Amdocs Development Centre India LLP, Pune V. Assistant Commissioner of Income Tax, Circle-7, Pune

ITA 559/PUN/2022

AI Insights

The case involves Amdocs Development Centre India LLP, which appealed against the final assessment order for the assessment year 2018-19, which included significant transfer pricing adjustments and disallowances related to provident fund and ESI contributions. The Tribunal's decision addressed multiple grounds of appeal, including challenges to transfer pricing adjustments, disallowances under section 36(1)(va) of the Income Tax Act, and issues related to the computation of income and tax liabilities. The Tribunal's decision to remit the issue of section 10AA deduction back to the Assessing Officer indicates a nuanced approach to the complex interplay between transfer pricing adjustments and deductions under specific sections of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137583 (ITAT-PUNE)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 18-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 18-07-2022
• Other Referred Cases: CIT vs. Gem Plus Jewellery India Ltd., 330 ITR 175 (Bom.), PCIT vs. Lionbridge Technologies (P.) Ltd., 86 taxmann.com 101 (Bom.), PCIT vs. Lionbridge Technologies (P.) Ltd., 96 taxmann.com 495 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; TDS
• Section: 43B; 143(3); 92D; 10AA; 143(1); 144C; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “C”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.559/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year: 2018-19 Amdocs Development Centre India LLP, 6th Floor, Tower-2, Cybercity, Magarpatta Hadapsar, Pune- 411028. PAN : ABHFA6017F Vs. ACIT, Circle-7, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against final assessment order dated 30.05.2022 passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2018-19. 2. The appellant raised the following grounds of appeal :- “Transfer Pricing (‘TP’) Grounds 1 That on the facts and circumstances of the case, and in law, the Learned Assessing Officer (‘Ld. AO’) / Learned Transfer Pricing Officer (‘Ld. TPO’) [in pursuance to the directions of the Honorable Dispute Resolution Panel (‘Hon’ble DRP’)] erred in enhancing the income of the Appellant by INR 1,083,185,753 holding that the international transaction pertaining to provision Assessee by : Shri Ajit Korde Revenue by : Shri Naveen Gupta Date of hearing : 19.04.2023 Date of pronouncement : 19.04.2023 ITA No.559/PUN/2022 2 of Information Technology (‘IT’) services do not satisfy the arm’s length principle envisaged under the Income- tax Act, 1961 (‘the Act’), and in doing so have grossly erred in: 1.1 disregarding the Arm’s Length Price (‘ALP’) as determined by the Assessee in the TP documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (‘the Rules’) as well as conducting fresh search; 1.2 rejecting comparability analysis in the TP documentation and conducting a fresh comparability analysis based on application of the additional/ revised filters in determining the ALP; 1.3 jurisdictional error made by the Ld. AO in making a reference to the Ld. AO to the Assistant Commissioner of Income Tax, Transfer Pricing Officer-1(1); 1.4 not providing the search strategy and reasons for acceptance or rejection for the fresh economic analysis conducted by Ld. TPO which tantamount to choosing ad hoc companies as comparable; 1.5 while performing the comparability analysis, erroneously including companies which do not satisfy the test of comparability which tantamount to cherry picking of companies and incorrectly rejecting certain comparable companies considered by the Assessee in its TP documentation to perform the arm’s length analysis; 1.6 rejecting certain additional companies proposed/ identified by the Assessee even though they are comparable in terms of functions performed, assets employed, and risks assumed; 1.7 erroneous computation of margins for companies selected by the Ld. TPO while performing comparability analysis and not giving regard to the directions passed by the Hon’ble DRP for re-verification of the computation of the same without giving any opportunity of being heard; Corporate tax grounds 2 That on the facts, in circumstances of the case and in law, Ld. AO erred in disallowing deduction of employees contribution of INR 5,32,27,364 deposited on or before the due date prescribed in the PF Act and accordingly, allowable under section 36(1)(va) of the Act. The Ld. AO and Hon’ble DRP grossly erred in making adjustment under section 36(1)(va) of the Act amounting to INR 3,29,28,122 for delay in deposit of employees contribution to provident fund without appreciating the fact that the contributions were deposited before the due date of filing of ITA No.559/PUN/2022 3 return and hence, were to be allowed in accordance with the provisions of section 43B of the Act. 3 Without prejudice to the above, Ld. AO [in pursuance to the directions of the Hon'ble DRP] grossly erred in not allowing additional deduction under section 10AA of the Act due to consequential increase in the profits eligible for deduction under section 10AA on account of alleged disallowance under section 36(1)(va) of the Act 4 That on the facts, in circumstances of the case and in law, Ld. AO has erred in computing excessive assessed income and consequential tax liability in the computation of income annexed to the final assessment order. 5 That on the facts, in circumstances of the case and in law, Ld. AO erred in not granting complete credit of Tax Deducted at Source (TDS) amounting to INR 17,85,96,051 as claimed by the Appellant in the return of income filed for the year under consideration and restricting the same to INR 13,80,81,281 in the computation of income annexed to the final assessment order. 6 That the Ld. AO erred in law in levying interest under section 234A of the Act without appreciating the fact that the return of income for AY 2018-19 was filed on 30 November 2018 i.e. within the due date specified under section 139(1) of the Act. 7 That the Ld. AO erred in law in levying interest under sections 234B and 234C of the Act, which is consequential in nature. The above grounds of appeals are independent of, and without prejudice to each other. The Appellant craves leave to add, alter, amend, rescind, modify or withdraw any ground(s) herein above or produce further documents either before or at the time of hearing of this appeal.” 3. Briefly, the facts of the case are as under: The appellant is a LLP engaged in the business of providing IT services to its parent company, namely, Amdocs Development Limited, Cyprus. The Return of Income for the assessment year 2018-19 was filed on 30.11.2018 declaring total income of Rs.272,07,10,780/-. The appellant also reported the international transactions with its AEs. Therefore, the Assessing Officer made a ITA No.559/PUN/2022 4 reference to the TPO for the purpose of benchmarking the above international transactions. The TPO vide order dated 30.07.2021 passed u/s 92CA(3) suggested TP adjustments of Rs.111,10,13,940/-. 4. On receipt of the TPO’s order, the Assessing Officer passed a draft assessment order u/s 143(3) r.w.s. 144C after making TP adjustment of Rs.111,10,13,940/- and making disallowance u/s 36(1)(va) in respect of belated payment of employees contribution of PF and ESI of Rs.8,61,45,863/- vide intimation u/s 143(1) of the Act. 5. On receipt of the draft assessment order, objections were filed before the Hon’ble DRP contesting the TP adjustments as well as disallowance on account belated payment of employees contribution of PF and ESI. The Hon’ble DRP vide order dated 28.04.2022 while giving part relief reduced the addition made on account of TP adjustments to Rs.108,31,85,753/-. However, confirmed the addition on account of belated payment of employees contribution of PF and ESI of Rs.8,61,45,863/-. 6. On receipt of the direction of the Hon’ble DRP, the Assessing Officer passed a final assessment order u/s 143(3) r.w.s. 144C(13) vide order dated 30.05.2022 making addition on account of TP ITA No.559/PUN/2022 5 adjustment of Rs.108,31,85,753/- and addition made in intimation u/s 143(1) of Rs.320,28,54,680/-. 7. Being aggrieved, the appellant is in appeal before us in the present appeal. 8. Ground of appeal no.1 challenges the addition on account of TP adjustment of Rs.108,31,85,753/-. The ld. AR submitted that the issue of addition on account of TP adjustment stands concluded by Advanced Pricing Agreement entered into by the appellant with the CBDT on 24.03.2023. In the circumstances, permission was sought to withdraw this ground of appeal no.1. On the other hand, ld. CIT- DR has no objection to withdraw this ground of appeal no.1. Considering the rival submissions, the ground of appeal no.1 stands dismissed as withdrawn. 9. Ground of appeal no.2 challenges the addition on account of belated payment of employees contribution of PF and ESI of Rs.8,61,45,863/-. We find that the disallowance on account of belated remittance of employees contribution of PF and ESI of Rs.8,61,45,863/- was made vide intimation issued u/s 143(1) and the same addition was repeated in the order made u/s 143(3) r.w.s. 144C(13) of the Act. If the assessee is aggrieved by the disallowance made under the intimation u/s 143(1), the assessee ITA No.559/PUN/2022 6 should have agitated the addition by availing the remedy available against the intimation u/s 143(1) of the Act. Therefore, this issue cannot be agitated in the appeal filed against the order u/s 143(3) r.w.s. 144C(13) of the Act. Thus, this ground of appeal no.2 stands dismissed. 10. Ground of appeal no.3 challenges the direction of the Hon’ble DRP disallowing the deduction u/s 10AA in respect of disallowance made u/s 36(1)(va) of the Act. It is settled position of law that the inflated business profits on account of any disallowances also qualifies for deduction u/s 10AA in view of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd., 330 ITR 175 (Bom.) and subsequently followed by the Hon’ble Bombay High Court in the case of PCIT vs. Lionbridge Technologies (P.) Ltd., 86 taxmann.com 101 (Bom.), affirmed by the Hon’ble Supreme Court in the case of PCIT vs. Lionbridge Technologies (P.) Ltd., 96 taxmann.com 495 (SC). However, the material on record does not indicate that the disallowance of PF and ESI was made in relation to business profits of unit, whose profits are eligible for deduction u/s 10AA of the Act. Therefore, this matter is remitted to the file of the Assessing Officer to examine whether or not PF and ESI disallowance was ITA No.559/PUN/2022 7 made in respect of unit, whose profits are eligible for deduction u/s 10AA and if so found, such disallowance may be treated as eligible profit for the purpose of deduction of income u/s 10AA of the Act. Thus, this ground of appeal no.3 stands partly allowed. 11. Ground of appeal nos.4 to 7 are dismissed as withdrawn as well as not pressed during the course of hearing of appeal. 12. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 19 th day of April, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 19 th April, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(DRP-3), Mumbai-1/2/3. 4. The Pr. CIT-4, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “C” बᱶच, पुणे / DR, ITAT, “C” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.