M/s. Concentrix Daksh Services India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 4844/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5015 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I2
• Next Hearing Date: 22-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Assessee Lawyers: PARICHAY SOLANKI
• Keywords: Transfer pricing; Rectification of order; Opportunity of being heard; International transaction; Royalty expenses; Commercial expediency
• Section: 92C; 143(3); 244A; 234B; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E I - 1 , NEW DELHI BEFORE SH. N. S . SAINI, ACCOUNTANT MEMBER A ND SH. SUDHANSHU SRIVASTAVA , JUDICIAL MEMBER ITA NO. 4844/DEL/2015 : ASSTT. YEAR : 2010 - 1 1 M/S CONCENTRIX D AKSH SERVICES INDIA PVT. LTD., (ERSTWHILE KNOWN AS IBM DAKSH BUSINESS PROCESS SERVICES PVT. LTD.), 4 TH FLOOR, TOWER - B, BUILDING NO. 8, CYBER CITY, DLF, PHASE - II, GURGAON, HARYANA VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4(1), NEW DELHI (APPELLANT) (RESPONDENT) P AN NO. A ABCD4187D ITA NO. 1561/DEL/2016 : ASSTT. YEAR : 2011 - 1 2 M/S CONCENTRIX D AKSH SERVICES INDIA PVT. LTD., DLF IT SEZ, BUILDING NO. 14, TOWER D, 17 TH FLOOR, DLF CYBER CITY, SECTOR 24 & 25A, DLF PHASE - III, GURGAON, HARYANA - 122002 VS ASSISTANT COMM IS SIONER OF INCOME TAX, CIRCLE - 6(2 ), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A ABCD4187D ASSESSEE BY : SH. G. C. SRIVASTAVA, ADV., SH. S U VINAY KR. D ASH , ADV. & SH. PARICHAY SOLANKI, CA REVENUE BY : SH. SANJAY I. BARA, CIT DR DATE OF HEARING : 29 .01 .201 9 DATE OF PRONOUNCE MENT : 04.02 .201 9 ORDER PER N. S . SAINI, AM : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF DRP - IV, NEW DELHI DATED 10.12. 2014 FOR ASSESSMENT ITA NO. 4844DEL/2015 ITA NO. 1561/DEL/2016 CONCENTRIX DAKSH SERVICES INDIA PVT. LTD . 2 YEAR 2010 - 11 AND AGAINST THE ORDER OF DRP - I, NEW DELHI DATED 28.11.2015 FOR ASSESSMENT YEAR 2011 - 12 . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: AY 2010 - 11 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E ORDER DATED MAY 12, 2015, PASSED BY THE LEARNED ASSESSING OFFICER ( LD. AO ) UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 ( ACT ) ( RECTIFICATION ORDER ), RECTIFYING THE FINAL ASSESSMENT ORDER DATED FEBRUARY 27, 2015 IS BAD IN LAW. 1.1. THAT ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN PASSING THE ORDER UNDER SECTION 154 OF THE ACT AS THERE WAS NO APPARENT MISTAKE FROM RECORD. 1.2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED I N REVIEWING ITS OWN ORDER OF ASSESSMENT UNDER SECTION 154 OF THE ACT WHEREIN THE LD. AO DOES NOT HAVE THE POWER TO REVIEW ITS OWN ORDER UNDER SECTION 154 OF THE ACT AND THUS IS WITHOUT JURISDICTION. 1.3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO ERRED IN HASTILY PASSING THE RECTIFICATION ORDER WITHOUT PROVIDING THE APPELLANT ADEQUATE AND REASONABLE OPPORTUNITY OF BEING HEARD ON THE MATTER. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO AND LD. DRP ERRED IN MAKING AN ALTERNATE ADDITION AMOUNTING TO RS.26,57,89,123 UNDER SECTION 37 OF THE ACT ON ACCOUNT OF PAYMENT OF ROYALTY FOR INTRA - GROUP SERVICES BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE. 2.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE LD. AO AND THE LD. DRP, ERRED IN HOLDING THAT THE PAYMENT OF ROYALTY FOR INTRA - GROUP SERVICES IS NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ITA NO. 4844DEL/2015 ITA NO. 1561/DEL/2016 CONCENTRIX DAKSH SERVICES INDIA PVT. LTD . 3 2.2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. AO AND THE LD. DRP ERRED IN NOT CONSIDERING THE ENHANCED PROFITS ON ACCOUNT OF ALTERNATE ADDITION OF RS.26,57,89,123 IN RELATION TO PAYMENT OF ROYALTY FOR INTRA - GROUP SERVICES WHILE COMPUTING THE DEDUCTION U/S 10A/10AA OF THE ACT. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.DRP ERRED IN NOT PROVIDING ADEQUATE AND REASONABLE OPPORTUNITY OF BEING HEARD ON THE MATTER OF ALTERNATE ADDITION UNDER SECTION 37 OF THE ACT IN RESPECT OF PAYMENT OF ROYALTY FOR INTRA - GROUP SERVICES, DURING THE PROCEEDINGS B EFORE THE LD.DRP. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, VARY OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AS MAY BE CONSIDERED NECESSARY EITHER BEFO RE OR DURING THE HEARING. AY 2011 - 12 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER ( LD. AO ) UNDER SECTION 154 OF THE ACT READ WITH SECTIONS 143(3) AND 144C OF THE ACT, PURSUANT TO TH E DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL ( LD. DRP ) IS BAD IN LAW AND VOID AB - INITIO. 2. TP ADJUSTMENT WITH RESPECT TO PAYMENT OF ROYALTY THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO (FOLLOWING THE DIRECTIONS OF THE LD . DRP), ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME OF THE APPELLANT BY INR 27,89,25,990/ - AND HOLDING THAT THE INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF ROYALTY DOES NOT SATISFY THE ARM S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT AND IN DOIN G SO HAVE GROSSLY ERRED IN: 2.1. HOLDING THAT THE APPELLANT DID NOT RECEIVE ANY TANGIBLE BENEFIT IN LIEU OF THE PAYMENT OF ROYALTY; THEREBY CHALLENGING THE COMMERCIAL WISDOM OF THE APPELLANT IN MAKING PAYMENT FOR ROYALTY AND PASSING ITA NO. 4844DEL/2015 ITA NO. 1561/DEL/2016 CONCENTRIX DAKSH SERVICES INDIA PVT. LTD . 4 THE ORDER IN CONTRAST W ITH THE RECENT JUDICIAL PRONOUNCEMENTS IN THIS REGARD; 2.2. ARBITRARILY REJECTING THE SUPPLEMENTARY ANALYSIS USING COMPARABLE UNCONTROLLED PRICE ( CUP ) METHOD TO BENCHMARK THE PAYMENT OF ROYALTY TRANSACTION SUBMITTED BY THE APPELLANT WITHOUT GIVING ANY C OGENT REASONS DURING THE PROCEEDINGS BEFORE THE LD. DRP; 2.3. HOLDING THAT AS PER THE FACTS OF THE CASE OF THE APPELLANT, NO INDEPENDENT PARTY WOULD HAVE MADE A PAYMENT FOR ROYALTY AND THEREBY CHALLENGING THE COMMERCIAL EXPEDIENCY OF THE APPELLANT; AND 2 .4. NOT EXAMINING THE TRANSFER PRICING ISSUE AND WITHOUT APPLYING HIS MIND WITH RESPECT TO THE BENCHMARKING/ OTHER DETAILS INSTEAD MADE A REFERENCE TO THE LD. TRANSFER PRICING OFFICER UNDER SECTION 92C(I) OF THE ACT AND THEREBY NOT DISCHARGING THE NECESSAR Y JUDICIAL FUNCTION CONFERRED UNDER SECTION 92C AND SECTION 92CA OF THE ACT. 3. ALTERNATE DISALLOWANCE UNDER SECTION 37 OF THE ACT ON ACCOUNT OF ROYALTY EXPENSES 3.1. WITHOUT PREJUDICE TO GROUND 2, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO AND LD. DRP ERRED IN MAKING AN ALTERNATE DISALLOWANCE UNDER SECTION 37 OF THE ACT AMOUNTING TO INR 27,89,25,990 ON ACCOUNT OF PAYMENT OF ROYALTY BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE. 3.2. THAT ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD. AO AND THE LD. DRP, ERRED IN HOLDING THAT THE PAYMENT OF ROYALTY FOR INTRA - GROUP SERVICES IS NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WITHOUT GIVING ANY REASONS THERETO. 3.3. WITHOUT PREJUDICE TO GROUND 3.1 AND 3.2, THE LD. AO AND THE LD. DRP ERRED IN NOT CONSIDERING THE ENHANCED PROFITS ON ACCOUNT OF ALTERNATE DISALLOWANCE IN RELATION TO PAYMENT OF ROYALTY AMOUNTING TO INR 27,89,25,990 WHILE COMPUTING THE DEDUCTION UNDER SECTIONS 10A/10AA OF TH E ACT. ITA NO. 4844DEL/2015 ITA NO. 1561/DEL/2016 CONCENTRIX DAKSH SERVICES INDIA PVT. LTD . 5 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN ONLY ALLOWING PART CREDIT OF TAXES DEDUCTED AT SOURCE WHILE CALCULATING THE TAX LIABILITY OF APPELLANT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. AO ERRED IN COMPUTING AND LEVYING INTEREST UNDER SECTION 234B OF THE ACT AMOUNTING TO INR 5,84,74,369. 6. THE LD. AO ERRED ON FACTS AND IN LAW IN WITHDRAWING INTEREST UNDER SECTION 244A AMOUNTING TO INR 1,20,77,189 AND CHARGING INTEREST UND ER SECTION 234D AMOUNTING TO INR 2,64,49,041 OF THE ACT. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, VARY OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AS MAY BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE HEARING. 3. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT HE HAS NOT PRESSED THESE TWO APPEALS FILED BEFORE THE TRIBUNAL, HENCE, THEY ARE DISMISSED FOR WANT OF PROSECUTION . 4 . I N THE RESULT, THE APPEALS OF THE ASSESSEE ARE DISMISSED . (ORDER PRON OUNCED IN THE OPEN COURT ON 04 /0 2 /2019 ) SD/ - SD/ - ( SUDHANSHU SRIVASTAVA ) (N. S . SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 / 0 2 /2019 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR