Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 5863 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-08-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
05-08-2019
Assessment Year
2013-2014
Appeal Filed On
13-10-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.2393/PUN/2017 / ASSESSMENT YEAR : 2013-14 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED (FORMERLY KNOWN AS APPLIED MICRO CIRCUITS INDIA PRIVATE LIMITED), 601, 6 TH FLOOR, B-1, CEREBRUM IT PARK, KALYANI NAGAR, PUNE 411 006 PAN : AAHCA3503C VS. DCIT,CIRCLE-1(1), PUNE 411 037 (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 04-08-2017 PASSED BY THE ASSESS ING OFFICER (AO) U/S. 143(3) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT YE AR 2013-14. ASSESSEE BY SHRI M.P. LOHIA & SHRI RAJENDRA AGIWAL REVENUE BY SHRI O.A. MAO & SHRI NITIN S.K. PATIL DATE OF HEARING 07-08-2019 DATE OF PRONOUNCEMENT 08-08-2019 ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 2 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE INCLUSIO N OF ACROPETAL TECHNOLOGIES LTD. IN THE FINAL SET OF COMPARABLES FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION OF `PROVISION OF DESIGN ENGINEERING SERVICES. 3. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, A WHOLLY OWNED SUBSIDIARY OF AMCC, USA, WAS ESTABLISHED IN INDIA TO C ARRY ON THE BUSINESS OF COMPUTER SOFTWARE, MANUFACTURE/SUPPLY O F HARDWARE, ELECTRONIC COMPONENTS AND SYSTEMS, NETWORKING AND PROVIDING ADVICE, CONSULTATION AND SOFTWARE TECHNOLOGY SOLUTIONS INTER ALIA IN RELATION TO EMBEDDED OPERATING SYSTEM ETC. IT F ILED A RETURN DECLARING TOTAL INCOME OF RS.10,31,24,860/-. THE ASSESSEE ALSO FILED FORM 3CEB DECLARING FIVE INTERNATIONAL TRANSACTIONS. T HE AO REFERRED THE MATTER OF DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTIONS TO THE TRANSFER PRICING OFFICER (TPO). 4. THE GROUNDS CHALLENGING THE TRANSFER PRICING ADDITION ARE BASED ONLY ON THE FIRST INTERNATIONAL TRANSACTION OF PROVISION OF DESIGN ENGINEERING SERVICES WITH TRANSACTED VALUE OF RS.58,51,42,829/-. THE ASSESSEE APPLIED THE TRANSACTION AL NET MARGINAL METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR DEMONSTRATING THAT THIS TRANSACTION WAS AT ALP. THE ASSESSEE ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 3 COMPUTED ITS OWN PROFIT LEVEL INDICATOR (PLI) OF OP/OC AT 14.93% . FIVE COMPARABLES WERE INITIALLY CHOSEN OUT OF WHICH ACROPETAL TECHNOLOGIES LTD. (SEGMENT) WAS SHOWN AS `NOT APPLICABLE A ND ROLTA INDIA LTD. (CONSOLIDATED SEGMENTAL) WAS SHOWN AS `NOT COMPARABLE. THUS, IN EFFECT, THE ASSESSEE HAD THREE C OMPARABLES WITH AVERAGE PLI OF 2.50%. THIS IS HOW, THE ASSESSEE DEC LARED THAT THE INTERNATIONAL TRANSACTIONS WAS AT ALP. THE TPO DID NOT ACCE PT THE COMPARABLES CHOSEN BY THE ASSESSEE. HE SELECTED FIVE COMPANIES IN TOTAL INCLUDING TWO FROM THE ASSESSEES LIST AND COMPUTED THEIR AVERAGE ADJUSTED PLI AT 21.38%, WHICH WAS CONSIDERED AS A RMS LENGTH MARGIN. SUCH A LIST OF THE TPO INCLUDED ACROPETAL TECHNOLOGIES LTD. ON THIS BASIS, THE TRANSFER PRICING ADJUST MENT OF RS.3,28,51,132/- WAS RECOMMENDED BY THE TPO IN HIS ORDE R DATED 19.8.2016. CONSIDERING THE TRANSFER PRICING ADJUSTMENT RECOMMENDED BY THE TPO, THE AO PROPOSED THE TRANSFER PRIC ING ADDITION TO THIS EXTENT IN THE DRAFT ORDER DATED 04-11-2016. THEREAFTER, THE TPO ISSUED NOTICE U/S.154 ON 29-09-2016 O BSERVING THAT ACROPETAL TECHNOLOGIES LTD. WAS WRONGLY CONSIDERED AS COMPARABLE. HE PASSED RECTIFICATION ORDER ON 15-11-2016 E XCLUDING ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. IN SUCH ORDER, THE TPO COMPUTED AVERAGE ADJUSTED PLI OF THE REMAININ G ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 4 FOUR COMPARABLES AT 22.35%. ON THE BASIS OF THIS ARMS LENGTH MARGIN, HE INCREASED THE AMOUNT OF TRANSFER PRICING ADJUSTM ENT TO RS.3,77,89,790/-. THEREAFTER, THE AO ALSO ISSUED NOTICE U /S.154 DATED 08-12-2016 PROPOSING TO INCREASE THE AMOUNT OF TRAN SFER PRICING ADJUSTMENT TO RS. 3.77 CRORE IN ACCORDANCE WITH RE CTIFIED ORDER OF THE TPO. THE ASSESSEE CHALLENGED THE DRAFT ORDE R BEFORE THE DISPUTE RESOLUTION PANEL (DRP) ON CERTAIN ISSUES OTHER THAN THE EXCLUSION OF ACROPETAL TECHNOLOGIES LTD. THE DRP ISSUED DIRECTIONS DATED 31-05-2017 ON THE ISSUES WHICH WERE ASSAILE D BEFORE IT. WHILE GIVING EFFECT TO THE DIRECTIONS GIVEN BY THE DR P, THE TPO RECALCULATED THE AMOUNT OF TRANSFER PRICING ADJUSTM ENT AND IN THIS PROCESS HE INCLUDED ACROPETAL TECHNOLOGIES LTD. IN THE LIST OF COMPARABLES. THIS RESULTED INTO AN INCREASE IN THE AMOUNT OF TRANSFER PRICING ADJUSTMENT TO THE TUNE OF RS.4,37,46,728/-. THE AO IN THE FINAL IMPUGNED ASSESSMENT ORDER DATED 04-08-2017, COMPU TED TOTAL INCOME, INTER ALIA , BY MAKING THE TRANSFER PRICING ADDITION OF RS.4.37 CRORE IN ACCORDANCE WITH THE REVISED FIGURE SENT B Y THE TPO AFTER GIVING EFFECT TO THE DIRECTIONS GIVEN BY THE DRP. THE A SSESSEE IS AGGRIEVED BY THE INCLUSION OF ACROPETAL TECHNOLOGIES LTD. IN THE FINAL LIST OF COMPARABLES BY THE TPO WHILE GIVING EFFECT TO THE DIRECTION OF THE DRP. ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 5 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. THE TPO IN HIS ORIGINAL ORDER DATED 19-0 8-2016 INCLUDED ACROPETAL TECHNOLOGIES LTD. THEREAFTER, HE RECTIFIED HIS ORDER ON 15-11-2016, INTER ALIA, EXCLUDING ACROPETAL TECHNOLOGIES LTD. FROM THE SET OF COMPARABLES, A COPY OF WHICH HAS BE EN PLACED AT PAGE 183 ONWARDS OF THE PAPER BOOK. IN PARA 5 OF THIS ORDER, THE TPO ACKNOWLEDGED THE INCLUSION OF ACROPETAL TECHNOLOGIES LTD. IN HIS EARLIER ORDER. HOWEVER, IN PARA 6 HE OBSERVED THAT IT IS NOTED THAT THE PLI OF THE ACROPETAL TECHNOLOGIES LTD. IS TAKEN WRONGLY.. AS THIS OFFICE HAS ALSO APPLIED THE FILTER OF EXCEPTIONALLY HIGH/LOW PROFIT MAKING COMPANIES, THE SAID COMPANY COULD NOT BE CONSIDERED AS COMPARABLE. IN THE CALCULATION OF THE PROFIT MARGIN OF THE COMPARABLES, THE TPO, IN HIS RECTIFICATION O RDER, EXCLUDED ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARA BLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF PROVISION OF DESIGN ENGINEERING SERVICES. THE ASSESSEE RAISED OBJECTIO NS BEFORE THE DRP BUT DID NOT CONTEST THE EXCLUSION OF ACROPETAL TECHNOLOGIES LTD. THE DRP GAVE DIRECTIONS ACCORDINGLY AND D ID NOT TOUCH THE COMPARABILITY OR OTHERWISE OF THE ACROPETAL TECHNOLOGIES LTD. IT WAS, HOWEVER, WHEN THE DIRECTION OF TH E DRP CAME TO THE TPO FOR GIVING EFFECT, HE CHANGED HIS EARLIER S TAND AND ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 6 INCLUDED ACROPETAL TECHNOLOGIES LTD. IN THE FINAL SET OF COMPARABLES. IN PARA 4.1 OF HIS LETTER TO THE AO CALCULATING THE FRESH TRANSFER PRICING ADJUSTMENT AS PER THE DIRECTION OF THE DRP, A COPY OF WHICH IS AVAILABLE AT PAGE 272 ONWARDS OF THE PAPER BOO K, HE NOTED THAT IT WAS FOUND THAT THE ACTUAL PLI OF ACROPETAL TECHNOLOGIES LTD. OF DESIGN ENGINEERING SEGMENT, IS 71.41% .............. UNDER RECTIFICATION ORDER, THIS COMPANY WAS NOT CONSIDERED AS COMPARABLE BEING EXCEPTIONALLY HIGH PROFIT MAKING COMPANY. THEN HE RECORDS THE DIRECTION OF THE DRP IN P ARA 6 OF HIS LETTER IN WHICH THERE IS NO REFERENCE TO ACROPETAL TECHNOLO GIES LTD. IN PARA 7, HE RECORDS THAT: `IN RESPECT OF ACROPETA L TECHNOLOGIES LTD., WHICH WAS TAKEN AS COMPARABLE BY THE A SSESSEE AND WHICH WAS NOT CONSIDERED BY THE TPO UNDER SECTION 154 OF THE ACT, AS MENTIONED ABOVE, NO DIRECTIONS HAVE BEEN RECEIVED FROM THE DRP. . BUT, IN ALL OTHER CASES, THE DRP HAS REJECTED THIS FILTER OF THE TPO AND DIRECTED TO INCLUDE ALL THE COMPANIES WITHOUT ANY UPPER OR LOWER LIMIT OF PROFIT. HENCE, THIS COMPANY IS CONS IDERED AS THE VALID COMPARABLE. 6. FROM THE ABOVE NARRATION OF FACTS, IT IS CLEAR THAT THE TPO DID NOT CONSIDER ACROPETAL TECHNOLOGIES LTD. AS COMPARABLE IN H IS ORDER ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 7 PASSED U/S.154. THE ASSESSEE DID NOT ASSAIL THIS ISSUE BE FORE THE DRP, WHICH WAS ALSO NOT TINKERED BY THE DRP. HOWEVER, WH ILE GIVING EFFECT TO THE DIRECTION OF THE DRP, THE TPO AGAIN INCLUDED THIS COMPANY IN THE LIST OF COMPARABLE DESPITE NO SUCH DIREC TION FROM THE PANEL. THE AO ACCORDINGLY PASSED THE FINAL ORDER REVISING UPWARD THE AMOUNT OF TRANSFER PRICING ADDITION BY CONSIDERING ACROPETAL TECHNOLOGIES LTD. ALSO AS COMPARABLE. UNDER SUC H CIRCUMSTANCES, A QUESTION ARISES AS TO WHETHER THE ACTION OF THE AUTHORITIES BELOW IN CONSIDERING ACROPETAL TECHNOLOGIES LTD. AS COMPARABLE IS IN ACCORDANCE WITH LAW? 7. SECTION 144C OF THE ACT HAS MARGINAL NOTE REFERENCE TO DISPUTE RESOLUTION PANEL. SUB-SECTION (1) OF SECTION 144C PROVIDES THAT: THE ASSESSING OFFICER SHALL, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTANC E, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (H EREAFTER IN THIS SECTION REFERRED TO AS THE DRAFT ORDER) TO THE ELIGIBLE ASSESS EE IF HE PROPOSES TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBER, 20 09, ANY VARIATION IN THE INCOME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESSEE. SUB-SECTION (2) OF SECTION 144 C STATES THAT THE ASSESSEE SHALL EITHER FILE HIS ACCEPTANCE TO THE AO ON THE ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 8 VARIATIONS PROPOSED IN THE DRAFT ORDER OR FILE HIS OBJECTIONS, IF ANY, WITH THE DRP. SUB-SECTION (3) STATES THAT : `THE ASSESSING OFFICER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER, IF (A) THE ASSESSEE INTIMATES TO THE ASSESSING OFFICER THE ACC EPTANCE OF THE VARIATION; OR (B) NO OBJECTIONS ARE RECEIVED WITHIN THE PE RIOD SPECIFIED IN SUB-SECTION (2). A CONJOINT READING OF FIRST THRE E SUB- SECTIONS OF SECTION 144C DECIPHERS THAT THE DRAFT ORDER ATTAINS FINALITY, INTER ALIA, ON THE ASSESSEE ACCEPTING THE VARIATION AND THE ASSESSMENT HAS TO BE NECESSARILY COMPLETED ON THE BASIS OF THE DRAFT ORDER . IT MEANS THAT UNLESS THE ASSESSEE RAISES OBJECTION BEFORE THE DRP, THE AO IN THE ASSESSMENT ORDER HAS TO OBEY AND FOLLOW THE INCOME COMPUTATION IN HIS DRAFT ORDER. HE CANNOT ALTER ANY ASPECT OF THE DRAFT ORDER IN PASSING THE ASSESSMENT ORDER U/S 144 C(3). NOW, WE COME TO THE SECOND SCENARIO OF THE ASSESSEE AGGRIEVED BY THE DRAFT ORDER. IF THE ASSESSEE IS NOT SATISFIED WITH THE DRAFT ORDER, SUB- SECTION (5) COMES INTO PLAY, WHICH STIPULATES THAT THE DRP SHALL, IN A CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2) , ISSUE SUCH NECESSARY DIRECTIONS FOR THE GUIDANCE OF THE AO TO ENABLE HIM TO COMPLETE THE ASSESSMENT. SUB-SECTION (13) PROVIDES THAT : `UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SUB-SECTION (5), THE ASSESSING OFFICER SHALL, IN CONFORMITY WITH THE DIRECTIONS, COMPLETE .... THE ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 9 ASSESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . IT MEANS WHAT IS REQUIRED TO B E DONE BY THE AO AT THE STAGE OF COMPLETING THE ASSESSMENT UNDER SUB-S ECTION (13) IS TO FIRST PICK UP THE INCOME DETERMINATION UNDER THE DR AFT ORDER; THEN ASCERTAIN THE DIRECTIONS GIVEN BY THE DRP, WHICH U NDER SUB-SECTION (8) CAN BE FOR CONFIRMING, REDUCING OR ENHA NCING THE VARIATIONS BUT NOT RESTORING FOR FURTHER ENQUIRY; AND THEREAF TER GIVE EFFECT TO THE DIRECTIONS GIVEN BY THE DRP BY MODIFYING THE IN COME COMPUTATION AS PER THE DRAFT STRICTLY IN ACCORDANCE WITH THE D IRECTION OF THE DRP. THIS MANIFESTS THAT ONCE THE MATTER TRAVELS TO THE D RP, THE AO/TPO BECOME FUNCTUS OFFICIO EXCEPT TO THE EXTENT OF GIVING EFFECT TO THE DIRECTIONS OF THE DRP VIS--VIS THE INCOME COMPUTATION UNDER THE DRAFT ORDER. IT IS UP TO THE STAGE OF THE PASSIN G OF THE DRAFT ORDER THAT THE AO/TPO CAN EXAMINE ANY ISSUE FROM ANY ANGLE . BUT AFTER THE PASSING OF THE DRAFT ORDER, THERE CANNOT BE ANY SUO MOTU ADDITION TO OR SUBTRACTION FROM THE DRAFT ORDER, WHETHER THE ORDER IS PASSED UNDER SUB-SECTION (3) OR SUB-SECTION (13) EXCEPT IN THE LATTER SUB-SECTION, TO THE LIMITED EXTENT OF GIVING EFFECT TO THE DIRE CTION GIVEN BY THE DRP. IF THE CONTRARY IS PERMITTED, THE ASSESSEE WOULD LOSE THE FORUM OF THE DRP FOR REDRESSAL OF HIS GRIEVANCE, WHICH IS STATUTORILY IMPERMISSIBLE. ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 10 8. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS OBSERVED THAT THE TPO VIDE HIS RECTIFICATION ORDER EXCLUDED ACROPETAL TECHNOLOGIE S LTD. FROM THE LIST OF COMPARABLES. THE AO PASSED THE DRAF T ORDER ACCORDINGLY. THE ASSESSEE ACCEPTED THE EXCLUSION OF ACROP ETAL TECHNOLOGIES LTD. BUT ASSAILED THE DRAFT ORDER BEFORE THE D RP ON CERTAIN OTHER ISSUES. THE DRP GAVE CERTAIN DIRECTIONS BUT DID NOT DIRECT TO INCLUDE ACROPETAL TECHNOLOGIES LTD. IN THE LIST OF COMPARABLES EITHER SUO MOTU OR ON THE REQUEST OF THE ASSESSEE. ONCE THE POSITION WAS SO, THE EXCLUSION OF ACROPETAL TECHNOLOGIES L TD. ATTAINED FINALITY AS THE SAME DID NOT FIGURE IN THE DRAFT ORDER. THE AO/TPO, WHILE GIVING EFFECT TO THE DIRECTIONS OF THE DRP, WERE DEVOID OF ANY POWER TO AGAIN INCLUDE ACROPETAL TECHNOLOGIES LTD. IN THE LIST OF COMPARABLES FOR ENHANCING THE AMOUNT OF TRANSF ER PRICING ADJUSTMENT. HAVING HIMSELF EXCLUDED ACROPETAL TECHNOLOGIES LTD. UP TO THE STAGE OF PASSING THE DRAFT ORD ER, THE TPO CEASED TO EXERCISE ANY JURISDICTION TO RE-EXAMINE HIS EARLIE R VIEW AND INCLUDE IT IN THE LIST OF COMPARABLES AT THE TIME OF GIVI NG EFFECT TO THE DIRECTION OF THE DRP, WHEN IT WAS NOT A PART OF THE DIRECTION. UNDER SUCH CIRCUMSTANCES, WE DIRECT TO EXCLUDE ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES FOR BENCHMAR KING ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 11 THE INTERNATIONAL TRANSACTION OF PROVISION OF DESIGN ENGINEERING SERVICES. 9. THE ASSESSEE HAS ALSO ASSAILED THE INCLUSION OF ECLERX SERVICES LTD. IN THE FINAL SET OF COMPARABLES FOR BENCHMARKING THE S AME INTERNATIONAL TRANSACTION OF PROVISION OF DESIGN ENGINEERING SER VICES. THE FACTS APROPOS THIS ISSUE ARE THAT THE TPO PROPOSED TO INC LUDE THIS COMPANY IN THE LIST OF COMPARABLES, WHICH WAS OBJECTED TO BY THE ASSESSEE ON THE GROUND THAT IT WAS FUNCTIONALLY DIFFERENT. THE TPO OBSERVED RULE 10TA(G) OF THE INCOME-TAX RULES, 1962 (HEREINAFTER ALSO CALLED `THE RULES) GIVES THE DEFINITION OF `KNOWLEDGE PROCESS OUTSOURCING (KPO) AS, INTER ALIA, INCLUDING DATA ANALYTICS AND DESIGN ENGINEERING SERVICE, WHICH WAS THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY. ON FINDING ECLERX SERVICES LTD. ALSO DOING BUSINESS ACTIVITY, FALLING WITH THE DEF INITION OF `KPO UNDER THE SAID RULE, HE INCLUDED IT IN THE LIST OF COMPARABLES. THE ASSESSEE REMAINED UNSUCCESSFUL BEFOR E THE LD. DRP AS WELL. THIS IS HOW, THIS COMPANY CAME TO BE INCLUDED IN THE FINAL SET OF COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF PROVISION OF DESIGN ENGINEERING SERVICES, AGA INST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 12 10. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE TPO INCLUDED ECLERX SERVICES LTD. IN THE LIST OF COMPARABLES BY NOTING THAT RULE 10TA(G) TREATS THE AS SESSEES NATURE OF BUSINESS OF DESIGN ENGINEERING, AS A KPO SERVICE PROVIDER; AND SINCE ECLERX SERVICES LTD. WAS ALSO PROVIDING SOME KPO SERVICE, THE SAME WAS COMPARABLE. RULE 10TA IS A COM PONENT OF PART IIDB OF THE RULES WITH THE CAPTION `SAFE HARBOUR RULES FOR INTERNATIONAL TRANSACTIONS, WHICH WERE INSERTED BY THE I.T. (SIXTEENTH AMDT.) RULES, 2013 W.E.F. 18.9.2013. RULE 10TA IS A DEFINITION CLAUSE, WHICH, INTER ALIA , DEFINES `INFORMATION TECHNOLOGY ENABLED SERVICES UNDER CLAUSE (E) TO MEAN CERTAIN BUSINE SS PROCESS OUTSOURCING (BPO) SERVICES PROVIDED MAINLY WITH THE ASSISTANCE OR USE OF INFORMATION TECHNOLOGY, SUCH AS, BACK OFFICE OPERA TIONS, CALL CENTRE, DATA PROCESSING OR INSURANCE CLAIM PROCESSING. TH EN THERE IS A DEFINITION OF KNOWLEDGE PROCESS OUTSOURCING (KPO) IN CLAUSE (G), TO MEAN CERTAIN BUSINESS PROCESS OUTSOURCING (BPO) SERVICES PROVIDED MAINLY WITH THE ASSISTANCE OR USE OF INFORMATION TECHNOLOGY REQUIRING APPLICATION OF KNOWLEDGE AND ADVANCED ANALYTICAL AND TECHNICAL SKILLS, SUCH AS, GEOGRAPHIC INFORMATION SYSTEM, HUMAN RESOURCE SERVICES, BUSINESS ANALYTICS SERV ICES, FINANCIAL SERVICES OR ENGINEERING & DESIGN SERVICES. IN THIS REGARD, ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 13 IT IS OBSERVED THAT THESE DEFINITIONS ARE SIMPLY MEANT TO CLASSIF Y A PARTICULAR SERVICE UNDER THE BROADER CATEGORY OF ITES OR KPO SERVICE AND NOTHING MORE THAN THAT. IT DOES NOT MEAN THAT IF AN ASSESSEE IS RENDERING A PARTICULAR KPO SERVICE, SUCH AS, ENGINEERING AND DESIGN SERVICE, THEN ALL THE COMPANIES PROVIDING KPO SERV ICES, SUCH AS, GEOGRAPHIC INFORMATION SYSTEM OR HUMAN RESOUR CE SERVICES OR BUSINESS ANALYTICS SERVICES OR FINANCIAL SERVICES, WOULD PER SE BECOME COMPARABLE. THE FURTHER COMPARABILITY WITHIN THE KPO SERVICES IS ALSO REQUIRED TO BE SEPARATELY ESTABLISHED TO TREAT A COMPANY AS COMPARABLE. 11. REVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THA T THE ASSESSEES FUNCTIONAL PROFILE UNDER THIS SEGMENT HAS BEEN SUMMARILY DISCUSSED BY THE TPO ON PAGE 2 OF HIS ORDER BY OBSERVIN G IT AS DESIGN ENGINEERING SERVICES. NOW WE TURN TO THE ANNUAL R EPORT OF ECLERX SERVICES LTD., A COPY OF WHICH HAS BEEN PLACED AT PAGE 380 ONWARDS OF THE PAPER BOOK. IT HAS BEEN RECORDED IN THE ANNUAL REPORT THAT THIS COMPANY RENDERED FINANCIAL SERVICES; SALES AND MARKETING SERVICES; AND CABLE AND TELECOMMUNICATION SERVICES. NO SEPARATE SEGMENTAL INFORMATION IS AVAILABLE. WHEN WE CONSID ER THE NATURE OF SERVICES PROVIDED BY ECLERX SERVICES LTD. ON ENTITY LEVEL ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 14 IN JUXTAPOSITION TO THE SERVICES RENDERED BY THE ASSESSEE, WE FIND THAT THERE IS A LOT OF DIFFERENCE. NOTWITHSTANDING THAT, IT IS STILL FURTHER FOUND FROM PAGE 10 OF THE ANNUAL REPORT OF THIS COMPANY THAT THERE HAPPENED CERTAIN EXTRAORDINARY FINANCIAL EVENTS DU RING THE YEAR IN AS MUCH AS THERE WAS ACQUISITION AND INTEGRATION OF AGILYST, A COMPANY WHICH WAS BOUGHT AT THE BEGINNING OF THE YEAR. THE CHAIRMANS MESSAGE RECORDS THAT THE ERSTWHILE AGILYST IS NOW ECLERX SERVICES LTD.S THIRD BUSINESS - CABLE AND TELECOM S ERVICES (CTS). ERGO, IT IS SEEN THAT ECLERX SERVICES LTD. ACQUIRED A NEW COMPANY DURING THE YEAR UNDER CONSIDERATION WHICH IS AN EXTRAORDINARY EVENT. 12. THE HONBLE JURISDICTIONAL HIGH COURT IN PR. CIT VS. APTARA TECHNOLOGY PVT. LTD. (2019) 410 ITR 100 (BOM.) HAS UPHELD THE DECISION OF THE TRIBUNAL IN EXCLUDING AN OTHERWISE FUNCTIONALLY COMPARABLE COMPANY DUE TO EXTRAORDINARY EVENTS LIKE MERGER ETC. THE MUMBAI BENCH OF THE TRIBUNAL IN PETRO ARALDITE P. LTD. VS. DCIT (2013) 154 TTJ 176 (MUM) HAS ALSO HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTION AL FINANCIAL RESULTS DUE TO MERGER/DEMERGER ETC. THE HONBLE D ELHI HIGH COURT IN AMERIPRISE INDIA PVT LTD [TS-875-HC-2016(DEL)- ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 15 TP] HAS DISMISSED THE REVENUES APPEAL AGAINST THE ORDER PASS ED BY THE TRIBUNAL IN WHICH CERTAIN COMPANIES WERE EXCLUDED ON ACC OUNT OF EXTRAORDINARY EVENTS. IN VIEW OF THE FOREGOING DISCUSS ION, IT IS PALPABLE THAT A COMPANY WITH EXTRAORDINARY FINANCIAL EVENTS OCCURRING DURING THE YEAR BECAUSE OF ACQUISITION AND MERGER/DEMERGER, CANNOT BE CONSIDERED AS COMPARABLE. SINCE ECLERX SERVICES LTD. UNDERWENT SUCH EXTRAORDINARY FINANCIAL EVENTS DURING THE YEAR DUE TO MERGER OF AGILYST, WE HOLD THAT IT CANN OT BE CONSIDERED AS COMPARABLE. THIS COMPANY IS, THEREFORE, D IRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 13. THE LD. AR SUBMITTED THAT IF THE ABOVE TWO COMPANIES, NAMELY, ACROPETAL TECHNOLOGIES LTD. AND ECLERX SERVICES LTD. ARE EXC LUDED FROM THE LIST OF COMPARABLES, THEN HE WILL NOT PRESS ANY OTHE R ISSUE ON THIS COUNT. IN VIEW OF OUR DECISION ON THE EXCLUSION OF THE TWO COMPANIES FROM THE FINAL SET OF COMPARABLES, WE DO NOT PRO POSE TO DEAL WITH OTHER ISSUES RELEVANT TO THIS INTERNATIONAL TRANSACTION. 14. IN THE ULTIMATE ANALYSIS, WE SET ASIDE THE IMPUGNED O RDER AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR REWORKING OUT THE ALP OF THE INTERNATIONAL TRANSACTION OF PROVISION OF DESIGN ENGINEERING SERVICES AFRESH IN ACCORDANCE WITH OUR ABOVE OBSERVA TIONS AND ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 16 DIRECTIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE GIVEN AN AD EQUATE OPPORTUNITY OF HEARING. 15. THERE IS ANOTHER GROUND WHICH HAS BEEN RAISED B Y THE ASSESSEE IN ITS APPEAL AGAINST THE DISALLOWANCE AMOUNTING TO RS.13,34,813 /- U/S.43B OF THE ACT ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND SCHEME. THE ASSESSEE LATE DEPO SITED THE SHARE OF EMPLOYEES CONTRIBUTION FOR A PARTICULAR MONTH B EYOND THE GRACE PERIOD OF 5 DAYS. THE AO DISALLOWED THIS AMOUNT IN THE FINAL ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE HAS APP ROACHED THE TRIBUNAL. 16. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. GHATGE PATIL TRANSPORTS LTD. (2014) 368 ITR 749 (BOM. ) IN WHICH IT HAS BEEN HELD THAT BOTH EMPLOYEES AND EMPLOYERS CONTRIBUTION ARE COVERED UNDER AMENDMENT TO SECTION 43B AN D NO DISALLOWANCE CAN BE MADE IF THE PAYMENT IS MADE BEFORE THE DUE DATE OF FILING RETURN U/S.139(1) OF THE ACT. THE DRP HAS RE CORDED ON PAGE 65 OF ITS DIRECTION THAT THE CONTRIBUTION OF RS.13,34,8 13/-, PERTAINING TO THE MONTH OF JULY, WAS ACTUALLY DEPOSITED ON 24-0 8- ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 17 2012 AS AGAINST THE DUE DATE OF 20-08-2012. RESPECTFULLY FOLLOWING THE PRECEDENT, WE ALLOW THIS GROUND OF APPEAL. 17. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH AUGUST, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 08 TH AUGUST, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR.CIT-V, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.2393/PUN/2017 MACOM TECHNOLOGY SOLUTIONS (INDIA) PRIVATE LIMITED 18 DATE 1. DRAFT DICTATED ON 07-08-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-08-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *
