Asst.C.I.T., Bangalore V. M/s ANZ Support Services India Private Ltd., Bangalore

ITA 40/BANG/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6948 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-01-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 18-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92B; 142(1); 80G; 201; 144C; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER IT (T.P) A NO. 40/BANG/2016 (ASSESSMENT YEAR: 201 1 - 12 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1), BANGALORE . .APPELLANT PAN AAGCA 5549M VS. M/S. ANZ SUPPORT SERVICES INDIA PVT. LTD. , ENCALYPTUS, MANYATA EMBASSY BUSINESS PARK - SEZ, ORR, NAGAVARA & RACHENAHALLI VILL. K.R.PURAM HOBLI, BANGALORE - 560 045 . RESPONDENT. C.O. NO.35/BANG/2016 ( IN IT (T.P) A NO. 40/BANG/2016) (ASSESSMENT YEAR: 201 1 - 12 ) (BY ASSESSEE) ASSESSEE BY: SHRI KEERTHI NARAYAN, C.A. REVENUE BY: MS. NEERA MALHOTRA, CIT (D.R) DATE OF HEARING : 20.01 .20 20 DATE OF PRONOUNCEMENT : 05.02 .20 20 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 ('THE ACT') 2 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 PASSED IN PURSUANCE OF THE DIRECTIONS U NDER SECTION 144C(5) OF THE ACT OF DISPUTE RESOLUTION PANEL (DRP) DT.26.10.2015 AND THE ASSESSEE HAS FILED CROSS OBJECTION. 2. AT THE TIME OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE A SSESSEE HAS NOT PRESSED THE C.O,AND MADE ENDORSEMENT IN THE MEM ORANDUM. ACCORDINGLY TREATED AS WITHDRAWN AN D DISMISSED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 3 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 4 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN IT ENABLED SERVICES (ITES) TO COMPANIES WITH IN GROUP , AND FILED THE RETURN OF INCOME ON 16.11.2011 WITH TOTAL INCOME OF RS.19,05,220 AFTER CLAIMING DEDUCTION UNDER SECTION 10AA, 80G AND 80GGA OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WAS ISSUED. IN COMPLIANCE, THE LEARNED AUTHORIZED RE PRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAILS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS INTERNATIONAL TRANSACTIONS AS PER THE PROVISIONS OF SECTION 92B OF THE ACT AND THE MATTER WAS REFERRED TO TPO. WHEREAS , THE TPO HAS PASSED ORDER UNDER SECTION 92CA OF THE ACT WITH TRANSFER PRICING ADJUSTMENT OF 5 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 RS.18,23,79,753 BY ORDER DT.6.1.2015. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED OBJECTIONS WITH THE DRP. THE DRP HAS CONSIDERED THE OBJECTIONS AND PASSED THE ORDER UNDER SECTION 144C(5) OF THE ACT DT.26.10.2015 NULLIFYING THE AD JUSTMENT OF ALP UNDER SECTION 92CA AS NIL AGAINST THE EARLIER ADJUSTMENT OF RS.18,23,79, 753. THE ASSESSING OFFICER CONSIDER ED THE ADJUSTMENT S TO THE EXPORT TURNOVER AS PER THE DIRECTIONS OF DRP AND COMPUTED THE TOTAL INCOME OF RS.21,05,123 AND PASSED THE ORDER UNDER SECTION 143(3) R.W.S. 144C OF THE ACT DT.20.1 1.2015. AGGRIEVED BY THE AO ORDER PASSED IN PURSUANCE TO THE DIREC TIONS OF DRP , THE REVENUE HAS FILED AN APPEAL WITH THE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE GROUND NO.1 IS GENERAL IN NATURE WHEREAS THE GROUND NOS.2 TO 9 ARE IN RESPECT OF TRANSFER PRICIN G ADJUSTMENT AND DRP DIRECTIONS AND GROUND NOS.10 & 11 ARE IN RESPECT OF DIRECTIONS OF DRP FOR EXCLUSION OF COMMUNICATION EXPENSES AND TRAVELLING EXPENSES INCURRED IN FOREIGN CURRENCY FROM TOTAL TURNOVER FOR DEDUCTION UN DER SECTION 10A OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE EMPHASIZED THAT DRP HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLU DE THE COMPARABLES AND EMPHASIZED THAT THE DRP HAS ERRED IN NULLIFYING THE TRANSFER PRICING ADJUSTMENT. THE LEARNED AUTHORIZED REPRESENTAT IVE, IN CONTRA HAS SUBMITTED A LETTER DT.20.01.2020 IN RESPECT OF ACCEPTANCE OF MUTUAL AGREEMENT FOR MAP UNDER THE INDIA - AUSTRALIA DOUBLE TAXATION AVOIDANCE ACT (DTAA). FURTHER, 6 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE TOTAL VALUE O F INTERNATION AL TRANSACTIONS RS.3,27,60,61,883 . A ND OUT OF TOTAL TURNOVER, THE ASSESSEE HAS ENTERED INTO MUTUAL AGREEMENT PROCED URE WITH AUSTRALIAN ENTITIES IS 90.53% AND THE REMAINING NOT COVERED UNDER MAP WITH NON AUSTRALIAN ENTITIES IS 9.47% AND SUPPORTED WITH THE JUDICIAL DECISIONS AND PRAYED THAT THE TRIBUNAL MAY APPLY THE MARK - UP OF 19.50% AS AGREED IN MAP RESOLUTION WITH RESPECT TO TRANSACTION S WITH AUSTRALIAN ENTITIES AND NON - AUSTRALIAN ENTITIES . WHEREAS THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE ASSESSEE HAS ACCEPTED THE MARGIN FOR AUSTRALIAN TRANSACTIONS AND THERE MAY NOT BE DISTINCTION BETWEEN THE AUSTRALIAN TRANSACTIONS AND NON - AUSTRALIAN TRANSACTIONS IN TP STUDY FOR ADOPTING DIFFERENT MARGINS AND PRAYED THAT THE MATTER BE REMANDE D TO DECIDE WHETHER PROFIT AND MARGIN UNDER THE AUSTRALIAN MAP PROCEDURE IS APPLIED TO NON - AUSTRALIAN ENTITIES. AND RELIED ON CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. GLOBAL E - BUSINESS OPERATIONS PVT. LTD. (2017) 86 TAXMAN.COM 197. WHERE AS THE LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION OF ASSESSEE GROUP COMPANIES IN THE CASE OF IT(TP)A NO.432, 403 AND 483/BANG/2013 DT.8.5.2019 AND REFERRED TO PARAS 5 & 6 AS UNDER : 7 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 8 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 6. SIMILARLY, THE LEARNED AUTHORISED REPRESENTA TIVE ALSO RELIED ON THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF AMAZON DEVELOPMENT CENTRE VS. ITO IN IT(TP)A NOS.76 & 78/BANG/2014 DT.27.4.2018 AT PAGE 7 P ARA 4.3.5 READ AS UNDER : 9 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 WE CONSIDERING THE SUBMISSIONS OF LD. DR , IN RESP ECT OF DIRECTIONS OF DRP AND SUBMISSIONS OF THE LEARNED AUTHORIZED REPRES ENTATIVE ON MAP MARGIN APPLICABILITY TO NO N - ENTITIES AND THE JUDICIAL DECISIONS, ARE OF THE OPINION THA T THE TRANSACTIONS OF THE ASSESSEE WITH N ON - AUSTRALIAN ENTITIES IS 9.47%. ACCORD INGLY, WE ARE OF THE OPINION THA T THE MATTER HAS TO BE REMANDED TO THE FILE OF TPO TO COMPUTE MARGI N FOR NON - AUSTRALIAN ENTITIES AND ALLOW THE GROUNDS OF APPEAL OF REVENUE FOR STATISTICAL PURPOSES. 7. WE HEARD THE RIVAL CONTENTIONS, ON THE DISPUTED ISSUE O F ALLOWING OF DEDUCTION OF TRAVELLING EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER, WE FOUND THE DRP HAS OBSERVED THAT THE ASSESSEE HAS OBJECTED BEFORE THE ASSESSING OFFICER FOR REDUCING THE COMMUNICATION AND OTHER FOREIGN EXPENSES ONLY 10 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 FROM THE EXPORT TURNOVER. THE DRP RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LIMITED VS. CIT REPORTED IN 349 ITR 98 DIRECTED THE ASSESSING OFFICER TO REDUCE T HE EXPENSES FROM TOTAL TURNOVE R. THE LD. DR COULD NOT CONTROVERT THE OBSERVATIONS OF DRP . EVEN THOUGH SLP IS FILED BY THE REVENUE IN THE HON'BLE SUPREME COURT, THE TRIBUNAL IS BOUND BY THE DECISION OF JURISDICTIONAL HIGH COURT. ACCORDIN GLY, WE DO NOT FIND ANY MERITS I N THE S UBMISSIONS OF LD. DR AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND C.O. OF THE AS SESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 0 5 .02 . 20 20 . *REDDY GP 11 IT (TP) A NO. 40/BANG/2016 & C.O. NO.35/BANG/2016 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE