Appeal details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 8529 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-01-2020
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
K
Assessment Year
2010-2011
Appeal Filed On
03-08-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K , MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI N.K.PRADHAN, ACCOUNTANT MEMBER ITA NO.5142/MUM/2017(A.Y. 2010-11) ALTICO CAPITAL INDIA PRIVATE LIMITED, (FORMERLY CLEARWATER CAPITAL PARTNERS INDIA PRIVATE LIMITED,) 7 TH FLOOR, MUDRA HOUSE, OPP. GRAND HYATT, SANTACRUZ(E), MUMBAI 400 055. PAN:AACCC3064F ...... APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1), AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ..... RESPONDENT APPELLANT BY : SHRI MADHUR AGRAWAL RESPONDENT BY : SHRI ASHISH HELI WAL DATE OF HEARING : 08/01/2010 DATE OF PRONOUNCEMENT : 10/01/2020 ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-55, MUMBAI [ IN SHORT THE CIT(A)]DATED 30/03/2017 FOR THE ASSESSMENT YEAR 20 10-11. 2. SHRI MADHUR AGRAWAL APPEARING ON BEHALF OF THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS PROVIDING INVESTMEN T ADVISORY SERVICES. 2 ITA NO.5142/MUM/2017(A.Y. 2010-11) THE ASSESSEE IS SUBSIDIARY OF CLEAR CAPITAL PARTNER , CYPRUS. THE ASSESSEE ENTERED IN INTERNATIONAL TRANSACTION WITHIN GROUP E NTITY BASED IN SINGAPORE. THE ASSESSEE APPLIED TRANSACTIONAL N ET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS. THE ASSESSEE SELECTED SEVEN COMPARAB LES TO DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSAC TIONS. THE TPO ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD HOWE VER, THE TPO EXCLUDED CERTAIN COMPARABLES SELECTED BY THE ASSESS EE AND INTRODUCED FRESH COMPARABLES. THE ARITHMETIC MEAN OF THE FINA L SET OF COMPARABLES SELECTED BY THE TPO WAS42.66% AS AGAINST THE AVERA GE WEIGHTED MARGIN OF THE COMPARABLES SELECTED BY THE ASSESSEE AT 18.2 3%. THUS, THE TPO MADE UPWARD ADJUSTMENT OF RS.19,05,210/-. THE ASSE SSING OFFICER VIDE ORDER DATED 10/04/2014 PASSED UNDER SECTION 143(3) R.W.S. 144C(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) MADE ADDI TION OF RS.98,05,210/- QUA INTERNATIONAL TRANSACTION AS PROPOSED BY THE T PO. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT APART FROM TRANSFER PRICING ADJUSTMENT, THE ASSE SSING OFFICER FURTHER MADE ADDITION OF RS.21,70,725/- ACCOUNT OF MISMAT CH IN FORM 26AS. THE ASSESSEE RECEIVED INTEREST INCOME OF RS.1,97,67 ,227/-. THE ASSESSEE HAD RECEIVED INTEREST AFTER DEDUCTION OF TDS. SINC E THE DEDUCTOR FAILED TO DEPOSIT TDS AMOUNT WITH THE GOVERNMENT EXCHEQUER THE TDS DEDUCTED WAS NOT REFLECTED IN FORM 26AS. HENCE, THE ASSESSIN G OFFICER MADE ADDITION OF RS.21,70,725/- ON ACCOUNT OF MISMATCH I N TDS STATEMENT AND INTEREST INCOME REFLECTED IN BOOKS OF ACCOUNT. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF YASHPAL SAHNI VS. ACIT, REPOR TED AS 165 TAXMAN 3 ITA NO.5142/MUM/2017(A.Y. 2010-11) 144(BOM) HAS HELD THAT WHEN IT IS ESTABLISHED THAT TAX HAS BEEN DEDUCTED AT SOURCE, THE REVENUE IS BARRED FROM RECOVERING TD S AMOUNT FROM DEDUCTEE FROM WHOSE INCOME TDS AMOUNT HAS ALREA DY BEEN DEDUCTED. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO CBDT OFFICE MEMORANDUM DATED 11/03/2016, WHEREIN IT HAS BEEN MENTIONED THAT NON-DEPOSIT OF TAX DEDUCTED AT SOURCE BY THE D EDUCTOR, PROVISIONS OF SECTION 205 OF THE ACT BARS THE DEPARTMENT TO RECOV ER TDS AMOUNT ON WHOSE BEHALF THE AMOUNT HAS ALREADY BEEN DEDUCTED. 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER THE ASSES SEE FILED APPEAL BEFORE CIT(A). THE FIRST APPELLATE AUTHORITY IN RE SPECT OF TP ADJUSTMENT GRANTED PART RELIEF TO THE ASSESSEE IN DELETING SOM E OF THE COMPARABLES SELECTED BY THE TPO . HOWEVER, THE CIT(A) ERRED IN ACCEPTING GOLDMAN SACHS AND AGM INDIA ADVISORS PVT. AS COMPARABLES . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED THAT BOTH T HESE COMPANIES ARE RENDERING SERVICES TO THEIR SUBSIDIARIES / AES ONLY . THUS, THEY FAIL RELATED PARTY TRANSACTION (RPT) FILTER. THOUGH THEIR INCLU SION WOULD NOT MATERIALLY EFFECT THE RESULT OF COMPARABLE ANALYSIS, HOWEVER , IN PRINCIPLE BOTH THESE COMPANIES SHOULD BE EXCLUDED. IN RESPECT OF ADDIT ION ON ACCOUNT MISMATCH IN FORM 26AS, THE LD. AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE POINTED THAT CIT(A) HAS FAILED TO ADJUDICA TE THE ISSUE. 5. PER CONTRA, SHRI ASHISH HELIWAL REPRESENTING TH E DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAY ED FOR DISMISSING THE APPEAL OF ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE ASSE SSEE IN APPEAL HAS RAISED THREE GROUNDS. GROUND NO.1 & 2 OF THE APPEA L RELATE TO TP 4 ITA NO.5142/MUM/2017(A.Y. 2010-11) ADJUSTMENT. THE ASSESSEE IS PRIMARILY AGGRIEVED AG AINST THE SELECTION OF COMPARABLES. AS FAR AS THE MOST APPROPRIATE METHOD FOR DETERMINING ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION WIT H AE, THE ASSESSEE HAS ADOPTED TNMM, AND THE SAME HAS NOT BEEN DISTURBED BY THE TPO . THE ASSESSEE IS PROVIDING INVESTMENT ADVISORY SERVICES AND HAS DECLARED MARGIN OF 20%. THE ASSESSEE SELECTED FOLLOWING SEV EN COMPANIES AS COMPARABLES WITH AVERAGE WEIGHTED MARGIN OF 18.23%: (1) ACCESS INDIA ADVISORS LIMITED, (2) FUTURE CAPITAL ADVISORS PVT. LTD. (3) ICRA MANAGEMENT CONSULTING SERVICES (4) IDC INDIA LIMITED (5) INFORMED TECHNOLOGIES LIMITED (6) INTEGRATED CAPITAL SERVICES LIMITED (7) KINETIC TRUST LIMITED THE TPO MODIFIED THE LIST OF COMPARABLES BY EXCLUD ING CERTAIN COMPARABLES AND INTRODUCING FRESH COMPARABLES. TH E FINAL SET OF COMPARABLES SELECTED BY THE TPO ARE AS UNDER:- S.NO. NAME OF THE COMPARABLE OP/TC (%) 1. FUTURE CAPITAL INVESTMENT ADVISORS LTD. 15.7 1 2. FUTURE CAPITAL HOLDINGS LTD.(SEGMENT- INVESTMENT ADVISORY) 31.68 3. IDFC INVESTMENT ADVISORS LTD. 36.62 4. ICRA ONLINE LTD. 41.77 5. KSHITI INVESTMENT ADVISORY CO.LTD. 32.33 6. MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD. 97.87 ARITHMETI C MEAN 42.66 7. THE ASSESSEE ASSAILED THE FINDINGS OF TPO AND THE FINAL LIST OF COMPARABLES BEFORE THE CIT(A). THE CIT(A) FINALLY SELECTED FOLLOWING FOUR COMPARABLES. 5 ITA NO.5142/MUM/2017(A.Y. 2010-11) (1) GOLDMAN SACHS (2) AGM INDIA ADVISORS PVT. LTD. (3) ICRA MANAGEMENT CONSULTANCY SERVICES, (4) FUTURE CAPITAL INVESTMENT PVT. LTD. THE LIMITED CONTENTION OF THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE IS THAT THOUGH WITH THE SET OF COMPARABLES SELECTED BY THE CIT(A) OP/OC RATIO OF THE COMPARABLES IS WITHIN +/- 5% RAN GE, HOWEVER, IN PRINCIPLE GOLDMAN SACHS AND AGM INDIA ADVISORS PVT . LTD. CANNOT BE SELECTED AS COMPARABLES AS THEY DO NOT QUALIFY RPT FILTER. THE CONTENTION OF THE ASSESSEE IS THAT BOTH THESE COMPANIES ARE R ENDERING SERVICES TO THEIR RESPECTIVE AES ONLY. WE FIND MERIT IN THE CO NTENTIONS OF THE ASSESSEE. IF THE SAID ENTITIES FAIL TO QUALIFY RPT FILTER, THEY CANNOT BE SELECTED AS COMPARABLES. WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO FOR THE LIMITED PURPOSE TO VERIFY WHETHER GOLDMAN SACHS AND AGM INDIA PVT. LTD. QUALI FY RPT FILTER OR NOT. IF BOTH THESE ENTITIES FAIL TO QUALIFY THE SAID FIL TER, THEY SHOULD BE REMOVED FROM THE LIST OF COMPARABLES. THE GROUND NO.1 & 2 OF THE APPEAL BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE IN TH E TERMS AFORESAID. 8. IN GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS ASSAILED ADDITION IN RESPECT OF TDS AMOUNT DEDUCTED BUT NOT DEPOSITED BY THE DEDUCTOR TO THE GOVERNMENT EXCHEQUER. THE CONTENTION OF THE ASSESS EE IS THAT THE ASSESSEE HAS RECEIVED INTEREST INCOME AFTER DEDUCTI ON OF TAX AT SOURCE. DUE TO MISMATCH OF TDS IN FORM NO.26AS VIS-A-VIS IN TEREST INCOME DECLARED BY ASSESSEE IN BOOKS OF ACCOUNT, THE ASSES SING OFFICER MADE ADDITION OF RS.21,70,725/-. THE LD. AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE MAILS AND T DS SUMMARY 6 ITA NO.5142/MUM/2017(A.Y. 2010-11) STATEMENT FURNISHED BEFORE CIT(A) AS ANNEXURE-4 TO SUBSTANTIATE THAT THE DEDUCTOR HAS CONFIRMED DEDUCTION OF TAX AT SOURCE O N INTEREST PAYMENTS TO THE ASSESSEE. 9. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF Y ASHPAL SAHNI (SUPRA) HAS HELD THAT WHERE THE ASSESSEE HAS BEEN A BLE TO ESTABLISH THAT THE TAX HAS BEEN DEDUCTED AT SOURCE, SECTION 205 OF THE ACT BARS TO RECOVER TDS AMOUNT FROM THE ASSESSEE (DEDUCTEE). T HE RELEVANT EXTRACT OF THE JUDGMENT OF HON'BLE HIGH COURT IN THIS REG ARD IS REPRODUCED HEREIN BELOW:- 24. AS STATED EARLIER, IN THE PRESENT CASE THE PETI TIONER-ASSESSEE HAS ESTABLISHED THAT FROM HIS SALARY INCOME, TAX HAS BE EN DEDUCTED AT SOURCE BY THE EMPLOYER-RESPONDENT NO. 6 AND, THEREFORE, THE R EVENUE HAS TO RECOVER THE SAID TDS AMOUNT WITH INTEREST AND PENALTY FROM THE RESPONDENT NO. 6 ALONE AND THE REVENUE CANNOT SEEK TO RECOVER THE SAID AMO UNT FROM THE PETITIONER- ASSESSEE IN VIEW OF THE SPECIFIC BAR CONTAINED UNDE R SECTION 205 OF THE ACT. THE FACT THAT THE PETITIONER IS NOT ENTITLED TO THE CREDIT OF THE TAX DEDUCTED AT SOURCE FOR THE NON-ISSUANCE OF THE TDS CERTIFICATE BY THE RESPONDENT NO. 6, CANNOT BE A GROUND TO RECOVER THE AMOUNT OF TAX DED UCTED AT SOURCE FROM THE PETITIONER. IN OTHER WORDS, EVEN IF THE CREDIT OF THE TDS AMOUN T IS NOT AVAILABLE TO THE PETITIONER-ASSESSEE FOR WANT OF TD S CERTIFICATE, THE FACT THAT THE TAX HAS BEEN DEDUCTED AT SOURCE FROM SALAR Y INCOME OF THE PETITIONER WOULD BE SUFFICIENT TO HOLD THAT AS PER SECTION 205 OF THE ACT, THE REVENUE CANNOT RECOVER THE TDS AMOUNT WITH INTE REST FROM THE PETITIONER ONCE AGAIN. (EMPHASIS BY US) THE CBDT HAS ALSO ISSUED OFFICE MEMO DATED 11/03/20 16 IN THIS REGARD. THE SAME READS AS UNDER:- SUB: NON-DEPOSIT OF TAX DEDUCTED AL SOURCE BY THE DEDUCTOR- RECOVERY OF DEMAND AGAINST THE DEDUCTEE ASSESSEE. VIDE LETTER OF EVEN NUMBER DATED 01.06.2015, THE BO ARD HAD ISSUED DIRECTIONS TO THE FIELD OFFICERS THAT IN CASE OF AN ASSESSEE WHOSE TA X HAS BEEN DEDUCTED AT SOURCE BUT NOT DEPOSITED TO THE GOVERNMENT'S ACCOUNT BY THE DEDUCT OR, THE DEDUCTEE ASSESSEE SHALL NOT BE CALLED UPON TO PAY THE DEMAND TO THE EXTENT TAX HAS BEEN DEDUCTED FROM HIS INCOME. IT WAS FURTHER SPECIFIED THAT SECTION 205 O F THE INCOME-TAX ACT, 1961 PUTS A BAR ON DIRECT DEMAND AGAINST THE ASSESSEE IN SUCH CASES AND THE DEMAND ON ACCOUNT OF TAX CREDIT MISMATCH IN SUCH SITUATIONS CANNOT BE ENFORC ED COERCIVELY. 7 ITA NO.5142/MUM/2017(A.Y. 2010-11) 2. HOWEVER, INSTANCES HAVE COME TO THE NOTICE OF TH E BOARD THAT THESE DIRECTIONS ARE NOT BEING STRICTLY FOLLOWED BY THE FIELD OFFICERS. 3. IN VIEW OF THE ABOVE, THE BOARD HEREBY REITERATE S THE INSTRUCTIONS CONTAINED IN ITS LETTER DATED 01.06.2015 AND DIRECTS THE ASSESSING O FFICERS NOT TO ENFORCE DEMANDS CREATED ON ACCOUNT OF MISMATCH OF CREDIT DUE TO NON -PAYMENT OF TDS AMOUNT TO THE CREDIT OF THE GOVERNMENT BY THE DEDUCTOR. THESE INS TRUCTIONS MAY BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS IN YOUR REGION FOR COMPLIANCE 10. THUS, IN VIEW OF JUDGMENT OF HON'BLE JURISDICTI ONAL HIGH COURT(SUPRA) AND THE OFFICE MEMORANDUM ISSUED BY C BDT(SUPRA), WE ARE OF CONSIDERED VIEW THAT IF ASSESSEE IS ABLE TO E STABLISH THAT TAX HAS ALREADY BEEN DEDUCTED AT SOURCE ON INTEREST PAYMENT S, THE TDS AMOUNT CANNOT BE RECOVERED FROM THE ASSESSEE AGAIN. THE I SSUE IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR THE LIMITED PU RPOSE TO VERIFY WHETHER TDS AMOUNT HAS BEEN DEDUCTED FROM INTEREST PAYMENTS . THE ASSESSEE SHALL FURNISH NECESSARY DOCUMENTS TO SUBSTANTIATE D EDUCTION OF TDS ON THE INTEREST PAYMENT RECEIVED BY IT. THE ASSESSING OFFICER AFTER EXAMINING THE DOCUMENTS, IF SATISFIED THAT THE TDS HAS ALREAD Y BEEN DEDUCTED, SHALL DELETE THE ADDITION. GROUND NO.3 OF THE APPEAL IS A LLOWED FOR STATISTICAL PURPOSE, IN THE TERMS AFORESAID. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 10 TH DAY OF JANUARY, 2020. SD/- SD/- (N.K.PRADHAN ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10/01/2020 VM , SR. PS(O/S) 8 ITA NO.5142/MUM/2017(A.Y. 2010-11) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI
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