HUTCHISON GLOBAL SERVICES P.LTD, MUMBAI V. DCIT 9(1), MUMBAI

ITA 7520/MUM/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6062 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 24-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 271(1)(c); 143(3); 234B; 144

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI C.N. PRASAD (AM) & SHRI BALAGANESH (JM) I.T.A. NO. 7520 /MUM/ 201 2 (ASSESSMENT YEAR 20 08 - 09 ) TECH MAHINDRA BUSINESS SERVICES LTD. (FOR M ERLY KNOWN AS H UTCHISON GLOBAL SERVICES PRIVATE LIMIT ED SPECTRUM TOWERS , GROUND FLR. CHINCHOLI BUNDER LINK ROAD, MINDSPACE MALAD (WEST) MUMBAI - 400 064. PAN : AABCH8136L V S . DCIT RANGE(9)(2) ROOM NO. 218 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI JEHANGIR D. M ISTRI DEPARTMENT BY SHRI AIRIJU JAIKARAN DATE OF HEARING 10 .1 . 201 9 DATE OF PRONOUNCEMENT 23 . 1 . 201 9 O R D E R PER M. BALAGANESH (AM) : THIS APPEAL IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER PASSED BY DCIT (OSD) - 9(1), MUMBAI (IN SHORT LEAR NED ASSESSING OFFICER) U/S. 143(3) READ WITH SECTION 144C(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) PURSUANT TO THE DIRECTION ISSUED BY HON'BLE DISPUTE RESOLUTION PANEL (LEARNED DRP) U/S. 144C(5) OF THE ACT DATED 25.9.2012. 2. AT THE OUTSET, LEARNED AR FOR THE ASSESSEE POINTED OUT THAT LEARNED TPO SELECTED SEVENTEEN COMPARABLES FOR BENCHMARKING INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESSEE FOR THE PURPOSE OF DETERMINATION OF ARMS LENGTH PRICE (IN SHORT ALP). LEARNED AR P OINTED OUT THE FACTS OF THE CASE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PROVIDED IT ENABLED SERVICES TO ITS AES TO THE TUNE OF RS 145,65,31,831/ - . ALP OF THE SAID INTERNATIONAL TRANSACTION WAS DETERMINED BY THE ASSESSEE BY APPLYING TRANS ACTIONAL NET TECH MAHINDRA BUSINESS SERVICES LTD. 2 MAR G IN METHOD (TNMM IN SHORT) AS THE MOST APPROPRIATE METHOD (MAM IN SHORT). OPERATING PROFIT TO THE TOTAL COST RATIO WAS TAKEN AS THE PROFIT LEVEL INDICATOR (PLI IN SHORT) IN TNMM ANALYSIS. PLI OF THE ASSESSEE - COMPANY WAS 15.65% ON COST . WHEREAS AVERAGE PLI OF THE COMPARABLE AS PER TRANSFER PRICING STUDY CARRIED OUT BY THE ASSESSEE WAS 4.86%. A CCORDINGLY, THE ASSESSEE PRESENTED RELEVANT DOCUMENTS BEFORE LEARNED TPO AND PLEADED THAT ITS MARGIN IS AT ALP. 3. DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE MADE SLUMP SALE PURSUANT TO BUSINESS TRANSFER AGREEMENT ENTERED INTO BETWEEN VODAFONE INDIA SERVICES PVT. LTD. AND THE ASSESSEE AND ENTIRE BUSINESS OF THE ASSESSEE WAS TRANSFERRED AS GOING CONCERN TO VODAFONE INDIA SERVICES PVT. LTD. FR OM DECEMBER, 2007. IT ENABLED SERVICE BUSINESS OF THE ASSESSEE WAS CARRIED OUT UP TO 4.12.2007 AND THEREAFTER THE SAME WAS TRANSFERRED TO VODAFONE INDIA SERVICES PVT. LTD. AS A GOING CONCERN WHICH IN TURN CARRIED OUT THE SAME BUSINESS FOR THE REMAINING PE RIOD OF FINANCIAL YEAR. LEARNED AR IN ORDER TO ADDRESS ENTIRE DISPUTE RAISED IN THE GROUNDS OF APPEAL AND TO CUT IT SHORT STATED , THAT THE LEARNED TPO IN THE HANDS OF VODAFONE INDIA SERVICES PVT. LTD. ALSO TOOK THE VERY SAME SEVENTEEN COMPARABLES AS WERE T AKEN IN THE HANDS OF THE ASSESSEE FOR THE VERY SAME ASSESSMENT YEAR FOR DETERMINATION OF ALP. HE PLACED ON RECORD THE ORDER PASSED BY THE DISPUTE RESOLUTION PANEL DRP - 1, MUMBAI U/S. 14 4 C (5) OF THE ACT ON 30.9.2012 WHEREIN OUT OF SEVENTEEN COMPARABLES CHOSE N BY THE LEARNED TPO AND AVERAGE OF COMPARABLES MARGIN ARRIVED AT 32.33%, LEARNED DRP HAD EXCLUDED SEVEN COMPARABLES CHOSEN BY LEARNED TPO. THE ASSESSEE PREFERRED FURTHER APPEAL TO THIS TRIBUNAL AGAINST THE ORDER OF LEARNED DRP DATED 30.9.2012 IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. (FORMERLY KNOWN AS 3 GLOBAL SERVICES PRIVATE LIMITED) VS. ACIT IN ITA NO. 7514/MUM/2013 FOR A.Y. 2008 - 09 DATED 10.12.2014, WHEREIN TWO MORE COMPARABLES CHOSEN BY THE LEARNED TPO WERE DIRECTED TO BE EXCLUDED BY THE TRI BUNAL. LEARNED AR PLEADED THAT ONCE THESE NINE COMPARABLES ARE EXCLUDED FROM THE TOTAL SEVENTEEN COMPARABLES CHOSEN BY THE LEARNED TPO, TECH MAHINDRA BUSINESS SERVICES LTD. 3 AND REVISED PLI IS WORKED OUT, COMPARABLE MARGIN COMES OUT TO 15.85% AS AGAINST ASSESSEES MARGIN 15.65%. HENCE, BY TAKI NG INTO ACCOUNT PLUS OR MINUS 5% RANGE OF TOLERANCE LIMIT , ASSESSEES PRICE WOULD BE AT ARMS LENGTH. 4. LEARNED DR AGREED TO THIS PROPOSITION BUT VEHEMENTLY ARGUED BEFORE THE BENCH TO REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PU RPOSE OF VERIFICATION OF MARGIN AND CLAIM MADE BY THE ASSESSEE IN THAT REGARD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED TPO HAD CHOSEN FOLLOWING SEVENTEEN COMPARABLES FOR BENCHMARKING INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AND ARRI VED AT THE MARGIN OF 32.33% AS UNDER : - SR NO NAME OF THE COMPARABLE SALES TOTAL COST OP. PROFIT OP/TC 1 ACCENTIA TECHNOLOGIES LTD (SEG.) 407293974 287301205 119992769 41.76% 2 ACROPETAL TECHNOLOGIES (SEG.) 208000505 153737300 54263205 35.30% 3 ADITYA BIRLA MINACS WORLDWIDE LTD 1881373000 1840860000 40513000 2.20% 4 CORAL HUBS LTD (FORMERLY VISHAL INFORMATION TECHNOLOGIES LTD) 380784348 252713811 128070537 50.68% 5 COSMIC GLOBAL LTD 58663285 47577163 11086122 23.30% 6 CROSSDOMAIN SOLUTIONS LTD 265981723 209497067 56484656 26.96% 7 DATAMATICS FINANCIAL SERVICES LTD (SEG.) 61925019 45915837 16009182 34.87% 8 E4E HEALTHCARE SOLUTIONS LTD 258185816 221205351 36980465 16.72% 9 ECLERX SERVICES LTD 1 221990000 736670000 485320000 65.88% 10 GENESYS INTERNATIONAL CORPORATION LTD 471943198 320181048 151762150 47.40% 11 HCL COMNET SYSTEMS & SERVICES LTD (SEG.) 3886156998 2924114030 962042968 32.90% 12 INFOSYS BPO LTD 8275563629 689552 6075 1380037554 20.01% TECH MAHINDRA BUSINESS SERVICES LTD. 4 13 ISERVICES INDIA PVT LTD 133954773 122242652 11712121 9.58% 14 MOLD - TEK TECHNOLOGIES LTD 178458000 90743000 87715000 96.66% 15 R SYSTEMS INTERNATIONAL (SEG.) 213305585 204518285 8787300 4.30% 16 SPANCO LTD (SEG.) 416992585 375547040 41445545 11.04% 17 WIPRO LTD (SEG.) 11572000000 8898000000 2674000000 30.05% AVERAGE 32.33% 6. ACCORDINGLY, LEARNED TPO MADE AN ADJUSTMENT OF RS.21,00,73,042/ - TO ALP. THE ASSESSEE DID NOT OBTAIN ANY REL IEF FROM LEARNED DRP. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE FIND THAT THE VERY SAME SEVENTEEN COMPARABLES WERE ALSO CONSIDERED IN THE HANDS OF THE VODAFONE INDIA SERVICES PVT. LTD. BY LEARNED TPO AND LEARNED DRP IN THEIR CASE HAD DIRECTED TO EXCLUDE FOLLOWING SEVEN COMPARABLES : - 1. ACROPETAL TECHNOLOGIES (SEG.) 2. CORAL HUBS LTD (FORMERLY VISHAL INFORMATION TECHNOLOGIES LTD) 3. GENESYS INTERNATIONAL CORPORATION LTD 4. CROSSDOMAIN SOLUTIONS LTD 5. DATAMATICS FINANCIAL SERVICES LTD (SEG.) 6. ECLERX SERVICES LTD 7. MOLD - TEK TECHNOLOGIES LTD 8. A GGRIEVED BY THIS ORDER, WE FIND THAT THE ASSESSEE PREFERRED AN APPEAL BEFORE THIS TRIBUNAL AND THE TRIBUNAL FURTHER DIRECTED TO EXCLUDE FOLLOWING TWO COMPARABLES VIDE ITS ORDER IN ITA NO. 7514/MUM/2013 DATED 10.12.2014 : 1. MOLD - TEK TECHNOLOGIES LTD 2. COSMIC GLOBAL LTD 9. N OW, WE ARE LEFT WITH REMAINING EIGHT COMPARABLES. LEARNED AR PLACED A CHART BEFORE US STATING THAT MARGIN OF TH ESE EIGHT COMPARABLES WOULD AS UNDER : - SR. NO. NAME OF COMPANY OP/ TC TECH MAHINDRA BUSINESS SERVICES LTD. 5 1 ADITYA BIRLA MINACS WORLDWIDE LT. 2.20% 2 E4E HEALTHCARE SOLUTIONS LTD. 16.72% 3 HCL COMNET SYSTEMS & SERVICES LTD.(SEG.) 32.90% 4 INFOSYS BPO LTD. 20.01% 5 ISERVICES INDIA PVT. LTD. 9.58% 6 R. SYSTEMS INTERNATIONAL (SEG.) 4.30% 7 SPANCO LTD. (SEG.) 11.04% 8 WIPRO LTD. (SEG.) 30.05% 10. NOW, PERTINENT QUESTION THAT REMAINS TO BE ANSWERED IS AS TO WHETHER ORDERS PASSED BY LEARNED DRP AND BY THIS TRIBUNAL IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. COULD BE USED IN THE HANDS OF THE ASSES SEE HEREIN. 11. WE FIND THAT THE VERY SAME BUSINESS CARRIED OUT BY THE ASSESSEE UP TO 4.12.2007 WAS CARRIED OUT BY VODAFONE INDIA SERVICES PVT. LTD. FOR THE REMAINING PART OF THE FINANCIAL YEAR. WE ALSO FIND THAT THE VERY SAME SEVENTEEN COMPARABLE COMPAN IES (SUPRA) WERE SELECTED BY LEARNED TPO WHILE FRAMING TRANSFER PRIC ING ASSESSMENT IN THE HANDS OF VODAFONE INDIA SERVICES PVT. LTD. FOR A.Y. 2008 - 09. HENCE, WE HOLD THAT THERE IS NO HARM IN FOLLOWING LEARNED DRPS ORDER AND ORDER OF THIS TRIBUNAL FOR ASSE SSEE - HEREIN. 12. FROM THE AFORESAID TABLE, IT COULD BE SEEN THAT AVERAGE OF FINAL EIGHT COMPARABLE WORKS OUT TO 15.85%, WHEREAS ASSESSEES MARGIN WAS 15.65%. GIVING CREDIT TO THE ASSESSEE FOR RANGE OF PLUS/MINUS 5%, WE HOLD THAT ASSESSEES MARGIN WOULD B E AT ARMS LENGTH. ACCORDINGLY, GROUND NO. 1 , 2(E) AND 2(K) ARE ALLOWED. IN VIEW OF THIS FINDING, ADJUDICATION OF GROUND 2(A) TO 2(D), 2(F) TO 2(J) AND 2(L) BECOME ACADEMIC IN NATURE 13. GROND NO. I RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. TECH MAHINDRA BUSINESS SERVICES LTD. 6 14. GROUND NO. II RAISED BY THE ASSESSEE IS WITH REGARD TO INITIATION OF PENALTY U/S. 271G OF THE ACT BY LEARNED TPO. LEARNED DRP HELD THAT THIS GROUND RAISED BY THE ASSESSEE IS PREMATURE. WE HOLD THAT ADJUDICATION OF THIS GROU ND AT THIS STAGE IS PREMATURE AND ACCORDINGLY DISMISS GROUND NO. II RAISED BY THE ASSESSEE. 15. GROUND NO. III RAISED BY THE ASSESSEE IS WITH REGARD TO INITIATION OF PENALTY U/S. 271(1)(C) OF THE ACT WHICH AGAIN IS PREMATURE TO BE ADJUDICATED AT THIS STAG E. ACCORDINGLY, GROUND NO. III IS DISMISSED. HOWEVER, THE SAME WOULD HAVE TO BE DECIDED AFRESH BY THE LD AO WHILE GIVING EFFECT TO THIS ORDER. 16. GROUND IV RAISED BY THE ASSESSEE IS WITH REGARD TO LEVY OF INTEREST U/S. 234B & 234C OF THE ACT, WHICH AR E CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 23 . 1 . 201 9 . SD/ - SD/ - (C.N.PRASAD ) (M. BALAGA NESH ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 23 / 1 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, M UMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI