EXL Service.Com (India) Pvt. LTd., New Delhi V. DCIT, New Delhi

ITA 3904/DEL/2010

• Counselvise Citation: 390420114 RSA 2010
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA
• Assessee Lawyers: DEEPAK GOEL CA S
• Keywords: Transfer pricing; Opportunity of being heard
• Section: 14A

Judgement Text

BEFORE THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3904/DEL.2010 (ASSESSMENT YEAR : 2006-07) M/S. EXL SERVICE. COM (INDIA) PVT. LTD., VS. DCIT, CIRCLE 11 (1), 103-A, ASHOKA ESTATE, NEW DELHI. BARAKHAMBA ROAD, NEW DELHI-110 001. (PAN NO.AAACE5174C) (APELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI ROHIT TIWARI & DEEPAK GOEL, CA S DEPARTMENT BY : SHRI KRISHNA, CIT DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE DRP-I, NEW DELHI PASSED U/S 144C OF THE INCOME-TAX ACT DATED 17.06.2010. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RENDERING TRANSACTION PROCESSING SERVICES AND INTERNET AND VO ICE BASED CUSTOMER CARE SERVICES. 3. AT THE OUTSET OF THE HEARING, LEARNED AR SUBMITT ED THAT THE LEARNED DRP HAS DISMISSED THE ASSESSEES OBJECTION IN A SUM MARY MANNER AND ITA NO.3904/DEL/2010 2 HAS NOT DECIDED ALL THE OBJECTIONS RAISED BY THE AS SESSEE. HE PRAYED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE DRP. 4. ON THE OTHER HAND, THE LEARNED DR WAS ALSO NOT H AVING ANY SERIOUS OBJECTION TO THIS PROPOSITION. 5. WE HAVE HEARD BOTH THE SIDES AND ALSO GONE THROU GH THE ORDER OF THE DRP. THE LEARNED DRP HAS DEALT THE ISSUE AS UN DER :- OUT OF 14 COMPANIES OF THE ASSESSEE'S TPO REPORT, SIX WERE REJECTED. ONLY 8 OF ASSESSEE'S COMPARABLES WER E SELECTED. AUTHORIZED REPRESENTATIVE SHOWED DISSATISFACTION OF THE GROUNDS OF REJECTION OF COMPARABLES OF VARIOUS COMPANIES IN FOLLOWING MANNER; 1 DIFFERENT FINANCIAL YEAR ENDING. 2 DECLINING SALES AND PROFIT TREND. 3 RATIO OF ADVERTISING, MARKETING AND DISTRIBUTION EXPENSES TO SALES ETC. AUTHORIZED REPRESENTATIVE HAS ALSO ASKED US TO GIV E WORKING CAPITAL ADJUSTMENT, PRECISION ADJUSTMENT AN D RISK ADJUSTMENT. THE TRANSFER PRICING OFFICER'S ORDER HA S BEEN PERUSED IN DETAIL. ASSESSEE'S REQUEST OF ALTERNATE CALCULATION OF APPROPRIATE TESTED PARTY BEING NOT THEIR APPELLANT BUT THE AE, IS REJECTED. THE TRANSFER PRICING ORDER IS FOUND CORRECT. NO DI RECTIONS ARE BEING ISSUED. REGARDING GROUND NO.9, 10 & 11 WHICH ARE AS FOLLOW S:- 9 DISALLOWANCE OF PROVISION FOR EXPENSES DURING THE RELEVANT YEAR THE LEARNED ASSESSING OFFICER ('LD. AO') HAS ERRED IN DISALLOWING THE PROVISIONS FOR EXPENSES AMOUNTING TO RS. 1,31,11,372/-. 10 DISALLOWANCE U/S 14A OF THE ACT. ITA NO.3904/DEL/2010 3 THE LD. AO HAS ERRED IN MAKING DISALLOWANCE U/S 14A AMOUNTING TO RS.2,18,722/- BY DEEMING IT TO HAVE BEEN INCURRED BY THE ASSESSEE ON AD-HOC BASIS FOR EARNING DIVIDEND INCOME OF RS.10,93,612/-. 11 DISALLOWANCE U/S 40 A(2) OF THE ACT. THE LD. AO HAS ERRED IN MAKING AN AD-HOC DISALLOWANCE U/S 40A(2) AMOUNTING TO RS.6,39,837/- BY DEEMING IT EXCESSIVE AND UNREASONABLE EXPENSE. THE QUANTIFICATION HAS BEEN ARBITRARILY AND WITHOUT AN Y JUSTIFIABLE BASIS BY THE AO. SINCE BOTH THE SIDES HAD AGREED TO RESTORE THE ISSU E TO THE FILE OF THE DRP FOR MAKING A SPEAKING ORDER, WE RESTORE THE ISSUE T O THE FILE OF DRP WITH A DIRECTION THAT THE DRP MAY PASS A FRESH SPEAKING ORDER U/S 144C OF THE INCOME-TAX ACT AFTER MEETING OUT ALL THE OBJECTIONS PREFERABLY WITHIN A YEAR FROM THE DATE OF THE SERVICE OF THE ORDER AFTE R PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF AUGUST, 2011. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 18 TH DAY OF AUGUST, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.DRP-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT