DCIT, Circle- 1(2)(1), International Taxation, NEW DELHI V. Convergys Customer Management Group Inc., NEW DELHI

ITA 5590/DEL/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9465 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Double taxation relief; International transaction; Bonafide belief
• Section: 92D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No. 5590/DEL/2017 [A.Y 2009-10) The Dy. C.I.T Vs. Convergys Customer Management Circle – 1(1)(1) Group Inc. C/o PricewaterCoopers Inttl. Taxation Pvt Ltd. 11A, Vishnu Digamber Marg New Delhi Sucheta Bhawan, New Delhi PAN: AACCC 8989 M (Applicant) (Respondent) Assessee By : Shri Kanchun Kaushal, FCA Shri Ravi Sharma, Adv Shri Rishab Malhotra, AR Department By : Shri R.D. Burman, CIT- DR Date of Hearing : 29.09.2022 Date of Pronouncement : 03.10.2022 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the Revenue is preferred against the order dated 22.02.2022 framed u/s 143(3)/144C(13) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. 2 2. The sum and substance of the grievance of the Revenue is that the ld. CIT(A) erred in deleting the penalty levied by the Assessing Officer u/s 271AA of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. 3. The representatives of both the sides were heard at length, the case records carefully perused and relevant documentary evidences brought on record duly considered in light of Rule 18(6) of ITAT Rules. 4. At the very outset, the ld. DR drew our attention to the decision of the co-ordinate bench in assessee’s own case in ITA Nos. 3529/DEL/2015 for Assessment Year 2006-07 and 3530/DEL/2015 for Assessment Year 2008-09 and pointed out that similar quarrel has been decided by the Tribunal in favour of the Revenue and against the assessee. 5. The ld. counsel for the assessee vehemently stated that the Tribunal has decided the issue on incorrect facts which were not at all applicable in these Assessment Years, and, therefore, the appeal of the assessee has been admitted by the Hon'ble High Court of Delhi, 3 though the Miscellaneous Application preferred by the assessee was dismissed. 6. We have given thoughtful consideration to the orders of the authorities below. We find that the sole basis for levy of penalty is the finding that the assessee company had not kept and maintained the information and documents as required by Sub-section (1) or sub- section (2) of section 92D of the Act. The Assessing Officer is also influenced by the fact that the assessee has entered into international transactions during the year under consideration. 7. The Assessing Officer further supported his finding that the existence of PE has no bearing on penalty u/s 271AA and further, section 92D r.w.r 10D does not provide for maintenance of TP documentation by an Indian AE, for its own affairs, and being a separate legal entity, entering into international transactions, the assessee could not shy away from complying with the statutory provisions application on him. 4 8. The Assessing Officer firmly concluded that the act of the assessee in not keeping and maintaining such information and documents, as required u/s 92D(1) and 92D(2) of the Act, attracts penalty u/s 271AA of the Act and levied penalty @ 2% of value of each international transaction entered into by it. 9. When the penalty order was assailed before the ld. CIT(A), the ld. CIT(A) found that this Tribunal, vide order dated 26.10.2015 has disposed of the appeal of the assessee by observing as under: (i) That the facts of the case for the assessment year under consideration are identical to those of the AY 2006-07 wherein the Hon'ble Tribunal has decided the identical issue against the Appellant on Fixed Place PE under Article 5{1) of the DTAA. Following the above finding, the Tribunal held that the Appellant has a Fixed Place PE in India in terms of Article 5(1) of the DTAA. (ii) That the Hon'ble Tribunal in its order in the Appellant's own case for AYs 2005-07 and 2008- 09 has opined the correct approach to arrive at the profits attributable to the PE involving four steps and directed the Ld. AO to re-compute the profits attributable to the PE in line with the methodology as provided by the Hon'ble Tribunal. 5 (iii) That the Hon'ble Tribunal in its order in the Appellant's own case for AY 2005-07 and 2008- 09 has opined on the Issue of taxability of payments for IPLC charges. The Tribunal in the instant year, in consistency with the view taken in its order for the AY 2006-07 and 2008-09, upheld the contentions of the Appellant that the same are not taxable as 'Royalty' under the provisions of Article 12 of the DTAA and even otherwise; the IPLC charges are in the nature of reimbursements of expenses and accordingly not taxable in the hands of the Appellant in India .” 10. Thus, the ld. CIT(A) observed that the only adjustment in the year under consideration is on account of profits attributable to PE. The ld. CIT(A) was convinced that the assessee in Form 3CEB has declared receipt of fees for services provided to CIS and receipt of fees for included services was shown as international transaction. 11. The ld. CIT(A), while cancelling the penalty, further observed that the assessee was under a bonafide belief that other transactions do not result in any income accruing/arising in the hands of the assessee and, therefore, such transactions have not been reported in Form 3CEB. 6 12. We find that even the TPO, while framing order u/s 92CA3 of the Act has admitted that TP documentation containing functional and economic analysis prescribed u/r 10D of the Rules were submitted and placed on record. 13. The TPO, while framing the order conclusively held that on the basis of documentation produced, no adverse inference is drawn in respect of international transactions undertaken by the assessee during the F.Y. 2008-09. 14. We have carefully perused the assessment order. There is no dispute that the assessee has maintained requisite documentation in respect of its reported international transaction of FTS and FIS and has also furnished details of various documentations maintained by it. We further find that the Assessing Officer has not specified the documents/information which, in his view, were required to be kept and maintained u/s 92D(1) and 92D(2)of the Act r.w.r 10D of the Rules but were not kept and maintained by the assessee. 7 15. Coming to the decision of this Tribunal in Assessment Year 2006- 07 and 2008-09 [supra], we find that the entire basis for deciding the issue in favour of the Revenue relates to the observations given in respect of independent accountant’s report/documents for specified domestic transactions whereas in the present assessment, there is not even a whisper of any specified domestic transactions. Therefore, the reference to the order of this Tribunal in earlier Assessment Years by the ld. DR would do no good to the Revenue, as the facts are totally different. 16. Considering the facts of the case in hand in totality, we do not find any reason to interfere with the findings of the ld. CIT(A). 17. In the result, the appeal of the Revenue in ITA No. 5590/DEL/2017 is dismissed. The order is pronounced in the open court on 03.10.2022. Sd/- Sd/- [SAKTIJIT DEY] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03 rd October, 2022. 8 VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order