Eli Research India Pvt Ltd., New Delhi V. DCIT, Circle-1, Faridabad

ITA 823/DEL/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2425 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2018-2019
• Appeal Filed On: 27-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH SHAH
• Keywords: Transfer pricing
• Section: 143(3); 144C; 92CA

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘I’, NEW DELHI Before Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 823/Del/2022 : Asstt. Year : 2018-19 Eli Research India Pvt. Ltd, B1/H3, Mohan Cooperative Industrial Area, Mathura Road, Block-B, South Delhi, New Delhi Vs DCIT, Circle-1, Faridabad (APPELLANT) (RESPONDENT) PAN No. AADCR6018H SA No. 115/Del/2022 (In ITA No. 823/Del/2022 : Asstt. Year : 2018-19) Eli Research India Pvt. Ltd, B1/H3, Mohan Cooperative Industrial Area, Mathura Road, Block-B, South Delhi, New Delhi Vs DCIT, Circle-1, Faridabad (APPELLANT) (RESPONDENT) PAN No. AADCR6018H Assessee by : Sh. Vishal Kalra, Adv. Sh. S. S. Tomar, Adv. Sh. Ankit Sahani, Adv. Sh. Yishu Goel, AR Revenue by : Sh. Mahesh Shah, CIT DR Sh. Mrinal Kumar, Das, Sr. DR Date of Hearing: 20.07.2022 Date of Pronouncement: 27.09.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: 1. The present appeal has been filed by the Assessee against the order of the ld. AO, Income Tax Department, National Faceless Assessment Centre, Delhi dated 28.03.2022. Page | 2 2. The Assessee has raised the following grounds of appeal: “1. That on the facts and the circumstances of the case and in law, the Ld. AO has erred in completing the assessment of the Appellant at assessed income of INR 39,47,38,2.89 as against the returned income of INR 37,61,15,570. 2. That on the facts and in the circumstances of the case and in law, the reference made by the Ld. AO to the Transfer Pricing Officer ('TPO') under section 92CA of the Act is void ab initio and bad in law, as the Ld. AO has not recorded any reasons in the order passed under section 143(3) of the Act read with section 144C of the Act, based on which the AO concluded that it was 'expedient and necessary' to refer the matter to the TPO for computation of Arm's Length Price ('ALP'), as is required under section 92CA (1) of the Act. 3. That on the facts and in the circumstances of the case and in law, the final assessment order is bad in law and void ab initio, as it has not been passed in conformity with the directions of the DRP ('Dispute Resolution Panel') as per provisions of section 144C(10) and (13) despite the TPO giving effect to the DRP directions vide order dated March 07,2022. 4. I That on the facts and in the circumstances of the case and in law, the Ld. AO / DRP / \TPO erred in making a transfer pricing adjustment amounting to INR 1,86,22,719 on account of interest on outstanding advances of the Appellant payable to the Associated Enterprises ('AEs'). The same would result in reduction in the income of the Appellant chargeable to tax in India, which is in direct contradiction of the provisions of section 92(3) of the Act thereby rendering the transfer pricing order to be void-ab-initio. 5. That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act.” Page | 3 3. Ground Nos. 1 to 3 are academic in nature therefore, the same are not being adjudicated. 4. The relevant ground is taken up at Ground No. 4. 5. The brief facts of the case are that Eli Research India Private Limited is engaged in provision of services pertaining to data processing system, designing, and allied electronics data processing equipment. The said services are categorized under back-office support services. In this case, the return of income for AY 2018-19 was e-filed on 30.11.2018 declaring a total income of Rs. 37,61,15,570/- and a draft order u/s section 144C was served on the assessee on 20.09.2021, proposing variation in the income returned, which forms the basis of the present set of objections filed before this Panel. The proposed variation has been objected by the Assessee on the grounds that the draft order passed under section 143(3) of the Act) by the AO is erroneous and bad in law as TPO erred in making a transfer pricing adjustment (amounting to INR 1,86,22,719) on account of interest on outstanding advances of the Assessee payable to the Associated Enterprises ('AEs'). 6. The Assessee received the advances as under: Name of the AE Date of receipt of advance Closing balance (as on March31,2018) Delay beyond 30 days (for FY 2017-18) Interest @ 5.660% (in USD) USD INR (closing balance) Eli Research LLC Before April 01, 2017 1,976,377 128,302,442 365 111,862.94 Beckett Media Before April 01,2017 508,104 32,985,094 365 28,758.69 SN Malta Services Limited 24-Aug-17 82,658 5,365,963 189 2,422.52 Alliance Services Limited Before April 01, 2017 2,528,393 164,138,203 365 143,107.03 Total interest(in USD) 286,151.18 USD/INR exchange rate(FY2017-18) 64.45 Total interest(in INR) 18,442,443 Weighted average delay(days) 362.15 Page | 4 7. The major interest transaction undertaken by the Assessee with its AE and during the FY 2017-18 as under: S. No. Transaction Type Transaction Value Method Used for Determining the price 1 Service Income 2494137846 TNMM 2. Advance received 330791702 Other method 8. Before the ld DRP the Assessee took up the plea that the TPO erred in making in making transfer pricing adjustment on account of interest on outstanding advances of the Assessee to the Assessee payable to the Associated Enterprises (AEs) and pleaded that the same would result in reduction in the income of the Assessee chargeable to the tax in India, which is in direct contradiction of the provisions of section 92(3) of the Act thereby rendering the transfer pricing order to be void-ab- inito. 9. At the outset it was argued that the amount of interest payable has been wrongly treated as interest receivable. Only this mistake is corrected in TP adjustment. 10. The ld DR has fairly accepted that the amount of Rs. 33,07,91,702/- is in fact the advance received by the Assessee from AEs but not the advance receivable from the AE. Keeping in view the fact that the ld. DRP erred in treating the advance, we restore the matter to the file of the AO to re-compute the TP adjustment excluding the interest charged on the advance payable. Page | 5 11. The appeal of the assessee is allowed. 12. In view of the above order, the stay application becomes infructuous. Order Pronounced in the Open Court on 27/09/2022. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 27/09/2022 *Ajay Kumar Keot, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR