Quislex Legal Services Private Limited, Hyderabad V. DCIT Circle -5(1), Hyderabad

ITA 416/Hyd/2022

AI Insights

The case involves Quislex Legal Services Private Limited, which appealed against the final assessment order passed by the Deputy Commissioner of Income Tax, Circle-5(1), Hyderabad, following the directions of the Dispute Resolution Panel, Bengaluru. The primary contention was regarding the non-consideration of the assessee's objections to the comparables adopted by the TPO and the lack of opportunity to file these objections. The Tribunal found that the TPO and the DRP did not adhere to the procedural requirements under the Income Tax Act, particularly concerning the issuance of notices and the consideration of the assessee's comparables. The Tribunal's decision emphasized the need for procedural fairness and adherence to statutory requirements in transfer pricing assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133181 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 18-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 29-08-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Set aside
• Section: 143(3); 92CA

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT & SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA-TP No. 416/Hyd/2022 (निर्धारण वर्ा / Assessment Year: 2018-19) Quislex Legal Services Private Limited, Kondapur, Ranga Reddy District [PAN No. AAACQ1153H] Vs. The Deputy Commissioner of Income Tax, Circle-5(1), Hyderabad अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध/Assessee by: Shri H. Srinivasulu, AR रधजस्‍व द्वधरध/Revenue by: Shri M. Vijay Kumar, CIT-DR सुिवधई की तधरीख/Date of hearing: 19/07/2023 घोर्णध की तधरीख/Pronouncement on: 27/07/2023 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the final assessment order dated 27/07/2022 passed consequent to the directions of Hon'ble Dispute Resolution Panel, Bengaluru (“DRP”), in the case of M/s. Quislex Legal Services Pvt. Ltd. (“the assessee”) for the assessment year 2018-19, under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (for short “the Act”), assessee filed this appeal. ITA-TP No. 416/Hyd/2022 Page 2 of 6 2. Briefly stated relevant facts are that the assessee is engaged in the business of legal process outsourcing. It filed its return of income for the assessment year 2018-19 on 28/11/2018 declaring total income of Rs. 14,88,59,090/-. The assessee was found to have entered into international transactions for a sum of Rs. 106.16 crores with its Associated Enterprises (AE) for provision of ITE services and, therefore, determination of Arms’ Length Price (ALP) was referred to the Transfer Pricing Officer (TPO). After obtaining the order of the TPO under section 92CA(3) of the Act, draft assessment order was passed on 16/09/2021, determining the total income of the assessee at Rs. 31,00,40,880/- by incorporating TP adjustment of Rs. 16,11,81,785/- comprising a sum of Rs. 9,44,60,417/- on account of provision of ITeS and Rs. 6,67,21,368/- on account of interest on delayed receivables. 3. Assessee filed objections before the learned DRP and the grievance of the assessee is that learned DRP did not consider the plea of the assessee, but, upheld the action of the learned TPO, claiming that neither the learned TPO nor the learned DRP gave any opportunity to file the objections against the comparable adopted by the learned TPO. Hence, the assessee preferred this appeal. 4. learned AR submits that the order of the learned TPO is in violation of the provisions of section 92CA(3) and 92C(3) inasmuch as before rejecting the TP study of the assessee, no opportunity was given and also that the TPO culled out 17 comparables from the database and computed the ALP, without considering the TP study of the assessee. Further, the learned AR stresses on the fact that the learned TPO considered the comparables, which were not chosen by the assessee at all before rejecting the same and resorting to a fresh search. 5. He further submitted that though a remand report was sought by the learned DRP and the learned TPO submitted such report, the submissions of the assessee to such report were not considered by the ITA-TP No. 416/Hyd/2022 Page 3 of 6 learned DRP, but on the other hand, learned DRP recorded certain factual mistakes. Learned AR further submitted that learned DRP, in the same breath, recorded that the assessee is a BPO and also engaged in high end ITE services vide paragraph Nos. 2.7.8 and 2.7.5 respectively, which shows that facts of some other case crept into the order of the assessee. According to the learned AR, for the assessment years 2013-14 and 2014- 15, after the assessments were set aside by the ITAT, the learned Assessing Officer accepted the assessee as BPO, rendering repetitive services and, therefore, the findings of the learned DRP cannot be sustained. 6. Per contra, learned DR submitted that the learned DRP properly considered the remand report and also the objections filed by the assessee and since the assessee at that time did not press all the arguments now taken, and, therefore, the authorities are justified in sustaining their view. He lastly contends that merely basing on technicalities, the assessee cannot seek quashing of the entire proceedings, and if for any reason, the Bench feels that there is non-issuance of notice under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act, the same can be rectified by giving an opportunity to both the parties, lest the judicial proceedings are likely to be treated as hide and seek game. 7. We have gone through the record in the light of the submissions made on either side. It could be seen from the proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act that issuance of notice to the assessee is mandatory. At the same time, it could be seen from the excerpts of the remand report culled out by the learned DRP at paragraph No. 2.7.3 of their direction, no such notice was admittedly issued to the assessee. 8. Apart from this, the 16 comparables chosen by the assessee are - 1. Informed Technologies India Ltd., 2. Cosmic Global Limited, 3. Suprawin Technologies Ltd., 4. Sundaram Business Services Ltd., 5. Crystal Hues Limited, 6. Jindal Intellicom Ltd., 7. ISN Global Solutions Pvt. Ltd., 8. R ITA-TP No. 416/Hyd/2022 Page 4 of 6 Systems International Ltd., 9. Datamatics Business Solutions Limited (formerly known as Datamatics Financial Services Limited), 10. Allsec Technologies Ltd., 11. Microland Limited, 12. Tech Mahindra Business Services Ltd., 13. CES Limited, 14. Manipal Digital Systems Pvt. Ltd., 15. Vitae International Accounting Services Private Limited and 16. Ultramarine & Pigments Ltd; whereas learned TPO referred to - 1. Denave India Pvt. Ltd., 2. Impressions Services Pvt. Ltd., 3. ERM India Pvt. Ltd., 4. Husys Consulting Ltd., 5. Ace Integrated Solutions Ltd., 6. Everstone Capital Advisors Pvt. Ltd., 7. Teks Tech Inspection India Pvt. Ltd., 8. Remunance Systems Pvt. Ltd., 9. Apave Assessments India Pvt. Ltd., 10. Mercer Consulting (India) Pvt. Ltd., and 11. Red Baron Integrated Services Pvt. Ltd. Not even a single entity selected by the assessee is considered by the learned TPO. Without referring to the comparables selected by the assessee, the learned TPO recorded that the assessee is specialized in managed document review and contract management, it is, therefore, providing high end legal services and, therefore, the assessee is not comparable with high end ITeS and has to be benchmarked under ITeS. 9. Assessee could have brought the fact to the notice of the learned TPO, had the learned TPO complied with the letter of law under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act. Even learned DRP also missed this vital issue which goes to the root of the problem. In these circumstances, we are of the considered opinion that the learned TPO must be directed to issue notice contemplated under proviso to section 92C(3) or under sub-section (2) of section 92CA of the Act, as the case may be and complete the assessment in accordance with law. At the same time, the learned TPO will also keep in view the assessment orders for the assessment year 2013-14 and 2014-15 passed pursuant to the set aside of the same by the ITAT. 10. Now coming to the aspect of interest charged on delayed payments on trade receivables, learned AR submitted that this issue is squarely ITA-TP No. 416/Hyd/2022 Page 5 of 6 covered by the order dated 06/03/2023 in assessee’s own case for the assessment year 2014-15 wherein a Co-ordinate Bench of the Tribunal, while following the view taken in assessee’s own case for the assessment year 2013-14, set aside the issue to the file of the learned Assessing Officer/learned TPO. While respectfully following the same, we set aside the issue to the file of the learned Assessing Officer/learned TPO with a direction to follow the same for this year also. Grounds are accordingly treated as allowed for statistical purposes. 11. In the result, appeal of assessee is treated as allowed for statistical purposes. Order pronounced in the open court on this the 27 th day of July, 2023. Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER Hyderabad, Dated: 27/07/2023 TNMM ITA-TP No. 416/Hyd/2022 Page 6 of 6 Copy forwarded to: 1. M/s. Quislex Legal Services Private Limited, 2 nd Floor, DHFL VS Silicon Towers, Madhapur Road Kondapur, Ranga Reddy District. 2. The Deputy Commissioner of Income Tax, Circle-5(1), Hyderabad. 3. The Dispute Resolution Panel (DRP), Bengaluru. 4. The Director of Income Tax (IT & TP), Hyderabad. 5. The Addl. Commissioner of Income Tax (Transfer Pricing), Hyderabad. 6. DR, ITAT, Hyderabad. 7. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD