Dun & Bradstreet Technologies & Data Services Pvt Ltd., CHENNAI V. ACIT, CHENNAI

ITA 760/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8803 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: S CHIDAMBARAM S
• Keywords: Transfer pricing; International transaction
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . , ! '# $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ] ./ I.T.A.NO.760/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S DUN & BRADSTREET TECHNOLOGIES & DATA SERVICES PVT. LTD [FORMERLY D&B TRANS UNION ANALYTIC AND DECISION SERVICES PVT. LTD) LEVEL 9, PRINCE INFOCITY PHASE 1 286/1, KANDANCHAVADI RAJIV GANDHI SALAI (OMR) CHENNAI 600 096 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I (4) CHENNAI [PAN AACCD 5293 M] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN & SHRI S. CHIDAMBARAM, ADVOCATES /RESPONDENT BY : SHRI JOE SEBASTIAN, CIT / DATE OF HEARING : 14 - 07 - 201 6 ! / DATE OF PRONOUNCEMENT : 15 - 0 7 - 201 6 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE ASSESSING OFFICER CONSEQUENT TO THE DIRECTION OF THE DISPUTE RESOLUTION PANEL(DRP) FOR THE ASSESSMENT YEAR 2009- 10. ITA NO. 760/14 :- 2 -: 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISALLO WANCE OF DEDUCTION CLAIMED U/S 10A OF THE ACT. 3. SHRI VIKRAM VIJAYARAGHAVAN, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE DRP BY FOLLOWING THE ORDER OF T HIS TRIBUNAL FOR ASSESSMENT YEAR 2007-08, DIRECTED THE ASSESSING OFF ICER TO CONSIDER THE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT IN T HE LIGHT OF THE CBDT CIRCULAR. THE LD. COUNSEL FURTHER SUBMITTED THAT T HE ENTIRE UNDERTAKING WAS ACQUIRED BY SLUMP SALE FROM THE TRANSFEROR COMP ANY, THEREFORE, THE UNDERTAKING CANNOT BE HELD TO BE FORMED BY RECO NSTRUCTION OF THE EXISTING BUSINESS. CONSEQUENT TO THE DIRECTION OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2007-08, THOUGH THE ASSESSING OFFIC ER REJECTED THE CLAIM OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08, THE CIT(A) IN FACT ALLOWED THE CLAIM OF THE ASSESSEE. FOR THE ASSESS MENT YEAR 2007-08, THE CIT(A) FOUND THAT THE ENTIRE UNDERTAKING WAS FO UND TO HAVE BEEN TRANSFERRED TO THE ASSESSEE ON LOCK, STOCK AND BAR REL BASIS, THEREFORE, THERE IS NO CASE FOR SPLITTING UP OR RECONSTRUCTION AS ADVOCATED BY THE ASSESSING OFFICER. IN VIEW OF THIS ORDER OF THE CI T(A), ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N U/S 10A OF THE ACT. 4. ON THE CONTRARY, SHRI JOE SEBASTIAN, LD. DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THE DRP DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE CBDT CIRCULAR ITA NO. 760/14 :- 3 -: NO.1 OF 2013 DATED 17.1.2013. THEREFORE, THE ASSE SSEE MAY NOT HAVE ANY GRIEVANCE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR, TH E DRP DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASS ESSEE IN THE LIGHT OF THE CBDT CIRCULAR NO.1 OF 2013 DATED 17.1.2013. A SIMILAR DIRECTION WAS GIVEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. THE CIT(A), FOR THE ASSESSMENT YEAR 2007- 08, IN FACT, EXAMINED THIS ISSUE AND FOUND THAT THERE WAS NO CAS E FOR SPLITTING UP OR RECONSTRUCTION, AND ACCORDINGLY, ALLOWED THE CLA IM OF THE ASSESSEE U/S 10A OF THE ACT. THE ORDER OF THE CIT(A) FOR T HE ASSESSMENT YEAR 2007-08 IS DATED 3.2.2016. IT IS NOT KNOWN WHETHER THE REVENUE HAS FILED ANY APPEAL BEFORE THIS TRIBUNAL AGAINST THE O RDER OF THE CIT(A) FOR ASSESSMENT YEAR 2007-08. HOWEVER, FOR THE SAKE OF CONSISTENCY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DRP HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO CONSIDER CBDT CIR CULAR NO.1 OF 2013 AND ADJUDICATE THE CLAIM OF THE ASSESSEE U/S 10A OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. ITA NO. 760/14 :- 4 -: 6. THE NEXT ISSUE IS WITH REGARD TO TRANSFER PRICING A DJUSTMENT MADE BY THE DRP. 7. SHRI VIKRAM VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE-COMPANY DO NOT HAVE ANY CONTROLLING INTEREST IN RESPECT OF THE SO CALLED CONCERN WITH W HICH THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE WAS HOLDING ONLY 24.5% INTEREST IN TH E NON-RESIDENT COMPANY. FOR THE PURPOSE OF CONSIDERING THE ASSOCI ATED ENTERPRISE, THE ASSESSEE NEEDS TO HAVE A MINIMUM OF 26% HOLDIN G. SINCE THE HOLDING OF THE ASSESSEE IS 24.5% WHICH IS LESS THA N 26%, THE NON- RESIDENT COMPANY CANNOT BE CONSIDERED TO BE AN ASSO CIATED CONCERN OF THE ASSESSEE. HOWEVER, THE DRP PROCEEDED ON THE P RESUMPTION THAT THE ASSESSEE IS PRICING THE SALE OF THE MATERIAL, THEREFORE, THE ASSESSEE IS DEEMED TO HAVE CONTROL OVER THE ASSOCI ATED ENTERPRISE. AN AGREEMENT FOR SALE/SERVICE, ACCORDING TO THE LD. COUNSEL, CANNOT BE CONSIDERED TO BE HAVING CONTROLLING INTEREST OVER T HE ASSOCIATED ENTERPRISE. UNLESS AND UNTIL THE ASSESSEE HAS CO NTROL OVER THE MANAGEMENT, FINANCE ETC. IN RESPECT OF THE ASSOCIAT ED ENTERPRISE, THERE IS NO QUESTION OF ANY DEEMING CONTROL OVER TH E ASSOCIATED ENTERPRISE. EVEN THOUGH THIS FACT WAS BROUGHT TO T HE NOTICE OF THE DRP, THERE WAS NO FINDING RECORDED BY THE DRP, THER EFORE, THE MATTER MAY BE REMITTED BACK TO THE ASSESSING OFFICER. ITA NO. 760/14 :- 5 -: 8. WE HEARD SHRI JOE SEBASTIAN, LD. DR ALSO. THE LD. DR VERY FAIRLY SUBMITTED THAT THE DRP HAS NOT RECORDED HOW THE ASSESSEE WAS HAVING CONTROL OVER THE ASSOCIATED ENTERPRISE. THER EFORE, HE MAY NOT HAVE ANY SERIOUS OBJECTION FOR REMITTING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 9. HAVING HEARD THE LD. COUNSEL FOR THE ASSESSEE AND T HE LD. DR, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THA T SINCE THE ASSESSEE CLAIMS TO HAVE LESS THAN 26% INTEREST IN THE ASSOC IATED ENTERPRISE AND NOT HOLDING ANY CONTROLLING INTEREST IN THE MANAGEM ENT AND FINANCE, THE MATTER NEEDS TO BE REEXAMINED BY THE ASSESSING OFFICER. IN OTHER WORDS, WHETHER THE NON-RESIDENT COMPANY TO WHICH TH E ASSESSEE HAS TRANSACTION IS AN ASSOCIATED ENTERPRISE WITHIN THE PARAMETERS OF LAW NEEDS TO BE EXAMINED. SINCE SUCH AN EXERCISE WAS N OT DONE EITHER BY THE TPO OR DRP, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE REEXAMINED. ACCORDINGLY, THE OR DERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL REEXAMINE THE ISSUE AFRESH AFTER REFERRING THE MATTER ONCE AGAIN TO THE TPO AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW A FTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. ITA NO. 760/14 :- 6 -: 10. THE NEXT GRIEVANCE OF THE ASSESSEE IS THAT THE DRP HAS TAKEN INTO CONSIDERATION THE DOMESTIC TRANSACTION E NTERED INTO BY ONE OF THE COMPARABLE COMPANY VIZ. DUN & BRADSTREET INF ORMATION SERVICES INDIA PVT. LTD (DB INDIA). 11. ACCORDING TO THE LD. COUNSEL, FOR THE PURPOSE OF TR ANSFER PRICING ADJUSTMENT, THE TPO AS WELL AS DRP ARE EXPE CTED TO TAKE ONLY INTERNATIONAL TRANSACTION AND NOT DOMESTIC TRANSACT ION. IN THE CASE BEFORE US, ACCORDING TO THE LD. COUNSEL, DB INDIA WHICH WAS TAKEN AS ONE OF THE COMPARABLE COMPANIES BY THE TPO AND DRP HAS ONLY DOMESTIC TRANSACTION, THEREFORE, DB INDIA CANNOT B E A COMPARABLE COMPANY IN THE CASE OF THE ASSESSEE. THEREFORE, T HE DOMESTIC TRANSACTION ENTERED INTO BY DB INDIA WITH ITS NON-A SSOCIATED ENTERPRISES HAS TO BE EXCLUDED. 12. WE HEARD SHRI JOE SEBASTIAN, LD. DR ALSO. THE LD. DR VERY FAIRLY SUBMITTED THAT THE DOMESTIC TRANSACTION HAS TO BE EXCLUDED WHILE COMPARING THE TRANSACTION OF THE ASSESSEE WITH ASS OCIATED ENTERPRISE SITUATED OUTSIDE THE COUNTRY. THEREFORE, THE LD. D R SUBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE ASSESSING OFFICE R FOR RECONSIDERATION. ITA NO. 760/14 :- 7 -: 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE CLAIMS THAT BOTH THE TPO AND DRP HAVE CONSIDERED THE DOMES TIC TRANSACTION ENTERED INTO BY DB INDIA WHICH IS TAKEN AS COMPARAB LE COMPANY BY THE TPO AND DRP FOR THE PURPOSE OF MAKING TRANSFER PRICING ADJUSTMENT. AS RIGHTLY SUBMITTED BY THE LD. COUNSE L AND THE LD. DR, WHEN TRANSFER PRICING ADJUSTMENTS WERE MADE IN RESP ECT OF THE INTERNATIONAL TRANSACTION, THE DOMESTIC TRANSACTION HAS TO BE EXCLUDED. HOWEVER, THE MATTER NEEDS TO BE VERIFIED WHETHER DB INDIA HAS ANY TRANSACTION IN THE DOMESTIC MARKET AS CLAIMED BY TH E ASSESSEE. SINCE NOBODY HAS EXAMINED THE TRANSACTION OF DB INDIA WIT H ITS NON- ASSOCIATED ENTERPRISE, THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT THE MATTER NEEDS TO BE REEXAMINED AS CLAIMED BY THE LD. DR. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ISSUE WITH REGARD TO TRANSFER PRICING ADJUSTMENT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL REFER THE MATTER ONCE AGAIN TO THE TPO FOR THE PURPOSE OF DE TERMINATION OF THE ARMS LENGTH PRICE. THE TPO WHILE RECONSIDERING TH E MATTER SHALL EXCLUDE THE DOMESTIC TRANSACTION, IF ANY, CARRIED O UT BY THE COMPARABLE COMPANY. THEREAFTER, THE ASSESSING OFFICER SHALL D ECIDE THE MATTER IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. ITA NO. 760/14 :- 8 -: 14. THE ASSESSEE HAS ALSO RAISED ISSUES WITH REGARD TO REIMBURSEMENT IN THE COST AND REVENUE BASE WHILE CO MPUTING THE ENTITY LEVEL MARGINS AND ALSO TDS CREDIT. 15. NO ARGUMENTS WERE ADVANCED DURING THE COURSE OF HEA RING WITH REGARD TO THESE TWO ISSUES. HOWEVER, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE TAX WAS DEDUCTED, CREDIT SHALL BE GIVEN WHILE COMPUTING THE TAX LIABILITY OF THE ASS ESSEE. THEREFORE, THE ASSESSING OFFICER SHALL VERIFY THE TDS CREDIT IN RE SPECT OF THE ASSESSEE AND GIVE NECESSARY CREDIT WHILE DETERMINING THE TAX LIABILITY OF THE ASSESSEE. 16. THE ASSESSEE HAS ALSO RAISED ONE MORE ISSUE WITH REGARD TO INTEREST LEVIED U/S 234B AND 234C OF THE ACT. 17. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WH ILE GIVING EFFECT TO THE ORDER OF THIS TRIBUNAL THE ASSESSING OFFICER SHALL REEXAMINE THE MATTER WITH REGARD TO LEVY OF INTERES T U/S 234B AND 234C AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFT ER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 760/14 :- 9 -: ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OF JULY, 2016, AT CHENNAI. SD/- SD/- ( . ) (D. KARUNAKARA RAO) ! / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 15 TH JULY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF