Ameriprise India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 5694/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58980 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G C SRIVASTAVA; PRITI BHARDWAJ
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NO. 5694/DEL/2011 ASSTT. YR: 2007-08 AMERIPRISE INDIA PVT. LTD., VS. DCIT CIR. 1(1), PLOT NO. 81, SECTOR 32, NEW DELHI. GURGAON. PAN/GIR NO. AAFCA3489B (APPELLANT) ( RESPONDENT ) APPELLANT BY: SH. G.C. SRIVASTAVA ADV.; & MS. PRITI BHARDWAJ ADV. RESPONDENT BY : SH. PIYUSH JAIN CIT DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF DCIT DATED 27-10-2011 PASSED U/S 143(3)/R.W.S. 144C OF THE I.T. ACT, 1961 (PURSUANT TO DRP DIRECTIONS DATED 10-10-2011), RELATING TO A.Y. 200 7-08. FOLLOWING GROUNDS ARE RAISED: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, 1. THE ASSESSING OFFICER (AO)/ DISPUTE RESOLUTION PANEL (DRP) HAS ERRED IN MAKING AN ADDITION OF RS. 21,856,752 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ENTERED BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES. 2. THE TPO/AO HAS ERRED IN REJECTING THE COMPARABLE S SELECTED BY THE APPELLANT AND IN CONDUCTING A FRESH SEARCH AND SELECTING A NEW SET OF COMPARABLES FOR THE ITA 5694.DEL/10 AMERIPRISE INDIA PVT. LTD. 2 DETERMINATION OF THE ALP OF THE IMPUGNED INTERNATIO NAL TRANSACTION. 3. THE TPO/ AO HAS ERRED IN (A) REJECTING THE DATA USED BY THE APPELLANT WHICH WAS AVAILABLE TO IT AT THE RELEVANT TIME AND PROCEEDING TO USE THE DATA WHICH WAS AVAILABLE ONLY AT THE TIME OF TP AUDIT AND (B) USING DATA FOR A SINGLE YEAR (FOR FY 2006-07 ON LY) INSTEAD OF MULTIPLE YEAR DATA (FOR THE PERIOD FY 2004-05 & FY 2005-06 & FY 2006-07). 4. THE TPO/AO HAS ERRED BY REJECTING CERTAIN COMPA RABLE COMPANIES IDENTIFIED BY THE APPELLANT FOR UNTENABLE GROUNDS SUCH AS: (A) TURNOVER < RS. 1 CRORE AS A COMPARABILITY CRITERION. (B) DIFFERENCE IN ACCOUNTING YEAR. (C) MISCONCEIVED DIFFERENCE IN ECONOMIC PERFORMANCE. 5. THE TPO/AO HAS ERRED IN EXERCISING HIS POWERS UN DER SECTION 133(6) OF THE ACT TO OBTAIN INFORMATION WHI CH WAS NOT AVAILABLE IN PUBLIC DOMAIN AND RELYING ON T HE SAME FOR COMPARABILITY PURPOSES. 6. THE TPO/AO HAS ERRED BY SELECTING CERTAIN COMPAN IES WHICH ARE EARNING SUPER NORMAL PROFITS AS COMPARABL E TO THE APPELLANT AND ADDING CERTAIN COMPANIES IN THE F INAL SET OF COMPARABLES ON AN AD HOC BASIS. 7. THE TPO/AO HAS ERRED BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIS A VIS THE COMPARABLES. ITA 5694.DEL/10 AMERIPRISE INDIA PVT. LTD. 3 2. LEARNED COUNSEL FOR THE ASSESSEE PLEADED THAT A SSESSEE SUBMITTED VARIOUS COMPARABLES TO JUSTIFY ITS ARMS LENGTH PRIC ING. TPO INSTEAD OF EXAMINING THE COMPARABLES OR USING PUBLIC DOMAIN DA TA, WHICH IS THE RECOGNIZED METHOD, ISSUED NOTICES U/S 133(6) CALLIN G T.P. INFORMATION FROM INDIVIDUAL COMPANIES. THE INFORMATION PROVIDED BY T HE TPO OFFICE REGARDING THE COMPARABLE COMPANIES USING POWER TO O BTAIN INFORMATION U/S 133(6) OF THE ACT WAS NOT CONFRONTED TO THE ASSESSE E. THUS, THE ASSESSEE HAD TO FACE VARIOUS DIFFICULTIES IN MEETING COMPARABLES PROPOSED BY TPO FOR ITS TRANSFER PRICE WORKING. BASED ON THE LIMITED INFOR MATION OBTAINED FROM THE COMPANIES TO WHOM NOTICES U/S 133 OF THE ACT WERE S ENT, ASSESSEE HAS NOT BEEN GIVEN PROPER OPPORTUNITY. WITHOUT EVALUATING A LL THE COMPARABILITY FACTORS/ PARAMETERS AS SPECIFIED IN THE INCOME-TAX RULES, 1962, IT WOULD NOT BE POSSIBLE TO CONSIDER THESE COMPANIES AS COMPARAB LES. THUS, TPO HAS ADOPTED A DISTORTED PROCESS WHILE MAKING T.P. ADDIT ONS. 2.1. WHILE THE AO IN THE INITIAL PHASE REQUESTED FO R INFORMATION FROM THE IDENTIFIED COMPANIES MENTIONED IN ITS NOTICE, THE T PO HAS NOT GATHERED COMPLETE INFORMATION FROM THESE COMPANIES AS SPECIF IED UNDER RULE 10B(2) FOR ASCERTAINING COMPARABILITY ANALYSIS. BESIDES, IN CASE OF CERTAIN COMPANIES CONSIDERED AS COMPARABLE BY THE TPO, THE RESPONSES FILED BY THE COMPANIES DO NOT ANSWER ALL THE QUESTIONS ASKED IN THE NOTICE SERVED U/S 133(6) OF THE ACT. 2.2. IT IS SETTLED PROPOSITION THAT IF THE TPO PROP OSES TO USE INFORMATION GATHERED U/S 133(6) OF THE ACT, IT IS NECESSARY THA T THE TPO USES THE POWERS CONFERRED BY THIS PROVISION TO OBTAIN OR DISCLOSE A LL INFORMATION REQUIRED FOR JUDGING COMPARABILITY OF A TRANSACTION RATHER THAN OBTAINING OR DISCLOSING TO THE ASSESSEE ONLY INFORMATION ON A SELECTIVE AND AR BITRARY BASIS. FURTHER, ALL THE INFORMATION, REQUIRED FOR ASCERTAINING COMPARAB ILITY, OBTAINED BY THE ITA 5694.DEL/10 AMERIPRISE INDIA PVT. LTD. 4 TPO, SHOULD BE SHARED WITH THE ASSESSEE IN ORDER T O ENSURE ITS COMPLETENESS AND CROSS VERIFY THE CLAIMS MADE BY THE TPO. 2.3. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS OF THE ITAT: - M/S GENISYS INTEGRATING SYSTEMS (INDIA) PVT. LTD. [ ITA NO. 1231(BANG.)/2010]. - M/S KODIAK NETWORKS (INDIA) PVT. LTD. [ITA NO. 1413 /BANG./2010] - M/S CENTILLIUM INDIA PVT. LTD. VS. DCIT [ITA NO. 13 54/BANG/2010] - M/S ELECTRONICS FOR IMAGING INDIA PVT. LTD. VS. DCI T [ITA NO. 1171/BANG/2010] 2.4. IT IS PLEADED THAT THE ENTIRE EXERCISE CARRIED OUT BY THE TPO IS ARBITRARY AND WITHOUT GIVING APPROPRIATE OPPORTUNITY TO THE A SSESSEE. THE CRUCIAL INFORMATION RELIED ON BY TPO AS SPECIFIED U/S 10B(2 ) FOR JUDGING COMPARABILITY WAS NOT PROVIDED TO THE ASSESSEE. THE ALLEGATION OF TPO THAT ASSESSEE WAS NOT ABLE TO RESPOND TO THE ISSUE OF MA RGINS EARNED BY THE COMPARABLE COMPANIES, IS BASELESS AND CONTRARY TO RECORD LD. COUNSEL PLEADS THAT THE TP ADJUSTMENT MADE THUS NEED TO BE REVERSED. ALTERNATIVELY, IF ITAT DEEMS IT FIT, THEN THE MATTER MAY BE SET AS IDE, RESTORED BACK TO THE FILE OF AO WITH DIRECTIONS TO TPO TO MAKE THE TRANS FER PRICING REPORT AFRESH, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD ABOUT THE 133(6) INFORMATION IN RESPECT OF COMPARABLES. 3. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT EMERGES FROM THE R ECORD THAT: (I) ASSESSEE WAS NOT PROVIDED OPPORTUNITY TO MEET OUT T HE COMPARABILITY FACTORS AND THE PARAMETERS AS PRESCRI BED BY RELEVANT T.P. RULES IN RESPECT OF 133(6) COMPANIES. ITA 5694.DEL/10 AMERIPRISE INDIA PVT. LTD. 5 (II) TPO HAS COMPLETED T.P. REPORT WITHOUT GATHERING COM PLETE INFORMATION AS MANDATORY RULE 10(B). 4.1. WHILE JUDGING THE COMPARABILITY, THE ASSESSEE NEEDS TO BE MADE AWARE ABOUT THE RELEVANT T.P. INFORMATION, IN THE ABSENCE WHEREOF, THE ORDER BECOMES DEFICIENT ON THE PRINCIPLES OF NATURAL JUST ICE. SINCE THE DRP SYSTEM IS NEW AND THE ITAT VIRTUALLY BECOME FIRST APPELLAT E AUTHORITY, IN THESE CIRCUMSTANCES IT WILL BE HARSH TO REVERSE THE T.P. ADJUSTMENTS. CONSEQUENTLY, IN THE INTEREST OF NATURAL JUSTICE AND FAIR PLAY, WE ACCEPT THE ALTERNATIVE SUBMISSION OF THE ASSESSEE AND RELYING ON THE ABOVE REFERRED ITAT JUDGMENTS, WE ARE INCLINED TO SET ASIDE THE MATTER BACK TO THE FILE OF AO/TPO TO MAKE A PROPER TP REPORT AND DECIDE THE IS SUES AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD IN ACCORDANC E WITH LAW. WE ORDER ACCORDINGLY. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 26-03-2012. SD/- SD/- ( T.S. KAPOOR) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26-03-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 5694.DEL/10 AMERIPRISE INDIA PVT. LTD. 6