DCIT 10 (2)(1), MUMBAI V. J.P.MORGAN SERVICES (I) PVT. LTD., MUMBAI

ITA 677/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2777 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MA N OJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 677 / MUM . /2019 ( ASSESSMENT YEAR : 20 11 12 ) ITA NO. 678 /MUM. /2019 ( ASSESSMENT YEAR : 2012 13 ) ITA NO. 679 /MUM. /2019 ( ASSESSMENT YEAR : 2013 14 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 10(2)(1), MUMBAI . APPELLANT V/S M/S. J.P. MORGAN SERVICES INDIA P. LTD. LEVEL 9 TO 11, LINK ROAD 707, PRISM TOWER, MINDSPACE GOREGAON (W), MUMBAI 400 104 PAN AABCD0503B . RESPONDENT ASSESSEE BY : SHRI PORUS KAKA REVENUE BY : SHRI ANAND MOHAN DATE OF HEARING 23 .0 3 .2021 DATE OF ORDER 22.04.2021 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEALS BY THE REVENUE ARISE OUT OF THREE SEPARATE ORDERS , ALL DATED 19 TH NOVEMBER 2018, OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 55, MUMBAI, FOR THE ASSESSMENT YEAR S 2011 12, 2012 13 AND 2014 15. 2 M/S. J.P. MORGAN SERVICES INDIA P. LTD. 2. AT THE VERY OUTSET, SHRI PORUS KAKA, THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE AND SHRI ANAND MOHAN, THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY SUBMITTED THAT ALL THE ISSUES RAISED IN THE REVENUES APPEALS ARE COVERED BY A NUMBER OF DECISIONS OF NOT ONLY THE TRIBUNAL BUT ALSO BY THE JUDGMENT S OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE HON'BLE S UPREME COURT AS WELL. IN VIEW OF THE AFORESAID SUBMISSIONS OF THE LEARNED COUNSEL S APPEARING FOR THE PA RTIES, WE PROCEED TO DISPOSE OF THE APPEALS AS UNDER: 3. THE FIRST ISSUE RAISED BY THE REVENUE IN ITS APPEAL BEING ITA NO. 677/MUM./2019, AND THE ONLY ISS UE RAISED IN APPEAL S BEING ITA NO. 678/MUM./2019 AND ITA NO.679/MUM./2019, IS ON THE APPLICABILITY OF THE MUTUAL AGREEMENT PROCEDURE ( MAP ) RESOLUTION TO NON UNITED STATES OF AMERICA ( US ) TRANSACTION S . 4. BRIEF FACTS RELEVANT FOR DISPOSAL OF THIS ISSUE ARE, THE ASSESSEE IS A RESIDENT COMPANY AND ENGAGED IN THE BUSINESS OF DEVELOPMENT OF SOFTWARE AND RENDERING INFORMATION TECHNOLOGY ENABLED SERVICE S (ITES). AS STATED BY THE ASSESSING OFFICER, THE ASSESSEE HAS THREE UNITS AT MUMBAI, BANGALORE AND HYDERABAD. ALL THESE UNITS HAVE BEEN SET UP IN SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) AND ARE ELIGIBLE FOR DEDUCTION OF 10 A OF THE INCOME TAX ACT, 1961 . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO CERTAIN INTERNATIONAL 3 M/S. J.P. MORGAN SERVICES INDIA P. LTD. TRANSACTIONS WITH ITS OVE R SEAS ASSOCIATED ENTERPRISES (A ES). NOTICING THIS, THE ASSESSING OFFICER MADE A REFERENCE TO THE TRANSFER PRICING OFFICER TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS . T HOUGH , THE ASSESSEE HAD BENCH MA RKED THE TRANSACTION WITH THE A E S AND C LAIMED IT TO BE AT ARM'S LENGTH, H OWEVER, THE TRANSFER PRICING OFFICER DID NOT ACCEPT THE BENCH MARK ING OF THE ASSESSEE AND P ROCEEDED TO INDEPENDENTLY BENCH MARK THE TRANSACTIONS. IN THE PROCESS, HE PROPOSED AN ADJUSTMENT OF ` 533,49,00,000. THE ADJUS TMENT PROPOSED BY THE ASSESSEE WAS ADDED TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. AFTER RECEIVING THE AS SESSMENT ORDER THE ASSESSEES AE IN USA APPLIED FOR MAP UNDER INDIA USA DOUBLE TAXAT ION AVOIDANCE AGREEMENT (DTAA). AFTER DISCUSSION S BETWEEN THE TAX AUTHORITIES IN INDIA AND USA , ASSESSEES REQUEST FOR SETTLEMENT OF DISPUTE UNDER THE MAP WAS ACCEPTED AND THE ADJUSTMENT TO ARM'S LENGTH PRICE WAS DETERMINED AT ` 8,75,19,549 IN ASSESSMENT YEAR 2011 12 AND NIL IN ASSESSMENT YEAR S 2012 13 AND 2013 14. 5. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE PLEADED THAT THOUGH THE MAP RESOLUTION WAS ARRIVED AT IN RE SPECT OF TRANSACTION WITH THE AE IN USA, HOWEVER, THE SAME WOULD ALSO BE APPLICABLE TO TRA NSACTIONS ENTERED WITH NON US A ES. THE FIR ST APPELLATE AUTHORITY HAVING FOUND THAT THE AFORESAID PLEADING OF THE ASSESSEE WAS ACCEPTED 4 M/S. J.P. MORGAN SERVICES INDIA P. LTD. BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2006 07, 2007 08 AND 2009 10, FOLLOWED THE SAME AND HELD THAT THE ADJUSTMENT SETTLED UNDER THE M AP RESOLUTION WOULD ALSO APPLY TO NON US TRANSACTION S . ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO ACCEPT THE MARGIN OF 15% EVEN FOR INTERNATIONAL TRANSACTIONS WITH NON US AES ALSO. AGAINST THE AFORESAID DECISION OF THE FIRST APPELLATE AUTHORITY, THE REVENUE IS IN APPEAL. 6. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND THAT WHILE CONSIDERING IDENTICAL CLAIM OF THE ASSE SSEE IN ASSESSMENT YEAR 2006 07 AND 2007 08 IN ITA NO.8987/MUM ./2010 AND ITA NO.7822/MUM./2011 DATED 30 TH NOVEMBER 2015, THE TRIBUNAL HAVING FOUND THAT THE MATERIAL FACT ON THE BASIS OF WHICH THE MAP RESOLUTION WAS ARRIVED AT IN RE SPECT OF TRANSACTIONS WITH US A ES ARE IDENTICAL TO THE FACTS RELATING TO INTERNATIONAL TRANSACTIONS WITH NON US AES, CONCLUDED THAT THE RESULT OF MAP PROCEEDINGS IN CASE OF US TRANSACTIONS WOULD ALSO APPLY TO NON US INTERNATIONAL TRANSACTIONS. THE SAME VIEW WAS EXPRESSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 09 VIDE ITA NO.477/MUM./2013, DATED 25 TH MAY 2016 . AGAIN THE TRIBUNAL REITERATED ID ENTICAL VIEW WHILE DISPOSING OF APPEALS IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 10 VIDE ITA NO.784/MUM./2014 DATED 31 ST JANUARY 2017, AND FOR THE ASSESSMENT YEAR 2010 11, IN ITA NO.998/MUM./2015 AND ITA 5 M/S. J.P. MORGAN SERVICES INDIA P. LTD. NO.1184/MUM./2015, DATED 11 TH AUGUST 2017. PERTINENTLY, THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR S 2006 07, 2007 08 AND 2008 09 WERE ALSO UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT. IN FACT, THE SPECIAL LEAVE PETITIO N FILED BY THE REVENUE AGAINST THE HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN ASSESSMENT YEAR 2008 09 HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DELIVERED IN SPECIAL LEAVE PETITION NO.878 OF 2020. IT IS RELEVANT TO OBSERVE , IN THE ADVA NCE PRICING AGREEMENT (APA) SIGNED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) FOR THE ASSESSMENT YEARS 2015 16 TO 2019 20, THE CBDT HAS ALSO ACCEPTED APPLICABILITY OF THE MAP RESOLUTION TO NON US TRANSACTION S . ALL THESE FACTS HAVE BEEN ANALYSED AND CONSID ERED BY THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DISMISSING REVENUES APPEAL FOR THE ASSESSMENT YEAR S 2006 07 AND 2007 08 IN INCOME TAX APPEAL NO.4 & 170 OF 2017 DATED 25 TH MARCH 2019. THUS, THE ISSUE IN DISPUTE BEING SQUARELY COVERED BY VARIOUS DECISIO NS OF THE TRIBUNAL, THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE SUPREME COURT IN ASSESSEES OWN CASE IN PRECEDING ASSESSMENT YEAR S , WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, WE UPHOLD THE DECISION OF LEARNED COMMISSI ONER (APPEALS) BY DISMISSING THE GROUNDS RAISED BY THE REVENUE. 7. THE ONLY OTHER ISSUE WHICH SURVIVES IS GROUND NO.3, RAISED BY THE REVENUE IN ITS APPEAL BEING ITA NO. 677/MUM./2019 AND T HE ISSUE IS, 6 M/S. J.P. MORGAN SERVICES INDIA P. LTD. WHETHER THE INTEREST INCOME EARNED BY THE ASSESSEE IS TO BE TREATED AS PROFIT OF THE STPI UNIT SO AS TO MAKE IT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. 8. IT IS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED CERTAIN INTEREST INCO ME FROM FIXED DEPOSIT S WHICH WAS TREATED AS PART OF PROFIT OF STPI UNIT FOR CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. THIS CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER. HOWEVER, LEARNED COMMISSIONER (APPEALS) HAVING FOUND THAT THE ISS UE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL , ALLOWED ASSESSEES CLAIM. 9. AS FAIRLY SUBMITTED BEFORE US BY THE LEARNED COUNSEL S FOR THE PARTIES, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE RIGHT FROM THE ASSESSMENT YEAR 2004 05 T ILL ASSESSMENT YEAR 2010 11. IT IS ALSO OBSERVED THAT THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR S 2005 0 6, 2006 07, 2007 08 AND 2008 09 HAS BEEN UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COU RT. THIS BEING THE ADMITTED FACTUAL POSITION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, DISMISS THE GROUNDS RAISED. 7 M/S. J.P. MORGAN SERVICES INDIA P. LTD. 10. IN THE RESULT, APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.04.2021 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 22.04.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI