ADDL. CIT, SPECIAL RANGE- 2, NEW DELHI V. CONVERGYS INDIA SERVICES PVT. LTD., NEW DELHI

ITA 2399/DEL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3656 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I1
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 144C; 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.2399/DEL/2018 (FOR ASSESSMENT YEAR 2012-13) ACIT, SPECIAL RANGE-2, NEW DELHI PAN NO. AABCC 5056 G VS. CONVERGYS INDIA SERVICES PVT. LTD., 60/14, OLD RAJINDER NAGAR, NEW DELHI 110 060 (APPELLANT) (RESPONDENT) A SSESSEE BY SHRI SURENDER PAL, CIT - D.R. RE VENUE BY SHRI K. M. GUPTA, ADV. DATE OF HEARING: 02 / 1 1 /2020 DATE OF PRONOUNCEMENT: 09 / 11 /2020 ORDER PER ANIL CHATURVEDI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 13.11.2017 OF THE COMMISSIONER OF INCOME TAX (A)- 12, NEW DELHI RELATING TO ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED FROM THE MATERIAL ON RECORDS ARE AS UNDER: ITA NO.2399/DEL/2018 ACIT VS. M/S. CONVERGYS INDIA SERVICES PVT. LTD. A.Y. 2012-13 2 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF HUNDRED PERCENT EXPORT OF INFORMATION TECHNOLOGY ENABLE SERVICES (ITES). ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2012- 13 ON 29.11.2012 DECLARING INCOME OF RS. 122,61,31,240/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) DATED 14.08.2013 WAS ISSUED AND SERVED UPON THE ASSESSEE. AO ON THE BASIS OF FORM 3CEB FILED ALONG WITH THE RETURN OF INCOME NOTICED THAT ASSESSEE HAD INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES (AE)/ CONCERNS. HE, THEREFORE, IN ORDER OF DETERMINE ARMS LENGTH PRICE (ALP) IN RELATION TO THE INTERNATIONAL TRANSACTIONS REFERRED THE MATTER TO TRANSFER PRICING OFFICER (TPO). THE TPO VIDE ORDER PASSED U/S 92CA(2) DATED 29.01.2016 SUGGESTED AN ADJUSTMENT OF RS. 1,94,32,824/-. SUBSEQUENTLY, TPO NOTICED CERTAIN MISTAKES IN THE ORDER AND THEREFORE, HE PASSED AN ORDER U/S 92CA(5) R.W.S 154 ON 15.02.2016 WHEREIN AN ADJUSTMENT OF RS. 53,86,94,824/- WAS MADE ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH AES. THEREAFTER, A DRAFT ASSESSMENT ORDER WAS PASSED BY THE AO TO WHICH ASSESSEE SUBMITTED THAT THEY ARE FILING THE APPEAL BEFORE THE CIT(A) AGAINST THE ORDER. AO THEREAFTER, VIDE ORDER PASSED U/S 143(3) R.W.S 144C OF THE ACT DATED 09.05.2016 DETERMINED THE TOTAL INCOME OF RS. 176,48,26,064/- INTER ALIA BY MAKING ADDITION ON ACCOUNT OF ARMS LENGTH PRICE OF RS. 53,86,94,824/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHEREIN ASSESSEE INTER ALIA CHALLENGED THE INCLUSION OF CERTAIN ITA NO.2399/DEL/2018 ACIT VS. M/S. CONVERGYS INDIA SERVICES PVT. LTD. A.Y. 2012-13 3 COMPARABLES INCLUDED BY THE TPO FOR COMPUTING THE MARGINS. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE VIDE ORDER DATED 13.11.2017 DIRECTED THE TPO TO EXCLUDE ACCENTIA TECHNOLOGIES LTD., ACROPETAL TECHNOLOGIES LTD. (SEG) AND ECLERX SERVICES LTD. IN THE FINAL LIST OF COMPARABLE COMPANIES. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN REDUCING TP ADJUSTMENTS BY EXCLUDING THREE COMPANIES NAMELY M/S. ACCENTIA TECHNOLOGIES LTD., M/S. ECLERX SERVICES LTD. AND M/S. ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. BEFORE US, LEARNED DR SUBMITTED THAT DURING THE COURSE OF TPO PROCEEDINGS, TPO REJECTED/ MODIFIED THE FILTERS APPLIED BY THE ASSESSEE IN THE TRANSFER PRICING DOCUMENTATION AND ARRIVED AT THE AVERAGE OF 23.73% BY INCLUDING ACCENTIA TECHNOLOGIES LTD., ACROPETAL TECHNOLOGIES LTD. (SEG) AND ECLERX SERVICES LTD. HE SUBMITTED THAT THE COMPANIES NAMELY ACCENTIA TECHNOLOGIES LTD., ACROPETAL TECHNOLOGIES LTD. (SEG) AND ECLERX SERVICES LTD. WERE RIGHTLY CONSIDERED BY THE TPO TO THE COMPARABLE COMPANIES BUT CIT(A) HAS ERRED IN DIRECTING THEIR EXCLUSION. HE, THEREFORE, SUBMITTED THAT THE ORDER OF TPO BE UPHELD. ITA NO.2399/DEL/2018 ACIT VS. M/S. CONVERGYS INDIA SERVICES PVT. LTD. A.Y. 2012-13 4 5. LEARNED AR ON THE OTHER HAND, REITERATED THE SUBMISSION MADE BEFORE THE AO/ TPO AND CIT(A) AND SUBMITTED THAT AS FAR AS ACCENTIA TECHNOLOGIES LTD. IS CONCERNED, IT IS ENGAGED IN RENDERING HIGH END SERVICES AND ITS ACTIVITIES ARE MORE IN THE NATURE OF KPO SERVICES AND IT CANNOT BE COMPARED TO ASSESSEE COMPANY WHICH IS RENDERING ITES SERVICES. WITH RESPECT TO ACROPETAL TECHNOLOGIES LTD., HE SUBMITTED THAT IN A.Y. 2008-09, CIT(A) HAS HELD IT TO BE NOT COMPARABLE COMPANY ON ACCOUNT OF FUNCTIONALLY DISSIMILAR AND THE FACTS FOR A.Y. 2008-09 AND THERE ARE NO CHANGE IN THE FACTS IN THE YEAR UNDER CONSIDERATION AND THAT OF A.Y. 2012-13. WITH RESPECT TO ECLEX SERVICES LTD., HE SUBMITTED THAT CIT(A) WHILE DECIDING THE ASSESSEES CASE IN A.Y. 2008-09 HAS HELD IT TO BE NOT FUNCTIONALLY COMPARABLE TO THAT OF ASSESSEE AND THERE ARE NO CHANGE IN THE FACTS BETWEEN 2008-09 AND 2013-14. HE THEREFORE, SUPPORTED THE ORDER OF CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT APPEAL OF THE REVENUE IS WITH RESPECT TO THE DIRECTION OF CIT(A) FOR THE EXCLUSION OF THREE COMPANIES, NAMELY M/S. ACCENTIA TECHNOLOGIES LTD., M/S. ECLERX SERVICES LTD. AND M/S. ACROPETAL TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLE COMPANIES. AS FAR AS THE EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. IS CONCERNED, WE FIND THAT CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS GIVEN A FINDING THAT IT IS ENGAGED IN RENDERING HIGH END SERVICES AND THE ITA NO.2399/DEL/2018 ACIT VS. M/S. CONVERGYS INDIA SERVICES PVT. LTD. A.Y. 2012-13 5 NATURE OF ITS ACTIVITIES ARE MORE IN THE NATURE OF KPO SERVICES WHEREAS THE SERVICES RENDERED BY THE ASSESSEE ARE OF ITES SERVICES. HE HAS THEREFORE HELD ACCENTIA TECHNOLOGIES LTD. TO BE NOT A COMPARABLE TO THAT OF ASSESSEE. WITH RESPECT TO ACROPETAL TECHNOLOGIES LTD. AND ECLERX SERVICES LTD., WE FIND THAT CIT(A) HAS NOTED THAT IN ASSESSEES OWN CASE FOR A.Y. 2008-09, THE CIT(A) HAD HELD THESE TWO COMPANIES TO BE FUNCTIONAL DISSIMILAR TO THAT OF ASSESSEE. HE HAS FURTHER NOTED THAT THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION AND THAT OF A.Y. 2008-09. BEFORE US, NO FALLACY IN THE FINDINGS OF CIT(A) HAS POINTED OUT BY THE REVENUE. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.11.2020 SD/- SD/- (KULDIP SINGH) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER *PRITI YADAV, SR.PS* DATE:- 09.11.2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI