Ciena India Pvt. Ltd., Gurgaon V. ITO, New Delhi

ITA 5090/DEL/2012

• Counselvise Citation: 509020114 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 31-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: SOMYA SETH
• Keywords: Transfer pricing; International transaction
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO.-5090/DEL/ 2012 (ASSESSMENT YEAR-2007-08) CIENA INDIA PVT. LTD., PLOT NO.-14, SECTOR-32, ECHELON INSTITUTIONAL AREA, GURGAON-122001, HARYANA. P AN-AACCC6131B (APPELLANT) VS ITO, WARD-3(3), C.R.BUILDING, NEW DELHI. (RESPONDENT) APPELLANT BY SMT. SOMYA SETH, CA RESPONDENT BY SH. PEEYUSH JAIN, CIT DR ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31.07.2012 OF CIT(A)-XX, NEW DELHI PERTAINING TO 2007-08 ASSES SMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN REJECTION OF THE APPELLANT S TP DOCUMENTATION, COMPARABLE COMPANIES AND ANALYSIS THEREOF AND ACCOR DINGLY UPHOLDING THE ERRONEOUS METHODOLOGY ADOPTED BY THE LD. AO/LD. TPO BASED UPON FRESH COMPARABILITY ANALYSIS ON THE BASIS OF ADDITIONAL/M ODIFIED QUANTITATIVE FILTERS WHICH LACKED VALID AND SUFFICIENT REASONING. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE LD. AO/LD. TP OS POSITION OF CONSIDERING THE UNAUDITED DATA REQUISITIONED BY TAK ING RECOURSE TO THE PROVISIONS OF SECTION 133(6) OF THE ACT, IRRESPECTI VE OF THE AVAILABILITY OF SUCH DOCUMENTATION OR THE INFORMATION IN THE PUBLIC DOMA IN. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ERRONEOUS APP ROACH OF THE LD. AO/LD. I.T.A .NO.-5090/DEL/2012 2 TPO OF DENYING THE ECONOMIC ADJUSTMENT FOR THE DIFF ERENCE IN RISK PROFILE OF THE APPELLANT VIS--VIS THE COMPARABLE COMPANIES. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING O F THIS APPEAL AS THEY MAY BE ADVISED. 2. THE RELEVANT FACTS AS PER RECORD ARE THAT THE AS SESSEE IS STATED TO BE INCORPORATED ON JUNE 27, 2005 AS A 100% EXPORT ORIE NTED UNIT UNDER SOFTWARE TECHNOLOGY PARK SCHEME. THE COMPANY IS STATED TO H AVE STARTED FULL-FLEDGED OPERATIONS FROM FY 2006-07 I.E. COMMENCED RENDERING SOFTWARE DEVELOPMENT SERVICES TO CIENA CORP US FROM APRIL 10, 2006. THE ASSESSEES NATURE OF WORK IS DESCRIBED AS SOFTWARE DEVELOPMENT SERVICES AND THE ASSESSEE IS STATED TO BE ESSENTIALLY ENGAGED IN THE PROVISION OF CONTRACT RE SEARCH AND DEVELOPMENT. AS PER THE TP REPORT THE ASSESSEE CARRIED OUT ITS FAR ANALYSIS AND BASED ON THE FUNCTIONS PERFORMED, ASSETS USED AND RISK BORNE HAS CHARACTERIZED ITSELF AS A ROUTINE SOFTWARE DEVELOPMENT SERVICE PROVIDER UTILI ZING ROUTINE ASSETS AND ASSUMING NORMAL BUSINESS RISKS. THE ASSESSEE FILED ITS RETURN ELECTRONICALLY DECLARING AN INCOME OF RS.30,59,992/-. THE FOLLOW ING INTERNATIONAL TRANSACTIONS WERE DISCLOSED BY THE ASSESSEE :- S.NO. INTERNATIONAL TRANSACTIONS VALUE OF INTERNATIONAL TRANSACTIONS (AMOUNT IN RS.) METHOD USED IN TP REPORT PLI CIPLS MARGIN COMPARABLE MARGIN 1. SOFTWARE DEVELOPMENT SERVICES 613,433,681 2. PURCHASE OF CAPITAL EQUIPMENT 303,827,285 3. REIMBURSEMENT OF EXPENSES (PAID) 38,653,342 4. REIMBURSEMENT OF EXPENSES (RECEIVED) 869,069 TRANSACTI ONAL NET MARGIN METHOD OP/TC 12.97% 13.09% 5. RECEIPT OF SHARE APPLICATION MONEY 24,047,575 NA TOTAL 652,956,092 I.T.A .NO.-5090/DEL/2012 3 2.1. IT IS FURTHER SEEN THAT AS PER THE TP REPORT T NMM WAS SELECTED AS THE MOST APPROPRIATE METHOD FOR ESTABLISHING THE ARMS LENGT H NATURE OF ITS INTERNATIONAL TRANSACTION TAKING OPERATING PROFIT/TOTAL COST (HER EINAFTER REFERRED TO AS OP/TC) AS A PROFIT LEVEL INDICATOR (HEREINAFTER REFERRED T O AS PLI). THE ASSESSEE IDENTIFIED 17 COMPARABLES WHOSE MEAN OP/TC WAS 13.0 9%. EXERCISING THE PROVISO TO SECTION 92C(2) THE ASSESSEES OP/TC OF 1 2.97% WAS REFERRED TO IN ORDER TO JUSTIFY THAT THE TRANSACTION WAS AT ARMS LENGTH. THE TPO REJECTED THE TP STUDY REPORT AND HE CARRIED OUT A FRESH BENCH-MARKI NG ANALYSIS USING COMPARABLE DATA COMPUTING THE ARMS LENGTH MARGIN AT 24%. CON SEQUENT TO THAT ADJUSTMENT OF RS.6,16,41,473/- WAS PROPOSED WHICH WAS UPHELD B Y THE CIT(A) IN THE IMPUGNED ORDER. HOWEVER AT THE TIME OF HEARING, A PETITION WAS MOVED ON BEHALF OF THE LD. AR REQUESTING AS UNDER :- RESPECTED SIRS, RE: CIENA INDIA PRIVATE LIMITED (PAN-AACCC6131B)-AP PEAL NO.- 5090/DEL/2012 FOR ASSESSMENT YEAR 2007-08-WITHDRAWA L OF APPEAL. WE WRITE FOR, ON BEHALF AND UNDER INSTRUCTIONS OF O UR CLIENT, CIENA INDIA PRIVATE LIMITED [CIPL OR THE APPELLANT] THIS HAS REFERENCE TO THE APPEAL FILED ON OCTOBER 1 , 2012. IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT THE APPELLANT WISHES TO WITHD RAW THE APPEAL FOR AY 2007-08. WE HOPE THAT OUR REQUEST SHALL BE ACCEDED TO. 3. THE RECORD SHOWS THAT THE FIRM DELOITTE HASKINS & SELLS ON WHOSE LETTER HEAD THE SAID REQUEST HAS BEEN MOVED HAS BEEN AUTHO RIZED BY A POWER OF ATTORNEY DATED 30.11.2012 TO APPEAR AND ACT ON BEHA LF OF THE ASSESSEE. IT IS ALSO SEEN THAT NAME OF THE SIGNATORY OF THE SAID REQUEST MR. ANKIT ARORA AND PERSON IN SUPPORT OF THE PETITION MOVED MS. SOMYA SETH HAVE B OTH BEEN DULY AUTHORIZED BY THE ASSESSEE TO APPEAR AND ACT ON BEHALF OF THE ASS ESSEE BEFORE THE TRIBUNAL AND OTHER FORUMS. ACCORDINGLY THE LD. CIT DR, SH. PEEY USH JAIN WAS REQUIRED TO ADDRESS THE BENCH WHETHER HE WOULD HAVE ANY OBJECTI ON IF THE WITHDRAWAL OF ASSESSEES APPEAL AS REQUESTED IS PERMITTED. IN RE SPONSE THERETO THE LD. CIT DR I.T.A .NO.-5090/DEL/2012 4 STATED THAT HE HAD NO OBJECTION IF THE ASSESSEE IS PERMITTED TO WITHDRAW ITS APPEAL. IN THE LIGHT OF THE AFORE-MENTIONED PECULIAR FACTS AND CIRCUMSTANCES, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. T HE ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE PARTIES. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE DISMIS SED AS WITHDRAWN. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND OF NOVEMBER, 2013. SD/- SD/- (J.S.REDDY) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/11/2013 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT RE GISTRAR ITAT NEW DELHI