Sutherland Healthcare Solutions Pvt.Ltd., (formerly known as Apollo Health Street Ltd), Hyd, Hyderabad V. DCIT, Circle-3(2), Hyderabad, Hyderabad

ITA 505/HYD/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3136 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 92B; 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 213/HYD/17 2012-13 SUTHERLAND HEALTHCARE SOLUTIONS PRIVATE LIMITED (FORMERLY KNOWN AS APOLLO HEALTH STREET LTD), HYDERABAD [PAN: AADCA4278N] THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD 505/HYD/16 2011-12 FOR ASSESSEE : SHRI ASHIK SHAH, AR FOR REVENUE : SHRI Y.V.S.T.SAI, CIT-DR DATE OF HEARING : 05-03-2020 DATE OF PRONOUNCEMENT : 11-03-2020 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : BOTH ARE ASSESSEES APPEALS FOR THE AYS.2012-13 & 20 11- 12 RESPECTIVELY. THE ASSESSEE WAS FORMERLY KNOWN AS APOLLO HEALTH STREET LTD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPAN Y, WHICH IS ENGAGED IN THE BUSINESS OF IT ENABLED SERVI CES AND BPO SERVICE PROVIDER, FILED ITS RETURNS OF INCOME FO R THE RELEVANT ASSESSMENT YEARS AND ALSO UNDER THE PROVISION S OF SECTION 115JB OF THE INCOME TAX ACT [ACT]. THE ASSESS ING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAS HAVING ITA NOS. 213/HYD/2017 505/HYD/2016 :- 2 -: INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRIS E [AE] FOR PROVIDING CORPORATE GUARANTEE. THEREFORE, THE MATTE R WAS REFERRED TO THE TRANSFER PRICING OFFICER [TPO] FOR DE TERMINATION OF THE ARMS LENGTH PRICE [ALP] OF THE TRANSACTION AND THE TPO PROPOSED AN ADJUSTMENT OF RS.8,39,90,088/-. ACCORDING LY, THE DRAFT ASSESSMENT ORDER WAS PASSED, AGAINST WHICH THE ASSESSEE PREFERRED ITS OBJECTIONS TO THE DISPUTE RESOLU TION PANEL [DRP]. AS PER THE DIRECTIONS OF DRP, FINAL ASSE SSMENT ORDER WAS PASSED, AGAINST WHICH, THE ASSESSEE IS IN SECOND APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS IN IT A NO.213/HYD/2017 FOR THE AY.2012-13: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO/DRP HAS: GENERAL GROUND 1. ERRED IN ASSESSING THE TOTAL INCOME OF THE APPEL LANT AT RS 22,81,83,328 AS AGAINST RS 14,41,93,240 UNDER NORMA L PROVISIONS OF THE ACT AS COMPUTED BY THE APPELLANT IN ITS RETURN OF INCOME. TRANSFER PRICING MATTERS - 2. MAKING ADJUSTMENT OF RS. 8,39,90,088 ON THE SHAR EHOLDERS CORPORATE GUARANTEE PROVIDED TO BANK AT THE RATE OF 2%: A) NOT APPRECIATING THAT THE SHAREHOLDER CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL T RANSACTION U/ S 92B OF THE ACT; B) NOT APPRECIATING THAT THE CLARIFICATORY AMENDMEN T TO SECTION 92B WOULD NOT APPLY TO THE FACTS OF THE CASE; C) DISCRIMINATING THE US SUBSIDIARY IN DETERMINING THE ALP FOR SHAREHOLDER CORPORATE GUARANTEE VIS-A-VIS SIMILAR S HAREHOLDER CORPORATE GUARANTEE PROVIDED BY PARENT COMPANY TO I NDIAN SUBSIDIARIES IN VIOLATION OF ARTICLE 26 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT. (DTAA). ITA NOS. 213/HYD/2017 505/HYD/2016 :- 3 -: D) WITHOUT PREJUDICE, NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETERMINING THE ALP ON THE SHAREHOLDER CORPORATE GU ARANTEE BY DETERMINING THE BENEFIT TO US WHOLLY OWNED SUBSIDIA RY IN TERMS OF INTEREST SAVINGS ON ACCOUNT OF THE GUARANT EE EXTENDED. E) WITHOUT PREJUDICE, NOT FOLLOWING THE HON'BLE TRI BUNAL RULINGS AND JUDICIAL PRECEDENTS ON APPLICABILITY OF TP TO S IMILAR GUARANTEE AND DETERMINATION OF ALP. CORPORATE TAX ISSUES 3. LEVYING OF INTEREST U/ S 234B AND 234C ON THE TR ANSFER PRICING ADJUSTMENTS. THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL . 3. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR I SSUE OF THE CORPORATE GUARANTEE AND THE RATE OF COMMISSION ON SUCH CORPORATE GUARANTEE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS.2009-10 & 2010-11 AN D THE TRIBUNAL HAD SET ASIDE THE ENTIRE ISSUE TO THE FILE OF AO/TPO FOR FRESH ADJUDICATION. IT IS SUBMITTED THAT IN THE CONSE QUENTIAL PROCEEDINGS, THE TPO HAS ADOPTED 0.92% AS THE CORPORATE GUARANTEE COMMISSION AT ARMS LENGTH. LD.COUNSEL FOR THE ASSESSEE HAS PLACED BEFORE US THE COPIES OF THE ORDER S OF THE TRIBUNAL IN ITA NOS.41/HYD/2014 & 132/HYD/2014, (AY.2009-10) DT.30-06-2014 AND ALSO THE COPIES OF THE ORDER IN ITA NOS.435/HYD/2015 & 332/HYD/2015 (AY.2010-11) DT.21-10-2016 IN WHICH THE ISSUE WAS REMITTED TO THE FIL E OF THE AO/TPO FOR FRESH CONSIDERATION. 4. LD.DR WAS ALSO HEARD. ITA NOS. 213/HYD/2017 505/HYD/2016 :- 4 -: 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE TP ADJUSTMENT ON CORPORATE GUARA NTEE WERE REFERRED TO THE AO/TPO FOR FRESH ADJUDICATION FO R THE AYS.2009-10 AND 2010-11. IT IS STATED THAT THE TPO, IN THE CONSEQUENTIAL PROCEEDINGS, HAS ACCEPTED 0.92% AS THE A LP CORPORATE GUARANTEE COMMISSION. FOLLOWING THE EARLIER ORDER OF ITAT, WE REMIT THE ISSUE FOR THE ASSESSMENT YEAR BEFORE US ALSO TO THE AO/TPO AND DIRECT THE AO/TPO TO ADOPT THE SAME RATE OF COMMISSION FOR THE CORPORATE GUARANTEE AS DECIDED I N THE EARLIER ASSESSMENT YEARS. 5.1. GROUND NO.3 IS IN CONNECTION WITH LEVY OF INTER EST U/SS.234B AND 234C OF THE ACT. THIS ISSUE IS ALSO R EMITTED TO THE FILE OF AO TO GIVE CONSEQUENTIAL RELIEF, IF ANY TO THE ASSESSEE. 6. IN THE RESULT, APPEAL OF ASSESSEE IN ITA NO.213/HYD/2017 FOR THE AY.2012-13 IS TREATED AS ALLOW ED FOR STATISTICAL PURPOSES. ITA NO.505/HYD/2016 (AY.2011-12): 7. IN THIS APPEAL OF ASSESSEE, THERE ARE OTHER CORPORA TE TAX ISSUES AND THESE ISSUE ARE ALSO SET ASIDE TO THE FILE O F AO FOR VERIFICATION OF THE ASSESSEES CLAIMS AND GRANTING O F RELIEF, IF ANY TO THE ASSESSEE AND IN RESPECT OF SET-OFF OF BROUG HT FORWARD LOSSES, AS DIRECTED BY THE DRP. HENCE, AO/TPO IS DIRE CTED TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESSEE. ITA NOS. 213/HYD/2017 505/HYD/2016 :- 5 -: 8. IN THE RESULT, APPEAL OF ASSESSEE IN ITA NO.505/HYD/2016 FOR THE AY.2011-12 IS ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. TO SUM-UP, BOTH THE APPEALS OF ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ODER PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH, 2020 SD/- SD/- ( A. MOHAN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 11-03-2020 TNMM ITA NOS. 213/HYD/2017 505/HYD/2016 :- 6 -: COPY TO : 1. SUTHERLAND HEALTHCARE SOLUTIONS PRIVATE LTD., UN IT-II, SURVEY NO.185(P), 2 ND & 3 RD FLOOR, KALAJYOTHI PROCESS, KONDAPUR VILLAGE, SERILINGAMPALLI, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3( 2), HYDERABAD. 3. DISPUTE RESOLUTION PANEL (DRP), BENGALURU. 4. DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICI NG), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.