Appeal details
Counselvise Citation
565020114 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-09-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
10-08-2011
Assessment Year
2006-2007
Appeal Filed On
13-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI B.C. MEENA ITA NO. 5650/DEL/2010 ASSESSMENT YEAR: 2006-07 FIS GLOBAL BUSINESS SOLUTIONS INDIA VS. DEPUTY COM MISSIONER OF IT, PVT. LTD., S-405 (LGF), CIRCLE 11(1), GR. KAILASH, PART-II, NEW DELHI. NEW DELHI-1100 48 (PAN: AAACH2815H) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R. SATISH KUMAR, ADV. RESPONDENT BY: SHRI NK CHAN D, SR. DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF ASSESSEE AGAINST THE ORDER OF LEARNED DRP DATED 05.08.2010, PASSED UNDER SECTION 144C OF THE INCOME-TAX ACT, 1961 FOR ASSESSMENT YEAR 2006-07. T HE ASSESSEE HAS TAKEN NINE GROUNDS OF APPEAL OUT OF WHICH SEVEN REVOLVE A ROUND A SINGLE ISSUE I.E. ADJUSTMENT MADE IN THE ARMS LENGTH PRICE OF THE IN TERNATIONAL TRANSACTION WITH ASSOCIATE ENTERPRISES. IN GROUND NO.8, IT HAS CHALLENGED THE LEVY OF INTEREST UNDER SEC. 234B AND IN GROUND NO.9, IT HAS CHALLENGED INITIATION OF PENALTY UNDER SEC. 271(1)(C) OF THE ACT. 2 2. AS FAR AS THE ISSUE REGARDING INITIATION OF PENA LTY UNDER SECTION 271(1)(C) OF THE ACT IS CONCERNED, WE ARE OF THE OP INION THAT IT IS PRE- MATURED TO CHALLENGE IN THE PRESENT APPEAL. THE ASS ESSEE WILL GET INDEPENDENT OPPORTUNITY TO AGITATE THE PENALTY PROC EEDINGS BEFORE THE ASSESSING OFFICER OR THE AUTHORITY GOING TO IMPOSE THE PENALTY UPON IT. IT WILL HAVE AN INDEPENDENT RIGHT OF APPEAL, THEREFORE , SUCH A PLEA CANNOT BE ENTERTAINED IN THE PRESENT APPEAL. THIS GROUND OF A PPEAL IS REJECTED. 3. WITH REGARD TO THE ISSUE OF ADJUSTMENTS MADE IN THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION, THE FACTS IN BRIEF AR E THAT THE ASSESSEE COMPANY AT THE RELEVANT POINT WAS ENGAGED IN THE BUSINESS O F PROVIDING SOFTWARE DEVELOPMENT SERVICES AND INFORMATION ENABLE SERVICE S OF BUSINESS PROCESS MANAGEMENT I.E. FINANCIAL PROCESSING AND SUPPORT SE RVICE. IT HAS FILED ITS RETURN OF INCOME ON 18.11.2006 DECLARING INCOME OF RS.4,08,85,713. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND A NOTICE UNDER SEC. 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND FOL LOWING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES: S.NO. DESCRIPTION OF THE TRANSACTIONS AMT. ( IN RS.) METHOD USED FOR DETERMINATION OF 3 ARMS LENGTH PRICE. 1. PROVISION OF SERVICES BY SDC 597,622,735 TRANSACTIONAL NET MARGIN METHOD (TNMM) 2. PROVISION OF IT ENABLED SERVICES 1,620,820,385 TRANSACTIONAL NET MARGIN METHOD (TNMM) 3 AVAILING SUPPORT SERVICES RENDERED BY EFC 13,371,393 TRANSACTIONAL NET MARGIN METHOD (TNM) 4 REIMBURSEMENT OF EXPENSES TO AES 19,154,582 N.A. 5. EMPLOYEE CONTRIBUTION TOWARDS EMPLOYEE STOCK PURCHASE PLAN REMITTED TO EFC 170,319 N.A. 6. REIMBURSEMENT OF EXPENSES BY AES 3,786,170 N.A. TOTAL 2,254,755,265 4. HE MADE A REFERENCE UNDER SEC. 92CA(3) TO THE LE ARNED TPO FOR DETERMINING ARMS LENGTH PRICE IN RESPECT OF INTERN ATIONAL TRANSACTION. LEARNED TPO HAS PASSED AN ORDER UNDER SEC. 92CA(3) ON 30 TH SEPTEMBER 2009 WHEREBY HE RECOMMENDED THE ADJUSTMENT IN THE A LP OF INTERNATIONAL TRANSACTION AT RS.16,92,32,410. ASSESSING OFFICER H AS PROPOSED ADDITION OF ABOVE AMOUNT THE DRAFT ORDER. THE MATTER WAS REFERR ED TO THE DISPUTE 4 RESOLUTION PENAL. THE ASSESSEE HAS MADE DETAILED SU BMISSIONS. IT CONTENDED THAT ASSESSEE HAS BEEN MAINTAINING PROPER TRANSFER PRICING DOCUMENTATION AS REQUIRED UNDER SEC. 92D READ WITH RULE 10D OF THE I T RULE, 1962. IT HAS SUBMITTED THE TP STUDY REPORT BEFORE THE LEARNED TP O. THE ASSESSEE HAS SELECTED TNMM METHOD I.E. TRANSACTIONAL NET MARGIN METHOD FOR DETERMINING THE ALP. IT POINTED OUT TO THE LEARNED DRP THAT LEARNED TPO HAS APPLIED CERTAIN ADDITIONAL QUANTITATIVE FILTER WHILE DETERMINING THE PROFIT LEVEL INDICATOR. HE HAS CONSIDERED THE FILTER SUCH AS DECLINING SALES, DECLINING OPERATING PROFIT FOR EXCLUDING CERTAIN COMPARABLES CONSIDERED BY THE ASSESSEE. THE ASSESSEE HAS DEMONSTRATED THE MATERIA L TO THE LEARNED DRP AS TO HOW COMPARABLES SELECTED BY THE LEARNED TPO COU LD NOT BE COMPARED. LEARNED DRP HAS DECIDED THE OBJECTION OF THE ASSESS EE BY PASSING THE FOLLOWING ORDER: ORDER UNDER SECTION 144C OF THE INCOME-TAX ACT IN THIS CASE THE OBJECTIONS TO THE DRAFT ASSESSMEN T ORDER WERE FILED BEFORE THE DRP ON 15.01.2010. THE CASE WAS FI XED FOR HEARING ON 30.7.2010. SHRI ANKIT ARORA, RICHA GUPTA, PRIYAN KA, ASHUTOSH MAHAJAN AND JASVINDER SINGH FROM DELOITTE HASKINS & SELLS APPEARED ON BEHALF OF THE ASSESSEE AND ARGUED THE CASE. THE TPO ORDERS HAVE BEEN OBJECTED TO ON GROUNDS OF WRONG REJECTION OF A SSESSEES COMPARABLE BY TPO AS ALSO REJECTION OF RISK ANALYSI S CONDUCTED BY THE 5 ASSESSEE. THE OTHER GROUND OF OBJECTION IS REGARDIN G DISALLOWANCE OF DEDUCTION U/S.10A OF THE INCOME-TAX ACT. WE HAVE CONSIDERED THE WRITTEN AND ORAL ARGUMENTS P UT UP BY THE ASSESSEES REPRESENTATIVES AS ALSO THE PROPOSED DRAFT ORDER OF TPO/A.O. IT IS FOUND THAT BOTH THE MAIN ISSUES AS R EGARDS SELECTION OF COMPARABLES AND RISK ANALYSIS OF THE ASSESSEE HAVE BEEN CONSIDERED AT LENGTH BY THE TPO AND HE HAS GIVEN DETAILED REASONS FOR REJECTION AND SELECTION OF COMPARABLES TO WORKOUT THE ALP. ALSO D ETAILED REASONS ARE GIVEN FOR REJECTING THE RISK ANALYSIS AND OTHER SUPPORTING ARGUMENTS OF THE ASSESSEE. WE, THEREFORE, DIRECT TH E TPO TO TAKE OUT SATYAM AS A COMPARABLE WHICH HAS NOT BEEN CONSIDERE D IN OTHER CASES AS WELL AS FOR OBLIVIOUS FINANCIAL DEFECTS. THE WOR KING OF TP ADJUSTMENT IS TO BE WORKED OUT ACCORDINGLY. WE DO N OT FIND ANY REASON TO INTERFERE WITH THE REJECTION OF RISK ANAL YSIS. AS REGARDS THE DISALLOWANCE OF DEDUCTION U/S. 10A O F THE I.T. ACT, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 10A RE GARDING ITS PROFIT THROUGH STP UNITS. THE ASSESSEE CLAIMS THAT THIS HA S BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 RIGHT UP TO THE HIGH COURT. THE A.O IS HENCE DIRECTED TO EXAMINE TH IS ISSUE AND IN CASE IT IS COVERED BY THE ORDER OF THE HIGH COURT A ND HAD BEEN ACCEPTED BY THE DEPARTMENT, THE SAME MAY BE ALLOWED . WITH THE ABOVE DIRECTIONS OBJECTIONS OF THE ASSESSEE ARE DISPOSED. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. LEARNED TPO HAS RECOMMENDED THE ADJUSTMENTS OF 6 RS.16,92,32,410 IN THE ALP OF INTERNATIONAL TRANSAC TION VIDE HIS ORDER DATED 30 TH SEPTEMBER 2009 PASSED UNDER SEC. 92CA(3) OF THE IN COME-TAX ACT, 1961. THE ASSESSEE HAD SUBMITTED BEFORE THE LEARNED DRP THAT TPO HAS ERRED IN INCLUDING AND EXCLUDING THE COMPARABLES FO R WORKING THE PLI, HOWEVER, LEARNED DRP HAS CONCURRED WITH THE FINDING S OF THE LEARNED TPO WITHOUT TAKING COGNIZANCE OF FACTS AND CIRCUMSTANCE S, PARTICULARLY THE DETAILS OF COMPARABLES PRODUCED BY THE ASSESSEE. THE LEARNE D DRP HAS NOT ASSIGNED ANY REASON FOR CONCURRING WITH THE LEARNED TPO. TO OUR MIND, IT IS NECESSARY FOR THE LEARNED DRP TO CONSIDER THE FACTS AND CIRCU MSTANCES AND RECORD REASONS IN SUPPORT OF ITS ORDER SO THAT HIGHER APPE LLATE FORUM CAN APPRECIATE WHAT WEIGH WITH THE COLLEGIUM OF THREE SENIOR OFFIC ERS OF THE REVENUE DEPARTMENT TO CONCUR WITH THE CONCLUSION DRAWN BY T HE LEARNED TPO. PERUSAL OF THE IMPUGNED ORDER, (EXTRACTED SUPRA), TO OUR MI ND CANNOT BE TERMED AS A SPEAKING ORDER AS PROPOUNDED BY THE HON'BLE SUPREME COURT IN THE CASE OF SALLAY MOHD. SAIT VS. CIT REPORTED IN 37 ITR 151. C ONSIDERING THIS LACUNA IN THE ORDER OF THE LEARNED DRP, WE DEEM IT APPROPR IATE TO SET ASIDE THIS ORDER AND REMIT THE ISSUE BACK TO THE FILE OF THE L EARNED DRP FOR ADJUDICATING UPON THE OBJECTION OF THE ASSESSEE ON MERIT BY PASS ING A REASONED ORDER. IT IS NEEDLESS TO SAY THAT THE OBSERVATIONS MADE BY US WI LL NOT IMPAIR OR INJURE THE CASE OF A.O. OR WOULD CAUSE ANY PREJUDICE TO THE DE FENCE/EXPLANATION OF THE 7 ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE AT T HE TIME OF HEARING MADE A PRAYER THAT LEARNED DRP BE DIRECTED TO DECIDE THE I SSUE WITHIN A PERIOD OF SIX MONTHS. HOWEVER, WE DO NOT DEEM IT FIT TO GIVE ANY SUCH DIRECTION BECAUSE WE DO NOT HAVE ANY IDEA ABOUT THE VOLUME OF WORK PE NDING WITH THE LEARNED DRP, BUT IT WOULD BE APPRECIATED IF THE OBJECTIONS OF THE ASSESSEE ARE DISPOSED OF AT AN EARLY DATE. AS FAR AS ISSUE REGAR DING CHARGING OF INTEREST U/S. 234B IS CONCERNED, IT IS ALSO REMITTED TO THE LEARNED DRP. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 16.09.201 1 SD/- SD/- ( B.C. MEENA ) ( RAJ PAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/09/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR
