M/s Repucom Media Analysis India Private Limited, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 196/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1947 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Bad and doubtful debts
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER IT(TP)A NO.196/BANG/2017 ASSESSMENT YEAR : 2012-13 M/S NIELSEN SPORTS INDIA PVT. LTD., (FORMERLY KNOWN AS REPUCOM MEDIA ANALYSIS INDIA PVT. LTD., 1 ST FLOOR, CRESCENT 4, PRESTIGE SHANTINIKETAN, WHITEFILED, BENGALURU-560 048. PAN AAECR 0400 L VS. THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE-5(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SHARATH RAO, C.A RESPONDENT BY : SHRI PRADEEP KUMAR, CIT DATE OF HEARING : 26.06.2019 DATE OF PRONOUNCEMENT : 28.06.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESS HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER PASSED BY THE AO FOR ASST. YEAR 2012-13 U/S 1 43(3) R.W.S 144C OF THE ACT IN PURSUANCE OF DIRECTIONS GIVEN BY LD DISPUTE RESOLUTION PANEL (DRP). THE ISSUES CONTESTED IN TH IS APPEAL RELATE TO TP ADJUSTMENTS MADE BY THE TPO AND DISALLOWANCE OF BAD DEBTS CLAIMED BY THE ASSESSEE. IT(TP)A NO.196/BANG/2017 PAGE 2 OF 7 2. AT THE TIME OF HEARING, THE ASSESSEE DID NOT PRE SS GROUND NO.14 RELATING TO DISALLOWANCE OF BAD DEBTS DUE TO SMALLNESS OF THE AMOUNT. ACCORDINGLY THE SAID GROUND IS DISMISSED A S NOT PRESSED. 3. GROUND NOS.15 AND 16 RELATES TO INTEREST CHARGED U/S 234B AND 234C OF THE INCOME-TAX ACT 1961 (THE ACT). B OTH ARE CONSEQUENTIAL IN NATURE AND HENCE THEY DO NOT REQUI RE ANY ADJUDICATION. 4. THE OTHER GROUNDS RELATE TO TRANSFER PRICING ADJ USTMENT. 5. THE ASSESSEE IS A PART OF COMMUNICATION GROUP OF COMPANIES. IT IS ENGAGED IN THE BUSINESS OF RENDERING MEDIA AN ALYSIS SERVICES TO ITS ASSOCIATES ENTERPRISES. THE COMMUNICATION GROU P IS ASSOCIATED WITH TELEVISION AND PRINT MEDIA ADVERTISEMENTS AND ACCORDINGLY INVOLVED IN ALL TYPES OF MARKETING, ADVERTISEMENTS, USERS RATINGS, PRINT MEDIA USER READERSHIP SURVEYS AND OTHER THING S TO MAKE DECISION ON THE ALLOCATION OF MARKETING LEVERS, LIK E BRANDED CONTENTS AND SPONSORSHIP ETC. 6. THE ASSESSEE HAS PROVIDED ITES ACTIVITIES TO ITS ASSOCIATED ENTERPRISE. IT HAS ADOPTED TNMM AS MOST APPROPRIAT E METHOD FOR BENCH MARKING THE INCOME RECEIVED FROM ITS AE. THE PROFIT LEVEL INDICATOR (PLI) WAS TAKEN AS OP/OC. THE ASSESSEE D ECLARED PLI OF 20.14%. THE TPO SELECTED 10 COMPARABLES AS GIVEN B ELOW:- IT(TP)A NO.196/BANG/2017 PAGE 3 OF 7 THE AVERAGE PLI OF COMPARABLE COMPANIES WORKED OUT TO 28.11%. THE TPO GAVE REDUCTION OF 0.27% TOWARDS WORKING CA PITAL ADJUSTMENT AND ACCORDINGLY ARRIVED AT ADJUSTED MARG IN OF 27.84%. ACCORDINGLY HE MADE ADJUSTMENT OF 130.98 LAKHS. TH E ASSESSEE FIELD OBJECTIONS BEFORE LD DRP, WHICH EXCLUDED 2 CO MPARABLES VIZ., ACCENTIA TECHNOLOGIES LTD., AND INFORMED TECHNOLOGI ES INDIA LTD., AND SUSTAINED REMAINING 8 COMPARABLES. THE SAME RE SULTED IN REDUCTION OF T.P ADJUSTMENT OF RS.166.27 LAKHS AND THE AO PASSED THE ASSESSMENT ORDER ACCORDINGLY BY MAKING ADDITION OF 166.27 LAKHS TOWARDS TRANSFER PRICING ADJUSTMENT. 7. BEFORE US, THE LD AR SOUGHT EXCLUSION OF 2 COMPA NIES VIZ., M/S INFOSYS BPO LTD., AND TCS-E-SERVE LTD., ON THE GROUND THAT THE TURNOVER OF BOTH THESE COMPANIES ARE MORE THAN 200 CORES WHILE THE TURNOVER OF THE ASSESSEE COMPANY WAS ONLY 20.23 CRORES. BY PLACING RELIANCE RENDERED IN THE CASE OF NORTHER N OPERATING SERVICES IT(TP)A NO.101/BANG/2016, MORE PARTICULARL Y PARAGRAPH IT(TP)A NO.196/BANG/2017 PAGE 4 OF 7 18 OF THE ORDER THEREOF, THE LD AR SUBMITTED THAT H IGH TURNOVER COMPANIES CANNOT BE COMPARED WITH THE LOW TURNOVER COMPANIES. 8. THE LD AR FURTHER SUBMITTED THAT THE LD DRP HAS CONFIRMED INCLUSION OF UNIVERSAL PRINT SYSTEMS LTD., AND BNR UDYOG LTD. THE COORDINATE BENCH IN THE CASE OF MOBILITY INFOTE CH INDIA PVT. LTD., (2018) 97 TAXMANN.COM 2 HAS RESTORED BOTH THE SE COMPARABLE COMPANIES TO THE FILE OF AO/TPO FOR EXAMINING THE S AME AFRESH BY DULY CONSIDERING THE CONTENTIONS OF THE COMPANY. 9. THE LD DR ON THE CONTRARY SUPPORTED THE ORDER PA SSED BY THE AO. 10. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. ADMITTEDLY THE TURNOVER OF THE ASSESSEE COMPANY IS 20.43 CRORES FOR THE YEAR UNDER CONSIDER ATION. THE TURNOVER OF INFOSYS BPO LTD., FOR THE YEAR UNDER CO NSIDERATION WAS 1312.41 CRORES AND THE TURNOVER OF TCS-E-SERVE LTD ., WAS 1578.40 CRORES. THE CO-ORDINATE BENCH IN THE CASE OF NORTH ERN OPERATING SERVICES (SUPRA) HAS HELD THAT THE DECISION RENDERE D IN THE CASE OF GENISYS INTEGRATING SYSTEMS IN IT(TP)A NO.1231/BANG /2010 IS GOOD LAW. IN THE CASE OF GENISYS INTEGRATING SYSTEMS (S UPRA) A GUIDELINE IN THE MATTER OF TURNOVER FILTER WAS SUGGESTED AND THE CATEGORIZATION OF SOFTWARE COMPANIES IN THE DUN AND BRAD STREET ST UDY TO BE ADOPTED AS THE METHOD OF CLASSIFICATION BY SIZE. A CCORDING TO THIS STUDY, 3 CATEGORIES OF FIRMS ARE IDENTIFIED I.E SMA LL WITH TURNOVER LESS THAN 200 CORES, MEDIUM WITH TURNOVER OF 200 TO 2000 CRORES AND LARGE WITH TURNOVER GREATER THAN 2000 CRORES. ACCORDINGLY IT IT(TP)A NO.196/BANG/2017 PAGE 5 OF 7 WAS HELD THAT SMALL COMPANIES CANNOT BE COMPARED WI TH LARGE COMPANIES. ACCORDINGLY, THE ASSESSEE HEREIN BEING A SMALL COMPANY CANNOT BE COMPARED WITH LARGE COMPANIES. A CCORDINGLY WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE AN D DIRECT THE AO TO EXCLUDE BOTH THE COMPANIES ON THE BASIS OF TURNO VER CRITERIA. 11. WITH RESPECT TO UNIVERSAL PRINT SYSTEMS LTD., AND BNR UDYOG LTD., WE NOTICED THAT THE COORDINATE BENCH HAS REST ORED BOTH THE COMPARABLES TO THE FILE OF AO/TPO IN THE CASE OF MO BILITY INFOTECH INDIA PVT. LTD. (SUPRA) TO CONSIDER THE OBJECTIONS OF THE ASSESSEE WITH REGARD TO BOTH THE COMPANIES. WITH REGARD TO UNIVERSAL PRINT SYSTEMS LTD (SEG. BPO), THE ASSESSEE HAS CONTENDED IN THE ABOVE SAID CASE THAT IT IS FUNCTIONALLY DIFFERENT AND IT FAILS ON RPT FILTER ALSO. WITH REGARD TO BNR UDYOG LTD (SEG MEDICAL TRANSCRIPTION), THE ASSESSEE HAS CONTENDED IN THE ABOVE SAID CASE T HAT IT IS FUNCTIONALLY DIFFERENT, FAILS ON RPT FILTER AND ERR OR IN MARGIN COMPUTATION. HENCE THE CO-ORDINATE BENCH HAS RESTO RED BOTH THE COMPARABLES IN THE CASE OF MOBILITY INFOTECH INDIA P LTD TO THE FILE OF AO/TPO AND FOR THAT PURPOSE, THE CO-ORDINATE BENCH HAS TAKEN SUPPORT OF DECISIONS RENDERED IN THE CASE OF CGI IN FORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD (2018)(9 4 TAXMANN.COM 97 (BANG. TRIB) AND INDEGENE P LTD (201 7)(85 TAXMANN.COM 60)(BANG.). 12. SINCE THE FACTS ARE IDENTICAL IN THE INSTANT CASE ALSO, FOLLOWING THE DECISION RENDERED IN THE CASE OF MOBILITY INFOT ECH INDIA P LTD (SUPRA), WE RESTORE BOTH THE COMPARABLES TO THE FI LE OF AO/TPO FOR IT(TP)A NO.196/BANG/2017 PAGE 6 OF 7 EXAMINING THEM AFRESH BY DULY CONSIDERING THE OBJEC TIONS AND EXPLANATIONS OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2019. SD/ - (N.V VASUDEVAN) VICE PRESIDENT SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 28 TH JUNE, 2019. /VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3 . THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER A SST. REGISTRAR, ITAT, BANGALORE. IT(TP)A NO.196/BANG/2017 PAGE 7 OF 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..