Credit Pointe Services Pvt.Ltd, Pune V. Deputy Commissioner of Income tax,

ITA 2767/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5060 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-12-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KRISHNA GUJRATHI
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 27 67 /P U N/201 6 / ASSESSMENT YEAR : 20 1 1 - 1 2 CREDIT POINTE SERVICES PVT. LTD., OFFICE 1B, 1 ST FLOOR, THE CEREBRUM IT PARK, KALYANINAGAR, PUNE 4110 14 . / APPELLANT PAN: A A CCC7203N VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1 (1), PUNE . / RESPONDENT / APPELLANT BY : SHRI KRISHNA GUJRATHI / RESPONDENT BY : S HRI SUDHENDU DAS / DATE OF HEARING : 13 . 12 .201 8 / DATE OF PRONOUNCEMENT: 06 . 0 2 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 1 3 , PUNE , DATED 1 5 . 0 7 .201 6 RELATING TO ASSESSMENT YEAR 20 1 1 - 1 2 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 144(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: - ITA NO. 2767 /P U N/20 1 6 CREDIT POINTE SERVICES PV T. LTD. 2 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT(APPEAL) - 13, PUNE ERRED IN CONFIRMING THE NEW SEARCH FOR C OMPARABLES BY THE LEARNED AO AND NOT ACCEPTING THE ARM'S LENGTH PRICE AS COMPUTED BY THE APPELLANT IN THE TP STUDY REPORT. THE APPELLANT HEREBY PRAYS THAT NO ADJUSTMENT BE MADE TO THE PRICE CHARGED TO ASSOCIATED ENTERPRISES SINCE APPELLANT WAS ENJOYING TAX HOLIDAY AND THERE WAS NO MOTIVE TO SHIFT PROFITS OUT OF INDIA. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (APPEAL) - 13, PUNE ERRED IN CONFIRMING THE INCLUSION OF ACCENTIA TECHNOLOGIES LTD. AS A COMPARABLE COMPANY . THE APPELLANT HEREBY PRAYS THAT THE SAID COMPANY MAY PLEASE BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (APPEAL) - 13, PUNE ERRED IN NOT ALLOWING FOR ADJUSTMENT T O THE ARM'S LENGTH PRICE ON ACCOUNT OF DIFFERENCES IN RISKS BORNE BY THE APPELLANT AND THE COMPARABLE COMPANIES. THE APPELLANT HEREBY PRAYS THAT RISK ADJUSTMENT TO THE OPERATING MARGINS OF COMPARABLE COMPANIES BE ALLOWED TO ARRIVE AT THE ARM'S LENGTH PRICE . 3. THE LIMITED ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DETERMINATION OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT TH E OUTSET POINTED OUT THAT IN CASE ACCENTIA TECHNOLOGIES LTD. IS EXCLUDED FROM THE LIST OF COMPARABLES AS EXCLUDED IN EARLIER YEAR I.E. ASSESSMENT YEAR 2010 - 11, THEN MARGINS SHOWN BY ASSESSEE WERE WITHIN +/ - 5% AND ONLY GROUND OF APPEAL NO.2 NEEDS TO BE DEC IDED AND GROUNDS OF APPEAL NO.1 AND 3 WOULD BECOME ACADEMIC. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES AGGREGATING 15,77,36,015/ - . THE ASSESSING OFFICER MADE REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(1) OF THE ACT. THE ASSESSEE WAS PROVIDING SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES AND WAS BEING ITA NO. 2767 /P U N/20 1 6 CREDIT POINTE SERVICES PV T. LTD. 3 REMUNERATED AT MARKUP OF 10%. THE MARG INS SHOWN BY ASSESSEE WERE 9.47%. THE COMPARABLES SELECTED BY THE ASSESSEE WERE REJECTED AS THE ASSESSEE HAD APPLIED MULTIPLE YEAR DATA. THE TPO IN THE FINAL ANALYSIS SELECTED FIVE CONCERNS AS COMPARABLE WHICH ARE AS UNDER: - SR. NO. NAME OF THE COMPANY PLI 1 ACCENTIA TECHNOLOGY LTD. 54.51 2 E CLERX SERVICES LTD. 56.85 3 INFORMED TECHNOLOGIES INDIA LTD. 12.06 4 INFOSYS BPO LTD. 18.80 5 COSMIC GLOBAL LTD. 9.81 AVERAGE 30.41 6. SINCE THE AVERAGE MARGINS OF COMPARABLES WERE 30.41%, THE TPO MADE AN UPWARD ADJUSTMENT OF 3,01,76,573/ - . THE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER, AGAINST WHICH, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE ORDER DATED 15.07.2016 DIRECTED THAT INFOSYS BPO LTD. AND E CLERX SERVICES LTD. BE E XCLUDED FROM THE FINAL LIST OF COMPARABLES AND R SYSTEMS INTERNATIONAL LTD. BE INCLUDED IN THE FINAL LIST OF COMPARABLES. IN THE ORDER GIVING EFFECT TO THE ORDER OF CIT(A) AFTER ALLOWING WORKING CAPITAL ADJUSTMENT, THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS WAS DETERMINED AND AN ADJUSTMENT OF 1,15,02,030/ - WAS MADE IN THE HANDS OF ASSESSEE. 7. THE LIMITED ISSUE WHICH IS RAISED BEFORE US IS THAT ACCENTIA TECHNOLOGIES LTD. IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT WAS ENGAGED IN RENDERING KPO SERVICES IN HEALTHCARE SECTOR AND THERE WERE EXTRAORDINARY EVENTS , UNDER WHICH IT HAD MADE ACQUISITIONS. 8. WE FIND THAT THE ISSUE OF EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. WAS DECIDED BY THE TRIBUNAL IN THE CASE OF APTARA TECHNOLOGIES PRIVATE LIMITED VS. ITA NO. 2767 /P U N/20 1 6 CREDIT POINTE SERVICES PV T. LTD. 4 DCIT IN ITA NO.291/PUN/2016, RELATIN G TO ASSESSMENT YEAR 2011 - 12, ORDER DATED 05.06.2018 . THE TRIBUNAL VIDE PARA 14, IT WAS HELD AS UNDER: - 14. SIMILAR ISSUE OF EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. WAS RAISED BY THE ASSESSEE BEING FUNCTIONALLY NOT COMPARABLE IN ITS OWN CASE IN EARLIER Y EARS AND THE TRIBUNAL IN ASSESSMENT YEARS 2008 - 09 TO 2010 - 11 HAS EXCLUDED THE SAID CONCERN AS BEING NOT FUNCTIONALLY COMPARABLE TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. THE LAST FINDING OF THE TRIBUNAL IN CROSS APPEALS FILED BY THE ASSESSEE AND THE R EVENUE IN ITA NO.259/PN/2015 AND ITA NO.579/PN/2015, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 31.05.2016, WHEREIN VIDE PARAS 12 TO 15, THE TRIBUNAL HAD EXCLUDED THE SAID CONCERN AS BEING NOT COMPARABLE. FURTHER, THE HONBLE HIGH COURT OF DELHI IN PR.CIT VS. B.C. MANAGEMENT SERVICES (P.) LTD. (2018) 89 TAXMANN.COM 68 (DEL) FOR ASSESSMENT YEAR 2011 - 12 HAD HELD THE SAID CONCERN TO BE NOT COMPARABLE BECAUSE OF EXTRAORDINARY EVENT IN ASSESSMENT YEAR 2011 - 12. FOLLOWING THE SAME PARITY OF REASONING, WE H OLD THAT THE SAID CONCERN IS NOT TO BE INCLUDED IN THE FINAL SET OF COMPARABLES WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF ASSESSEE. 9. APPLYING THE SAID PROPOSITION TO THE FACTS OF PRESENT CASE AND THE YEAR UNDER APPEAL BEING ASSESSMENT YEAR 2011 - 12 AND IN LINE WITH THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN PR.CIT VS. B.C. MANAGEMENT SERVICES PVT. LTD., REPORTED IN 2017 (12) TMI 255, WHEREIN ALSO RELEVANT ASSESSMENT YEAR WAS ASSESSMENT YEAR 2011 - 12. WE HOLD THAT THE CONCERN AC CENTIA TECHNOLOGIES LTD. IS NOT COMPARABLE BECAUSE OF EXTRAORDINARY EVENTS IN THE CAPTIONED ASSESSMENT YEAR. ACCORDINGLY, WE HOLD THAT THE SAID CONCERN CANNOT BE INCLUDED IN THE FINAL SET OF COMPARABLES WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS ENTERE D INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD FAIRLY POINTED OUT THAT IN CASE ACCENTIA TECHNOLOGIES LTD. IS EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THEN MARGINS SHOWN BY THE ASS ESSEE AND MEAN MARGINS OF COMPARABLES WERE WITHIN +/ - 5% RANGE. ACCORDINGLY, WE HOLD THAT NO FURTHER ADJUSTMENT NEEDS TO BE MADE IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL ITA NO. 2767 /P U N/20 1 6 CREDIT POINTE SERVICES PV T. LTD. 5 NO.2 RAISED BY ASSESSEE IS THUS, ALLOWED. THE GROUNDS OF APPEAL NO.1 AND 3 WO ULD THUS, BECOME ACADEMIC. 11 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 6 TH DAY OF FEBRUARY , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 6 TH FEBRUARY , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 3 , PUNE ; 4. THE PR. CIT - 1 / CIT(TP/IT) , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE