CRM Services India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6674/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6789 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Additional evidence; Set aside
• Section: 143(3); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I-1 : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6674/DEL/2016 ASSESSMENT YEAR: 2012-13 CRM SERVICES INDIA PVT. LTD., 220, VINOBHA PURI, LAJPAT NAGAR-II, NEW DELHI. PAN: AABCC6211B VS ACIT, CIRCLE-6(2), CR BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ JAIN, ADVOCATE & SHRI RAMIT KATYAL, CA REVENUE BY : SHRI KUMAR PRANAV, SR. DR DATE OF HEARING : 10.10.2019 DATE OF PRONOUNCEMENT : 18.10.2019 ORDER PER R.K. PANDA, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 30.11.2016 PASSED U/S 143(3) R.W.S. 144C OF THE IT ACT, 1961 RELATING TO ASSESSMENT YEAR 2012-13. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A 99.99% OWNED SUBSIDIARY OF TPUSA INC., USA AND DURING THE RELEVANT PREVIOUS YEAR WAS ENGAGED IN ITA NO.6674/DEL/2016 2 RUNNING OF VOICE BASED CALL CENTRE FACILITIES IN GU RGAON (HARYANA). IT FILED ITS RETURN OF INCOME ON 29.11.2012 DECLARING TOTAL INCO ME OF RS.21,34,95,460/-. SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSAC TIONS WITH ITS ASSOCIATED ENTERPRISE, THE ASSESSING OFFICER MADE REFERENCE TO THE TPO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY IT. THE TRANSFER PRICING OFFICER, VIDE ORDER DATED 29 TH JANUARY, 2016, PASSED U/S 92CA(3) OF THE ACT HAS DONE AN UPWARD ADJUSTMENT OF RS.2,83,07,290/- WHILE DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN WHY A SUM OF RS.2,83,07,290/- SHOULD NOT BE ADDED TO THE TAXABLE INCOME AS DONE BY THE TPO. REJECTING THE EXPLANATIONS GIV EN BY THE ASSESSEE, THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER ON 4 TH MARCH, 2016. THE ASSESSEE APPROACHED THE DRP, WHO, VIDE ORDER DATED 18.10.2016, FOLLOWING ITS ORDER FOR ASSESSMENT YEAR 2009-10, DIRECTED THE A.O ./TPO TO EXAMINE THE FACTS AND ALLOW PART OF THE ROYALTY EXPENDITURE IN ACCORDANC E WITH THE DIRECTIONS OF THE DRP FOR ASSESSMENT YEAR 2009-10. 3. AGGRIEVED WITH SUCH ORDER OF THE A.O./TPO/DRP, T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. THAT THE ASSESSING OFFICER / DISPUTE RESOLUTION PANEL (DRP) ERRED ON FACTS AND IN LAW IN COMPLETING THE ASSESSMENT UNDER SECTI ON 144C/143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT') AT AN INCOME OF RS, 24,18,02 750 AS AGAINST INCOME OF RS. 21,34,95,460 RETURNED BY THE APPELLAN T. 2. THAT THE ASSESSING OFFICER/ DRP ERRED ON FACTS A ND IN LAW IN MAKING TRANSFER PRICING ADJUSTMENT OF RS. 2,83,07,290 ALLE GEDLY ON ACCOUNT OF DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERNA TIONAL TRANSACTION OF PAYMENT ITA NO.6674/DEL/2016 3 OF ROYALTY HOLDING THAT THE APPELLANT WAS NOT REQUI RED TO PAY ROYALTY IN RESPECT OF SERVICES PROVIDED TO THE ASSOCIATED ENTERPRISE. 2.1 THAT THE ASSESSING OFFICER/ DRP ERRED ON FAC TS AND IN LAW IN HOLDING THAT IN TERMS OF INTANGIBLE AND PROPRIETARY PROPERTY AN D LICENSING AGREEMENT' (THE AGREEMENT') DATED 02-01-2002, ROYALTY WAS REQ UIRED TO BE PAID ONLY ON THE PROPORTIONATE SALES MADE TO UNRELATED THIRD PAR TIES. 2.2 THAT THE ASSESSING OFFICER/ DRP ERRED ON FACT S AND IN LAW IN NOT APPRECIATING THAT THE ENTIRE REVENUES OF THE APPELL ANT ARE FROM SALE OF SERVICES TO THIRD PARTIES - WHETHER SUCH THIRD PARTIES ARE D IRECT CUSTOMERS OF THE ASSESSEE OR CUSTOMERS OF THE ASSOCIATED ENTERPRISE, AND ACCO RDINGLY ROYALTY WAS PAYABLE ON THE TOTAL REVENUE. 2.3 WITHOUT PREJUDICE, THE ASSESSING OFFICER/ TP O ERRED ON FACTS AND IN LAW IN MAKING TRANSFER PRICING ADJUSTMENT OF RS. 2,83,07,2 90, BEING THE ENTIRE AMOUNT OF ROYALTY PAID TO THE ASSOCIATED ENTERPRISE , WITHOUT GIVING EFFECT TO THE BINDING DIRECTION OF THE DRP OF ALLOWING PART RELIE F AS DIRECTED IN THE DRPS ORDER FOR ASSESSMENT YEAR 2009-10, RESTRICTING THE ADJUSTMENT ONLY TO THE EXTENT OF ROYALTY PAID ON SALES MADE TO THE ASSOCIA TED ENTERPRISE. 2.4 THAT THE ASSESSING OFFICER/ TPO ERRED ON FACTS AND IN LAW IN ALLEGEDLY HOLDING THAT THE ASSESSEE HAS NOT SUBMITTED DOCUMEN TARY EVIDENCE TO VERIFY AND COMPUTE PROPORTIONATE ADJUSTMENT OF ROYALTY EXP ENSE AS DIRECTED BY THE DRP, WHEN THE ENTIRE DETAILS WERE ALREADY ON RECORD . 3. THAT THE ASSESSING OFFICER/ TPO ERRED ON FACTS A ND IN LAW IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS. 2,83,07,290 ALLE GEDLY APPLYING CUP METHOD FOR BENCHMARKING THE TRANSACTION OF PAYMENT OF ROYA LTY BY UNDERTAKING COST BENEFIT ANALYSIS WITHOUT PLACING ON RECORD ANY COMP ARABLE DATA FOR COMPARISON. 3.1 THAT THE ASSESSING OFFICER/ TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE TRANSACTION OF PAYMENT OF ROY ALTY HAS ALREADY BEEN BENCHMARKED APPLYING TNM METHOD AS THE MOST APPROPR IATE METHOD AND ACCORDINGLY, NO ADJUSTMENT IS REQUIRED TO BE MADE O N THIS ACCOUNT. 3.2 WITHOUT PREJUDICE, THAT THE ASSESSING OFFICER /DRP ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PAYMENT OF ROYALTY WAS MADE IN RESPECT OF SALE OF SERVICES TO THE CUSTOMERS OF THE ASSOCIATED ENTE RPRISE IN TERMS OF THE AGREEMENT AND WAS INCURRED WHOLLY AND EXCLUSIVELY F OR PURPOSES OF BUSINESS. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. ITA NO.6674/DEL/2016 4 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE FILED AN APPLICATION FOR FILING ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963 IN THE SHAPE OF THE FOLLOWING DOCUMENT:- ADDENDUM TO INTANGIBLE AND PROPRIETARY PROPERTY AN D LICENSING AGREEMENT BY WAY OF ADDITIONAL EVIDENCE. 5. REFERRING TO THE COPY OF THE ORDER OF THE TRIBUN AL IN ASSESSEES OWN CASE, VIDE ITA NO.432/DEL/2016, ORDER DATED 15 TH JULY, 2019 FOR ASSESSMENT YEAR 2011- 12, HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE A.O./TPO FOR DECIDING THE ISSUE AFRESH AND IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL. HE ACCORDINGLY SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE A.O./TPO WITH SIMILAR DIRECTIONS AS GIVEN IN THE IM MEDIATELY PRECEDING ASSESSMENT YEAR. 6. THE LD. DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE A.O./TPO/DRP, FAIRLY CONCEDED THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HAS RESTORED THE ISSUE TO THE FILE OF THE A.O./TPO. THEREFORE, HE HAS NO OBJECTION IF THE MA TTER IS RESTORED TO THE FILE OF THE A.O./TPO FOR ADJUDICATION OF THE ISSUE AFRESH IN TH E LIGHT OF THE DIRECTIONS OF THE TRIBUNAL IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE A.O./TPO/DRP AND THE PAPE R BOOK FILED ON BEHALF OF THE ITA NO.6674/DEL/2016 5 ASSESSEE. WE FIND, THE DRP, FOLLOWING THE ORDER OF THE DRP FOR ASSESSMENT YEAR 2009-10 HAS DIRECTED THE A.O./TPO TO EXAMINE THE FA CTS AND ALLOW PART OF THE ROYALTY EXPENDITURE IN ACCORDANCE WITH THE DIRECTIO NS OF THE DRP FOR ASSESSMENT YEAR 2009-10. WE FIND THE TRIBUNAL, VIDE ORDER PAS SED FOR ASSESSMENT YEAR 2009- 10 HAD ACCEPTED THE ADDITIONAL EVIDENCE FILED BY TH E ASSESSEE IN RESPECT OF THE ISSUE PERTAINING TO ALP OF ROYALTY AND RESTORED THE ISSUE TO THE FILE OF THE A.O./TPO FOR DECIDING THE ISSUE OF ROYALTY AFRESH AFTER DULY CON SIDERING THE AGREEMENT AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT I TS CASE. WE FIND, FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10, THE TRIBUNAL FOR ASSESSMENT YEAR 2010-11 ALSO RESTORED THE ISSUE TO THE FILE OF A.O./TPO. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2010-11 HAS RESTORED THE ISSUE TO THE FILE OF A.O./TPO FOR DECIDING THE ISSUE AFRESH AND IN ACCOR DANCE WITH LAW BY OBSERVING AS UNDER:- 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE A.O./TPO/DRP AND THE PAPE R BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND, IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR I.E., 2010-11, VIDE ITA NO.1161/DEL/2015, ORDER DATED 27 TH JULY, 2018, THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE A.O./TPO FOR FRESH ADJUDICATION BY OBSERVING AS UNDER:- 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL FOR THE EARLIER ASSESSMENT YEARS 2008-09 AND 2009-1 0 IN THOSE YEARS ALSO ASSESSEE FURNISHED THE ADDITIONAL EVIDENCES AS HAS BEEN DONE IN THE YEAR UNDER CONSIDERATION. THIS BENCH OF THE IT AT IN ASSESSEES OWN CASE FOR THE AFORESAID ASSESSMENT YEARS 2008-09 AND 2009-10 WHILE DECIDING THE IDENTICAL ISSUE IN ITA NOS. 5930 /DEL/2012 AND 1630/DEL/2014 HAS RESTORED THE ISSUE BACK TO THE FI LE OF THE AO / TPO. ITA NO.6674/DEL/2016 6 THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 7.1 T O 9 WHICH READ AS UNDER:- 7.1 AS FAR AS THE ASSESSEES PLEA REGARDING ADJUST MENT IN RESPECT OF ROYALTY IS CONCERNED, WE HAVE DULY CONSI DERED THE ASSESSEES APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH HAS BEEN FILED UNDER RULE 29 OF THE INCOME TA X (APPELLATE TRIBUNAL) RULES, 1963 AND LOOKING TO THE FACTS AND CIRCUMSTANCES, IT IS OUR CONSIDERED OPINION THAT TH IS ADDENDUM TO THE AGREEMENT GOES TO THE VERY ROOT OF THE MATTE R AND IT WILL SUITABLY ASSIST THE LOWER AUTHORITIES DID NOT HAVE THE BENEFIT OF EXAMINING THIS DOCUMENT, THE MATTER HAS TO BE NECES SARILY RESTORED TO THE FILE OF THE ASSESSING OFFICER / TPO FOR DECIDING THE ISSUE OF ROYALTY AFRESH AFTER DULY CONSIDERING THIS AGREEMENT AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. ACCORDINGLY, GROUND NO. 17 IN ASSESSEES APPE AL FOR ASSESSMENT YEAR 2008-09 ALSO STANDS ALLOWED FOR STA TISTICAL PURPOSES. 7.2 SINCE THE LD. AR HAS STATED THAT IF GROUND NOS. 3 AND 17 ARE DECIDED IN FAVOUR OF THE ASSESSEE, THE OTHER GROUND S WILL BECOME ACADEMIC IN NATURE, WE ARE NOT PROCEEDING TO HEAR T HE ARGUMENTS OF EITHER OF THE PARTIES ON THE REMAINING GROUNDS AT THE PRESENT MOMENT. WE, HOWEVER, NOTE THAT THE ASSE SSEE WILL BE AT LIBERTY TO RAISE THESE GROUNDS AGAIN BEFORE THE TRIBUNAL AT A FUTURE DATE, IF IT IS SO REQUIRED. 8. IN THE RESULT, THE ASSESSEES APPEAL ITA NO. 593 0/DEL/2013 STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN T ERMS OF OUR DIRECTIONS AS CONTAINED IN THE PRECEDING PARAGRAPHS . 9. COMING TO THE ASSESSEES APPEAL IN ITA NO. 1630/ DEL/2014, SINCE WE HAVE ALREADY ADMITTED ADDITIONAL EVIDENCE IN RESPECT OF THE ISSUE PERTAINING TO ALP OF ROYALTY IN ASSESSMEN T YEAR 2008- 09, ON IDENTICAL REASONING, WE ADMIT ADDITIONAL EVI DENCE IN THIS YEAR AS WELL. SINCE THE LOWER AUTHORITIES DID NOT H AVE THE BENEFIT OF EXAMINING THIS DOCUMENT, THE MATTER HAS TO BE NE CESSARILY RESTORED TO THE FILE OF THE ASSESSING OFFICER / TPO FOR DECIDING THE ISSUE OF ROYALTY AFRESH AFTER DULY CONSIDERING THIS AGREEMENT AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. 7. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 14.5.2018 FOR THE ASSESSMENT YEARS 2008-09 AND 2009 -10 IN ASSESSEES OWN CASE. THE ISSUE UNDER CONSIDERATION IN THE PRES ENT CASE RELATING TO PAYMENT OF ROYALTY IS ALSO SET ASIDE TO THE FILE OF THE AO / TPO TO BE ITA NO.6674/DEL/2016 7 ADJUDICATED AFRESH IN ACCORDANCE WITH LAW BY KEEPIN G IN VIEW THE DIRECTIONS GIVEN IN THE AFORESAID REFERRED TO ORDER DATED 14.5.2018. 10. SINCE THE FACTS OF THE IMPUGNED ASSESSMENT YEAR ARE IDENTICAL TO THE FACTS OF THE PRECEDING ASSESSMENT YEAR, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEARS, WE RESTORE THE ISSUE TO THE FILE OF THE A.O. /TPO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL. THE GROUND OF APPEAL N O.2 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBU NAL IN ASSESSEES OWN CASE IN RESPECT OF ALP OF ROYALTY, WE RESTORE THE ISSUE TO THE FILE OF THE A.O./TPO FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH THE LA W IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 8.10.2019. SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 18 TH OCTOBER, 2019 DK ITA NO.6674/DEL/2016 8 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI