ITO 3(1)(4), MUMBAI V. HELIX INVESTMENTS ADVISORS INDIA P.LTD, MUMBAI

ITA 5564/MUM/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0925 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILLU JAGGI
• Keywords: Transfer pricing; Tax effect; Condonation of delay
• Section: 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) A.C.I.T-3(1)(2), ROOM NO.607, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ...... APPELLA NT VS. M/S.HELIX INVESTMENTS ADVISORS INDIA PVT. LTD. 1421, MAKER CHAMBERS-V, NARIMAN POINT, MUMBAI 400 021 PAN:AABCH8531M ..... RESPONDENT C.O.NO.172/MUM/2016 (ARISING OUT OF ITA NO.5564/MUM/2016,A.Y.2010-11) M/S.HELIX INVESTMENTS ADVISORS INDIA PVT. LTD. 1421, MAKER CHAMBERS-V, NARIMAN POINT, MUMBAI 400 021 PAN:AABCH8531M ..... CROSS OBJECTO R VS. A.C.I.T-3(1)(2), ROOM NO.607, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 ...... APPELLANT IN APPEAL REVENUE BY : MS. NILLU JAGGI ASSESSEE BY : S/ SHRI VIJAY MEHTA & GOVIND JAVERI DATE OF HEARING : 10/12/2019 DATE OF PRONOUNCEMENT : 20/12/2019 2 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 ORDER PER VIKAS AWASTHY, JM: THE TWO APPEALS BY THE REVENUE IN ITA NO.5564 & 5 563/MUM/2015 ARE DIRECTED AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX(APPEALS)- 56 (IN SHORT THE CIT(A)),MUMBAI FOR THE ASSESSMEN T YEARS 2010-11 AND 2011-12, RESPECTIVELY. BOTH THE IMPUGNED ORDERS AR E OF EVEN DATE I.E. 16/09/2015. 2. SHRI VIJAY MEHTA APPEARING ON BEHALF OF THE ASSE SSEE SUBMITTED AT THE OUTSET THAT THE APPEALS FILED BY THE REVENUE AR E LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT IN THE LIGHT OF THE RE CENT CBDT CIRCULAR NO. NO.17/2019 DATED 08/08/2019. 3. MS. NILLU JAGGI REPRESENTING THE DEPARTMENT FAI RLY ADMITTED THAT THE TAX EFFECT INVOLVED IN BOTH THE APPEALS IS LESS THAN RS.50,00,000/- EACH. 4. BOTH SIDES HEARD. A PERUSAL OF THE GROUNDS OF A PPEAL IN ITA NO.5564/MUM/2015 FOR ASSESSMENT YEAR 2010-11 SHOWS THAT THE REVENUE IS IN APPEAL AGAINST THE RELIEF OF RS.57,03 ,352/- ALLOWED BY THE CIT(A) IN TRANSFER PRICING ADJUSTMENT. SIMILARLY, IN ITA NO. 5563/MUM/2015 FOR ASSESSMENT YEAR 2011-12, THE DEP ARTMENT IS IN APPEAL AGAINST DELETING THE ADDITION OF RS.42,25,17 9/-. 5. THE TAX EFFECT INVOLVED IN THESE APPEALS IS LES S THAN THE MONETARY LIMIT PRESCRIBED BY THE RECENT CBDT CIRCUL AR NO. 3 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 17/2019, DATED 08-08-2019 FOR FILING OF APPEALS BEF ORE THE TRIBUNAL BY THE DEPARTMENT. THE CBDT VIDE CIRCULAR DATED 08-08- 2019 (SUPRA) HAS AMENDED PARA 3 OF CIRCULAR NO. 3 O F 2018 DATED 11-07-2018 THEREBY ENHANCING MONETARY LIMIT OF TAX EFFECT FROM RS.20 LAKHS TO RS.50 LAKHS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL. THUS, WITHOUT GOING INTO MERIT S OF THE ISSUE RAISED IN THE APPEALS, THE PRESENT APPEALS BY THE R EVENUE ARE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. 6. BEFORE PARTING, WE CLARIFY HERE THAT THE REVENUE SHALL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR RESTORATION OF APPEAL(S), WITH THE REQUISITE MATERIAL TO SHOW THAT THE APPEAL(S) I S/ARE PROTECTED BY THE EXCEPTIONS PRESCRIBED IN PARA 10 OF THE CIRC ULAR DATED 11- 07-2018 AND ITS AMENDMENT DATED 20/08/2018. 7. IN THE RESULT, BOTH APPEALS BY THE REVENUE ARE DISMISSED. C.O NO. 172/MUM/2016 (AY.2010-11): 8. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN THE A PPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2010-11. THE CROSS- O BJECTIONS ARE TIME BARRED BY 249 DAYS. THE ASSESSEE HAS FILED APPLICA TION SUPPORTED BY AN AFFIDAVIT SEEKING CONDONATION OF DELAY IN FILING OF THE CROSS OBJECTIONS. 9. THE LD.REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT DELAY IN FILING OF THE CROSS OBJECTIONS OCCURRED AS THE ASSESSEE WA S UNDER BONAFIDE 4 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 BELIEF THAT IT HAS RECEIVED COMPLETE RELIEF FROM TH E CIT(A). IT WAS ONLY WHEN THE ASSESSEE GOT IN TOUCH WITH PRESENT REPRES ENTATIVE OF THE ASSESSEE, IT WAS POINTED THAT WRONG COMPARABLES AND INCORRECT MARGINS WERE TAKEN BY THE CIT(A) WHILE ADJUDICATING THE APP EAL OF THE ASSESSEE. THE DELAY IN FILING THE CROSS OBJECTIONS IS NOT DEL IBERATE OR INTENTIONAL. TO SUPPORT HIS CONTENTION THE LD.REPRESENTATIVE OF TH E ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- (I) DBS BANK LTD. VS. DDIT, CO NO.189/MUM/2013 A.Y . 1995-96 DECIDED ON 15/04/2016. (II) SUNDARAM MULTIPAP LTD. VS. DCIT,C.O NO.272/MU M/2017, A.Y. 2012-13 DECIDED ON 20/04/2018. 10. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY OPPOSED CONDONATION OF DELAY IN FILING OF CROSS OBJECTIONS. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INORDINATE DELAY OF 2 49 DAYS IN FILING CROSS OBJECTION IS UNPARDONABLE BECAUSE OF THE ASSESSEES NEGLIGENCE. 11. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SID ES ON THE ISSUE OF CONDONATION OF DELAY. AFTER EXAMINATION OF FACTS, WE ARE SATISFIED THAT THE DELAY IN FILING OF CROSS OBJECTIONS WAS NOT DELIBER ATE. THE HONBLE SUPREME COURT OF INDIA, IN THE CASE OF RAM NATH SA O VS. GOBARDHAN SAO REPORTED AS 2002(3) SCC 195 HAS HELD THAT ACCEPTAN CE OF EXPLANATION FURNISHED SHOULD BE THE RULE AND REFUSAL AN EXCEPT ION MORE SO WHEN NO NEGLIGENCE OR INACTION OR WANT OF BONAFIDE CAN BE I MPUTED TO THE DEFAULTING PARTY. TAKING A PEDANTIC AND HYPER TEC HNICAL VIEW OF THE 5 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 MATTER, EXPLANATION FURNISHED SHOULD NOT BE REJECTE D, WHERE ARGUABLE POINTS OF FACTS AND LAW ARE INVOLVED IN THE CASE. TAKING INTO CONSIDERATION THE EXPLANATION FURNISHED BY THE ASSESSEE RESULTIN G DELAY IN FILING OF CROSS OBJECTIONS AND THE LAW LAID DOWN BY THE HONBLE APE X COURT ON THIS ISSUE, WE DEEM IT APPROPRIATE TO CONDONE THE DELAY OF 249 DAYS IN FILING OF THE CROSS OBJECTIONS. THE CROSS OBJECTIONS ARE ADMITT ED FOR HEARING AND THE SAME ARE DISPOSED OF ON MERITS. 12. THE ASSESSEE HAS RAISED TWO GROUNDS IN THE CROS S OBJECTIONS AND THE SAME ARE REPRODUCED HEREIN BELOW:- I. CONFIRMATION OF COMPARABLE TAKEN BY TPO - FUTUR E CAPITAL HOLDINGS LTD 1) THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMP ARABLE TAKEN BY TPO IN THE CASE OF FUTURE CAPITAL HOLDINGS LTD. 2) WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT( A) FAILED TO APPRECIATE THAT THE OP/TC OF FUTURE CAPITAL HOLDINGS LTD - SEGMENT INVESTMENT ADVISORY IS 15.21% AND NOT 31.68%. II. CONFIRMATION OF COMPARABLE TAKEN BY TPO - KSHITIJ INVESTMENT ADVISORY CO. LTD 1) THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMP ARABLE TAKEN BY TPO IN THE CASE OF KSHITIJ INVESTMENT ADVISORY CO. LTD. 13. IN RESPECT OF GROUND NO.1, THE LD.REPRESENTATIV E OF ASSESSEE SUBMITTED THAT WHILE CALCULATING OPERATING MARGINS , THE AUTHORITIES BELOW HAVE ERRED IN APPLYING OP MARGIN ON FUTURE CAPITAL HOLDING LTD. INVESTMENT ADVISORY SEGMENT AS 31.68% INSTEAD OF 15 .21%. THE LD.REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT T HIS ISSUE MAY BE 6 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 RESTORED TO THE FILE OF ASSESSING OFFICER FOR FRESH COMPUTATION OF OP MARGIN. 14. IN RESPECT OF GROUND NO.2, THE LD.REPRESENTATIV E OF ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN SELECTING KSHITIJ INVESTMENT ADVISORY CO. LTD. AS ONE OF THE COMPARA BLES. THE LD.AUTHORIZED REPRESENTATIVE POINTED THAT THE MUMBA I BENCH OF TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORY PVT. LTD. VS . ACIT, REPORTED AS 157 ITD 600(MUM) HAS HELD THAT KSHITIJ INVESTMENT ADVISOR Y CO. LTD IS NOT A GOOD COMPARABLE FOR INVESTMENT ADVISORY SERVICES. THE S AID COMPANY IS ENGAGED IN MERCHANT BANKING, INVESTMENTS AND OFFER PORTFOLIO MANAGEMENT SERVICES. 15. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE IMPUGNED ORDER AND PRAYED FOR DISMISS ING THE CROSS OBJECTIONS OF THE ASSESSEE. THE LD. DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT TPO IN HIS ORDER HAS CATEGORICALLY MENTIONED THAT KSHITIJ INVESTMENT ADVISORY CO. LTD HAS REALIGNED ITS BUSIN ESS. THE BUSINESS HAS NOT RESULTED IN ANY CHANGE OF ACTIVITY AND THUS, WI LL NOT IMPACT COMPARABILITY. M/S. KSHITIJ INVESTMENT ADVISORY C O. LTD HAS NOT EARNED ANY INCOME FROM MERCHANT BANKING ACTIVITIES DURING THE RELEVANT PERIOD. HENCE, IT IS A GOOD COMPARABLE AS ITS INCOME DURING THE RELEVANT PERIOD IS ONLY FROM THE SINGLE SEGMENT I.E. ADVISORY SERVICES . 7 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 16. BOTH SIDES HEARD. IN SO FAR AS GROUND NO.1 OF THE CROSS OBJECTIONS IS CONCERNED, THE LD. AUTHORIZED REPRESENTATIVE HAS PO INTED THAT WHILE SELECTING FUTURE CAPITAL HOLDING AS COMPARABLE, THE TPO HAS WRONGLY APPLIED OP MARGIN AS 37.68% AS AGAINST ACTUAL OP MA RGIN OF 15.21%. THE ASSESSEE HAS ALSO FILED CALCULATION GIVING DETAILS OF COMPUTATION OF OP MARGIN IN THE CASE OF FUTURE CAPITAL INVESTMENT SE GMENT. WE ARE OF CONSIDERED VIEW THAT THERE APPEARS TO BE A CLERICAL ERROR IN CALCULATION OF OP MARGINS. THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER/TPO FOR RECOMPUTATION OF OP MARGIN IN RESPECT OF FUTURE CA PITAL/INVESTMENT SEGMENT. THE TPO/ASSESSING OFFICER, AFTER RECOMPUT ING O.P MARGIN SHALL APPLY CORRECTED MARGINS, IN ACCORDANCE WITH LAW. T HE GROUND NO.1 OF THE CROSS OBJECTIONS IS ALLOWED FOR STATISTICAL PURPOSE S. 17. THE GROUND NO.2 OF THE CROSS OBJECTIONS IS AGAI NST SELECTION OF KSHITIJ INVESTMENT ADVISORY CO. LTD AS COMPARABLE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT ADVISORY SERV ICES. THE CONTENTION OF THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS THAT KSHITIJ INVESTMENT ADVISORY CO. LTD IS ENGAGED IN THE BUSIN ESS OF MERCHANT BANKING ACTIVITIES AND HENCE, IS NOT A GOOD COMPARA BLE. TO SUPPORT HIS CONTENTIONS RELIANCE IS PLACED ON THE DECISION OF CARLYLE INDIA ADVISORY PVT. LTD. VS. ACIT (SUPRA). WE FIND THAT THE CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORY PV T. LTD. VS. ACIT (SUPRA) FOR ASSESSMENT YEAR 2010-11 HAD AN OCCASION TO CONSIDER INCLUSION/EXCLUSION OF KSHITIJ INVESTMENT ADVISORY CO. LTD. IN TH E FINAL SET OF COMPARABLES IN RESPECT OF A COMPANY ENGAGED IN INVESTMENT ADVISORY RELATED SUPPORT 8 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 SERVICES. THE TPO HAD INCLUDED KSHITIJ INVESTME NT ADVISORY CO. LTD AS COMPARABLE, WHEREAS, THE ASSESSEE THEREIN HAD SOUGH T EXCLUSION OF THE SAID COMPANY. THE CO-ORDINATE BENCH OF THE TRIBUNA L AFTER EXAMINING THE ACTIVITIES OF COMPARABLE COMPANY CONCLUDED AS UNDER :- 22.............CONSIDERING THE ENTIRE CONSPECTUS O F FACTS AND CIRCUMSTANCES, IN OUR VIEW, THE ASSESSEE COMPANY IS JUSTIFIED IN ASSERTIN G THAT KSHITIJ INVESTMENT ADVISORY CO. LTD. DESERVES TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES ON ACCOUNT OF PECULIAR ECONOMIC CIRCUMSTANCES DURING T HE YEAR UNDER CONSIDERATION 18. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BEE N ABLE TO CONTROVERT THE FINDINGS OF THE CO-ORDINATE BENCH ON THIS ISSUE. WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. ACCORDIN GLY, WE DIRECT THE ASSESSING OFFICER / TPO TO EXCLUDE KSHITIJ INVEST MENT ADVISORY CO. LTD FROM THE LIST OF COMPARABLES FOR SIMILAR REASONS. THE ASSESSEE SUCCEEDS ON GROUND NO.2 OF THE CROSS OBJECTIONS AS WELL. 19. IN THE RESULT, CROSS OBJECTIONS OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS AFORESAID. 20. TO SUM UP, APPEALS OF THE REVENUE ARE DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF DECEMBER, 2019. SD/- SD/- (R.C.SHARMA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20 /12/2019 VM , SR. PS(O/S) 9 ITA NO.5564/MUM/2015(A.Y.2010-11) ITA NO.5563/MUM/2015(A.Y. 2011-12) C.O.NO.172/MUM/2016 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