSFER PRICING ADJUSTMENT ENTERED WITH ASSOCIATED ENTERPRI SES IN USA IS CONCERNED, THE SAME HAS BEEN RESOLVED IN TERMS OF T HE MAP PROCEEDINGS AND, THEREFORE, THE SAID GROUNDS MAY BE ALLOWED TO BE ITA NOS.1876 & 1877/DEL/2015 7 WITHDRAWN. IN VIEW OF THE AFORESAID SUBMISSION, TH E SAID GROUNDS OF APPEAL NOS.1 TO 10 ARE DISMISSED AS WITHDRAWN. 6. INSOFAR AS GROUND NOS.11 TO 20 RELATING TO TRANS FER PRICING ADJUSTMENT MADE TO THE TRANSACTIONS ENTERED WITH NO N-USA ENTITIES; GROUND NOS.21 TO 23 RELATING TO SHORT GRANT OF CRED IT FOR TDS/ADVANCE TAX ARE CONCERNED, THE SAY OF THE LEARNED REPRESENT ATIVES IS THAT THE ASSESSEE IS CONTEMPLATING TO SETTLE THE DISPUTE UND ER THE DIRECT TAX VIVAD SE VISHWAS ACT, 2020. 7. IN VIEW OF THE SUBMISSIONS MADE, THE APPEAL IN I TA NO.1876/DEL/2015 IS CONSIGNED TO RECORDS AND TREATE D AS DISMISSED. 8. HOWEVER, THE AFORESAID IS SUBJECT TO A CAVEAT TH AT IN CASE THE DISPUTE RELATING TO TAX ARREARS FOR THE CAPTIONED A SSESSMENT YEAR IS NOT ULTIMATELY RESOLVED IN TERMS OF THE AFORESTATED ACT , THE APPELLANT (I.E., THE ASSESSEE) SHALL BE AT LIBERTY TO APPROACH THE T RIBUNAL FOR REINSTITUTION OF THE APPEAL AND THE TRIBUNAL SHALL CONSIDER SUCH APPLICATION APPROPRIATELY AS PER LAW. THE RESPONDEN T (I.E., THE REVENUE) HAS NO OBJECTION WITH REGARD TO THE AFORES AID CAVEAT. 9. ACCORDINGLY, THE APPEAL IN ITA NO.1876/DEL/2015 IS DISMISSED. 10. INSOFAR AS ITA NO.1877/DEL/2015 IS CONCERNED, T HE GROUNDS OF APPEAL AS REVISED/MODIFIED READ AS UNDER :- (I) TRANSFER PRICING ADJUSTMENT MADE TO THE TRANSA CTIONS ENTERED WITH ASSOCIATED ENTERPRISES (AES) IN UNIT ED STATES (US) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 1. THE LEARNED AO ERRED IN COMPLETING THE ASSESSMEN T PROCEEDINGS BY ADMITTEDLY NOT GIVING EFFECT TO THE ITA NOS.1876 & 1877/DEL/2015 8 DIRECTIONS OF THE HONBLE DRP UNDER SECTION 144C(5) OF THE ACT AND THEREBY VIOLATING THE PROVISIONS OF SECTION 144C(13) OF THE ACT. SINCE THE IMPUGNED ORDER DOES NOT TAKE INTO ACCOUNT ALL THE DIRECTIONS OF THE HONBLE DRP, THE SAME IS BAD IN LAW AND VOID AB INITIO. 2. THE LEARNED AO/TRANSFER PRICING OFFICER (TPO) ERRED IN MAKING AN ADDITION OF INR 46,99,24,625 TO THE TO TAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE SOFTWARE DEVELOPMENT SERV ICES TRANSACTION ENTERED BY THE APPELLANT WITH ITS AES I N US; 3. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH PROVISIONS OF THE INCO ME-TAX ACT, 1961 (THE ACT) READ WITH THE INCOME-TAX RULE S, 1962 (THE RULES), AND MODIFYING THE SAME FOR DETERMINA TION OF ARMS LENGTH PRICES (ALP) OF THE IMPUGNED TRANSAC TION TO HOLD THAT THE SAME IS NOT AT ARMS LENGTH. 4. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y DETERMINING THE ARMS LENGTH MARGIN/PRICE USING ONL Y FY 2009-10 DATA WHICH WAS NOT AVAILABLE TO THE APPELLA NT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; 6. THE LEARNED AO/TPO ERRED IN REJECTING CERTAIN COMPARABLE BY APPLYING THE FOLLOWING QUANTITATIVE A ND QUALITATIVE FILTERS : (A) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT APPLYING THE UPPER TURNOVER FILTER AS A COMPARABILI TY CRITERION; (B) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E . COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 3 1 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PER IOD OTHER THAN 12 MONTHS); (C) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT ON ACCOUNT OF SHOWING DIMINISHING REVENUE S TREND; (D) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE ITA NOS.1876 & 1877/DEL/2015 9 APPELLANT USING EMPLOYEE COST GREATER THAN 25 PERC ENT OF TOTAL COST AS A COMPARABILITY CRITERION; (E) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EXPORT EARNINGS LESS THAN 75 PERCE NT OF OPERATING REVENUES AS A COMPARABILITY CRITERION; 6. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y ACCEPTING/REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA. 7. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y NOT CONSIDERING GAINS/LOSSES ARISING OUT OF FOREIGN EXC HANGE FLUCTUATIONS WHILE COMPUTING THE OPERATING MARGINS OF THE APPELLANT AS WELL AS COMPARABLE COMPANIES. 8. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y NOT MAKING SUITABLE ADJUSTMENTS ON ACCOUNT OF DIFFERENC ES IN THE RISK PROFILE OF THE APPELLANT VIS-A-VIS THE COM PARABLES, WHILE CONDUCTING COMPARABILITY ANALYSIS; 9. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, B Y COMPUTING THE ARMS LENGTH PRICE WITHOUT GIVING BEN EFIT OF +/- 5 PERCENT UNDER THE PROVISO TO SECTION 92C OF T HE ACT; (II) TRANSFER PRICING ADJUSTMENT MADE TO THE TRANSA CTIONS ENTERED WITH NON-US AES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 10. THE LEARNED AO ERRED IN COMPLETING THE ASSESSME NT PROCEEDINGS BY ADMITTEDLY NOT GIVING EFFECT TO THE DIRECTIONS OF THE HONBLE DRP UNDER SECTION 144C(5) OF THE ACT AND THEREBY VIOLATING THE PROVISIONS OF SECTION 144C(13) THE ACT. SINCE THE IMPUGNED ORDER DOES NO T TAKE INTO ACCOUNT ALL THE DIRECTIONS OF THE HONBLE DRP, THE SAME IS BAD IN LAW AND VOID AB INITIO. 11. THE LEARNED AO/TRANSFER PRICING OFFICER (TPO) ERRED IN MAKING AN ADDITION OF INR 11,91,74,817 TO THE TO TAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE SOFTWARE DEVELOPMENT SERV ICES TRANSACTION ENTERED BY THE APPELLANT WITH ITS NON-U S AES; 12. THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE ITA NOS.1876 & 1877/DEL/2015 10 APPELLANT IN ACCORDANCE WITH PROVISIONS OF THE INCO ME-TAX ACT, 1961 (THE ACT) READ WITH THE INCOME-TAX RULE S, 1962 (THE RULES), AND MODIFYING THE SAME FOR DETERMINA TION OF ARMS LENGTH PRICES (ALP) OF THE IMPUGNED TRANSAC TION TO HOLD THAT THE SAME IS NOT AT ARMS LENGTH. 13. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY DETERMINING THE ARMS LENGTH MARGIN/PRICE USING ONL Y FY 2009-10 DATA, WHICH WAS NOT AVAILABLE TO THE APPELL ANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; 14. THE LEARNED AO/TPO ERRED IN REJECTING CERTAIN COMPARABLE COMPANIES BY APPLYING THE FOLLOWING QUANTITATIVE AND QUALITATIVE FILTERS: (A) THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES USING TURNO VER LESS THAN INR 5 CRORES AS A COMPARABILITY CRITERION ; (B) THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E . COMPANIES HAVING ACCOUNTING YEAR OTHER THAN MARCH 3 1 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PER IOD OTHER THAN 12 MONTHS); (C) THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT ON ACCOUNT OF SHOWING DIMINISHING REVENUE S TREND; (D) THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EMPLOYEE COST GREATER THAN 25 PERC ENT OF TOTAL COST AS A COMPARABILITY CRITERION; (E) THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED B Y THE APPELLANT USING EXPORT EARNINGS LESS THAN 75 PERCE NT OF OPERATING REVENUES AS A COMPARABILITY CRITERION; 15. THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY ACCEPTING/REJECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA. 16. THE LEARNED TPO/AO ERRED, IN LAW AND IN FACTS, BY NOT CONSIDERING GAINS/LOSSES ARISING OUT OF FOREIGN EXC HANGE ITA NOS.1876 & 1877/DEL/2015 11 FLUCTUATIONS WHILE COMPUTING THE OPERATING MARGINS OF THE APPELLANT AS WELL AS COMPARABLE COMPANIES. 17. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY NOT MAKING SUITABLE ADJUSTMENTS ON ACCOUNT OF DIFFERENC ES IN THE RISK PROFILE OF THE APPELLANT VIS-A-VIS THE COM PARABLES, WHILE CONDUCTING COMPARABILITY ANALYSIS; 18. THE LEARNED AO/TPO ERRED, IN LAW AND IN FACTS, BY COMPUTING THE ARMS LENGTH PRICE WITHOUT GIVING BEN EFIT OF +/- 5 PERCENT UNDER THE PROVISO TO SECTION 92C OF T HE ACT; (III) CORPORATE TAX AND OTHER GROUNDS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 19. THE LEARNED AO HAS ERRED IN LAW AND FACTS BY NO T GRANTING DEDUCTION UNDER SECTION 10A/10AA OF THE AC T IN RESPECT OF INTEREST INCOME AND MISCELLANEOUS INCOME AMOUNTING TO INR 29,31,95,455 AND INR 30,01,004 RESPECTIVELY, WHICH FORMS PART OF THE BUSINESS INCO ME OF THE APPELLANT. 20. THE LEARNED AO HAS ERRED IN LAW AND FACTS, IN N OT GRANTING FULL CREDIT IN RESPECT OF TDS AND ADVANCE TAX CLAIMED BY THE APPELLANT; 21. THE LEARNED AO HAS ERRED, IN LAW AND FACTS, IN DETERMINING THE TOTAL INCOME OF THE APPELLANT AT IN R 118,06,06,788 AND THE TOTAL TAX AND INTEREST PAYABL E (AS REDUCED BY THE TAX DEDUCTED AT SOURCE AND ADVANCE T AX) BY THE APPELLANT AT INR 40,24,50,570 22. THE LEARNED AO HAS ERRED IN LEVYING INTEREST OF INR 10,87,65,428 UNDER SECTION 234 OF THE ACT, INR 9,25 ,620 UNDER SECTION 234C OF THE ACT, INR 1,01,14,656 UNDE R SECTION 234D OF THE ACT AND INR 70,06,190 UNDER SEC TION 244A OF THE ACT. 11. IT HAS BEEN EXPLAINED BEFORE US THAT THE DISPUT E MANIFESTED IN GROUND OF APPEAL NOS.1 TO 9 RELATING TO THE TRANSFE R PRICING ADJUSTMENT ENTERED WITH ASSOCIATED ENTERPRISES IN USA HAS BEEN RESOLVED IN TERMS OF THE MAP PROCEEDINGS AND, THEREFORE, THE SAID GRO UNDS MAY BE ITA NOS.1876 & 1877/DEL/2015 12 ALLOWED TO BE WITHDRAWN. IN VIEW OF THE AFORESAID SUBMISSION, THE SAID GROUNDS OF APPEAL NOS.1 TO 9 ARE DISMISSED AS WITHD RAWN. 12. INSOFAR AS GROUND NOS.10 TO 18 RELATING TO TRAN SFER PRICING ADJUSTMENT MADE TO THE TRANSACTIONS ENTERED WITH NO N-USA ENTITIES; GROUND NOS.19 RELATING TO NON-GRANT OF DEDUCTION UN DER SECTION 10A/10AA IN RESPECT OF INTEREST INCOME; AND GROUND NOS.20 TO 22 RELATING TO SHORT GRANT OF CREDIT FOR TDS/ADVANCE T AX AND DETERMINATION OF TOTAL INCOME AND INTEREST ARE CONCERNED, THE SAY OF THE LEARNED REPRESENTATIVES IS THAT THE ASSESSEE IS CONTEMPLATI NG TO SETTLE THE DISPUTE UNDER THE DIRECT TAX VIVAD SE VISHWAS ACT, 2020. 13. IN VIEW OF THE SUBMISSIONS MADE, THE APPEAL IN ITA NO.1877/DEL/2015 IS CONSIGNED TO RECORDS AND TREATE D AS DISMISSED. 14. HOWEVER, THE AFORESAID IS SUBJECT TO A CAVEAT T HAT IN CASE THE DISPUTE RELATING TO TAX ARREARS FOR THE CAPTIONED A SSESSMENT YEAR IS NOT ULTIMATELY RESOLVED IN TERMS OF THE AFORESTATED ACT , THE APPELLANT (I.E., THE ASSESSEE) SHALL BE AT LIBERTY TO APPROACH THE T RIBUNAL FOR REINSTITUTION OF THE APPEAL AND THE TRIBUNAL SHALL CONSIDER SUCH APPLICATION APPROPRIATELY AS PER LAW. THE RESPONDEN T (I.E., THE REVENUE) HAS NO OBJECTION WITH REGARD TO THE AFORES AID CAVEAT. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ABOVE DECISION WAS ANNOUNCED IN THE PRESENCE OF BOT H THE SIDES ON CONCLUSION OF VIRTUAL HEARING ON 16 TH NOVEMBER, 2020. SD/- SD/- ( (( ( AMIT SHUKLA AMIT SHUKLA AMIT SHUKLA AMIT SHUKLA ) )) ) (G.S. PANNU (G.S. PANNU (G.S. PANNU (G.S. PANNU ) )) ) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. ITA NOS.1876 & 1877/DEL/2015 13 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR