Global Turbine Services (India) Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5586/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1240 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Transfer pricing; International transaction; Additional evidence; Wholly owned subsidiary

Judgement Text

I.T.A. NO. 5586/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5586/DEL/2011 A.Y. : 2007-08 GLOBAL TURBINE SERVICES INDIA PVT. LTD., (NOW CALLED GRANITE SERVICES INTERNATIONAL INDIA PVT. LTD.), B-6/8, LOCAL COMMERCIAL COMPLEX, 3 RD FLOOR, SAFDARJUNG ENCLAVE, NEW DELHI 110 029 (PAN: AACCG3374Q) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. AMITAVA SEN, CA DEPARTMENT BY : SH. SATPAL SINGH, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ASSESSING OFFICER DATED 31.10.2011 PASSED U/S. 1 43(3) /144C OF THE I.T. ACT PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THE LD. DISPUTES RESOLUTION PANEL AND THE LD. ACIT (LD. ASSESSING OFFICER) (FOLLOWING THE DIRECTIONS O F THE DRP), ERRED ON FACTS AND IN LAW, IN ENHANCING THE INCOME OF THE APPELLANT BY ` 9,589,796/-, ON ACCOUN T OF THE TRANSFER PRICING ADJUSTMENT U/S. 92CA(3) OF TH E I.T.A. NO. 5586/DEL/2011 2 INCOME TAX ACT, 1961 MADE BY THE LD. ACIT, TRANSFER PRICING OFFICER-1(2). 2. THE DRP AND CONSEQUENTLY THE ASSESSING OFFICER (FOLLOWING THE DIRECTIONS OF THE LD. DRP), ERRED ON FACTS AND IN LAW BY : 2.1 SUBJECTIVELY DISREGARDING THE ARMS LENGTH PRIC E (ALP) AS DETERMINED BY MANIPULATING THE FRESH SEARCH SUBMITTED BY THE APPELLANT IN COURSE OF TRANSFER PRICING ASSESSMENT PROCEEDING WHICH WAS OTHERWISE ADMITTED BY THE TPO; 2.2 INCLUDING HIGH PROFIT MAKING COMPANIES IN THE FIN AL COMPARABLES SET FOR DETERMINATION OF ALP OF THE APPELLANT AND DISREGARDING JUDICIAL PRONOUNCEMENTS OF THE JURISDICTIONAL TRIBUNALS ON THE ISSUE; 2.3 INCLUDING CERTAIN HIGH PROFIT MAKING COMPANIES T HAT ARE NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED. 2.4 RESORTING TO ARBITRARY REJECTION OF LOW PROFIT / LOSS MAKING COMPANIES BASED ON ERRONEOUS AND INCONSISTENT REASONS; THAT THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. I.T.A. NO. 5586/DEL/2011 3 THAT THE APPELLANT CRAVES TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT T HE TIME OF HEARING OF THIS APPEAL. 3. IN THIS CASE ASSESSEE WAS INCORPORATED ON 15.2.2 005 AS A WHOLLY OWNED SUBSIDIARY OF GRANITE SERVICES INTERNATIONAL INC. DURING FINANCIAL YEAR 2006-07, THE ASSESSEE WAS PRIMARILY ENGAGED IN PROVIDING TECHNICAL SERVICES TO ITS ASSOCIATED ENTERPRISES. DURING FINANCIAL YEAR 2006-07 IT ENTERED IN FOLLOWING INTERNATIONAL TRAN SACTIONS:- S.NO. NATURE OF TRANSACTIONS VALUE (INR IN CRORE) 1. PROVISION OF SOURCING AND SUPPORT SERVICES 17.05 2. AVAILING SERVICES 4.87 3. PROVISION OF BUSINESS PROMOTION OUTSOURCING 1.80 4. PURCHASE OF COMPUTER HARDWARE 0.00 FOR THE PURPOSE OF JUSTIFYING THE ARMS LENGTH NATUR E OF ITS INTERNATIONAL TRANSACTIONS, THE APPELLANT IN ITS TP DOCUMENTATION, APPLIED THE TRANSACTIONS NET MARGIN METHOD (TNMM) USING OPERATING PROFIT (OP) / TOTAL COST(TC) AS THE PROFIT LEVEL INDICATOR (PLI). ARMSS LENGTH PRICE (ALP AS PER TP STUDY NO. OF COMPARABLES 7 COMPARABLES MEAN OP/TC 4.93% APPELLANTS OP/TC 20.80% I.T.A. NO. 5586/DEL/2011 4 CONCLUSION AT ARMS LENGTH 3.1 HOWEVER, THE TPO REJECTED THE ANALYSIS AS CARRIE D OUT BY THE ASSESSEE IN HIS TRANSFER PRICING DOCUMENTATION. ASSESSEES SUBMISSIONS IN THIS REGARD WAS THAT TPO RETAINED AN ABNORMALLY HIGH PROFIT MAKING COMPANY NAMELY OIL FIELD INSTRUMENTATIO N (INDIA) LTD. IN HIS FINAL COMPARABLE SET. FURTHER, THE TPO REJEC TED THE CONTENTION OF THE ASSESSEE REGARDING FUGRO GEOTECH PVT. LTD. THE REAFTER, THE TPO MADE THE ADDITION OF ` 95,89,796/- TO THE INTERNATIO NAL TRANSACTION OF THE ASSESSEE. IN THIS REGARD, ASSESSEE HAS SUBMITTE D THAT IF THE TPO WAS OF THE OPINION THAT OIL FIELD INSTRUMENTATION IND IA LTD. WHICH WAS ENGAGED IN THE MUD LOGGING ACTIVITIES OUGHT TO BE A CCEPTED, THE FUGRO GEOTECH PVT. LTD. WHICH WAS ENGAGED IN OFFSHORE DRI LLING ACTIVITIES SHOULD ALSO BE ACCEPTED. ASSESSEE RAISED OBJECTIO NS TO THE DRP. HOWEVER, THE DRP UPHELD THE ORDER OF THE TPO AND CON FIRMED THE ADDITION OF ` 9,589,796/- ON THE INTERNATIONAL TRA NSACTIONS OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. AT THE THRESHO LD, IN THIS CASE THE LD. COUNSEL OF THE ASSESSEE SOUGHT PERMISSION TO FI LE ADDITIONAL I.T.A. NO. 5586/DEL/2011 5 EVIDENCE IN SUPPORT OF THE GROUNDS OF THE SAID AP PEAL. THE ADDITIONAL EVIDENCES SOUGHT TO BE ADMITTED WERE WIT H REGARD TO THE FOLLOWING I) ANNEXURE-A ANNUAL REPOT OF OIL FIELD INSTRUMENTAT ION (INDIA) LIMITED FOR FINANCIAL YEAR 2006-07. II)ANNEXURE-B ANNUAL REPORT OF OIL FIELD INSTRUMENTAT ION (INDIA) LIMITED FOR FINANCIAL YEAR 2007-08 III)ANNEXURE-C ANNUAL REPORT OF FUGRO GEOTECH LIMITE D FOR FINANCIAL YEAR 2006-07 IV)ANNEXURE-D INTERNET REFERENCE FOR PRODUCTS AND S ERVICES FOR FURGO GEOTECH LIMITED. V)ANNEXURE-E RELEVANT EXTRACT OF OECD GUIDELINES (PA RA 3.59) 5.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. IN OUR CONSIDERED OPINION, ASSESSEE SHOULD BE GRANTED PERMISSION TO FI LE THE ADDITIONAL EVIDENCES AS THE SAME WILL GO TO THE ROOT OF THE MA TTER AND FACILITATE ADJUDICATION OF THE ISSUE RAISED IN THE APPEAL. HEN CE, WE ADMIT THE ADDITIONAL EVIDENCES. HAVING SO ADMITTED THE ADDITI ONAL EVIDENCES, WE FIND THAT ASSESSING OFFICER SHOULD BE PROVIDED AN OPPORTUNITY TO GO THROUGH THE SAME AND GIVE HIS PERSPECTIVE IN THIS REGARD. HENCE, WE I.T.A. NO. 5586/DEL/2011 6 REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER . THE ASSESSING OFFICER SHALL ADJUDICATE THE ISSUE AFRESH, AFTER CO NSIDERING THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEE STANDS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/2/2013. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/2/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES I.T.A. NO. 5586/DEL/2011 7