Alcatel- Lucent India Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 583/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6917 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU AGGARWALC A
• Assessee Lawyers: BHUVAN DHOOPAR
• Keywords: Related party transaction; Transfer pricing; Principle of natural justice; International transaction; Set aside
• Section: 271(1)(c); 92C; 143(3); 92D; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: I-1: NEW DELHI) , , BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER / ITA NO:- 583/DEL/2017 / ASSESSMENT YEAR: 2006-07 ALCATEL LUCENT INDIA LTD. .......... /APPELLANT (ALIL) 202-206, TOLSTOY HOUSE, TOLSTOY MARG, NEW DELHI PAN-AACCA8667N VS ADDL CIT, SPECIAL RANGE-1, . !' /RESPONDENT ROOM NO. 159A, C.R. BUILDING, I.P. ESTATE, NEW DELHI-110001 #$% / APPELLANT BY :SH. HIMANSHU SINHA, ADV, MS. VRINDA TULSHAN, ADV & SH. BHUVAN DHOOPAR, ADV !' #$% / RESPONDENT BY :SH. HIMANSHU AGGARWAL, C.A. &#'() / DATE OF HEARING : 25.09.2019 *+ #'() / DATE OF PRONOUNCEMENT: 16.10.2019 / ORDER PER SUSHMA CHOWLA, JM: THE PRESENT APPEAL FILED BY ASSESSEE IS AGAINST ORD ER OF AO PASSED UNDER 144C R.W.S. 143(3) RELATING TO ASSESSM ENT YEAR 2006-07 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). / ITA NO:- 583/DEL/2017 PAGE | 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL WHICH READ AS UNDER:- 1. THE REFERENCE MADE BY THE LD. AO SUFFERS FROM JURISD ICTIONAL ERROR AS HE HAD NOT RECORDED ANY REASON IN THE ORIGINAL DRAFT ASSES SMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS 'NECESS ARY OR EXPEDIENT' TO REFER THE MATTER TO THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICER- I(1)(1), NEW DELHI ('LD. TPO') FOR COMPUTATION OF THE ARM'S LENGTH PRICE (ALP), AS IS REQUIRED UNDER SECTION 92C A(1) OF THE ACT. 2. THE ORDER PASSED BY THE LD. TPO FOR GIVING EFFECT T O THE SPECIFIC AND STATED DIRECTIONS ISSUED BY THE HONOURABLE INCOME TAX APPE LLATE TRIBUNAL (HON'BLE ITAT) IS NON-SPEAKING IN NATURE AS IT DOES NOT CONTA IN ANY OBSERVATION ON THE SPECIFIC CONTENTIONS RAISED BY THE APPELLANT BEFORE THE LD. TPO WITH RESPECT TO REJECTION OF INFOSYS TE CHNOLOGIES LIMITED AND MPHASIS BFL LIMITED, IN ACCORDANCE WITH THE DIRECTIONS ISSUED BY THE HON'BL E ITAT. 3. THE ORDER PASSED BY THE LD. TPO FOR GIVING EFFECT T O THE DIRECTIONS ISSUED BY THE HON'BLE ITAT CONTAINS OBSERVATIONS MADE BY THE L D. TPO ON A MATTER WHICH WAS NEITHER RESTORED BACK TO THE FILE OF THE LD. TPO BY THE HON'BE ITAT NOR WAS CONTENDED BY THE APPELLANT BEFORE THE LD. T PO. 4. WITHOUT PREJUDICE TO THE OTHER GROUNDS OF OBJE CTIONS, THE APPELLANT OBJECTS TO THE PROPOSED ENHANCEMENT OF THE INCOME OF THE APPEL LANT BY RS. 218,850,219/- BY THE LD. AO/LD. TPO BY HOLDING THAT THE INTERNATIONAL TRANSACTION OF THE APPELLANT PERTAINING TO PROVISIO N OF SOFTWARE DEVELOPMENT AND SUPPORT SERVICE DO NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT AND IN DOING SO HAVE GROSSLY ERRED BY: 4.1. DISREGARDING THE ARM'S LENGTH PRICE AS DETERMI NED BY THE APPELLANT IN THE TP DOCUMENTATION MAINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCO ME-TAX RULES, 1962 ('RULES'); 4.2. DISREGARDING MULTIPLE YEAR/ PRIOR YEARS' DATA AS USED BY THE APPELLANT IN THE TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR [I.E. FINANCIAL YEAR ('FY') 2005-06] DATA FOR COMPA RABLE COMPANIES SHOULD BE USED DESPITE THE FACT THAT THE SAME WAS N OT NECESSARILY AVAILABLE TO THE APPELLANT AT THE TIME OF PREPARING ITS TP DOCUMENTATION, AND IN DOING SO HAVE GROSSLY ERRED I N; 4.3 HOLDING THAT AT THE TIME OF CREATING/ MAINTAINI NG THE TP DOCUMENTATION, THE APPELLANT COULD HAVE PROCURED CU RRENT/ SINGLE YEAR DATA (I.E. FY 2005-06 DATA) FROM SOURCES OTHER THAN THE ELECTRONIC DATABASES, WHEN INFACT PRACTICALLY NO SUCH OTHER SO URCES WERE AVAILABLE IN CASE OF MOST COMPANIES; 4.4. REJECTING CERTAIN COMPARABLES ON GROUND OF SIG NIFICANT RELATED PARTY TRANSACTIONS ('RPT') AND ACCORDINGLY, DISREGA RDING THE FACT THAT RPT DATA WAS NOT AVAILABLE AT THE TIME OF PREPARATIO N OF TP DOCUMENTATION; / ITA NO:- 583/DEL/2017 PAGE |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| 4 UNDERTAKEN BY THE ASSESSEE, THE ISSUE WAS SET ASIDE TO THE FILE OF TPO WITH REGARD TO THE SELECTION OF TWO CONCERNS I.E. I NFOYSYS TECHNOLOGIES LIMITED AND MPHASIS BFL LIMITED (HEREINAFTER REFERR ED TO AS THE MPHASIS). THE ASSESSEE IS AGGRIEVED BY THE ORDER OF AO/TPO IN INCLUDING THE TWO CONCERNS IN THE FINAL SET OF COMP ARABLES. 5. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE W AS PROVIDING SOFTWARE DEVELOPMENT & SUPPORT SERVICES TO LUCENT I NC ON BEHALF OF ITS GROUP COMPANIES, WHO CATERED TO THE TELECOM IND USTRIES. THE ASSESSEE HAD APPLIED TNMM METHOD TO BENCHMARK THE I NTERNATIONAL TRANSACTION BY APPLYING PLI OF OP/OC. THE AO MADE R EFERENCE TO THE TPO UNDER SECTION 92CA(1) OF THE ACT, WHO IN TURN P ASSED ORDER UNDER SECTION 92CA(3) OF THE ACT. IN FINAL ANALYSIS EIGHT CONCERNS WERE SELECTED AS FUNCTIONALLY COMPARABLE TO THE ASSESSEE . THE MEAN MARGINS OF THE SAID COMPANIES WORKED OUT TO 23.56% AS AGAINST THE MARGIN OF THE ASSESSEE AT 14.89% AND HENCE THE UPWA RD ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE. AFTER THE PROCEE DINGS OF THE DRP, THE FINALLY SELECTED CONCERNS TOTAL LED TO SEVEN, A ND THE MEAN MARGINS WORKED TO 22.62%. THE ASSESSEE IN ITS APPEAL BEFORE THE TRIBUNAL WAS AGGRIEVED BY THE INCLUSION OF TWO CONCERNS I.E. INF OSYS TECHNOLOGIES LIMITED AND MPHASIS BFL LIMITED. THE TRIBUNAL VIDE ITS ORDER DATED 23.4.2014 REMITTED THE MATTER BACK TO THE FILE OF A O/TPO. HOWEVER, THE TPO INCLUDED BOTH THE CONCERNS IN THE SECOND RO UND OF / ITA NO:- 583/DEL/2017 PAGE | 5 PROCEEDING, AND THE ASSESSEE IS AGGRIEVED BY THE OR DER OF THE AO/DRP/TPO IN THIS REGARD. HENCE THE PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST CONCERN WITH WHICH THE ASSESSEE IS AGGRIE VED IS INFOSYS TECHNOLOGIES LIMITED. THE CASE OF THE ASSESSEE IS B EFORE US IS THAT NOT ONLY THE SAID CONCERN HAD VERY HIGH TURNOVER AS COM PARED TO THE TURNOVER OF THE ASSESSEE AT 230 CRORE, BUT THERE W ERE DIFFERENCE IN FUNCTIONAL AND RISK PROFILE OF THE ASSESSEE VIZ A V IZ INFOSYS TECHNOLOGIES LIMITED. IN THIS REGARD, THE ASSESSEE HAD FILED A TABULATOR CHART BEFORE THE AUTHORITIES BELOW AND EV EN BEFORE THE TRIBUNAL IN THE FIRST ROUND. THE LD. AR FOR THE ASS ESSEE FURTHER POINTED OUT THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 2297 & 2298/DEL/2008 WITH CROSS APPEAL NOS. 2244 & 2245/DE L/2008 RELATING TO ASSESSMENT YEARS 2003-04 & 2004-05, VID E CONSOLIDATED ORDER DATED 9.9.2015, HAD HELD THAT THE CONCERN INF OSYS TECHNOLOGIES LIMITED IS FUNCTIONALLY DIFFERENT FROM ASSESSEE, ON ACCOUNT OF THE DIVERSIFIED FUNCTIONS AND ALSO ON ACCOUNT OF OWNERS HIP OF BRANDED / PROPRIETARY PRODUCTS. 7. THE LD. DR FOR THE REVENUE HOWEVER STRONGLY OPPO SED THE SUBMISSIONS PUT IN BY THE LD. AR FOR THE ASSESSEE A ND THE POINTED OUT THAT THE REVENUE EARNED FROM THE PROPRIETARY PRODUC TS, BY INFOSYS TECHNOLOGIES LIMITED, WAS NEGLIGIBLE. / ITA NO:- 583/DEL/2017 PAGE | 6 8. WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT I NFOSYS TECHNOLOGIES LIMITED IS NOT TO BE INCLUDED IN THE F INAL LIST OF COMPARABLES, FIRSTLY ON ACCOUNT THAT THE TRIBUNAL I N ASSESSEES OWN CASE IN ASSESSMENT YEARS 2003-04 AND 2004-05 VIDE O RDER DATED 9.9.2015 HAS DIRECTED ITS EXCLUSION. FURTHER, WE AL SO FIND THAT THE INFOSYS WAS ENGAGED IN DIVERSIFIED FIELDS AND IT PE RFORMED VARIOUS FUNCTIONS AS AGAINST THE PROFILE OF THE ASSESSEE WH EREIN IT WAS ONLY PROVIDING SOFTWARE DEVELOPMENT SERVICES TO THE GROU P COMPANIES OF LUCENT INC. ANOTHER ASPECT WHICH NEEDS TO BE KEPT I N MIND IS THE OWNERSHIP OF THE BRANDED / PROPRIETARY PRODUCTS BY INFOSYS TECHNOLOGIES LIMITED, AS AGAINST THE FACTS THAT THE ASSESSEE OWNS NO INTANGIBLE PRODUCT COMPANY, EVEN IF IT HAD MEAGRE I NCOME CANNOT BE COMPARED WITH A NON PRODUCT COMPANY. SUCH IS THE PR OPOSITION LAID DOWN BY THE HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. VS. COMMISSIONER OF INCOME TAX, 377 ITR 533 (D ELHI). ACCORDINGLY, WE DIRECT THE AO TO EXCLUDE THE CONCERN INFOSYS TEC HNOLOGY LIMITED FROM THE FINAL LIST OF THE COMPARABLES. 9. NOW COMING TO THE NEXT CONCERN WHICH IS IN DISPU TE I.E. MPHASIS BFL LIMITED. THE PLEA OF THE LD. AR OF THE ASSESSEE BEFORE IS THAT THE SAID CONCERN WAS FUNCTIONALLY DIFFERENT AN D ON THIS ASPECT THE ASSESSEE HAD FILED DETAILED SUBMISSIONS BEFORE THE TPO WHICH HAVE NOT BEEN CONSIDERED BY THE TPO. OUR ATTENTION WAS D RAWN TO PAGE 12 OF THE ORDER OF THE TPO AND THE FINAL ANALYSIS AT P AGE 34 OF THE ORDER / ITA NO:- 583/DEL/2017 PAGE | 7 OF THE TPO. THE LD. AR FOR THE ASSESSEE FURTHER DRE W OUR ATTENTION TO THE ANNUAL REPORT OF THE SAID CONCERN AND REFERRED TO THE BUSINESS PROFILE OF THE GROUP WHICH WAS ENGAGED IN DIFFERENT FIELDS. HE FURTHER POINTED OUT THAT MPHASIS BFL LIMITED ALSO WAS A PRO DUCT COMPANY AND IT OWNED VARIOUS PRODUCT AND SUCH A CONCERN COU LD NOT BE COMPARED WITH THE ASSESSEE. ANOTHER ASPECT WHICH WA S POINTED OUT BY THE LEARNED AR FOR THE ASSESSEE WAS THE COST OF REV ENUE TOTALING 260 CRORES INCLUDED SOFTWARE DEVELOPMENT CHARGES OF 161 CRORES APPROXIMATELY, WHICH IN TURN WAS AN EXPENDITURE IN FOREIGN CURRENCY. IN OTHER WORDS, IT WAS A CONCERN WHICH WAS PROVIDIN G ONSITE SERVICES TO THE THIRD PARTY; WHEREAS THE ASSESSEE WAS WORKIN G ON OFFSIDE MODULE. THE LEARNED AR FOR THE ASSESSEE FAIRLY ADMI TTED THAT THE SEGMENTALS OF THE SAID CONCERN WERE AVAILABLE AND T HE TPO PICKED UP THE SEGMENT OF THE PROVISION OF I.T. SERVICES BUT ( A) THE FUNCTIONAL PROFILE BEING DIFFERENT, COULD NOT APPLY AND (B) TH E SEGMENTAL WERE FAULTY AS LARGE AS UNALLOCABLE EXPENDITURE WAS BOOK ED. 10. THE LEARNED DR FOR THE REVENUE STRESSED THAT ON CE THE SEGMENTALS WERE AVAILABLE, WHICH HAVE BEEN APPLIED BY THE TPO THEN THE ORDER OF THE TPO / AO NEEDS TO BE UPHELD IN ENT IRETY. 11. ON THE PERUSAL OF RECORD AND AFTER HEARING BOTH THE AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES IS WITH REG ARD TO THE INCLUSION/EXCLUSION OF THE CONCERN MPHASIS, WHILE B ENCHMARKING THE / ITA NO:- 583/DEL/2017 PAGE | 8 INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESS EE. UNDER THE TP PROVISIONS WHAT HAS TO BE SEEN WHETHER THE CONCERN WHICH IS PICKED UP IS ENGAGED IN SIMILAR LINE OF BUSINESS I.E. IT I S FUNCTIONALLY SIMILAR TO THE BUSINESS MODULE OF THE ASSESSEE AND THEN THE MARGINS OF THE SAID CONCERNS ARE TO BE COMPARED WITH THE MARGINS O F THE ASSESSEE IN ORDER TO DETERMINE WHETHER THE MARGINS EARNED BY TH E ASSESSEE ARE AT ARMS LENGTH OR NOT. THE FIRST STEP IS TO SEE WHETH ER THE CONCERN IS FUNCTIONALLY SIMILAR OR NOT. THE CASE OF THE ASSES SEE BEFORE US IS THAT MPHASIS IS NOT FUNCTIONALLY SIMILAR TO THE ASSESSEE AS THE ACTIVITIES CONDUCTED BY THE SAID CONCERN WERE DIVERSIFIED, WHE REIN IT OFFERS BUSINESS PROCESS OPERATIONS, APPLICATION DEVELOPMEN T AND MAINTENANCE, PRODUCT ENGINEERING AND CUSTOMER SUPPO RT SERVICES, PROVIDES BROKERAGE SERVICES SUCH AS TRADE EXECUTION , ACCOUNT OPENING AND ORDER PROCESSING TO CLIENTS. IT ALSO PROVIDED F INANCIAL SERVICES. AS AGAINST THIS, THE ASSESSEE WAS ONLY ENGAGED IN PROV IDING CONTRACT SOFTWARE DEVELOPMENT SERVICES TO THE GROUP COMPANIE S OF LUCENT INC THE PERUSAL OF THE ANNUAL REPORT OF THE SAID CONCER N REFLECTS THE BUSINESS ACTIVITIES AT PAGE 7 & 8 THAT APPLICATION DEVELOPMENT & INTEGRATION; APPLICATION MANAGEMENT; TESTING SERVIC ES; USABILITY ENGINEERING; QUALITY CONSULTING AND ADVISORY SERVIC ES. AT PAGE 13 OF THE ANNUAL REPORT IT IS ALSO PROVIDED THAT MFRAME IS MPHASIS CROSS CHANNEL APPLICATION INTEGRATION FRAMEWORK, WHICH HE LPS CUSTOMERS RAPIDLY DEVELOP A NEW GENERATION OF WORLD-CLASS SOL UTIONS FOR SALES AND / ITA NO:- 583/DEL/2017 PAGE | 9 SERVICE BUSINESS PROCESSES IN A MEASURABLY COST EFF ECTIVE MANNER. MFRAME IS OF PROVEN METHODOLOGY, A WELL-DEFINED INT EGRATION ARCHITECTURE FRAMEWORK, USING SERVICE ORIENTED ARCH ITECTURE (SOA), WHICH LEVERAGES AN EXPERIENCED DEVELOPMENT TEAM WIT H OFFSHORE ECONOMICS. FURTHER THE SAID CONCERN ALSO OWNED OTHE R PRODUCTS NAMELY M-TECH & TECHNOLOGY RENTAL LAB WHICH WERE US ED BY MPHASIS FOR PROVIDING SERVICES TO ITS AES. IN OTHER WORDS THE SAID CONCERN OWNS PRODUCT, AS AGAINST THE ASSESSEE NOT OWNING AN Y PRODUCT. AT THIS JUNCTURE, WE HOLD THAT THE SAID CONCERN IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE. FURTHER, WE ALSO NOTE T HE FACT POINTED OUT BY THE LEARNED AR FOR THE ASSESSEE THAT THE BUSINES S MODEL OF MPHASIS WAS DIFFERENT WHEREIN IT WAS PROVIDING ONSI TE SERVICES TO ITS THIRD PARTIES, WHEREIN OUT OF SOFTWARE CHARGES OF R S. 161 CRORES DEBITED TO COST OF REVENUE, SUM OF RS. 157 CRORES HAD BEEN INCURRED IN FOREIGN CURRENCY. SUCH FACT ALSO MAKES THE SAID CONCERN AS FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE. THOUGH SEGMENTAL DETAILS ARE AVAILABLE BUT THE SEGMENTAL ARE AT FAUL T AS LARGE PART OF EXPENSES HAVE BEEN BOOKED AS AN UNALLOCABLE EXPENDI TURE. IN SUCH FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT TH E CONCERN MPHASIS IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE, HEN CE THE SAME IS NOT TO BE INCLUDED IN THE FINAL LIST OF SAID COMPARABLE S, WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS UNDERTA KEN BY THE ASSESSEE. IN FINAL ANALYSIS, WE DIRECT THE AO TO EX CLUDE BOTH THE / ITA NO:- 583/DEL/2017 PAGE | 10 CONCERNS INFOSYS TECHNOLOGIES LIMITED & MPHASIS BFL LIMITED FROM THE FINAL LIST OF COMPARABLES. THE LEARNED AR FOR T HE ASSESSEE FAIRLY POINTED OUT THAT IN CASE THE TWO CONCERNS ARE EXCLU DED FROM THE FINAL LIST OF COMPARABLES, THEN THE MARGINS OF THE ASSESS EE WOULD BE AT ARMS LENGTH. THUS WE ALLOW THE GROUNDS OF APPEAL R AISED BY THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DAY OF OCTOBER, 2019. SD/- SD/- (B.R.R. KUMAR) (SUSHM A CHOWLA) %)- %)- %)- %)- /ACCOUNTANT MEMBER - - - - /JUDICIAL MEMBER / DATED : 16 TH OCTOBER, 2019 . SH %,#!'./%.'0 COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. !' / THE RESPONDENT; 3. &1 2 3 / THE CIT(A) 4. .45!' 6 6 / DR, ITAT, DELHI 5. 578 0 GUARD FILE. %,& %,& %,& %,& / BY ORDER , '.'!' // TRUE COPY // :;-< , 6 / ITAT, DELHI / ITA NO:- 583/DEL/2017 PAGE | 11 DRAFT DICTATED 25.09.2019 DRAFT PLACED BEFORE AUTHOR APPROVED DRAFT COMES TO THE SR.PS/PS ORDER SIGNED AND PRONOUNCED ON FILE SENT TO THE BENCH CLERK 17.10.2019 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. DATE OF UPLOADING ON THE WEBSITE 16.10.2019