Dy. Director of Income Tax (International Taxation), Pune V. Schlumberger Global Support Centre Limited, Pune

ITA 599/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7885 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-04-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 10-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Assessee Lawyers: ABHISHEK TILAK; ARIJIT CHAKRAVARTHY
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92D; 234B; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 550 /P U N/20 1 7 / ASSESSMENT YEAR : 20 12 - 13 M/S. SCHLUMBERGER INDIA TECHNOLOGY CENTRE PVT. LTD., (REGARDING SCHLUMBERGER GLOBAL SUPPORT CENTRE LIMITED INDIA BRANCH) OFFICE NO.701, 7 TH FLOOR, BUILDING NO.6, COMMERZONE, S URVEY NO.144/145, SAMRAT ASHOK PATH, OFF AIRPORT ROAD, YERWADA, PUNE 411006 . / APPELLANT PAN: AALCS2048C VS. THE DY. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE - 2, PUNE . / RESPONDENT . / ITA NO. 599 /P U N/20 17 / ASSESSMENT YEAR : 20 12 - 13 THE DY. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE - 2, PUNE . / APPELLANT VS. M/S. SCHLUMBERGER INDIA TECHNOLOGY CENTRE PVT. LTD., (REGARDING SCHLUMBERGER GLOBAL SUPPORT CENTRE LIMITED INDIA BRANCH) OFFICE NO.701, 7 TH FLOOR, BUILDING NO.6, COMMERZONE, SURVEY NO.144/145, SAMRAT ASHOK PATH, OFF AIRPORT ROAD, YERWADA, PUNE 411006 . / RESPONDENT PAN: AALCS2048C ITA NO. 550 /P U N/20 1 7 ITA NO.599/PUN/2017 2 ASSESSEE BY : S /SHRI ARIJIT CHAKRAVARTHY AND ABHISHEK TILAK REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 1 0 . 04 .201 9 / DATE OF PRONOUNCEMENT: 22 . 04 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E CROSS APPEAL S FILED BY ASSES SEE AND REVENUE ARE AGAINST THE ORDER OF CIT (A) - 13 , PUNE , DATED 05 . 1 2 .20 1 6 RELATING TO ASSESSMENT YEAR 20 12 - 13 AGAINST ORDER PASSED UNDER SECTION 144C(3) R.W.S. 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE CROSS APPEALS FILED BY ASSESSE E AND REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.550/PUN/2017 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED DEPUTY COMMISSIONER OF INCOME - TAX (INTERNATIONAL TAXATION) CIRCLE - 2, PUNE ('LD. AO') HAS ERRED IN MAKING TRANSFER PRICING ADDITION TO THE APPELLANT'S INCOME AND THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 1 3, PUNE ['LD. CIT(A)'] HAS ERRED IN PARTIALLY UPHOLDING/CONFIRMING SOME ACTIONS OF THE LD. AO IN THIS REGARD. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF DISREGARDING THE BEN CHMARKING ANALYSIS AND COMPARABLE COMPANIES SELECTED BY THE APPELLANT BASED ON THE CONTEMPORANEOUS DATA IN THE TRANSFER PRICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE INCOME - TAX ACT, 1961 ('THE ACT') READ WITH RULE 10D OF THE INCOME - TAX ITA NO. 550 /P U N/20 1 7 ITA NO.599/PUN/2017 3 RULES, 1 962 ('THE RULES') AND THEREBY REJECTING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE APPELLANT. 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO O F NOT PROVIDING REASONS TO SHOW THAT THE CONDITIONS MENTIONED IN CLAUSES (A) TO (D) OF SECTION 92C(3) OF THE ACT WERE NOT SATISFIED AND NOT SHARING THE SEARCH STRATEGY INCLUDING THE ACCEPT - REJECT MATRICES USED BEFORE MAKING AN ADJUSTMENT TO THE INCOME OF T HE APPELLANT. 4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF APPLYING THE FOLLOWING FILTERS AS WELL AS MODIFYING THE FILTERS APPLIED IN THE TRANSFER P RICING DOCUMENTATION: REJECTING THE TURNOVER FILTER OF RS. 0 - 30 CRORES APPLIED BY THE APPELLANT AND SELECTING COMPANIES HAVING TURNOVER GREATER THAN RS. 1 CRORE WITH AN UPPER LIMIT OF RS.500 CRORE. REJECTING THE FILTER OF EXPORT TURNOVER BEING AT LEAST 25 % PER CENT OF TOTAL TURNOVER AND INSTEAD, APPLYING A FILTER OF EXPORT TURNOVER BEING AT LEAST 75 % PERCENT OF TOTAL TURNOVER. REJECTING COMPANIES HAVING FINANCIAL YEAR END OTHER THAN 31 MARCH 2012. 5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF REJECTING A COMPARABLE COMPANY ON ACCOUNT OF HAVING A DIFFERENT FINANCIAL YEAR END AND HAVING INCURRED LOSSES IN THE BPO SERVICES SEGMENT DURING AY 2012 - 13. 6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) F U RTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF REJECTING CERTAIN COMPANIES FROM THE SET OF COMPARABLES AS ADDITIONALLY IDENTIFIED BY THE APPELLANT DESPIT E THEM BEING FUNCTIONALLY COMPARABLE. 7 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF SELECTING COMPANIES WHICH ARE FUNCTIONALLY DIFFERENT / EARN SUPER NORMAL PROFITS. 8 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD.CIT(A) F U RTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF NOT ALLOWING AN ADJUSTMENT FOR THE DIFFERENCE BETWEEN THE LEVEL OF RISK BORNE BY THE COMPARABLES AND THE APPELLANT AS WELL AS OTHER FACTORS AS MANDATED BY THE PROVISIONS OF RULE 10B( 1 )(E)(III) OF THE RULES. 9 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) F U RTHER ERRED IN CONFIRMIN G THE ACTION OF THE LD. AO OF CONSIDERING NON - CONTEMPORANEOUS SINGLE YEAR DATA FOR THE MARGIN COMPUTATION OF THE COMPARABLES WHICH WAS NOT AVAILABLE AT THE TIME OF CONDUCTING THE TRANSFER PRICING STUDY AND DISREGARDING CONTEMPORANEOUS MULTIPLE YEAR DATA WH ICH WAS CONSIDERED BY THE ITA NO. 550 /P U N/20 1 7 ITA NO.599/PUN/2017 4 APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B (4) OF THE RULES. 10 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) F U RTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF NO T ALLOWING THE APPELLANT THE BENEFIT OF 5 % VARIATION ENVISAGED IN THE PROVISO TO SECTION 92C(2) OF THE ACT. 11 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO ERRED IN AND THE LD. CIT(A) F U RTHER ERRED IN CONFIRMING THE ACTION OF THE LD. AO OF INITIATING PENALTY PROCEEDING UNDER SECTION 271( 1 )(C) OF THE ACT AND LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 4. THE REVENUE IN ITA NO.599/PUN/2017 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER THE CIT(A) WAS CORRECT IN LAW AND ON FACTS IN DIRECTING TO INCLUDE INFORMED TECHNOLOGIES LTD. AS A COMPARABLE IGNORING SUBSTANCE AGAINST FROM THAT IT IS NOT EXACTLY ENGAGED IN BPO BUSINESS, HENCE FUNCTIONALLY NOT COMPARABLE. 2. WHETHER THE CIT(A) WAS CORRECT IN LAW AND ON FACTS IN IGNORING T HE FACT THAT INFORMED TECHNOLOGIES LTD. IS IN THE BUSINESS OF PROVIDING SERVICES OF FINANCIAL RESEARCH, EXECUTIVE COMPENSATION DATA, BOOK PUBLICATION AND DATA PROCESS. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THA T THE CIT(A) HAS DIRECTED THAT THE CONCERN INFORMED TECHNOLOGIES LTD. IS TO BE INCLUDED. HE FURTHER POINTED OUT THAT IN ASSESSMENT YEAR 2009 - 10, THE TRIBUNAL HAD DIRECTED THE INCLUSION OF SAID CONCERN AS IT WAS FUNCTIONALLY COMPARABLE. IN ASSESSMENT YEAR S 2010 - 11 AND 2011 - 12, THE TRANSFER PRICING OFFICER (TPO) HIMSELF HAS INCLUDED THE SAID CONCERN, SINCE THERE IS NO DOUBT ABOUT THE FUNCTIONAL CO MPARABILITY OF THE SAID CONCERN. THE YEAR UNDER APPEAL IS ASSESSMENT YEAR 2012 - 13. HE ALSO POINTED OUT THAT TH OUGH THE AUTHORITIES BELOW HAVE RAISED THE ISSUE OF AMD , BUT NO SUCH ISSUE HAS BEEN RAISED BY REVENUE. HE FURTHER STATED THAT IN CASE THE REVENUES APPEAL IS DISMISSED, THEN THE APPEAL OF ASSESSEE WOULD BECOME ACADEMIC. ITA NO. 550 /P U N/20 1 7 ITA NO.599/PUN/2017 5 6. THE LEARNED DEPARTMENTAL RE PRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS IN RESPECT OF TRANSFER PRICING PROVISIONS, WHEREIN THERE IS NO DISPUTE ABOUT THE METHOD TO BE APPLIED I.E. TNMM METHOD AND THE MARGINS OF ASSESSEE AND MEAN MARGINS OF THE CONCERNS FINALLY SELECTED IN THE HANDS OF ASSESSEE. THE LIMITED ISSUE WHICH IS RAISED BY THE REVENUE IS AGAINST FUNCTIONAL COMPARABILITY OF THE CO NCERN INFORMED TECHNOLOGIES LTD. THE GROUNDS OF APPEAL CLEARLY REFLECT THE ISSUES RAISED BY REVENUE THAT THE ASSESSEE WAS CARRYING ON SAME ACTIVITY IN EARLIER YEARS ALSO. IN ASSESSMENT YEAR 2009 - 10, WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS, THE TRIB UNAL IN ITA NO .86/PN/2013, ORDER DATED 30.10.2015 HELD THAT THE CONCERN INFORMED TECHNOLOGIES LTD. WAS FUNCTIONALLY COMPARABLE AND HAD DIRECTED ITS INCLUSION. THE COPY OF SAID ORDER IS PLACED AT PAGES 1 TO 31 OF PAPER BOOK. THEN, THE TPO HIMSELF IN ASSES SMENT YEARS 2010 - 11 AND 2011 - 12 VIDE ORDERS PLACED AT PAGES 36 TO 79 OF PAPER BOOK HAD HELD IT TO BE FUNCTIONALLY COMPARABLE AND INCLUDED THE SAME IN FINAL LIST OF COMPARABLES. THE YEAR UNDER APPEAL IS ASSESSMENT YEAR 2012 - 13, WHEREIN THE ASSESSEE IS CARR YING ON THE SAME ACTIVITY AS IN EARLIER YEARS. CONSEQUENTLY, WE FIND MERIT IN THE ORDER OF CIT(A) IN DIRECTING THE INCLUSION OF THE CONCERN INFORMED TECHNOLOGIES LTD. ACCORDINGLY, UPHOLDING THE SAME, WE DISMISS THE GROUNDS OF APPEAL RAISED BY REVENUE. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT IN CASE THE APPEAL OF REVENUE IS DISMISSED, THEN THE GROUNDS OF ITA NO. 550 /P U N/20 1 7 ITA NO.599/PUN/2017 6 APPEAL RAISED BY ASSESSEE WOULD BECOME ACADEMIC. HENCE, THE SAME ARE ALSO DISMISSED. 9 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE AND REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 22 ND DAY OF APRIL , 201 9 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 22 ND APRIL , 201 9 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 13 , PUNE ; 4. THE CIT ( IT/TP ), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE