Broadridge Financial Solutions India Private Limited, Hyderabad, Hyderabad V. DCIT, Circle-1(2), Hyderabad, Hyderabad

ITA 514/HYD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1374 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUNATHAN S
• Assessee Lawyers: J SIRI KUMAR
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 142(1); 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE S MT P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S . RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO S . 514 & 515 /HYD/201 7 ASSESSMENT YEAR: 20 08 - 09 & 2009 - 10 BROADRIDGE FINANCIAL SOLUTIONS (INDIA) PVT. LTD., HYDERABAD. PAN AA DCB0321R VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1 ( 2 ), HYDERABAD. (APPELLANT) (RESPONDENT) REVENUE BY : S HRI RAGHUNATHAN S. ASSESSEE BY : SHRI J. SIRI KUMAR DATE OF HEARING : 01 / 1 0/2018 DATE OF PRONOUNCEMENT : 29 /1 1 /2018 O R D E R PER S . RIFAUR RAHMAN , A .M. : TH E S E TWO APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER S PASSED U/S 143(3) R.W.S. 144C R.W.S. 254 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) , BOTH DATED, 16/01/2017 RELATING TO AY 2 0 08 - 09 AND 2009 - 10 . AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF C ONVENIENCE. 2. BRIEF FACTS AS TAKEN FROM AY 2008 - 09 ARE, ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF IT SERVICES AND IT ENABLED SERVICES, FILED ITS RETURN OF INCOME FOR THE AY 2008 - 09 ON 29/08/2008, ADMITTING TOTAL INCOME OF RS. 74,180/ - UNDER NORMAL PR OVISIONS OF THE ACT, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) & 142(1) WERE ISSUED AND DULY SERVED ON THE ASSESSEE. 2 ITA NO S . 514 & 515 /HYD/1 7 M/S BROADRIDGE FINANCIAL SOLUTIONS INDIA PVT. LTD. 2.1 ASSESSEE HAS FURNISHED A REPORT IN FORM NO. 3CEB I N ACCORDANCE WITH THE PROVISIONS OF SECTION 92E. AS PER THIS REPORT, ASSESSEE HAD INTERNATIONAL TRANSACTIONS WITH ITS AES AND, THEREFORE, A REFERENCE WAS MADE TO THE TPO AS PER THE PROVISIONS OF SECTION 92CA FOR DETERMINATION OF ARMS LENGTH PRICE. ACCORDI NGLY, TPO PASSED TH E ORIGINAL TP ORDER ON 28/10/201 1. BASED ON THE ABOVE TP ORDER, A DRAFT ASSESSMENT WAS ISSUED ON 14/12/2011 U/S 144C(1) OF THE ACT. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DRP. 2.2 CONSEQUENT TO THE ORDER OF DRP DATED 03/08/2012, FINAL ASSESSMENT ORDER WAS PASSED ON 12/10/2012. AGGRIEVED WITH THE ABOVE ORDE R, ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT, HYDERABAD. 2.3 BEFORE THE ITAT, ASSESSEE SUBMITTED THAT THAT ASSESSEE IS INTO I TES SERVICES AS WELL AS IT ACTIVITIES. THE TPO AS WELL AS DRP WRONGLY CATEGORIZED THE ASSESSEE AS ITES COMPANY ONLY. BASED ON THE SWORN AFFIDAVIT, ASSESSEE DECLARED THAT IT SERVICES IS AT 67.06% AND THAT ITES IS AT 32.94% TO THE TOTAL TURNOVER. ASSESSEE AL SO RELIED UPON THE SERVICE ISSUED BY STPI DATED 19/02/2007 AND 18/04/2007 ALONG WITH AFFIDAVIT. CONSIDERING THE ABOVE SUBMISSIONS, ITAT HAS REMITTED THIS BACK TO THE FILE OF TPO TO CONSIDER THE SUBMISSIONS OF THE ASSESSEE IN RE - CHARACTERISATION OF THE CATE GORY OF THE ASSESSEE AND IT IS DIRECTED FOR DECIDING AFRESH AFTER CONSIDERING THE AVERMENTS OF THE ASSESSEE AS WELL AS OTHER FACTS AND MATERIAL AVAILABLE ON RECORD, VIDE ORDER DATED 29/11/2013. 2.4 SUBSEQUENTLY, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE AP HIGH COURT ON CERTAIN ISSUES AND THE HONBLE AP HIGH COURT REMANDED THE MATTER BACK TO THE ITAT TO REDECIDE THE ISSUE IN ACCORDANCE WITH LAW AND ON MERITS. BASED ON THE ABOVE DIRECTIONS, ITAT PASSED REVISED ORDER ON 20/03/2015. 3 ITA NO S . 514 & 515 /HYD/1 7 M/S BROADRIDGE FINANCIAL SOLUTIONS INDIA PVT. LTD. 2.5 SUBSEQUENT LY, THE TPO PASSED ORDER GIVING EFFECT TO THE ITATS REVISED ORDER ON 30/01/2016, IN WHICH, THE TPO HAS ACCEPTED THE RE - CHARACTERISATION OF THE ASSESSEE AND HELD THAT ASSESSEE IS INTO IT AS WELL AS ITES SEGMENTS. ACCORDINGLY, TPO COLLECTED VARIOUS INFORMAT ION FROM THE ASSESSEE AND CARRIED OUT SEPARATE BENCH MARKING ANALYSIS FOR IT AND ITES SEGMENTS AND PROPOSED TP ADJUSTMENTS INDIVIDUALLY TO EACH SEGMENT. HE COMPLETED THE TP STUDY AND PROPOSED ALP ADJUSTMENT IN RESPECT OF ITES SEGMENT TO THE EXTENT OF RS. 1 ,92,39,483/ - AND FOR IT SEGMENT, THE ADJUSTMENT TO THE EXTENT OF RS. 4,83,79,982/ - , VIDE HIS ORDER DATED 30/01/2016. BASED ON THE ABOVE TPOS ORDER, AO PASSED SECOND DRAFT ASSESSMENT ORDER ON 29/03/2016. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED A N APPEAL BEFORE THE DRP. 2.6 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE DRP REJECTED APPEAL OF THE ASSESSEE VIDE ITS ORDER DATED 15/12/2016, BY OBSERVING AS UNDER: THE HON'BLE ITAT PASSED AN ORDER DATED 29.11.2013 IN THIS CASE (IN ITA NO. 179 5/HYD / 12), ON WHICH ASSESSEE PREFERRED AN APPEAL TO HON'BLE HIGH COURT ON CERTAIN ISSUES. PURSUANT TO THE ORDERS OF THE HON'BIE HIGH COURT OF TELANGANA AND AP, THE HON'BLE TRIBUNAL IN THIS CASE PASSED A REVISED ORDER DATED 20 MARCH 2015 GIVING SPECIFIC DIR ECTIONS IN THE MATTER AND CONSEQUENTLY, THE TPO PASSED AN ORDER DATED 30 JANUARY 2016, GIVING EFFECT TO THE DIRECTIONS OF THE HON'BLE TRIBUNAL. THE AO HAS INCORPORATED TPO'S REVISED COMPUTATION OF ADJUSTMENT U/S 92CA, IN HIS DRAFT ORDER DATED 29.03.2016. W HEN THE AO PASSES AN ORDER GIVING EFFECT TO THE HON'BLE TRIBUN AL ORDER, PROVISIONS OF SECTION 144C ARE NOT APPLICABLE AS SECTION 144C(L) PROVIDES THAT THE ASSESSING OFFICER SHALL FORWARD THE DRAFT ASSESSMENT ORDER 'IN THE FIRST INSTANCE . THE TERM 'FIRST I NSTANCE' USED IN SECTION 144C(1) PROVIDES UNDER WHAT CIRCUMSTANCES THE AO SHA LL FORWARD THE DRAFT ASSESSMENT ORDER SO AS TO ENABLE THE ASSESSEE TO FILE AN OBJECTION BEFORE THE D RP. THE TERM 'FIRST INSTANCE' MEANS FOR THE FIRST TIME OR FIRST EVENT IN SERIES OF THE EVENT. IN THE CONTEXT OF SECTION 144C(L), IT MEANS WHEN THE AO IS PASSING THE ORDER FOR THE FIRST TIME FOR THE RELEVANT ASSESSMENT YEAR. 4 ITA NO S . 514 & 515 /HYD/1 7 M/S BROADRIDGE FINANCIAL SOLUTIONS INDIA PVT. LTD. IT IS FURTHER OBSERVED THAT SECTION 144C( 1 ) PROVIDES THAT A DRAFT ORDER SHALL BE ISSUED WHEN ANY VARIATION IS PROPOSED TO INCOME OR L OSS RETURNED. SECTION 144C WOULD THEREFORE BE ATTRACTED ONLY WHERE A VARIATION IS PROPOSED TO THE INCOME OR LOSS RETURNED BY THE ASSESSEE. T H E EXPRESSION INCOME OR LOSS RETURNED USED IN SECTION 144C (1 ) REFERS TO INCOME OR LOSS DECLARED BY THE ASSESSEE IN ' ITS RETURN OF INCOME. THE AD IS NOT MAKING ANY VARIATION TO THE INCOME 'RETURNED'. IN THE INSTANT CASE, THE AD IS CONCERNED WITH THE RECOMPUTATION OF ASSESSED INCOME, PURSUANT TO THE ORDER OF THE HON'BLE TRIBUNAL. THE ORDER PASSED BY THE A O FOR THE YEAR UNDER CONSIDERATION IS FOR GIVING EFFECT TO SPECIFIC DIRECTIONS OF THE HON'B L E I TAT, HENCE , DOES NOT COME UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 144C(1) OF THE ACT. FURTHER , IT IS ALSO NOTICED THAT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A ) ON 27. 5.2016 IN FORM 35, SIMULTANEOUSLY, FOR REDRESSAL OF THE SAME GRIEVANCE (EMANATING FROM THE ASST . ORDER DATED 29 . 03 . 2016) FOR WHICH THESE OBJECTIONS ARE FILED BEFORE US. INFACT , IN THE APPEAL MEMO FILED BY THE ASSESSEE BEFORE THE CIT(A) IN FORM 35 , AT SERIAL 11, THE ASSESSEE IN ITS REPLY, STATES THAT THE DRP MAY OR MAY NOT ADJUDICATE THE MATTER FOR LACK OF JURISDICTION, AND BEFORE US THE ASSESSEE STATES THAT BECAUSE OF ISSUE OF DEMAND NOTICE BY THE AO THE ORDER PASSED IS NOT AS PER RULES. HENCE, I N VIEW O F THE ABOVE FACTS OF THE CASE AND PROVISIONS OF LAW, WE ARE OF THE OPINION THAT THE ORDER PASSED IN CONSEQUENCE TO THE DIRECTIONS ISSUED BY THE HON'BLE ITAT UNDER SECTION 254, DOES NOT COME UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 144C(1) OF THE ACT AND THEREFORE, THE DISPUTE RESOLUTION PANEL DOES NOT HAVE THE JURISDICTION AND ACCORDINGLY NOT EMPOWERED TO ISSUE THE DIRECTIONS ON THE SAME. AND, THE ASSESSING OFFICER MAY THEREFORE PROCEED WITH PASSING FINAL ASSESSMENT ORDER IN THIS CASE, AS PER THE PROVISIONS OF THE ACT. 3. ASSESSEE IS IN APPEAL BEFORE US AGAINST THE IMPUGNED ORDER OF DRP DATED 15/12/2016. 4. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE OBSERVE THAT TPO HAS PASSED THE ORIGINAL TP ORDER ON 28/10/2011 CHARACTERISING THE ASSESSEE AS ITES SERVICES PROVIDER. ASSESSEE PREFERRED AN APPEAL BEFORE THE DRP, IN WHICH THE DRP ALSO AGREED WITH THE TPO. IN THE SECOND APPEAL PROCEEDINGS, ITAT REMANDED THE ISSUE BACK TO THE FILE OF TPO WITH A DIRECTION TO RE - CHARACTE RISE THE ASSESSEE INTO IT & ITES SEGMENTS AND REDO THE TP 5 ITA NO S . 514 & 515 /HYD/1 7 M/S BROADRIDGE FINANCIAL SOLUTIONS INDIA PVT. LTD. ANALYSIS AFRESH. BASED ON THE DIRECTION FROM ITAT, THE TPO HAS PASSED THE SECOND ORDER INCORPORATING THE DIRECTIONS OF THE ITAT AND ACCEPTED THE RE - CHARACTERISATION OF THE ASSESSEE INTO IT AND ITES SEGMENTS BASED ON THE INFORMATION PROVIDED ON RECORD BY THE ASSESSEE AND THE TPO HAS COMPLETED THE TP ANALYSIS AND CARRIED OUT SEPARATE BENCH MARKING FOR IT AND ITES SEGMENTS. BASED ON THE ABOVE STUDY, TPO HAS PROPOSED FRESH TP ADJUSTMENTS VIDE HIS ORDER DATED 30/01/2016. THE DRP IN ITS IMPUGNED ORDER DATED 15/12/2016 REJECTED THE APPEAL OF THE ASSESSEE BY TREATING THE SECOND ROUND OF APPEAL AS NOT FALLS WITHIN THE PROVISIONS OF SECTION 144C(1) OF THE ACT AND IT IS NOT IN THE FIRST INSTANCE OF THE APPEAL PROCEEDINGS. 4.1 ON CAREFUL ANALYSIS OF THE SUBSEQUENT EVENTS RELATING TO 2008 - 09, WE ARE OF THE VIEW THAT TPO HAS PASSE D ORIGINAL ORDER CHARACTERISING THE ASSESSEE AS ITES SERVICE PROVIDER AND THE SAME WAS REMITTED BACK TO HIM TO REDO THE TP ANALYSIS BASED ON THE OBJECTIONS FROM THE ASSESSEE, WHICH WAS ACCEPTED BY THE TPO AND PASSED A FRESH TP ANALYSIS. THE FIRST INSTANCE REFERRED BY THE DRP IS THE FIRST INSTANCE AVAILABLE TO THE ASSESSEE ON AN ORDER PASSED BY THE TPO. WHEN THE TPO PASSED EARLIER ORDER, FOR THAT PARTICULAR ORDER, THE FIRST INSTANCE WAS APPLIED BY THE ASSESSEE TO GO FOR THE SUBSEQUENT APPEAL. WHEN THE TPO P ASSED SECOND ORDER, THE FIRST INSTANCE IN RELATION TO THAT ORDER IS AVAILABLE WITH THE ASSESSEE TO PROCEED WITH THE APPEAL PROCEEDINGS SINCE THE TPO HAS PASSED FRESH ORDER AFTER SEPARATE BENCH MARKING ANALYSIS UNDERTAKEN FOR IT AND ITES SEGMENTS. THEREFORE , THE ASSESSEE CANNOT BE DENIED ITS RIGHTS TO APPEAL BEFORE HIGHER FORUM AND THE TIME FRAME TO GO FOR APPEAL AS PER SECTION 144 C COMMENCES FROM THE FRESH ORDER FROM THE TPO IRRESPECTIVE OF PAST EVENTS RELAT ING TO THE SAME ASSESSMENT. THEREFORE, WE REMIT THI S ISSUE BACK TO THE DRP TO CONSIDER THE OBJECTIONS OF THE ASSESSEE RELATING TO SECOND ORDER OF TPO AND PASS AN ORDER IN ACCORDANCE WITH THE LAW AS WELL AS ON MERITS. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOS ES. 6 ITA NO S . 514 & 515 /HYD/1 7 M/S BROADRIDGE FINANCIAL SOLUTIONS INDIA PVT. LTD. 5. AS THE FA CTS AND GROUNDS RAISED IN AY 2009 - 10 ARE MATERIALLY IDENTICAL TO THAT OF AY 2008 - 09, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE REMIT THIS APPEAL ALSO TO THE FILE OF DRP TO DECIDE THE SAME IN LINE WITH THE DIRECTIONS GIVEN IN AY 2008 - 09 ( SUPRA). 6. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERATION ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 29 TH NOVEMBER , 2018 KV C OPY TO: - 1) M/S BROADRIDGE FINANCIAL SOLUTIONS (INDIA) PVT. LTD. SURVEY NO. 64, HITECH CITY, MADHAPUR, SERILINGAMPALLY MANDAL, RANGA REDDY, HYDERABAD 500 081 2) D C IT, CIRCLE 1 ( 2 ) , 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD 500 004. 3) DRP, BENGALURU 4 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 5 ) GUARD FILE