Expedia Online Travel Services India Private Limited (as successor in interest for 'Orbits India services Private Limited), New Delhi V. DCIT, Circle-7(1), Delhi

ITA 878/DEL/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2597 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 27-09-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 19-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH SHAH
• Assessee Lawyers: RISHABH
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92D; 142(1); 234B; 144C; 143(2); 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘I’ : NEW DELHI) BEFORE DR. B.R.R.KUMAR, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.878/Del/2021 (Assessment Year : 2016-17) Expedia Online Travel Services India Private Limited (as successor in interst for ‘Orbits India Services Private Limited) C/o. Perfect Accounting & Shared Services Pvt. Ltd., E-20, 1 st and 2 nd Floor, Hauz Khas, New Delhi PAN : AABCE7443H Vs. Deputy Commissioner of Income Tax, National e- Assessment Centre, Delhi (‘NeAC’) Appellant Respondent Assessee by Sh. K.M.Gupta, Adv. And Sh. Rishabh Malhotra, AR Revenue by Shri Mahesh Shah, CIT(DR) Date of hearing: 28.09.2022 Date of Pronouncement: 4 th .10.2022 ORDER Per Anubhav Sharma, JM; The assessee has come to this Tribunal challenging the orders of Ld. Tax Authorities in the form of assessment order dated 29.04.2021 u/s 143(3) r.w.s. 144C(13) read with section 144B of the Income Tax Act ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 2 (hereinafter referred to as ‘the Act’) passed by National Faceless Assessment Centre, Delhi (hereinafter referred to as ‘the AO or Assessing officer’) which was passed on the transfer pricing order dated 30.10.2019 and the DRP-2, New Delhi directions dated 16.03.2021 u/s 144C(5) of the Act. 2. The facts in brief are that Orbitz India (here in after referred as the assessee) filed its Return of Income (‘ROI’) for Assessment Year (‘AY’) 2016-17 on November 30, 2016 declaring a taxable income of INR 3,92,43,670 and same was selected for limited scrutiny assessment proceedings vide issuance of notices u/s 143(2) of the Act dated July 17, 2017 and July 13, 2017 by the Income Tax Officer, Ward - 5(3)(5), Bangalore. Thereafter, notices u/s 142(1) of the Act were issued to assessee and the case was referred to the Deputy Commissioner of Income-tax, Transfer Pricing - 2(1)(2), Bangalore (hereinafter referred to as ‘Transfer Pricing Officer’ or ‘Ld. TPO’) under section 92CA of the Act. The Ld. TPO vide order dated October 30, 2019 passed u/s 92CA(3) of the Act proposed a transfer pricing adjustment of INR 3,06,63,521 in respect of arm’s length price of IT enabled service segment of the international transactions. Thereafter, the draft assessment order dated November 20, 2019 u/s 143(3) of the Act was passed whereby the transfer pricing adjustment of INR 3,06,63,521 was made, against which assessee Orbitz India filed objections before the Dispute Resolution Panel (‘Ld. DRP’). The Ld. DRP vide directions dated March 16, 2021 passed u/s 144C of the Act accepted two of the comparable companies selected by Orbitz India and directed the Ld. TPO to consider the same as well as consider the Assessee’s submission regarding arithmetical error in the computation. Pursuant to the DRP directions, the Ld. TPO passed order dated April 16, 2021 whereby the transfer pricing ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 3 adjustment was revised to INR 1,75,59,032. Thereafter, the final assessment order dated April 29, 2021 has been passed by the National e- Assessment Centre, Delhi u/s 143(3) r.w.s 1440(13) r.w.s 144B of the Act whereby, transfer pricing adjustment of INR 1,75,59,032 under section 92CA of the Act has been made to the returned income of Orbitz India and the total income has been assessed at INR 5,68,02,705. Consequently, a demand of INR 95,93,090 has been raised vide the notice of demand u/s 156 of the Act. 3. The assessee raised following grounds of appeal : “1. On the facts and in the circumstances of the case & in law, the NeAC erred in assessing the total income under normal provisions of the Act at INR 5,68,02,710 as against INR 3,92,43,670 declared by the Appellant in the Return of Income. 2. On the facts and circumstances of the case & in law, the final assessment order passed by the NeAC is void ab initio for the reason that the order has been passed in the name of a non- existent entity (i.e. Orbitz India) and accordingly vitiates the assessment proceedings in entirety. 3. On the facts and in the circumstances of the case & in law, the Ld. AO/NeAC has grossly erred in completing the assessment by making addition on an issue other than the one identified under limited scrutiny as communicated to the Appellant vide notice issued u/s 143(2) of the Act dated July 13, 2017 and July 17, 2017. 4. On the facts and in the circumstances of the case and in law, the additions made by the Ld. AO/NeAC cannot be sustained in the absence of requisite previous administrative approvals of the Principal Commissioner of Income Tax (‘PCIT’) / CIT / Principal Director of Income Tax (‘PDIT’) / DIT as directed by the CBDT Instructions for increasing the scope of ‘Limited scrutiny’ assessment. ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 4 5. On the facts and circumstances of the case and in law the Ld. TPO has erred in making an upward Transfer Pricing adjustment of INR 1,75,59,032 to the income of the Appellant Company and holding that the international transaction pertaining to provision of support services to its Associated Enterprise (‘AE’) does not satisfy the arm’s length principle envisaged under the Act. 6. On the facts and circumstances of the case & in law, the Ld. TPO has failed to appreciate that the conditions set out in section 920(3) of the Act are not satisfied in the present case and hence has erroneously, disregarded the ALP as determined by the Appellant in the Transfer pricing (‘TP’) documentation maintained by it in terms of Section 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 (“the Rules”). 7. On the facts and circumstances of the case & in law the Ld. TPO erroneously rejected the operating margin computation of the Appellant and has incorrectly treated “liabilities written back” as non-operating income and “irrecoverable balance written off’ as operating expense while computing the operating profit/operating cost. 8. On the facts and circumstances of the case & in law, the Ld. TPO erred in including Infosys B P M Ltd. in the final set of comparable, which is not comparable to the Appellant due to its diversified operations which are functionally dissimilar to the Appellant and having abnormally high profit margins. 9. On the facts and circumstances of the case & in law, the Ld. TPO erred in including SPI Technologies India Pvt. Ltd. in the final set of comparable, which is not comparable to the Appellant due to its diversified operations which are functionally dissimilar to the Appellant and lack of availability of segmental information in the financial statements. 10. On the facts and circumstances of the case & in law, the Ld. TPO erred in excluding companies that are functionally comparable to the Appellant. ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 5 11. On the facts and circumstances of the case & in law, the Ld. TPO erred in denying the benefit of a working capital adjustment while computing the margins of the comparable companies. 12. That on the facts and in the circumstances of the case and in law, NeAC has erred in levying additional interest u/s 234B of the Act as a consequence to the impugned adjustment. 13. That on the facts and in the circumstances of the case and in law, NeAC has erred in initiating penalty proceedings u/s 271(i)(c) of the Act. The above grounds are without prejudice to each other. The Appellant craves for leave to amend, vary or omit or substitute any of the aforesaid ground(s) of appeal or add any further ground(s) of appeal at any time before or at the time of hearing of the appeal.” 4. Heard and perused the records. 5. Ld. Counsel for the assessee restricted his arguments to ground no. 1 and 2 and submitted that the assessee Orbitz India Services Private Limited (‘Orbitz India’) had merged with the appellant Expedia Online Travel Services India Private Limited from an appointed date of October 31, 2018 vide order of the National Company Law Tribunal, Delhi Bench (‘NCLT’) issued on August 7, 2020. The NCLT order was filed by Orbitz India with the Registrar of Companies (‘ROC’) pursuant to which, effective from September 1, 2020, Orbitz India stands dissolved. It is submitted that the AO of Orbitz India was intimated by the NCLT regarding the amalgamation scheme filed before it in the case of Orbitz India, which was proposed to be merged with Expedia India, vide letter dated January 30, 2020. In response to the same, the Ld.AO of Orbitz India issued a letter/report dated July 6, 2020 to the NCLT stating the outstanding demands in case of Orbitz India . It is submitted that further, ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 6 the intimation of said merger along with the copy of the Hon’ble NCLT order approving the Scheme of Arrangement and copy of Form INC 28 filed with ROC was furnished before Deputy Commissioner of Income- tax, Circle 3(1)(1), Bangalore, the jurisdictional Assessing Officer (‘AO’) of Orbitz India vide letter dated October 9, 2020 (filed over e-mail dated November 13, 2020 as well as sent vide post). Further, a request for transfer of records of Orbitz India to the jurisdictional AO of Expedia India was made. The fact of merger was also intimated to the Ld. TPO vide letter dated April 9, 2021 for giving effect to the DRP directions. Further, the letter was filed on the letterhead of Expedia India. Further, the Company filed another letter dated October 12, 2021 and also sent over e-mail on October 27, 2021 to the AO of Orbitz India enquiring on the status of the transfer of records of Orbitz India to the jurisdictional AO of Expedia India. Therefore, jurisdictional AO & TPO of Orbitz India were duly intimated and aware in respect of the fact of merger of Orbitz India with Expedia India. It is submitted that the DRP directions dated March 16, 2021, TPO effect order dated April 16, 2021 as well as the final assessment order dated April 29, 2021 have been passed in the name of ‘Orbitz India Services Private Limited’ (amalgamating company), which had ceased to exist in the eyes of law pursuant to merger with Expedia India. Therefore, these orders are null and void ab initio. 11. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (Supreme Court). Further, reliance is placed on the decision of Spice Entertainment Ltd. v. Commissioner of Service Tax [ITA no. 475 & 476 of 2011] (Delhi High Court) and it was submitted that SLP filed by revenue against said decision dismissed by the Hon’ble Supreme Court ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 7 in case of CIT vs. Spice Enfotainment Ltd. in Civil Appeal No. 285 of 2014 (SC). Reliance was also be placed on the decision of the Hon’ble Delhi ITAT in case of Vedanta Limited (Successor to M/s. Cairn India Ltd.) vs ACIT [ITA No. 9495/Del./2019] (Delhi — ITAT) dated December 24, 2020 and on a recent decision dated September 16, 2021 of Bangalore Tribunal in case of Infosys BPM Limited vs. JCIT [ITANo.2372/Bang/2019] 6. On the other hand, Ld. DR submitted that there is no error in the findings and full information was not given. 7. Giving thoughtful consideration to the matter on record it can be observed that Ld. DR could not dispute the fact of intimation of the amalgamation of the assessee Orbits India Services Private Limited with the Expedia Online Travel Services India Pvt. Ltd. On page no. 1 to 4 of the paper book no. 2, the copy of application under RTI Act have been placed by which appellant had sought information in regard to the proceedings of assessment subsequent to letter dated 09.10.2020 given to AO. Appellant had received information which is available from page no. 5 to 50 which shows that the facts authorities below were duly informed of the merger. 8. Perusal of the assessment order shows that there is no whisper of the facts which assessee has submitted as with regard to fact of intimation of merger to the ld. AO on 09.10.2020. A copy of that letter on record at page no. 3 of PB shows that copy of company writ petition no. CAA-08 (PB)/2020 order dated 04.08.2020 was also provided to the Ld. AO whereby NCLT had ordered for the amalgamation. Pertinent to mention is that the Income Tax Department was a party in the company petition proceedings before NCLT and in para no. 9 of the order it is mentioned that the Income Tax Department did not raise any objections to the scheme in its report with respect of petitioner companies. ITA No.878/ Del/2021 Expedia Online Travel Services India Pvt. Ltd. 8 9. Thus, very firmly it is established that the assessee company had duly informed of the fact of merger with the appellant company with all relevant details but still the tax authorities below preferred to complete the assessment upon a non-existing entity. The judgments relied by Ld. Counsel for the appellant substantiate the arguments that such assessment order against non-existing company, after due information to the Ld. Tax Authorities, is non-est in the eyes of law. Accordingly, the grounds no 1 and 2, touching the jurisdictional error are decided in favour of the appellant and the remaining grounds on merits thus become redundant. The Appeal of the assessee is allowed. Order pronounced in the open court on 4 th October, 2022. Sd/- Sd/- (DR. B.R.R.KUMAR) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 4 th .10.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI