JABIL CIRCUIT INDIA P.LTD, MUMBAI V. DCIT CIR 3(2), MUMBAI

ITA 7314/MUM/2012

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8931 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 25-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI SRDR
• Keywords: Transfer pricing; International transaction; Additional evidence; Corroborative evidences; Revised return
• Section: 143(3); 144C; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH K, MU MBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 7315/MUM/2012(ASSESSMENT YEAR: 2008-09) (VIRTUAL COURT NO. III ) JABIL CIRCUIT INDIA PVT LTD, ARENA HOUSE, PLOT NO.103, ROAD NO12, OPPOSITE, TULIP TELECOM, MAROL, MIDC, ANDHERI(E) MUMBAI-400093 PAN : AACCP 7114 K VS DCIT-(3)(2), ROOM NO. 608, 6 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDEDNT APPELLANT BY SH. NITESH JOSHI ADVOCATE RESPONDENT BY SHRI AKHTAR HUSSAIN ANSARI SR-DR DATE OF HEARING 28/07/2020 DATE OF PRONOUNCEMENT 30/07/2020 O R D E R PER PAWAN SINGH, JUDICIAL MEMEBR : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER DATED 08.10.2012 UNDER SECTION 143(3) READ WITH SECTION ( R.W.S.) 144C (13) OF INCOME TAX ACT (ACT), PASSED IN PURSUANCE OF DIRECT ION OF DISPUTE RESOLUTION PENAL (DRP-1) DATED 06.06.2012 FOR ASSESSMENT YEAR (AY) 2009-09. 2. BRIEF FACTS OF THE CASE AS GATHERED FROM THE ORDER OF LOWER AUTHORITIES ARE THAT ASSESSEE COMPANY AND ENGAGED IN THE BUSINESS OF MAN UFACTURING OF ASSEMBLY AND CUSTOMISATION OF PRINTED CIRCUIT BOARD S. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 30 TH SEPTEMBER 2008 ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 2 DECLARING LOSS. THE ASSESSEE REVISED IT RETURN OF I NCOME AND REVISED RETURN OF INCOME WAS FILED ON 31 ST DECEMBER 2009 DECLARING LOSS OF 72,91,14,145/-. THE ASSESSEE WHILE FILING RETURN OF INCOME REPORTED INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES (AES), IN ITS REPOR T FURNISHED UNDER FORM 3CEB. CONSEQUENT UPON REPORTING OF INTERNATIONAL TR ANSACTION, THE ASSESSING OFFICER (AO), MADE A REFERENCE TO TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF ARMS LENGTH PRICE (ALP) ABOUT THE INTERNATIONAL TRANSACTION REPORTED BY ASSESSEE. AS NOTED BY TPO IN PARA 4 OF HIS ORDER, THE ASSESSEE REPORTED 16 INTERNATIONAL TRANSACTIONS WITH ITS AES . THE TPO IDENTIFIED ITEM NO. 4 AND 15 FOR BENCH MARKING WHICH ARE AS FOLLOWS : 4 BUSINESS SUPPORT SERVICES RENDERED BY JABIL US TNMM (MARK- UP VOLUNTARY OFFERED FOR DISALLOWANCE) RS. 59,19,196/- 15 REIMBURSEMENT OF THIRD PARTY COST INCURRED BY JABIL GROUP ENTITIES ON BEHALF OF ASSESSEE REIMBURSEMENT OF COST RS. 4,77,68,244/- 3. OUT OF REIMBURSEMENT OF THIRD PARTY COST INCURRED B Y JABIL GROUP ENTITIES ON BEHALF OF ASSESSEE, THE ASSESSEE BEFORE THE TPO THE ASSESSEE OFFERED VOLUNTARY ADJUSTMENT OF RS. 24,25,98,017/-, WHICH I S DULY RECORDED IN TABLE NO. 2 OF PARA 4 OF TPOS ORDER. THE TPO AFTER ISSU ING SHOW CAUSE NOTICE CONSIDERING THE SUBMISSION OF ASSESSEE SUGGESTED TH E TOTAL ADJUSTMENT OF RS. 25,76,88,325/- (INCLUDING OF RS. 24,25,98,017/-) WI TH REGARD TO INTERNATIONAL TRANSACTION OF ASSESSEE WITH ITS AES. THE TPO TOOK HIS VIEW THAT NO ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 3 EVIDENCES ARE PRODUCED BY THE ASSESSEE. ON THE TRAN SACTION OF BUSINESS SUPPORT SERVICES THE TPO REJECTED THE BASIS OF ALLO CATION FOR DIRECT SELLING, GENERAL AND ADMINISTRATION (SG&A) AND APPLIED GLOBA L ASSET AS A BASE INSTEAD OF ASIA PACIFIC ASSET BY TAKING VIEW THAT T HE ASSESSEE HAS NOT PROVIDED ANY BASIS OF TRACKING OF THE COST OF THESE REGIONAL SERVICES SEPARATELY BY US ENTITY. THUS, EFFECTIVELY THE TPO IN ADDITION TO THE VOLUNTARILY DISALLOWANCE, SUGGESTED FOLLOWING ADJUS TMENT; SERIAL NO. NATURE OF INTERNATIONAL TRANSACTION AMOUNT IN INR 1 ADJUSTMENT TO THE INTERNATIONAL TRANSACTION PERTAINING TO BUSINESS SUPPORT SERVICES RENDERED BY JABIL CIRCUIT INC (JABIL US) WITH RESPECT TO ALLOCATION OF DIRECT SELLING, GENERAL AND ADMINISTRATION (SG& A) COST. 19,28,994/- 2 ADJUSTMENT TO THE INTERNATIONAL TRANSACTION PERTAINING TO REIMBURSEMENT OF EXPENSES TO JABIL US (SALARIES FOR EMPLOYEES TO BY JABIL US AT JCIPL) 1,46,66,531/- 3 ADJUSTMENT TO THE INTERNATIONAL TRANSACTION PERTAINING TO RENDERING BUSINESS DEVELOPMENT SERVICES, REGIONAL HUMAN RESOURCE SUPPORT SERVICES AND INFORMATION TECHNOLOGY SUPPORT SERVICES BY JCIPL 2 JABIL US 1,02,883/- TOTAL 1,66,98,408/- 4. ON RECEIPT OF ORDER OF TPO THE ASSESSING OFFICER PA ST DRAFT ASSESSMENT ORDER ON 9 TH DECEMBER 2011 UNDER SECTION 143(3) READ WITH SECTI ON (RWS) 144C(1). ON RECEIPT OF DRAFT ASSESSMENT ORDER THE ASSESSEE E XERCISED ITS OPTION FOR FILING OBJECTIONS BEFORE DISPUTE REGULATION PANEL ( DRP). THE LEARNED DRP, ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 4 VIDE ITS DIRECTION DATED 6 TH JUNE 2012 CONFIRMED THE ADJUSTMENTS SUGGESTED BY TPO. ON RECEIPT OF DIRECTION OF DRP, THE ASSESS ING OFFICER PASSED FINAL ASSESSMENT ORDER, IN PURSUANCE OF DIRECTION OF DRP UNDER SECTION 143 (3) RWS 92 CA & 144C (13) OF INCOME TAX ACT. FURTHER AG GRIEVED BY THE ADDITION/ADJUSTMENT IN THE ASSESSMENT ORDER, THE AS SESSEE HAS FILED WITH PRESENT APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE H AS RAISED THE FOLLOWING GROUNDS OF APPEAL:- I. GROUND OF APPEAL IN RESPECT OF TRANSFER PRICING ADJ USTMENT . (1) PROPOSED ADDITION TO THE TOTAL INCOME ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. ERRED IN MAKING TRANSFER PRICING ADJUSTMENT BY REJE CTING THE ANALYSES UNDERTAKEN BY THE APPELLANT TO DETERMINE ARMS LENGT H PRICE FOR THE INTERNATIONAL TRANSACTION AND NOT CONSIDERING ALL T HE DOCUMENTATION MAINTAINED AND FILED. (2) USE OF SINGLE YEAR DATA. ERRED IN NOT CONSIDERING MULTIPLE YEAR DATA FOR DET ERMINING THE ARMS LENGTH PRICE. (3) REJECTION OF LOSS MAKING COMPANY. ERRED ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW BY REJECTING CG BAK SOFTWARE AND EXPORTS LTD (CGV AK) FROM THE SET OF COMPARABLES COMPANIES IDENTIFIED BY THE APPELLANT (IN CASE OF I T SUPPORT SERVICES) ON THE BASIS THAT IT IS A LOSS MAKING COMPANY AND THE APPE LLANT IS OPERATING ON COST PLUS MODEL. (4) ACCEPTING COMPANIES HAVING SUPER NORMAL PROFITS . ERRED IN LAW AND IN FACTS BY ACCEPTING COMPANIES HA VING SUPER NORMAL PROFIT AS COMPARABLE TO THE APPELLANT IN CASE OF IT SUPPOR T SERVICES. ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 5 (5) ACCEPTING CERTAIN ADDITIONAL COMPANIES BY ADOPTING INAPPROPRIATE APPROACH OF CHERRY PICKING OF COMPANIES AS COMPARAB LES TO THE APPELLANT . ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND LA W IN ACCEPTING CERTAIN ADDITIONAL COMPARABLE COMPANIES TO THE ASSESSEE IN RELATION TO IT SUPPORT SERVICES PROVIDED BY IT TO ITS AE S, WITHOUT PROVID ING ANY ANALYSES AS TO WHY THE SAME HAVE BEEN ACCEPTED AS COMPARABLE COMPANIES AND WITHOUT PROVIDING ANY SHOW CAUSE IN RELATION TO THE SAME. (6) REJECTION OF ALLOCATION BASIS ADOPTED BY THE APPELL ANT AND ADOPTING A DIFFERENT ALLOCATION BASIS FOR ALLOCATION OF DIRECT SG & A COST. ERRED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN REJECTING THE ALLOCATION BASIS DETERMINED BY JABIL GROUP FOR ALL THE QUESTION OF DIRECT SG & A COST OF RS. 2,933,154/-FORMING OF PART OF BUSIN ESS SUPPORT SERVICES RENDERED BY JABIL US AND USING A DIFFERENT ALLOCATI ON BASIS FOR ALLOCATION OF THE SAME, WITHOUT PROVIDING ANY COGENT REASON. (7) NON CONSIDERATION OF DOCUMENTATION IS PROVIDED IN C ONNECTION WITH INTERNATIONAL TRANSACTIONS OF IMBURSEMENT OF THIRD PARTY COSTS BY JCIPL. ERRED ON THE FACTS AND IN CIRCUMSTANCES OF BKC AND THE LAW IN NOT CONSIDERING THE DOCUMENTATION PRODUCED IN RELATION TO INTERNATI ONAL TRANSACTIONS PERTAINING TO REIMBURSEMENT OF EXPENSES BY APPELLANT TO ITS AE S AND ACCORDINGLY MAKING AN ADJUSTMENT TO THE VALUE OF SUCH INTERNATIONAL TR ANSACTION-BASED ON ABSENCE OF SUFFICIENT BACKUP DOCUMENTATION. (8) APPLICABILITY OF 5% VARIATION FROM MEAN OF COMPARAB LE MARGINS . ERRED IN COMPUTING THE ARMS LENGTH PRICE OF DESIGN ENGINEERING SERVICES AS THE MEAN ARMS LENGTH PRICE DETERMINED, WITHOUT TAKING I NTO ACCOUNT THE LOWER 5% VARIATION FROM THE ARMS LENGTH PRICE DETERMINED. II. INITIATION OF PENALTY PROCEEDING UNDER SECTION 271( 1)(C) OF THE ACT . 5. WE HAVE HEARD THE SUBMISSION OF THE LEARNED AUTHORI SED REPRESENTATIVE (AR) OF THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRES ENTATIVE (DR) FOR THE ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 6 REVENUE AND PERUSED THE ORDER OF THE LOWER AUTHORIT IES AND ALSO GONE THROUGH THE RECORD OF THE CASE VERY CAREFULLY. 6. AT THE OUTSET OF HEARING THE LEARNED AR OF THE ASSE SSEE SUBMITS THAT GROUND NO. 1 IS GENERAL AND NEEDS NO ADJUDICATION. FURTHER , HE IS NOT PRESSING GROUND NO. 2 TO 5 AND 8. CONSIDERING THE SUBMISSION OF LEARNED AR OF THE ASSESSEE GROUND NO. 1 TO 5 AND 8 ARE DISMISSED AS N OT PRESSED. 7. GROUND NO. 6 RELATES TO REJECTION OF ALLOCATION BAS IS ADOPTED BY THE ASSESSEE. THE FACTS RELATED TO THIS GROUND OF APPEAL ARE THAT US BASED AE OF THE ASSESSEE CLAIMED TO HAVE ALLOCATED CERTAIN BUSINESS SUPPORT SERVICES COST TO THE ASSESSEE OF RS. 16,20,54,860/-, OUT OF WHICH TH E ASSESSEE ALREADY OFFERED RS. 15,61,35,664/- AS VOLUNTARY DISALLOWANCE IN THE RETURN OF INCOME. REMAINING OF RS. 59,19,196/- IS THE BONE OF CONTENT ION BETWEEN THE ASSESSEE AND REVENUE. THE ALLOCATION WERE ON ACCOUNT OF VARI OUS SERVICES CONSISTING OF CORPORATE OPERATION , DIRECT SELLING, GENERAL AN D ADMINISTRATION (SG&A), GLOBAL IT MANUFACTURING, GLOBAL SG&A AND HUMAN RESO URCES. THE ASSESSEE CLAIMED THAT THESE SERVICES WERE ALLOCATED ON THE B ASIS OF ASSESSEES ASSET AS A PERCENTAGE OF JABIL GROUP GLOBAL ASSETS (1.8845%) , EXCEPT FOR DIRECT SG&A, WHICH WAS ALLOCATED ON THE BASIS OF ASSESSEE S ASSET AS A PERCENTAGE OF ITS GLOBAL GROUP ASSET OF THE ASIA PACIFIC REGIO N BEING 5.5047%. THE TPO REJECTED THE BASIS OF ALLOCATION FOR DIRECT SG&A AN D APPLIED GLOBAL ASSET AS ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 7 BASE INSTEAD OF ASSET JABIL GROUPS ASIA PACIFIC RE GION BY TAKING VIEW THAT THE ASSESSEE HAS NOT PROVIDED ANY BASIS FOR TRACKIN G OF THE COST OF THESE REGIONAL SERVICES SEPARATELY BY US BASED AE. ON OBJ ECTION BEFORE LD. DRP THE ACTION OF TPO WAS UPHELD. 8. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSE E SUBMITTED DETAILED DOCUMENTARY EVIDENCE BEFORE TPO AND THE LEARNED DRP INCLUDING SAMPLE INVOICES, INTERNAL CORRESPONDENCE EVIDENCE OF RECEI PT OF BUSINESS SUPPORT SERVICES BY ASSESSEE, FINANCIAL STATEMENT OF JABIL US, COST ALLOCATION WORKING ALONG WITH ALLOCATION KEYS, DETAILS OF ALLOCATION M ETHOD ADOPTED BY JABIL US FOR ALLOCATING COST TO VARIOUS JABIL GROUPS ENTITY AND CERTIFICATE FROM JABIL US SUBSTANTIATING THE FACT THAT EXPENSES HAVE BEEN ALLOCATED BASED ON APPROPRIATE ALLOCATION KEYS. COPIES OF SUCH EVIDENC ES ARE ALSO FURNISHED BEFORE THIS TRIBUNAL AS PER PAGE NO. 361 TO 364 PAP ER BOOK AND PAGE NO. 380 TO 574 OF PAPER BOOKS. THE ASSESSEE ALSO FURNIS HED THE BENEFIT IN CASE OF COSTS INCURRED IN FORM OF CORPORATE OPERATIONS, G LOBAL IT MANUFACTURING AND GLOBAL SG &A IS REAPED BY JABIL ENTITIES AROU ND THE GLOBE AND HENCE, THESE COSTS ARE ALLOCATED TO JABIL ENTITY AROUND TH E GLOBE ON THE BASIS OF GLOBAL ASSETS. ON THE BASIS OF THOSE COSTS ARE ALLO CATED TO ASSESSEE AND THE ASSESSEES ASSETS AS A PERCENTAGE OF GLOBAL ASSETS ARE 1.8845%. THE LEARNED AR OF THE ASSESSEE DURING THE COURSE OF HEARING SUB MITS THAT THESE ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 8 PERCENTAGE ARE FORMING PART OF ORDER OF TPO AS RECO RDED IN PARA 10.1.1 AND 10.1.2 OF HIS ORDER. THE LD. AR SUBMITTED THAT THE SE SERVICES ARE PROVIDED BY EMPLOYEES OF THE REGIONAL SUPPORT ENTITY, OR EXPATR IATES ASSIGNED TO PROVIDE SPECIFIC SERVICES TO ENTITY ARE WITHIN A SPECIFIC R EGION. AS AN ADVERSE TO PRACTICE, RATHER THAN DIRECTLY CHARGING OUT COST AS SOCIATED WITH THESE REGIONAL SERVICES TO THE ENTITIES WITHIN THAT SPECIFIC REGIO NS, THE REASON OF SUPPORT ENTITY IDENTIFIES THESE COST AND CHARGES THEM TO U. S.-BASED AE, WHO INTENDS TO THESE COST SEPARATELY AND CHARGES THEM OUT OF TH E ENTITIES WITHIN THE SPECIFIC REGION AS THE BENEFIT OF THESE SERVICES WE RE REAPED ONLY BY THE ENTITIES IN THE SPECIFIC REGION. THUS, THE COST FOR DIRECT SG &A WERE ALLOCATED ON THE BASIS OF ASSESSEE IS ASSESSED ON A PERCENTAGE OF JABIL GROUPS ASSETS OF ASIA-PACIFIC REGION THAT IS 5.5047%. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITS THAT THE TPO AND THE DRP A DOPTED WRONG ALLOCATION OF DIRECT SG&A COST TO ASSESSEE. THE LEARNED AR PRA YED FOR ACCEPTING THE ALLOCATION USED BY US BASED AE THAT IS ASSESSEE IS ASSESSED AS A PERCENTAGE OF GROUPS ASSET OF ASIA-PACIFIC REGION. THE LD. AR VEHEMENTLY SUBMITTED THAT THIS ISSUE WAS NOT DISTURBED IN EARLIER OR SUB SEQUENT YEARS. 9. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF TPO AND DRP. IT WAS SUBMITTED THAT SIMILAR SUBMISSIONS WERE MODE BEFORE LD. DRP, ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 9 BUT THE ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY E VIDENCE TO PROVE ITS CONTENTION ABOUT SUCH ALLOCATION OF COST. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE TPO AND DRP. DURING THE TP ADJUSTMENT PROCEEDINGS THE TPO THE ASSESSEE CLAIMED THE COSTS INCURRED IN FORM OF CORPORATE OPERATIONS, GLOBAL IT MANUFACTURING EXC EPT SG &A IS REAPED BY JABIL ENTITIES AROUND THE GLOBE AND HENCE, THESE COSTS ARE ALLOCATED TO JABIL ENTITY AROUND THE GLOBE ON THE BASIS OF GLOBA L ASSETS. ON THE BASIS OF THOSE COSTS ARE ALLOCATED TO ASSESSEE AND THE ASSES SEES ASSETS AS A PERCENTAGE OF GLOBAL ASSETS ARE 1.8845%. THE CONTENTION OF THE ASSESSEE WAS REJECTED BY TPO. THE TPO APPLIED GLOBAL ASSET AND MADE ADJUSTME NT ON THE BASIS OF ASSESSEES ASSET AS A PERCENTAGE OF JABIL GROUPS A SSET AT 1.885 %, INSTEAD OF ASIA- PACIFIC REGION I.E. 5.5047%. THE TPO TOOK HI S VIEW THAT THE ASSESSEE HAS NOT FURNISHED TRACKING OF COST F REGIONAL SERVI CES BY US AE OF THE ASSESSEE. IT WAS ALSO HELD THAT THE ASSESSEE HAS N OT PROVIDED THE DETAILS OF ASSET OF VARIOUS ENTITIES ON WHICH ALLOCATION KEY H AS BEEN COMPUTED. THE LD. DRP AFFIRMED THE ACTION OF THE TPO BY HOLDING THAT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH THE NEW EVIDENCE OR EXPLANATIO N REGARDING THE BASIS OF TRACKING THE COST OF REGIONAL SERVICES OF VARIOUS E NTITIES. ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 10 11. BEFORE US, THE LD AR FOR THE ASSESSEE VEHEMENTLY S UBMITTED THAT ALL DETAILS AND DOCUMENTARY EVIDENCE WERE FURNISHED BEFORE TPO AND THE LEARNED DRP INCLUDING SAMPLE INVOICES, INTERNAL CORRESPONDENCE EVIDENCE OF RECEIPT OF BUSINESS SUPPORT SERVICES BY ASSESSEE, FINANCIAL ST ATEMENT OF JABIL US, COST ALLOCATION WORKING ALONG WITH ALLOCATION KEYS, DETA ILS OF ALLOCATION METHOD ADOPTED BY JABIL US FOR ALLOCATING COST TO VARIOUS JABIL GROUPS ENTITY AND CERTIFICATE FROM JABIL US SUBSTANTIATING THE FACT THAT EXPENSES HAVE BEEN ALLOCATED BASED ON APPROPRIATE ALLOCATION KEYS AS P ER PAGE NO. 361 TO 364 PAPER BOOK AND PAGE NO. 380 TO 574 OF PAPER BOOKS. THE ASSESSEE HAS ALSO CERTIFIED THAT ALL THE EVIDENCES WERE FURNISHED BEF ORE THE LOWER TPO AND DRP. PERUSAL OF TPO ORDER REVEALS THAT THE TPO IN P ARA 10.1.1 AND 10.1.2 OF HIS ORDER HAD DULY RECORDED THE DETAILS OF COST ALL OCATION OF ON THE BASIS OF ASSESSEES ASSET AS A PERCENTAGE OF JABIL GROUPS A SSET ON THE ASIA PACIFIC REGION. WE HAVE NOTED THAT THE COPIES OF ALL THESE DOCUMENTARY EVIDENCE WERE FILED BEFORE THE TRIBUNAL ON 24.08.2015, AFTER SUPPLYING THE COPY IN THE OFFICE OF LD. DR CONCERNED. TILL THE TIME OF HEARI NG THE LD. DR FOR THE REVENUE HAS NOT DISPUTED THAT THE COPIES OF THESE D OCUMENTS WERE NOT FILED BEFORE THE LOWER AUTHORITIES, EXCEPT MAKINGS SUBMIS SIONS THAT THE ASSESSEE FAILED TO PROVIDE ANY EVIDENCE TO PROVE ITS CONTENT ION ABOUT SUCH ALLOCATION OF COST. PERUSAL OF THESE DOCUMENTARY EVIDENCES RE FLECTS THE BREAKUP OF COST ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 11 ALLOCATION WITH REGARD TO CORPORATE OPERATION, D IRECT SG&A GLOBAL IT MANUFACTURING, GLOBAL SG&A, HUMAN RESOURCES ALONG W ITH ALLOCATION KEY USED WITH ALLOCATION RATIO (PAGE NO. 360 OF PB). TH E ASSESSEE HAS ALSO PLACED OTHER CORROBORATIVE EVIDENCE TO SUBSTANTIATE ITS CONTENTION ABOUT ITS GLOBAL AS WELL AS ASIA-PACIFIC REGION ASSET. THE TP O IN ITS ORDER HAS NOTED THAT IN ABSENCE OF COMPLETE SUPPORTING DETAILS AND TRACING OF COST OF REGIONAL SERVICES, THE TRANSACTION CANNOT BE CONSIDERED AT A RMS LENGTH. HOWEVER, THE TPO HAS NOT DISPUTED THE PERCENTAGE OF ASSESSEES T OTAL ASSET OF ASIA PACIFIC REGION. WE HAVE FURTHER NOTED THAT THE TPO HAS NOT EXAMINED THE FACT WHETHER THE ASSESSEE IS ADOPTING SIMILAR TREATMENT FOR ALLOCATION OF COST, IN EARLIER OR SUBSEQUENT YEARS OR NOT. CONSIDERING THE AFORESAID DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE, WE FIND MERIT IN THE SUBMISSIONS OF THE LD AR FOR THE ASSESSEE THAT ALLOCATION OF DIRECT SG &A COST ON THE BASIS OF THE ASSESSEE AS A PERCENTAGE OF ASSESSEES GROUPS ASSETS OF ASIA PACIFIC REGION @ 5.5047% IS APPROPRIATE AS THE BENEFIT OF D IRECT SG&A COST WAS REAPED BY THE ENTITIES IN THE ASIA PACIFIC REGION, WHEREAS AS THE BENEFIT OF THE OTHER SERVICES WHICH WERE ALLOCATED ON THE BASI S OF PERCENTAGE OF ASSESSEES GLOBAL ASSET IS REAPED BY THE GROUP AROU ND THE GLOBE. THUS, WE DIRECT THE ASSESSING OFFICER/ TPO TO DELETE THE ADJ USTMENT. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 12 12. GROUND NO. 7 RELATES TO NON-CONSIDERATION OF DOCUME NTATION PRODUCED IN CONNECTION WITH THE INTERNATIONAL TRANSACTION OF RE IMBURSEMENT OF THIRD PARTY COST BY ASSESSEE. THE FACTS RELATED TO THIS GROUND OF APPEALS ARE THAT ASSESSEE CLAIMED THAT ITS GROUP ENTITY INCURRED EXPENSES OF 4,77,68,244/- ON BEHALF OF ASSESSEE AND ASSESSEE REIMBURSED THE SAME TO THE RESPECTIVE AES. OUT OF THE AFORESAID EXPENSES RS. 2,35,07,513/- WAS OFFERE D TO TAX BY ASSESSEE VOLUNTARILY IN THE RETURN OF INCOME. OUT OF THE REM AINING BALANCE OF RS. 2,42,60,371/-THE TPO ACCEPTED RS. 95,94,200/- AT AR MS LENGTH ON THE BASIS OF DOCUMENTATION FURNISHED DURING THE TP PROCEEDING S AND FOR REMAINING THE TPO SUGGESTED ADJUSTMENT OF 1,46,66,531/- BY TAKING VIEW THAT SAMPLE DOCUMENTATION SUBMITTED BY ASSESSEE IS INCOMPLETE A ND THE BACK-TO-BACK THIRD-PARTY DOCUMENTATION IS INCOMPLETE. ON OBJECTI ON BEFORE DRP, THE ACTION OF TPO WAS AFFIRMED. 13. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THE ASS ESSEE SUBMITTED A CHART DEMONSTRATING AE WISE BREAKUP OF THE AMOUNT BEFORE THE TPO AND LD. DRP. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITS THAT THE DISALLOWANCE PREDOMINANTLY PERTAINS TO THE REIMBURSEMENT MADE BY ASSESSEE U.S. BASED AE IN THE NATURE OF SALARY AND OTHER COST WHICH IN CLUDES BONUS AND TAXES FOR THE EMPLOYEES DEPUTED BY JABIL US AT ASSESSEE NAMEL Y, DAYAL PRASAD AND RAMESH SALIGAME. THE LEARNED AR FOR THE ASSESSEE F URTHER SUBMITS THAT ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 13 DAYAL PRASAD IS THE MANAGING DIRECTOR OF ASSESSEE, WHOSE SALARY WAS PAID BY JABIL US AND CROSS CHARGED TO ASSESSEE AND RAMES H SALIGAME IN THE BUSINESS UNIT DIRECTOR WHOSE SALARY WAS PAID BY JA BIL US AND CROSS CHARGED BY ASSESSEE. THE ASSESSEE FURNISHED THE SAL ARY AND OTHER COST, INCLUDING THE COPY OF INVOICES, FORM -16 OF DAYAL P RASAD AND CONFIRMATION OF JABIL US, STATING THAT THEY HAD DEPUTED HIM AND RAMESH SALIGAME TO ASSESSEE FOR THE ENTIRE YEAR UNDER CONSIDERATION AN D THE SALARIES OF THESE EMPLOYEES WERE PAID BY US AE (JABIL US) AND SUBSEQU ENTLY RECOVERED FROM THE ASSESSEE. THE TPO DID NOT CONSIDER THE BACK TO BACK DOCUMENTATION PRODUCED BY ASSESSEE DURING THE COURSE OF TP PROCEE DINGS. 14. THE LEARNED AR OF THE ASSESSEE ALSO SUBMITTED THAT FORM-16 OF RAMESH SALIGAME AS ADDITIONAL EVIDENCE BEFORE THIS TRIBUNA L ALONG WITH APPLICATION DATED 11.02.2019 UNDER RULE 29 OF INCOME TAX (APPEL LATE TRIBUNAL) RULES 1963. THE LEARNED CIT-DR FORWARDED THE SAID ADDITIO NAL EVIDENCE TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING O FFICER HAS ALREADY FURNISHED HIS COMMENTS VIDE REPLY/ LETTER DATED 27 FEBRUARY 2020, WHEREIN THE ASSESSING OFFICER HAS GIVEN HIS COMMENTS STATIN G THAT THE ADDITIONAL EVIDENCE MAY BE CONSIDERED ON MERIT. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ADDITIONAL EVIDENCE FURNIS HED BY ASSESSEE MAY BE ACCEPTED AS THE EVIDENCE HAS DIRECT RELEVANCE WITH THE ISSUE. IT WAS FURTHER ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 14 SUBMITTED THAT ALL THE SUPPORTING EVIDENCE IN THE F ORM OF THIRD PARTY BACK-TO- BACK DOCUMENTATION FOR REIMBURSEMENT OF SALARY AND ANOTHER COST OF DEPUTED EMPLOYEES IS FURNISHED. THE LEARNED AR FURTHER SUBM ITS THAT SIMILAR REIMBURSEMENT FOR SALARY AND OTHER COST OF THE DEPU TED EMPLOYEE WAS ACCEPTED BY TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 IN ITA NO. 3627/MUM/2016, DATED 20.03.2019, COPY OF WHICH IS P LACED ON RECORD. 15. THE LEARNED AR FINALLY PRAYED THAT THE DOCUMENTATIO N PRODUCED IN RELATION TO THE INTERNATIONAL TRANSACTION OF REIMBURSEMENT O F SALARY AND OTHER COST BY ASSESSEE TO JABIL US MAY BE ACCEPTED AS APPROPRIATE AND ADEQUATE BACK-TO- BACK DOCUMENTATION TO SUBSTANTIATE REIMBURSEMENT OF ACTUAL SALARY AND OTHER COST OF EMPLOYEES DEPUTED BY JABIL US. 16. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SU PPORTED THE ORDER OF TPO AND LEARNED DRP. ON THE ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 29, THE LEARNED DR FOR THE REVENUE SUBMITS THAT THE HE IS STRONGLY OBJECTING TO THE ADMISSIONS OF ADDITIONAL EVIDENCE AS THE SAM E IS NOT IN ACCORDANCE WITH RULE 29 OF INCOME TAX (APPELLATE TRIBUNAL) RUL ES. THE LD DR WOULD SUBMITS THAT IN CASE THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE IS ADMITTED, THEN THE ISSUE MAY BE RESTORED BACK TO TH E FILE OF TPO/AO FOR CONSIDERATION OF SUCH EVIDENCE AFRESH. ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 15 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE TPO AND DRP. WE HAVE ALSO DELIBERATED ON THE ORDERS OF THE TRIBUNAL RELIED BY LEARNED AR OF THE ASSESSEE. WE HAVE ALSO PERUSED THE CONTENTS OF THE APPLICATION FILED BY TH E ASSESSEE UNDER RULE 29 OF INCOME TAX (APPELLATE TRIBUNAL) RULES DATED 11.02.2 019. IN THE APPLICATION UNDER RULE 29, FOR ADMISSION OF ADDITIONAL EVIDENCE S THE ASSESSEE HAS CONTENDED THAT THE DURING THE FINANCIAL YEAR 2007-0 8, OVERSEAS GROUP ENTITY INCURRED EXPENSES OF RS.4.77 CRORE ON BEHALF OF THE ASSESSEE. THE SAME HAS BEEN REIMBURSED BY THE ASSESSEE TO THE RESPECTIVE A ES. OUT OF THE ABOVE REIMBURSEMENT WORTH RS.2.42 CRORE HAVE BEEN BENCHMA RKED BY THE ASSESSEE AND THE BALANCE OF 2.35 CRORE HAVE BEEN VOLUNTARY DISALLOWED BY THE ASSESSEE. THE REIMBURSEMENT TRANSACTIONS ARE MOSTLY IN THE NATURE OF SALARY AND OTHER RELATED COST THAT HAVE BEEN PAID BY THE A ES ON BEHALF OF ASSESSEE. THE TPO DURING THE BENCHMARKED PROCEEDINGS CONSIDER ED THE DOCUMENTATION FILED IN RESPECT OF 95.94 LAKHS AND CONCLUDED THAT THE SAME IS AT THE ARMS LENGTH PRICE. THE BALANCE AMOUNT WA S PRIMARILY IN THE NATURE OF SALARY OF TWO DEPUTED EMPLOYEES NAMELY DAYAL PRA SAD AND RAMESH SALIGAME. THE TPO OBSERVED THAT THE ASSESSEE SUBMIT TED ONLY INTERCOMPANY INVOICES IN RELATION TO THE EXPENSES OF 1.46 CRORE. IT IS FURTHER CONTENDED THAT IN THE APPLICATION THAT THE ASSESSEE SUBMITTED THE COPY OF FORM-16 OF ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 16 DAYAL PRASAD AND AS DEPUTATION CERTIFICATE FROM US ENTITY AND RAMESH SALIGAME AS BACKUP TO DOCUMENTATION VIDE THEIR SUBM ISSION DATED 27 JULY 2011 AND 13 SEPTEMBER 2011 RESPECTIVELY. THE TPO FA ILED TO TAKE THE CONSIDER THESE DOCUMENT AND ACCORDINGLY MADE ADJUST MENT OF 1.46 CRORE IN HIS ORDER. THE ASSESSEE BEFORE THE DRP ALSO FURNISH ES THE NECESSARY DOCUMENTS TO SUBSTANTIATE THEIR CONTENTIONS. IT IS FURTHER CONTENDED THAT CONSIDERING THE OBSERVATION OF LOWER AUTHORITIES TH AT THE PRESENT DOCUMENTS WERE NOT BEFORE THE LOWER AUTHORITIES THE ASSESSEE IS FILING NECESSARY EVIDENCES WHICH INCLUDES FORM-16 OF DEPUTED EMPLOYE ES. 18. WE HAVE CONSIDERED THE CONTENTS OF APPLICATION FOR ADDITIONAL EVIDENCE AND THE SUBMISSION OF LEARNED AR OF THE ASSESSEE. CONSI DERING THE SUBMISSIONS OF THE LEARNED AR FOR THE ASSESSEE THAT DAYAL PRASA D IS THE MANAGING DIRECTOR OF ASSESSEE, WHOSE SALARY WAS PAID BY JABI L US AND CROSS CHARGED TO ASSESSEE AND RAMESH SALIGAME IN THE BUSINESS UNIT DIRECTOR WHOSE SALARY WAS PAID BY JABIL US AND CROSS CHARGED BY ASSESSEE , NOW BEFORE, US THE ASSESSEE HAS FURNISHED THE COPY FORM 16 OF DAYAL PR ASAD AND CLAIMED THAT JABIL US, HAD DEPUTED RAMESH SALIGAME TO ASSESSEE F OR THE ENTIRE YEAR UNDER CONSIDERATION AND THE SALARIES OF THESE EMPLOYEES W ERE PAID BY US AE (JABIL US) AND SUBSEQUENTLY RECOVERED FROM THE ASSESSEE. W E HAVE FURTHER NOTED THAT SIMILAR REIMBURSEMENT FOR SALARY AND OTHER COS T OF THE DEPUTED EMPLOYEE ITA NO. 7314/MUM/2012 JABIL CIRCUIT INDIA PVT LTD 17 WAS ACCEPTED BY TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 IN ITA NO. 3627/MUM/2016. THEREFORE, CONSIDERING THE NATUR E OF THE EVIDENCES WE ADMIT THE ADDITIONAL EVIDENCES FURNISHED BY THE ASS ESSEE AND RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO EXAMINE A ND VERIFY THE CONTENTS OF FORM-16 OF THESE TWO EMPLOYEES AND OTHER EVIDENCES FURNISHED BY THE ASSESSEE AND GRANT APPROPRIATE RELIEF TO THE ASSESS EE IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER IS ALSO DIRECTED THAT WHILE C ONSIDERING THE ISSUE HE SHALL CONSIDER THE ORDER OF TRIBUNAL IN ASSESSEES CASE FOR AY 2009-10 IN ITA NO. 3627/MUM/2016. IN THE RESULT THIS GROUND O F APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AS PER RULE 34. ORDER PRONOUNCED IN OPEN COURT ON 30 TH DAY OF JULY 2020. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 30 TH JULY, 2020 SELF(PS) COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI