DCIT 10(3), MUMBAI V. NOMURA SERVICES INDIA P.LTD, MUMBAI

ITA 3675/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92343 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Transfer pricing; Right to appeal
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH K , MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER ITA NO. 3675/M/2014 ASSESSMENT YEAR: 2007 - 08 THE DY. COMMISSIONER OF INCOME TAX 10(3), ROOM NO.451, 4 TH F LOOR, AAYAKAR BHAVAN , MAHARSHI KARVE ROAD, MUMBAI 400 020 VS. M/S. NOMURA SERVICES INDIA PVT. LTD., 10 TH FLOOR, OFF HIGH STREET, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI 400 076 PAN: AABCL 0053C (APPELLANT) (RESPONDENT) CO NO. 122/M/2014 ASSESSMENT YEAR: 2007 - 08 M/S. NOMURA SERVICES INDIA PVT. LTD., 10 TH FLOOR, NOMURA, OFF HIGH STREET, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI 400 076 PAN: AABCL 0053C VS. THE DY. COMMISSIONER OF INCOME TAX - 1 0(3), ROOM NO.451, 4 TH FLOOR, AAYAKAR BHAVAN , MAHARSHI KARVE ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI . FARROKH V. IRANI, A.R. REVENUE BY : SMT. N.K. CHAND , CIT D.R. DATE OF HEARING : 2 1.04.2015 DATE OF PRONOUNCEMENT : 21.04.2015 O R D E R PER BENCH : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ASSESSMENT ORDER DATED 28.03.2014 PASSED UNDER SECTION 143(3) READ WITH SECTI ON 144C AND 254 OF THE INCOME TAX ACT IN PURSUANT TO ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 2 THE ORDER OF THIS TRIBUNAL DATED 16.11.2012 AND CONSEQUENTIAL DIRECTIONS OF THE DRP DATED 11.03.2014 PASSED UNDER SECTION 144C(5) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2007 - 08. THE REVENUE HAS R AISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISPUTE RESOLUTION PANEL ERRED IN DELETING THE ADDITION OF TP REGARDING SUPER NORMAL PROFIT OF ONE COMPARABLE COMPANY HAVING VARIATION IN PLI RANGING FROM ( - ) 13.55% TO 113.49% AND IN TNNM. 2 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISPUTE RESOLUTION PANEL ERRED TO EXCLUDE THE COMPARABLE IN THE CASE OF MOLD - TEK ONLY FROM THE ANGLE OF SUPER NORMAL PROFIT RATHER THAN COMPARING THE S AME FROM ITS FUNCTIONAL BASIS. AS THE MOLD - TEK AND THE ASSESSEE COMPANY BOTH ARE FUNCTIONALLY IN SAME LINE OF SERVICES I.E. ITES THE SAID COMPARABLE OUGHT NOT TO BE EXCLUDED IN VIEW OF RATION LAI D DOWN BY SPECIAL BENCH, ITAT, MUMBAI IN CASE OF MAERSK GLOBA L CENTRE (I) PVT. LTD. 3. THE APPELLANT PRAYS THAT THE ORDER OF CT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY OF THE GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. IN THE CROSS OBJECTIONS THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: GROUNDS OF OBJECTION 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED IN LAW AND IN FACTS, IN FILING AN APPEAL AGAINST THE DIRECTIONS OF DRP PASSED UNDER SECTION 144 C (5) OF THE INCOME - TAX ACT, 1961 SINCE AS PER THE PROVISIONS OF SECTION 253(2A) OF THE INCOME - TAX ACT, 1961 THE LEARNED AO HAS THE RIGHT TO FILE AN APPEAL AGAINST THE DIRECTIONS OF THE DRP ONLY IF THE OBJECTIONS TO THE DRP WERE FILED BY THE ASSESSEE ON OR AFTER 01 JULY 2012 WHEREAS TH E OBJECTIONS TO THE DRP ARE ACTUALLY FILED BY THE ASSESSEE ON 23 DECEMBER 2010 . 2. WITHOUT PREJUDICE TO CONTENTIONS IN THE AFORESAID GROUND OF OBJECTION, THE LEARNED AO/TPO ERRED IN FILING AN APPEA L FOR ACCEPTANCE OF A COMPARABLE, NAMELY MOLD - TEK TECHNOLOGIES LIMITED, WHICH IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AND HAS BEEN DELETED BY THE LEARNED DRP. 3. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS OF OBJECTION, THE LEARNED AO/TPO ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 3 ERRED IN: I. NO T GRANTING THE WORKING CAPITAL ADJUSTMENT AS DETERMINED BY THE ASSESSEE AND NOT CONSIDERING THE LEVEL OF RISK ASSUMED IN THE CASE OF ASSESSEE VIS - - VIS RISK ASSUMED BY THE IDENTIFIED COMPARABLE COMPANIES II. INCLUDING ADDITIONAL COMPANIES WHICH ARE NOT COMPARA BLE TO THE ASSESSEE DUE TO THE FOLLOWING REASONS: FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE EARNING SUPER NORMAL PROFITS EXCEPTIONAL YEAR OF OPERATION FINANCIAL INFORMATION NOT AVAILABLE IN PUBLIC DOMAIN III. REJECTING TWO OF THE ASSESSEE'S COM PARABLES AS CONSOLIDATED FINANCIALS WERE BEING USED IV. HOLDING THAT NINE COMPANIES ARE NOT A REASONABLE UNDER OF COMPARABLES. V. PROVIDING THE ASSESSEE AN ADDITIONAL SET OF 21 COMPARABLE COMPANIES IDENTIFIED THROUGH A SEPARATE PROCESS, WITHOUT REJECTING THE SEARCH UNDERTAKEN BY THE ASSESSEE VI. IDENTIFYING COMPARABLE COMPANIES BASED ON THE DATA AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF CONDUCTING THE ASSESSMENT I.E. USING NON - CONTEMPORANEOUS DATA FOR CALCULATING ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANS ACTION ENTERED BY THE ASSESSEE VII. USING SINGLE YEAR DATA FOR UNDERTAKING A COMPARABILITY ANALYSIS VIII. NOT CONSIDERING THE PROVISIONS OF SECTION 920(2) OF THE INCOME - TAX ACT, 1961 WHILE DETERMINING THE ARM'S LENGTH PRICE THE ASSESSEE CRAVES, TO CONSIDER EACH O F THE ABOVE GROUNDS OF CROSS OBJECTIONS WITHOUT PREJUDICE TO EACH OTHER AND CRAVES, LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF CROSS OBJECTIONS. 3. SINCE THE ASSESSEE HAS RAISED THE OBJECTION AGAINST THE MAINTAINABILITY OF T HE APPEAL FILED BY THE REVENUE WHICH GOES TO THE ROOT OF THE MATTER, THEREFORE, WE FIRST TAKE UP TO DISPOSE OF THE CROSS OBJECTION OF THE ASSESSEE. ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 4 4. THE BRIEF FACTS LEADING TO THE CONTROVERSY AS EMERGED FROM THE RECORD ARE THAT A DRAFT ORDER WAS PASSE D BY THE ASSESSING OFFICER UNDER SECTION 144C READ WITH SECTION 143(3) AGAINST WHICH THE ASSESSEE FILED THE OBJECTIONS ON 23.12.2010 IN FORM NO.35A WHICH WERE REJECTED BY THE DRP VIDE ITS ORDER DATED 04.07.2011 ON THE GROUND THAT THE SAME WERE NOT SIGNED B Y THE MANAGING DIRECTOR OF THE ASSESSEE. CONSEQUENTLY, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A). 5. HOWEVER, THE LD. CIT(A) REJECTED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE IMPU GNED ORDER PASSED BY THE ASSESSING OFFIC ER WAS IN PURSUANT TO THE ORDER/ DIRECTION S OF THE DRP. THE ASSESSEE FILED TWO SEPARATE APPEALS IN ITA NO.7230/M/2011 AND 5401/2012 AGAINST THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY THE LD. CIT(A). IN THE APPEAL FILED AGAINST THE ASSESSMENT ORDER PURSUANT TO THE ORDER OF DRP REJECTING THE OBJECTIONS , THE TRIBUNAL VIDE ITS ORDER DATED 16.11.12 HELD THAT THE DRP HAS COMMITTED THE MISTAKE IN REJECTING THE OBJECTIONS OF THE ASSESSEE ON THE GROUND THAT THE FORM NO.35A WAS NOT SIGNED BY THE MANAGING DIRECTOR OF THE ASSESSEE. ACCORDINGLY, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE DRP FOR CONSIDERATION OF OBJECTIONS FILED BY THE ASSESSEE AFRESH. SINCE THE MATTER WAS RESTORED TO THE RECORD OF THE DRP FOR CONSIDERATION OF THE OBJECTIONS FILED BY THE ASSESSEE, THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) WAS ALSO DISPOSED OF BY SETTING ASIDE THE ORDER OF LD. CIT(A) ALONG WITH THE ORDER OF THE ASSESSING OFFICER AND RESTORED THE PROCEED INGS TO THE STAGE OF DRAFT ASSESSMENT ORDER PROPOSED BY THE ASSESSING OFFICER. THE DRP PASSED THE FRESH DIRECTIONS DATED 11.03.14 IN PURSUANT TO THE ORDER OF THIS TRIBUNAL WHEREBY ONE OF THE COMPARABLES NAMELY MOLD - TEK TECHNOLOGIES L TD. WAS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES SELECTED BY THE TPO. ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 5 6. THE REVENUE HAS FILED THE PRESENT APPEAL CHALLENGING THE EXCLUSION OF THE MOLD - TEK TECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. SINCE THE OBJECTIONS WERE FILED BY THE ASSESSEE ON 23.12.2 010 WHICH IS PRIOR TO 01.07.2012 THEREFORE THE ASSESSEE HAS RAISED THE OBJECTION REGARDING MAINTAINABILITY OF THE APPEAL OF THE REVENUE. 7. WE HAVE HEARD THE LD. A.R. AS WELL AS LD. D.R. AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. A.R. OF T HE ASSESSEE HAS SUBMITTED THAT PRIOR TO THE AMENDMENT IN SECTION 253 OF THE INCOME TAX ACT , THE REVENUE HAS NO RIGHT TO FILE THE APPEAL AGAINST THE DIRECTION OF THE DRP AND EVEN AFTER THE AMENDMENT, THE REVENUE HAS RIGHT TO FILE THE APPEAL AGAINST THE DIRE CTIONS OF THE DRP ONLY IF THE OBJECTIONS TO THE DRP WERE FILED BY THE ASSESSEE ON OR AFTER 01.07.2012. THE LD. A.R. HAS SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE OBJECTIONS WERE FILED ON 23.12.10 AND THEREFORE AS PER THE PROVISIONS OF SECTION 253 THE REVENUE HAS NO RIGHT TO FILE THE APPEAL AGAINST THE DIRECTIONS OF THE DRP AND CONSEQUENTLY THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. 8. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED THAT ONCE THE MATTER WAS RESTORED BY THE TRIBUNAL TO THE RE CORD OF THE DRP WITH THE DIRECTION TO CONSIDER THE OBJECTIONS FILED BY THE ASSESSEE AFRESH THEREFORE , THE OBJECTION SO FILED BY THE ASSESSEE WOULD BE TREATED AS FILED SUBSEQUENT TO THE ORDER OF THIS TRIBUNAL AND ACCORDINGLY THE APPEAL OF THE REVENUE IS MAI NTAINABLE. 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF THE RECORD, WE FIND THAT THERE IS NO DISPUTE THAT THE OBJECTIONS AGAINST THE DRAFT ORDER OF THE ASSESSING OFFICER WERE FILED BY THE ASSESSEE ON 23.12.2010 WHICH WERE REJECTED B Y THE DRP IN - LIMINIE ON A TECHNICAL GROUND THAT THE SAME WERE ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 6 NOT SIGNED BY THE MANAGING DIRECTOR OF THE ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL RESTORED THE MATTER TO THE RECORD OF THE DRP FOR DECIDING THE OBJECTIONS ON MERITS. THEREFORE, IT IS NOT A CASE OF FILING OF FRESH OBJECTION BEFORE THE DRP BUT THE MATTER WAS RESTORED BY THE TRIBUNAL TO THE RECORD OF THE DRP FOR CONSIDERATION OF THE OBJECTIONS FILED BY THE ASSESSEE ON 23.12.2010 ON MERITS. 10. THUS, WE DO NOT FIND ANY SUBSTANCE IN THE CONTENT ION OF THE LD. D.R. THAT THE OBJECTIONS OF THE ASSESSEE WILL BE TREATED AS FILED AFRESH AFTER THE ORDER OF THE TRIBUNAL. THE DRP WAS CREATED BY THE FINANCE ACT, 2009 WITH THE OBJECT TO BRING SPEEDY RESOLUTION OF DISPUTES IN THE CASE OF INTERNATIONAL TRANS ACTIONS PARTICULARLY THE TRANSACTIONS INVOLVING TRANSFER PRICING ISSUES. AS PER THE PROVISIONS OF SECTION 253(1)(D) ONLY ASSESSEE MAY APPEAL TO THIS TRIBUNAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER INTER - ALIA IN PURSUANT TO THE DIRECTIONS OF DRP . THEREFORE, AS PER THE PROVISIONS AS EXIS T AT THE RELEVANT POINT OF TIME THE DEPARTMENT/PRINCIPAL COMMISSIONER/COMMISSIONER WAS NOT ALLOWED TO DIRECT THE ASSESSING OFFICER TO APPEAL TO THIS TRIBUNAL AGAINST SUCH ORDERS PASSED IN PURSUANT TO THE DIRECTION S OF DRP. SUBSEQUENTLY, SECTION 253 OF THE ACT HAS BEEN AMENDED BY FINANCE ACT, 2012 WHEREBY SUB SECTION 2A HAS BEEN INSERTED WHICH READS AS UNDER: (2A) THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER MAY, IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPU TE RESOLUTION PANEL UNDER SUB - SECTION (5) OF SECTION 144C IN RESPECT OF ANY OBJECTION FILED ON OR AFTER THE 1 ST DAY OF JULY, 2012, BY THE ASSESSEE UNDER SUB - SECTION (2) OF SECTION 144C IN PURSUANCE OF WHICH THE ASSESSING OFFICER HAS PASSED AN ORDER COMPLET ING THE ASSESSMENT OR REASSESSMENT, DIRECT THE ASSESSING OFFICER TO APPEAL TO THE APELLATE TRIBUNAL AGAINST THE ORDER. 11. IT IS CLEAR FROM THE PROVISION OF SUB SECTION 2A INSERTED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01.07.2012 THAT THE PRINCIPA L COMMISSIONER OF ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 7 COMMISSIONER MAY DIRECT THE ASSESSING OFFICER TO FILE THE APPEAL BEFORE THIS TRIBUNAL AGAINST THE ORDER PASSED IN PURSUANT TO THE DIRECTIONS OF DRP ON THE OBJECTIONS FILED BY THE ASSESSEE ON OR AFTER 01.07.2012. THERE IS NO AMBIGUITY IN THE PROVISIONS OF SECTION 253 THAT PRIOR TO INSERTION OF SUB SECTION 2A, THE ASSESSING OFFICER WAS NOT PERMITTED TO FILE AN APPEAL AGAINST THE DIRECTIONS OF DRP. AS IT IS MANIFEST FROM THE RECORD AS WELL AS THE FACTS OF THE CASE THAT THE OBJECTIONS IN THE CASE OF THE ASSESSEE WERE FIL ED BEFORE THE DRP ON 24.12.2010, THEREFORE THE ASSESSING OFFICER IS NOT PERMITTED TO FILE THE APPEAL AGAINST THE DIRECTIONS OF THE DRP. THE PRE - AMENDED PROVISIONS OF THE ACT STIPULATES THAT THE DIRECTIONS GIVEN BY THE DRP ARE BINDING ON THE ASSESSING OFFICER AND ONLY AFTER THE AMENDMENT AND ONLY IN CASE WHEN THE DIRECTIONS ARE ISSUED BY THE DRP IN RESPECT OF THE OBJECTIONS FILED ON OR AFTER 01.07.2012, THE ASSESSING OFFICER MAY FILE THE APPEAL AGAINST THE DIRECTIONS OF THE DRP . 12. IN THE CASE IN HAND, THE OBJECTIONS WERE FILED ON 23.12.2010 , T HEREFORE , THE DIRECTIONS PASSED BY THE DRP ON THE OBJECTIONS FILED BY THE ASSESSEE ARE BINDING ON THE ASSESSING OFFICER. THE ORDER OF THIS TRIBUNAL RESTORING THE MATTER TO THE RECORD OF THE DRP FOR DECIDING THE OBJECTIONS FILED BY THE ASSESSEE ON MERITS WOULD NOT CHANGE THE FACTUM OF FILING THE OBJECTIONS BY THE ASSESSEE ON 23.12.2010 AND THEREFORE THE DIRECTION OF THE DRP DATED 11.03.2014 ARE IN RESPECT OF THE OBJECTIONS DATED 23.12.2 010 CANT BE CHALLENGED BY THE ASSESSING OFFICER. 13. IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE APPEAL FILED BY THE ASSESSING OFFICER IS NOT MAINTAINABLE AS THE ASSESSING OFFICER IS NOT PERMITTED TO FILE THE APPEAL AGAINST THE DIRECTIONS OF THE DRP IN RESPECT OF THE OBJECTIONS FILED BY THE ASSESSEE DATED 23.12.2010 WHICH IS PRIOR TO 01.07.2012. ACCORDINGLY, THE ITA NO.3675/M/2014 CO NO.122/M/2014 M/S. NOMURA SERVICES INDIA PVT. LTD. 8 APPEAL OF THE REVENUE DESERVES DISMISS AL AS NOT MAINTAINABLE. 14. IN THE RE SULT, THE APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 21.04.2015 . SD/ - SD/ - ( G.S. PA NNU ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.04.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.