Cushman & Waakefield India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 722/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8128 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 08-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B M BARNWAL
• Assessee Lawyers: PURSHOTAM ANAND
• Keywords: Transfer pricing; Business expenditure; International transaction; Initiation of penalty proceedings; Commercial expediency
• Section: 271(1)(c); 143(3); 37(1); 144C; 274; 13; 92CA

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 2 : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 722 /DEL/2017 (ASSESSMENT YEAR: 2012 - 13 ) CUSHMAN & WAKEFILED INDIA PVT. LTD, DSO 601 - 06, 607 - 608, 6 TH FLOOR, DLF, SOUTH COURT, SAKET, NEW DELHI PAN: AAACC5006B VS. ACIT, CIRCLE - 6(2), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PURSHOTAM ANAND, ADV REVENUE BY: M R. B M BARNWAL , SR. DR DATE OF HEARING 15 - 01 - 2021 DATE OF PRONOUNCEMENT 15 - 01 - 2021 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD AO DATED 30.12.2016 FOR AY 2012 - 13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. GENERAL GROUNDS 1.1. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(2), NEW DELHI (HEREINAFTER REFERRED TO AS AO), PURSUANT TO DIRECTIONS OF DISPUTE RESOLUTION PANEL (DRP) - I, HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN COMPLETING THE PRESENT ASSESSMENT AT AN INCOME OF INR 28,64,11,726 AS AGAINST THE RETURNED INCOME OF INR 24,58,07,550 DECLARED BY THE APPELLANT AND IS LIABLE TO BE QUASHED. 1 .2. THAT, THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX, TRANSFER PRICING OFFICER - I (6) (HEREINAFTER REFERRED AS LD. TPO)/ HONBLE DRP HAS GROSSLY ERRED IN MAKING AN ADJUSTMENT OF RS 4,06,04,176 IN RESPECT OF PAYMENT FOR NON IT BUSINESS SERVICE CHARGES A ND IN NOT APPRECIATING THAT NONE OF THE CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT ARE SATISFIED IN THE PRESENT CASE. 1.3. THE ASSESSMENT ORDER PASSED BY LD. AO UNDER SECTION 143(3) R.W.S 144C OF THE ACT IS BAD IN LAW AND VOID AB INITIO AS THE REFEREN CE WAS MADE TO THE LD. TPO BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5(2), NEW DELHI WHO DID NOT HOLD THE VALID JURISDICTION OVER THE APPELLANT. 2. REJECTION OF THE ECONOMIC ANALYSIS OF THE APPELLANT 2.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. TPO/ HONBLE DRP HAVE ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS OF THE APPELLANT, FOR DETERMINATION PAGE | 2 OF THE ARM'S LENGTH PRICE (ALP) IN CONNECTION WITH THE DISALLOWANCE OF THE NON IT BUSINESS SERVICE CHARGES. 2.2. THE LD. TP O/ HONBLE DRP HAVE GROSSLY ERRED IN REJECTING THE APPROACH OF BENCHMARKING ADOPTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION ANALYSIS, AND BY REJECTING COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD (COST - TO - COST BASIS) AS THE MOST APPROPRIATE METHOD (MAM) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF PAYMENT FOR NON IT BUSINESS SERVICE CHARGES PAID TO ITS ASSOCIATED ENTERPRISES (AES) IN ACCORDANCE WITH THE ACT, INCOME TAX RULES, 1962 (RULES) AND THE GENERALLY ACCEPTED OECD GUIDELINES. GROUNDS OF APPEAL 3. ADOPTION OF COMPARABLE UNCONTROLLED PRICE METHOD AS THE MOST APPROPRIATE METHOD (MAM) 3.1. THAT THE LD. TPO/ HONBLE DRP ERRED IN NOT CONDUCTING THE ANALYSIS OF SELECTING THE MAM AS PRESCRIBED UNDER RULE 10C OF THE RULES AND ACC ORDINGLY NOT DOCUMENTED THE SAME AS PRESCRIBED UNDER RULE 10D OF THE RULES. 3.2. THE LD. TPO/ HONBLE DRP ERRED IN LAW BY USING THE DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION USING COMPARABLE UNCONTROLLED PRICE (CUP) METHOD WITHOUT FOLLOW ING THE MANNER OF APPLYING THE CUP METHOD PRESCRIBED UNDER RULE 10B(1)(A) OF THE RULES. 4. TRANSFER PRICING ADJUSTMENT BASED ON INCORRECT ASSUMPTIONS 4.1. THE LD. TPO/ HONBLE DRP ERRED IN PASSING AN ORDER THAT IS PERVERSE IN LAW IGNORING THE RELEVANT SU BMISSIONS, INFORMATION AND DOCUMENTS PROVIDED BY THE APPELLANT TO SUBSTANTIATE THE RECEIPT OF NON IT BUSINESS SERVICES AND INAPPROPRIATELY CONCLUDED THAT THE ARMS LENGTH VALUE OF THE IMPUGNED TRANSACTIONS SHOULD BE NIL. THE LD. TPO/ HONBLE DRP ERRED IN D ISREGARDING THE DOCUMENTARY EVIDENCE SUBMITTED BY THE APPELLANT AND CONCLUDING THAT NO BENEFIT HAS BEEN RECEIVED BY THE APPELLANT BY RECEIPT OF IMPUGNED NON IT SERVICES WITHOUT APPRECIATING THAT THE SAME IS IRRELEVANT FOR THE COMPUTATION OF ARMS LENGTH PR ICE. 4.2. THE LD. TPO/ HONBLE DRP ERRED IN QUESTIONING THE COMMERCIAL RATIONALE OF THE LEGITIMATE NON IT BUSINESS EXPENSES INCURRED BY THE TAXPAYER AND NOT RESTRICTING THE SCOPE OF ASSESSMENT UNDER SECTION 92CA TO DETERMINING THE ARMS LENGTH PRICE OF TH E INTERNATIONAL TRANSACTION BY ADOPTING ONE OF THE PRESCRIBED METHODS ONLY. 4.3. THE LD. TPO/ HONBLE DRP ERRED IN FACTS AND IN LAW BY CONCLUDING THE FOLLOWING, WITHOUT PROVIDING ANY MATERIAL ON RECORD TO SUBSTANTIATE THE BASIS OF CONCLUDING THAT I. NON IT SERVICES RENDERED BY THE AES ARE DUPLICATIVE IN NATURE FOR WHICH NO SEPARATE PAYMENT NEEDS TO BE MADE; II. NON IT SERVICES RENDERED BY THE AES ARE INCIDENTAL SERVICES OR SHAREHOLDER ACTIVITY FOR THE BENEFIT OF THE GROUP; III. NO INDEPENDENT PARTY WOULD HAVE PAID FOR SUCH SERVICES WITHOUT PROVIDING ANY COMPARABLE UNCONTROLLED TRANSACTION TO SUBSTANTIATE THIS CLAIM. IV. COMPARING THE EMPLOYEE COST OF THE APPELLANT WITH THE HUMAN RESOURCE SERVICES AVAILED FROM THE ASSOCIATED ENTERPRISE; AND V. THE APPELLANT HAD SHIFTED PROFITS OUT OF INDIA BY MAKING PAYMENT FOR NON IT BUSINESS SERVICES. 4.4. THE LD. TPO/ HONBLE DRP ERRED IN LAW AND FACTS BY STATING THAT THE APPELLANT HAS SUBMITTED BEFORE THE LD TPO THAT THERE WAS NO EVIDENCE OF HAVING DONE ANY COST PAGE | 3 BENEFIT ANALYSIS OR ANY BENCHMARKING ANALYSIS AT THE TIME OF AVAILING OF SERVICES. FURTHER, THE LD TPO HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE BY STATING THAT THE APPELLANT HAS ADMITTED THAT NO ANALYSIS WAS DONE AS TO THE PAYMENT WHICH WOULD HAVE BEEN MA DE TO AN INDEPENDENT PERSON FOR SUCH SERVICES. 4.5. THE LD. TPO/ HONBLE DRP ERRED IN NOT ALLOWING THE SET OFF WHILE DISALLOWING THE NON IT BUSINESS SERVICE CHARGES. 4.6. THE LD. TPO/ HONBLE DRP HAVE ERRED IN NOT GIVING DUE CONSIDERATION TO THE INTERNAT IONAL GUIDELINES ISSUED IN RESPECT TO THE CURRENT ISSUE. 5. CORPORATE TAX GROUND 5.1. THAT LD. AO HAS ERRED IN FACTS AND IN LAW IN ALTERNATIVELY DISALLOWING THE EXPENDITURE TOWARDS INTRA GROUP SERVICES UNDER SECTION 37(1) OF THE ACT. 5.2. THAT LD. AO HAS ERRED IN FACTS AND IN LAW IN CONCLUDING THAT THE EXPENDITURE TOWARDS INTRA GROUP SERVICES HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 5.3. THAT LD. AO HAS ERRED IN FACTS IN DOUBTING THE COMMERCIAL EXPEDIENCY OF THE EXPENDITURE . 5.4. THE LD. AO HAS ERRED IN FACTS IN DISREGARDING THE DOCUMENTARY EVIDENCES SUBMITTED BY THE APPELLANT AND IN CONCLUDING THAT THE SERVICES WERE ACTUALLY NOT PROVIDED TO THE APPELLANT TO MEET ITS SPECIFIC NEEDS AND/ OR NO BENEFIT ACTUALLY ACCRUED TO THE APPELLANT AND/ OR PAYMENT WERE NOT ACTUALLY MADE BY THE APPELLANT. 6. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) 6.1. ON FACTS AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) READ WITH SECTION 274 O F THE ACT AGAINST THE APPELLANT FOR CONCEALING THE INCOME THROUGH SUBMISSION OF INACCURATE PARTICULARS IN THE TAX RETURN. 6.2. THE LD. AO HAS ERRED ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND LAW IN NOT APPRECIATING THE FACTS THAT THE APPELLANT HAS NEVER FURNISHED INACCURATE PARTICULARS NOR CONCEALED ITS INCOME WITH RESPECT TO THE EXPENSES CLAIMED IN THE SUBJECT AY AND HENCE SHOULD NOT BE PENALIZED UNDER THE ACT FOR CONCEALING OF INCOME. 3. WHEN THIS MATTER WAS CALLED ON FOR HEARING TODAY, ASSESSEE FILE D A COPY OF FORM NUMBER 3 BEING A CERTIFICATE UNDER SUBSECTION (1) OF SECTION 5 OF THE DIRECT TAX VIVAD SE VISHWAS ACT, 2020 (3 OF 2020) DATED 17 DECEMBER 2020 WHEREIN THE DISPUTE OF THE ASSESSEE IN THE IMPUGNED APPEAL HAS BEEN SETTLED. IN VIEW OF THIS, T HE APPEAL OF THE ASSESSEE IS WITHDRAWN AND HENCE DISMISSED. 4. IN VIEW OF ABOVE FACTS, APPEAL OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 15 / 01/2021 . - SD/ - - SD/ - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 / 01/2021 A K KEOT COPY FORWARDED TO PAGE | 4 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI