BT (India) Pvt. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 4438/DEL/2010

• Counselvise Citation: 443820114 RSA 2010
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILAS MEENA
• Assessee Lawyers: G C SRIVASTAVA; MANONEET DALAL S
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 92C; 92F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.4438/DEL/2010 ASSESSMENT YEAR : 2006-07 BT (INDIA) PVT. LTD., 11 TH FLOOR, EROS CORPORATE TOWER, OPP. INTERNATIONAL TRADE TOWER, NEHRU PLACE, NEW DELHI. PAN : AABCC4785E VS. ADDL. CIT, RANGE-3, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI G.C. SRIVASTAVA & MANONEET DALAL, ADVOCATES REVENUE BY : SHRI RAM BILAS MEENA, SR.DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07, TAKING THE FOLLOWING GROUNDS:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. ASSESSING OFFICER (ASSESSING OFFICER) HAS ERRED I N PASSING THE ASSESSMENT ORDER U/S 143 (3) R.W.S. 144C OF THE INCOM E TAX ACT, 1961 (THE ACT) AFTER CONSIDERING THE ADJUSTMENTS PROPOS ED BY THE LEARNED TRANSFER PRICING OFFICER (TPO) IN HIS ORDER PASSED U/S 92CA(3) OF THE ACT AND THEREBY APPROVED BY THE HON BLE DISPUTE RESOLUTION PANEL (DRP). EACH OF THE GROUND IS REFERRED TO SEPARATELY, WHICH M AY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, ITA NO.4438/DEL/2010 2 TRANSFER PRICING ADJUSTMENT : 1. THE A.O./DRP HAS ERRED IN CONFIRMING THE ORDER PASSE D U/S 92CA (3) OF THE ACT MAKING AN ADDITION OF RS.13,904, 365 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE INTERNATION AL TRANSACTION ENTERED BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES. 2. THE DRP HAS ERRED IN CONCURRING WITH FINDINGS OF THE A.O./TPO AND DISREGARDING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT FOR ESTABLISHING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS RELATED TO THE PROVISION OF TELECOMMUNICATION AND RELATED SUPPORT SERVICES WITHOUT APPROPRIATE JUSTIFICATION. 3. THE TPO/A.O. HAS ERRED IN SEGREGATING PROVISION OF TELECOMMUNICATION AND RELATED SUPPORT SERVICES INTO TWO DISTINCT ACTIVITIES I.E., LEASING OF EQUIPMENT AND PROVI SION OF SERVICES WITHOUT PROVIDING ADEQUATE JUSTIFICATION FOR DOING SO. 4. THE TPO/A.O. HAS ERRED IN REJECTING 9 OUT OF THE 14 COMPANIES CONSIDERED AS COMPARABLES BY THE ASSESSEE WITHOUT PROVIDING SUFFICIENT BASIS FOR REJECTING THEM. 5. THE DRP HAS ERRED IN NOT CONSIDERING THE CORRECT MARGIN COMPUTATION OF CRISIL LIMITED AS SUBMITTED DURING THE PROCEEDINGS. 6. THE TPO/A.O. HAS ERRED IN DETERMINING THE ARMS LENGTH MARGIN/PRICE USING ONLY FINANCIAL YEAR 2005-06 DATA WHICH WAS NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS. FURTHER, THE TPO HAS ERRED IN USING SI NGLE YEAR DATA PERTAINING TO FINANCIAL YEAR 2005-06 AS AGAI NST MULTIPLE YEAR DATA USED BY THE APPELLANT. 7. THE TPO/A.O. HAS ERRED BY NOT MAKING APPROPRIATE ADJUSTMENTS TO ACCOUNT FOR DIFFERENCES IN WORKING CAPITA L EMPLOYED BY THE ASSESSEE VIS--VIS THE COMPARABLES. 8. THE TPO/A.O HAS ERRED BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR DIFFERENCES IN THE RISK PROFI LE OF THE ASSESSEE VIS--VIS THE COMPARABLES. 9. THE TPO/A.O. HAS ERRED IN NOT PROVIDING THE BENEFIT OF THE ARMS LENGTH RANGE AS PROVIDED UNDER PROVISO TO SECTI ON 92C OF THE ACT FOR PURPOSES OF COMPUTING THE ARMS LENG TH PRICE UNDER SECTION 92F OF THE ACT. ITA NO.4438/DEL/2010 3 DEPRECIATION ON COMPUTER ACCESSORIES AND PERIPHERALS: 10. THE A.O. HAS ERRED IN INTERPRETING THE OBSERVATIONS OF DRP BY APPLYING A TAX DEPRECIATION RATE OF 15 PERCENT ON COMPUTER PERIPHERALS AND SOFTWARE CAPITALIZED BY THE ASSESSEE (WHICH CAN ONLY WORK WITH THE AID OF COMPUTERS), WITHOUT APPRECIATING THAT THE DRP HAS DIRECTED THAT TAX DEPRECIATION SHOULD BE ALLOWED ON SUCH COMPUTER PERIPHERALS AT THE RATE OF 60 PERCENT. 2. THE REGISTRY REPORTS THAT THERE IS A DELAY OF 53 DA YS IN FILING THE APPEAL. IN THE APPLICATION FILED BY THE ASSESSEE FOR CO NDONATION OF DELAY, IT HAS BEEN CONTENDED THAT THE ORDER OF THE A SSESSING OFFICER WAS RECEIVED BY THE ASSESSEE ON 14.06.2010 BY A CLERK, S HRI ANIL KUMAR, WHO DID NOT HAVE ANY BACKGROUND IN FINANCIAL OR TAX MATTERS; THAT THE SAID CLERK INADVERTENTLY KEPT THE ASSESSMENT O RDER ALONG WITH THE OTHER REGULAR MAIL OF THE ASSESSEE AND THE SAME WAS N OT DELIVERED TO THE CONCERNED PERSON RESPONSIBLE FOR TAX/FINANCIAL MATTERS OF THE ASSESSEE COMPANY; THAT IT WAS ON INQUIRY FROM THE DRP TH AT THE ASSESSEE BECAME AWARE, ON 06.09.2010, ABOUT THE ASSESSMENT ORDER HAVING NOT BEEN RECEIVED IN THE ASSESSEES OFFICE; THAT IT WAS THEREAFTER, THAT THE APPEAL WAS FILED ON 05.10.2010, INCURRING A DELAY OF 53 DAYS, THE LIMITATION FOR FILING THE APPEAL HAV ING EXPIRED ON 13.08.2010. 3. THE AFFIDAVIT OF THE AFORESAID CLERK, SHRI ANIL K UMAR, HAS BEEN FILED, SUPPORTING THE APPLICATION FOR CONDONATION OF DELAY. BESIDES, AN AFFIDAVIT OF SHRI RAJIV KHANNA, AUTHORISED REPRESENTA TIVE OF THE ASSESSEE COMPANY, HAS ALSO BEEN FILED. 4. FROM THE AFORE-DETAILED CONTENTS OF THE APPLICATI ON FOR THE CONDONATION OF DELAY, WE FIND THAT DELAY OF 53 DAYS IN FILING THE APPEAL HAS OCCURRED DUE TO THE INADVERTENCE OF THE CLERK OF THE ASSESSEE, WHO KEPT THE ASSESSMENT ORDER ALONG WITH OTHER REGULAR MAIL OF THE ITA NO.4438/DEL/2010 4 ASSESSEE AND THE SAME WAS NOT DELIVERED TO THE CONCERNED PERSON RESPONSIBLE FOR THE TAX/FINANCIAL MATTERS OF THE ASSESSEE COMPANY. IT WAS THIS INADVERTENCE WHICH RESULTED IN THE DELAY OF 5 3 DAYS IN FILING THE APPEAL. THE DELAY, THEREFORE, IS NEITHER DELIBE RATE NOR INTENTIONAL. MOREOVER, THE APPEAL BEING THE APPEAL OF THE ASSESSEE ITSELF, THE ASSESSEE CANNOT BE SAID TO STAND TO GAIN ANYTHING BY FILI NG THE APPEAL AFTER SUCH A DELAY OF 53 DAYS. 5. IN THESE CIRCUMSTANCES, THE DELAY OF 53 DAYS IN FILI NG THE APPEAL IS CONDONED. 6. APROPOS THE MERITS OF THE CASE, IT IS SEEN THAT THE DRP HAS DISPOSED OF THE MATTER BY PASSING THE FOLLOWING SHORT OR DER:- THE ASSESSEE HAS FILED OBJECTIONS ON 29.12.2009 A ND THE CASE WAS FIXED BY DRP FOR 6 TH MAY 2010. BEFORE DRP CASE WAS REPRESENTED BY CA SH. ANUJ KHORANA. THE DRP, HAVING CONSIDERED THEIR ARGUMENTS AND MATERIAL ON RECORD, DEC IDES MATTER AS UNDER: 2. ARMS LENGTH PRICE U/S 92CA (3): A.O/TPO MADE ADDITION OF RS.1,39,04,365/- TOWARDS PROVISION FOR TRSS (TELECOMMUNICATION AND RELATED SU PPORT SERVICES). MAIN ARGUMENTS AGAINST HE ORDER OF THE TPO /A.O. ARE THAT THEY HAVE REJECTED 9 OUT OF THE 14 COMPARABLES GIVE N BY THE ASSESSEE, DIVIDED OPERATING MARGIN ON COST OF BT I NDIA (P) LIMITED INTO LEASING OF EQUIPMENT AND TRSS TO ARRIVE THE MARGIN AT 10.35% INSTEAD OF 10.91% COMPUTED BY THE ASSESSEE, USED CONTEMPORANEOUS DATA OF CURRENT YEAR INSTEAD OF MULTIP LE DATA TO ARRIVE AT ARITHMETICAL MEAN, AND MOST IMPORTANTLY THE M ARGIN OF THE CRISIL LIMITED FOR FINANCIAL YEAR 2005-06 HAS BEEN MENTIONED IN THE ORDER AS 17.39% PERCENT THOUGH THE COR RECT MARGIN IS STATED TO BE WORKED OUT AT 11.55%. THE DRP HAS CONSIDERED THE ARGUMENTS PLACED BY THE ASSESSEE COMPANY AND ALSO PERUSED THE MATERIAL ON REC ORD. IT IS SEEN THAT THE TPO/A.O COMPLETED ENTIRE EXERCISE AFTER GI VING DUE OPPORTUNITY TO THE ASSESSEE. THE ARGUMENTS AT THIS STA GE ARE BASICALLY REITERATION OF SUBMISSIONS MADE DURING THE ASSESSMENT PROCEEDINGS WHICH HAVE ADEQUATELY BEEN CONSIDERED. AS REGARDS THE ARGUMENT THAT MARGIN OF CRI SIL ITA NO.4438/DEL/2010 5 LIMITED IS AT 1.55% INSTEAD OF 17.39% WE HAVE SEEN THE WORKING PROVIDED IN SUPPORT. PRIMA FACIE IT IS CASE OF ALLOCA TING CERTAIN RECEIPTS AND OUTGOING DIFFERENTLY BY TPO AND THE ASSESS EE. IN SUCH A SITUATION EXISTENCE OF SUBJECTIVITY IS OBVIOUS A ND ASSESSEE NOWHERE IS ABLE TO CANVASS A CASE THAT HIS AP PROACH IS MORE OBJECTIVE THAN THE APPROACH ADOPTED BY THE TPO/A.O. IN THESE CIRCUMSTANCES DRP IS OF THE VIEW THAT THE REASONS GIVEN BY THE TPO ARE SOUND AND SUSTAINABLE. THEREFORE NO INTERFERENCE IS REQUIRED IN THE ORDER OF THE TPO/A. O. 3. EXCESS DEPRECIATION ON COMPUTER ACCESSORIES AND PERIPHERALS: THE A.O. DISALLOWED EXCESS DEPRECIATION OF RS.1,26, 784/- BY RESTRICTING THE CLAIM OF DEPRECIATION ON COMPUTER P ERIPHERALS @ 15% AS AGAINST THE CLAIM OF THE ASSESSEE @ 6%. BEFO RE DRP ARS HAVE ARGUED THAT COMPUTER PERIPHERAL ARE PART AND P ARCEL OF COMPUTER AND DEPRECIATION ALLOWABLE ON THESE ASSETS IS @ 60%. WE HAVE GONE THROUGH THE SUBMISSIONS ON THIS POINT AND CONSIDERED THE ARGUMENTS OF THE ARS. ACCORDINGLY A.O. IS BEING DIRECTED TO ALLOW DEPRECIATION @ 60% ON COMPUTER PERIP HERALS WHICH CAN WORK ONLY WITH THE AID OF COMPUTERS. ANY CL AIM OF DEPRECIATION MADE @ 60% ON ASSETS WHICH CAN WORK INDEPENDENTLY WITHOUT THE AID OF COMPUTERS SHOULD BE CONSIDERED UNDER THE BLOCK PLANT & MACHINERY AND DEPRECIATION ON SUCH ASSETS BE RESTRICTED @ 15%. SD/- SD/- SD/- VIJAY SHARMA J.P. MASSAR GOPAL KAMAL CIT-I, NEW DELHI. CIT-I, NEW DELHI DIT (IT)-I, NEW DELHI. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTE D THAT THE MATTER REQUIRES TO BE SENT BACK TO THE DRP, SINCE THE DRP HAS PASSED ITS ORDER BY JUST RELYING ON THE FINDINGS RECORDE D BY THE A.O./TPO, WITHOUT CONSIDERING THE VARIOUS OBJECTIONS R AISED BEFORE IT BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE, IN THIS REGA RD, HAS PLACED RELIANCE ON VODAFON ESSAR LTD. VS. DISPUTE RESOL UTION PANEL-II, 240 CTR 263 (DEL), WHEREIN IT HAS BEEN HELD THAT WH EN A QUASI JUDICIAL AUTHORITY LIKE THE DRP DEALS WITH A LIS U/S 144C, THEN , IT IS OBLIGATORY ON ITS PART TO GIVE COGENT REASONS FOR THE DECISION. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON A DECISION DATED 29.12.2011 R ENDERED BY THE TRIBUNAL IN ITA NOS.4362 AND 3990/DEL/2010, FOR A.Y . 2006-07 IN THE ITA NO.4438/DEL/2010 6 CASE OF AMERICAN EXPRESS SERVICES INDIA LTD. VS. ACIT, COPIES WHEREOF HAVE BEEN PLACED ON RECORD, CO-AUTHORED BY ONE OF US, THE HONBLE VICE PRESIDENT. 8. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY RELIED ON THE ORDER PASSED BY THE LD. DRP. IT HAS BEEN CONTENDED THAT TH E DRP HAS DEALT WITH EACH AND EVERY ISSUE BEFORE IT AND THAT SO, IT CA NNOT BE SAID THAT THE ORDER PASSED BY THE DRP IS A NON-SPEAKING ORDER. 9. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED TH E MATERIAL ON RECORD. A PERUSAL OF THE DRP ORDER SHOWS THAT IT I S A SHORT ORDER PASSED IN GENERAL TERMS ON BOTH THE ISSUES INVOLVED, I.E. , ARMS LENGTH PRICE U/S 92CA(3) OF THE ACT AND EXCESS DEPRECIATION O N COMPUTER ACCESSORIES AND PERIPHERALS. THE OBJECTIONS RAISED BY TH E ASSESSEE BEFORE THE LD. DRP HAVE NOT BEEN DISCUSSED IN DETAIL. 10. IN VODAFON ESSAR LIMITED (SUPRA), IT HAS BEEN HEL D THAT THE DRP IS A QUASI JUDICIAL AUTHORITY AND WHILE DEALING WITH THE CASE U/S 144C OF THE ACT, THE DRP IS UNDER AN OBLIGATION TO ASSIGN COGE NT AND GERMANE REASONS IN ITS ORDER, SO AS TO FACILITATE APPRECIATION B EFORE THE SUPERIOR FORA. VODAFON ESSAR LIMITED (SUPRA) HAS BEEN FOLLOW ED IN AMERICAN EXPRESS SERVICES INDIA LTD. (SUPRA). 11. ACCORDINGLY, WE DEEM IT APPROPRIATE TO REMIT T HIS MATTER TO THE FILE OF THE DRP, TO BE DECIDED AFRESH IN ACCORDANCE WITH THE LAW BY PASSING A SPEAKING ORDER ON AFFORDING ADEQUATE AND PR OPER OPPORTUNITY OF HEARING TO THE ASSESSEE. ORDERED ACCORD INGLY. 12. SINCE THE MATTER IS BEING REMITTED TO THE FILE O F THE DRP, AS ABOVE, THE MERITS OF THE CASE ARE NOT BEING GONE INTO AT THIS STAGE. ITA NO.4438/DEL/2010 7 13. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.10.20 12. SD/- SD/- [G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 12.10.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES