THOMSON REUTERS INDIA P.LTD, MUMBAI V. ASST CIT CIR 2(3), MUMBAI

ITA 901/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88385 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 19-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J PAZDIWALA
• Keywords: Business income; Transfer pricing; Opportunity of being heard; International transaction
• Section: 92C; 43B; 143(3); 92F; 234B

Judgement Text

, , , , , ,, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K, MUMBAI . . , !'# , !$ BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.901/MUM/2014 ASSESSMENT YEAR: 2009-10 THOMSON REUTERS INDIA PRIVATE LIMITED, 3 RD FLOOR, PIRAMAL TOWER, B-WING, PENINSULA CORPORATE PARK, GANPATRAO KADAM MARG, LOWER PAREL(W), MUMBAI - 400013 / VS. ASSIST ANT COMMISSIONER OF INCOME TAX, CIRCLE-2(3), MUMBAI ( '() /ASSESSEE) ( *# / REVENUE) P.A. NO.AAACR3717L '() + , ! + , ! + , ! + , ! / // / ASSESSEE BY) SHRI P.J. PAZDIWALA & AARTI SATHE *# + , ! + , ! + , ! + , ! / REVENUE BY : SHRI SANTOSH KUMAR ! + )- / / / / DATE OF HEARING : 19/01/2015 DATE OF ORDER : '. '. '. '. + )- / 11/02/2015 '. '. '. '. / / / / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 30/12/2013 OF THE LD. DISPUTE RESOLUTION PANEL (HER EINAFTER DRP), MUMBAI. THE ASSESSEE HAS RAISED AS MANY AS 15 GROUNDS OF APPEAL, WHICH ARE REPRODUCED HEREUNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE THOMSON REUTERS INDIA PRIVATE LIMITED . 2 HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED IN C ONFIRMING THE ADDITION MADE TO THE APPELLANT'S INCOME BY THE ASSI STANT COMMISSIONER OF 1' INCOME TAX, RANGE 2(3) (LD. AO') , MUMBAI. THE APPELLANT HUMBLY PRAYS THAT THE ADDITION MADE T O THE APPELLANT'S INCOME BE KINDLY DELETED. 2. THE LD. AO ERRED IN FACTS AND IN LAW IN CONCLUDING THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME TAX ACT, 1962 ('THE ACT'), I N: A. SALE OF BUSINESS UNIT 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE DRP ERRED IN UPHOLDING THE ACTION OF THE LD. AO')/T RANSFER PRICING OFFICER ('TPO) OF TREATING THE TRANSACTION OF SALE OF BUSINESS UNIT BY THE APPELLANT TO A DOMESTIC COMPAN Y AS AN INTERNATIONAL TRANSACTION AND ALSO MAKING AN ADJUSTMENT OF RS. 121,00,00,000 IN RESPECT OF. IT IS PRAYED THAT THE SAID ADJUSTMENT BE DELETED. 4. WITHOUT PREJUDICE TO 3 ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP ERRED IN UPHOLDING THE ACTION OF THE LD. AO I TPO IN WRONGLY DETERMINING THE VALUE OF THE TRANSACTION OF SALE OF BUSINESS UNIT BY THE APPELLANT TO A DOMESTIC COMPANY. IT IS PRAYED THAT AN APPROPRIATE RELIEF BE GRANTED. 5. WITHOUT PREJUDICE TO 3 & 4 ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP ERRED IN UPHOLDING THE ACTION OF THE LD. AO / TPO IN DEEMING THE DIFFERENCE BETWEEN THE TRANSACTION VALUE (OF THE SA LE OF BUSINESS UNIT) AS PER THE BOOKS OF ACCOUNT AND THE TRANSACTION VALUE DETERMINED BY THE LD. AO / TPO TO BE A LOAN. IT IS PRAYED THAT THE ACTION OF THE TPO BE HELD TO BE NOT IN ACCORDANCE WITH LAW. 6. WITHOUT PREJUDICE TO 3 ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ER RED IN CLASSIFYING THE ADJUSTMENT MADE TO THE SALE CONSIDE RATION AS BUSINESS INCOME INSTEAD OF LONG TERM CAPITAL GAINS. THE APPELLANT PRAYS THAT THE LD. AO BE DIRECTED TO RECLASSIFY THE INCOME AS LONG TERM CAPITAL GAIN AND RE-COMPUTE THE INCOME ACCORDINGLY. 7. WITHOUT PREJUDICE TO 3, 4 & 5 ABOVE, ON THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP ERRED IN PARTIALLY UPHOLDING THE ACTION OF THE LD. AO /TPO IN CHARGING INTEREST ON THE DIFFERENCE CITED IN 3 ABOVE AND THEREBY UPHOLDING A N ADJUSTMENT OF THOMSON REUTERS INDIA PRIVATE LIMITED . 3 RS. 18,30.00,000. IT IS PRAYED THAT AN APPROPRIATE RELIEF BE GRANTED. B. PROVISION OF INFORMATION TECHNOLOGY ENABLED SERV ICES (ITES) 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP ERRED IN UPHOLDING THE ACTION OF LD. AO/ TPO IN CHARACTERIZI NG THE PROVISION OF SERVICES BY THE APPELLANT TO ITS ASSOC IATED ENTERPRISE AS THAT OF KNOWLEDGE PROCESS OUTSOURCING SERVICES (KPO SERVICES') WITHOUT APPRECIATING THE FACTS THAT THE APPELLANT IS PROVIDING BUSINESS PROCESS OUTSOURCING SERVICES ('BPO SERVICES'). 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP ERRED IN UPHOLDING THE ACTION OF THE LD. AD I TPO IN DETERMI NING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROVISION OF ITES TO ASSOCIATED ENTERPRISE, AT RS. 175,71,02,199 INSTEAD OF RS. 146,23,44,427. IN DOING SO, THE DRP HAS ERRED IN AGREEING WITH THE LD. AO/ TPOS ACTION OF: A. FAILING TO APPRECIATE THAT IN THE APPELLANT'S CASE, NONE OF THE CONDITIONS SET OUT IN SECTION 920(3) OF THE ACT WER E SATISFIED: B. DISREGARDING THE APPELLANT'S CONTEMPORANEOUS TRANSF ER PRICING ('TP') DOCUMENTATION AND CONDUCTING HIS OWN COMPARABILITY ANALYSIS (WITHOUT FOLLOWING A STRUCTU RED SEARCH PROCESS); C. APPLYING FINANCIAL DATA OF CURRENT YEAR (FY 2008-09 ) OF THE COMPARABLE COMPANIES FOR BENCHMARKING; D. INCLUDING CERTAIN COMPARABLES. WHICH WERE NOT COMPA RABLE; E. NOT INCLUDING CERTAIN COMPARABLES SELECTED BY THE A PPELLANT IN ITS TP STUDY / SUBMITTED DURING THE COURSE OF ASSES SMENT PROCEEDINGS; AND F. NOT INCLUDING CERTAIN COMPARABLES FORMING PART OF T HE TPO'S SEARCH, WHICH OUGHT TO BE INCLUDED IN THE FINAL SET OF COMPARABLE. IT IS PRAYED THAT IT BE HELD THAT THE AFORESAID INT ERNATIONAL TRANSACTION WAS AT ARM'S LENGTH AND ACCORDINGLY. THE LD. AD /TPD BE DIRECTED TO DELETE THE ADJUSTMENT OF RS. 29 ,47.57,772. C. APPORTIONMENT OF OPERATING EXPENSES FROM NON- ST PI UNIT TO STPI UNIT 10. A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP ERRED IN UPHOLDING THE ACTION OF THE LD. AD IN MAKING AN ADHOC ALLOCATION OF FOLLOWING OPERATING EXPENSES OF NON STPI UNITS THOMSON REUTERS INDIA PRIVATE LIMITED . 4 TO STPI UNIT BASED ON THE PROPORTION OF RECEIPTS OF EACH UNIT, THEREBY RESULTING IN A REDUCTION ON PROFITS OF THE STPI UNIT (ELIGIBLE FOR DEDUCTION U/S 1 OA OF THE ACT): I. COMMUNICATION EXPENSES - RS. 32,26,545 II. DATA COSTS EXPENSES - RS. 94,38,018 III. DISTRIBUTION AND PRODUCT FEES - RS. 43,21,48,976 B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DRP ERRED IN UPHOLDING THE ACTION OF THE L D. AO IN RELYING ON THE REASONS RECORDED IN THE ASSESSMENT O RDER FOR AY 2008-09 AND BY RELYING ON RECORDS PRIOR TO THE YEAR OF CLAIMING THE DEDUCTION UNDER SECTION 10A OF THE ACT, FOR ABO VE MENTIONED APPORTIONMENT OF EXPENSES TO STP UNIT. IT IS PRAYED THAT THE SAID ADJUSTMENT BE DELETED. 11. WITHOUT PREJUDICE TO 10 ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ER RED IN NOT ALLOWING PROFIT OF NON STPI UNITS TO BE SET OFF AGA INST THE LOSS OF STP UNITS. D. DOUBLE DISALLOWANCE OF DELAYED PAYMENT OF EMPLOY EES' CONTRIBUTION TO PROVIDENT FUND 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. AO ERRED IN MAKING DOUBLE DISALLOWANCE TO THE INCOME OF THE ASSESEE OF RS 29,80,655/- TOWARDS THE EMPLOYEE CONTRIBUTION TO PROVIDENT FUND, WITHOUT APPRECIATIN G THE FACT THAT THE APPELLANT HAS SUO MOTO DISALLOWED SUCH CON TRIBUTION IN ITS COMPUTATION OF TOTAL INCOME FOR THE CAPTIONE D ASSESSMENT YEAR. IT IS PRAYED THAT THE SAID ADJUSTMENT BE DELETED. E. GENERAL 13. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. AO HAS ERRED IN GRANTING SHORT CREDIT OF TOS TO THE EXTENT OF INR. 79,25,166. THE APPELLANT PRAYS THAT THE LD. AO BE DIRECTED TO PROVIDE THE AFORESAID CREDIT. 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. AO HAS ERRED IN LEVYING EXCESS INTERES T UNDER SECTION 234B. THE APPELLANT PRAYS THAT BASED ON THE RELIEF GRANTE D IN RESPECT OF THE ABOVE GROUNDS, THE LD. AO BE ACCORDINGLY DIRECT ED TO RE- COMPUTE THE INTEREST UNDER SECTION 234B. 15. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDI NGS. THOMSON REUTERS INDIA PRIVATE LIMITED . 5 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD, SHRI P.J. PARDIWALA, LD. SENIOR ADVOCATE ALONG WITH MS. AARTI SATHE. SO FAR AS, GROUNDS NO. 1 AND 2 IN THE GROUNDS OF AP PEAL ARE CONCERNED, BEING GENERAL IN NATURE, WERE NOT ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, BOTH THESE GRO UNDS ARE DISMISSED AS NOT PRESSED. 3. SO FAR AS, GROUNDS NO.3 TO 7, IN THE GROUNDS OF APPEAL, ARE CONCERNED, THESE PERTAINS TO TREATING T HE TRANSACTION OF SALE OF BUSINESS UNIT BY THE ASSESS EE TO A DOMESTIC COMPANY AS AN INTERNATIONAL TRANSACTION AN D ALSO MAKING AN ADJUSTMENT OF RS.121,00,00,000/- THE LD. SENIOR ADVOCATE, MR. PARDIWALA, CONTENDED THAT THE LD. DRP WRONGLY UPHELD THE ACTION OF THE ASSESSING OFFICER/TPO BY T REATING THE TRANSACTION OF SALE OF THE UNIT AS AN INTERNATIONAL TRANSACTION AND MAKING THE ADJUSTMENT OF THE IMPUGNED AMOUNT. FURTHER, IT WAS ALSO ASSERTED THAT THE ASSESSING OFFICER/TPO WRONGLY DETERMINED THE VALUE OF THE TRANSACTION OF SALE OF BUSINESS UNIT TO A DOMESTIC COMPANY. IT WAS PLEADED THAT THE BOA RD OF DIRECTORS DECIDED TO SELL THE UNIT BY PASSING A RES OLUTION ON 29/08/2008. IT WAS EXPLAINED THAT ON 09/09/2008 AN AGREEMENT TO SELL WAS ENTERED AND THUS THE REJECTIO N OF VALUATION IS CONTRARY TO FACTS. THE IMPUGNED ORDER WAS ARGUED TO BE WRONGLY ARRIVED AT IGNORING THE FACTS BY THE DRP. OUR ATTENTION WAS INVITED TO VARIOUS PAGES OF THE PAPER BOOK. IT WAS EXPLAINED THAT EVEN IF AN ADVERSE INFERENCE IS DRAWN BY THIS BENCH STILL IT IS NOT AN INTERNATIONAL TRANSAC TION AS WITH EFFECT FROM 01/04/2005, SUCH REQUIREMENT HAS BEEN D ONE AWAY WITH AND NONE OF THE CONDITIONS WERE FULFILLED. FU RTHER, RELIANCE WAS PLACED UPON THE DECISION IN M/S SWARNA NDHRA THOMSON REUTERS INDIA PRIVATE LIMITED . 6 IJMII INTEGRATED TOWNSHIP DEVELOPMENT COMPANY PVT. LTD. VS DCIT (ITA NO.2072/HYD./2011) ORDER DATED 31/12/0201 2, KODAK INDIA PVT. LTD VS ADDL. CIT (ITA NO.7349/MUM/ 2012) ORDER DATED 30/04/2013, M/S IJM INDIA INFRASTRUCTUR E LTD. HYDERABAD VS ACIT (ITA NO.1814/HYD./2012) ORDER DAT ED 22/08/2013. IT WAS ASSERTED THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER/TPO. ALTERNATIVELY, IT WAS CONTENDED THAT IF THE BENCH IS NOT WITH THE ASSESSE E AND ASSUMING THAT IT IS AN INTERNATIONAL TRANSACTION, A S PER SECTION 92C OF THE ACT, THERE ARE FIVE METHODS, THEREFORE, ONE OF THEM IS MOST APPROPRIATE METHOD. IT WAS EXPLAINED THAT IF THE TPO REJECTS THE METHOD ADOPTED BY THE ASSESSEE, HE HAS TO DETERMINE AS TO WHICH METHOD IS CORRECT. 3.1. ON THE OTHER HAND, THE LD. CIT-DR, SHRI SANTO SH KUMAR, DEFENDED THE CONCLUSION ARRIVED AT BY THE LD . TPO/DRP BY ASSERTING THAT RIGHT FROM ASSESSMENT STAGE, THE GLOBAL TRANSFER AGREEMENT WAS NEVER PRODUCED BY THE ASSESS EE IN SPITE OF THE FACT THAT THE ASSESSEE WAS ASKED TO DO SO, THEREFORE, TO EXAMINE THE CORRECTNESS OF SUCH AGREEMENT, IT MA Y BE SENT TO THE DRP/TPO. ON THE ISSUE OF METHOD OF VALUATIO N, THE LD. CIT-DR DEFENDED THE CONCLUSION ARRIVED AT IN THE AS SESSMENT ORDER/IMPUGNED ORDER. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BR IEF, ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED IN MAY 1994 A ND IS ENGAGED IN THE DISTRIBUTION OF INFORMATION, DEALING IN SOFTWARE PRODUCTS OF THE REUTERS GROUP IN THE TERRITORY OF I NDIA. THE ASSESSEE IS ENGAGED IN PROVISION OF IT ENABLED SERV ICES AND DATA CENTRE SERVICES TO ITS ASSOCIATED ENTERPRISES (HEREINAFTER THOMSON REUTERS INDIA PRIVATE LIMITED . 7 AES). THE ASSESSEE DECLARED TOTAL INCOME OF RS.17, 13,47,130/- IN ITS RETURN FILED ON 30 TH SEPTEMBER, 2009, WHICH WAS SUBSEQUENTLY REVISED AT RS.19,62,75,961/-. THE ASSE SSMENT WAS FRAMED AT RS.233,17,70,160/-. DURING THE FINAN CIAL YEAR 2008-09, THE ASSESSEE ENTERED INTO INTERNATIONAL TR ANSACTIONS WHICH ARE SUMMARIZED HEREUNDER:- SR. NO. NATURE OF INTERNATIONAL TRANSACTION TRANSACTION VALUE MOST APPROPRIATE METHOD 1. DISTRIBUTION SEGMENT DISTRIBUTION OF INFORMATION, DEALING AND SOFTWARE PRODUCTS; RECEIPT OF FEES FROM RTSL FOR ADVERTISING; PAYMENT OF LICENSE FEES 1,46,35,95,702 TRANSACTION NET MARGIN METHOD (TNMM) 2. IT ENABLED SERVICES SEGMENT DATA & CONTENT OPERATION (BANGALORE STP/UNIT) EDITORIAL SERVICES (MUMBAI) PROVISION OF FINANCIAL, ACCOUNTING & OTHER BACK-OFFICE SERVICES (BANGALORE STP/UNIT) 1,46,23,44,427 3. DATA CENTRE ACTIVITY (MUMBAI) 55,56,000 4. EXPENSE REIMBURSEMENTS REIMBURSEMENT AT COST THE CASE OF THE ASSESSEE WAS REFERRED TO THE LD. TP O FOR HIS OPINION FOR THE YEAR UNDER APPEAL WHO PROCEEDED TO CONSIDER IT A DOMESTIC TRANSACTION NAMELY SELL OF RIPLS STP U NIT TO THOMSON CORPORATION INTERNATIONAL PVT. LTD. (TCIPL) FOR THE PURPOSE OF EVALUATION OF THE ARMS LENGTH PRICE AND HE MADE THE FOLLOWING ADJUSTMENT TO THE ARMS LENGTH PRICE AS DETERMINED BY THE ASSESSEE:- SR. NO. PARTICULARS AMOUNT (IN RS.) 1 THE TRANSFER OF THE STP UNIT TO TCIPL 121,00,00,0 00 THOMSON REUTERS INDIA PRIVATE LIMITED . 8 2 INTEREST CHARGED @ 15% ON THE DIFFERENCE IN SALE VALUE 18,30,00,000 3 THE CHARACTERIZATION OF THE IT ENABLED SERVICES SEGMENT AS A KPO (KNOWLEDGE PROCESS OUTSOURCING) AND THE CONSEQUENT MODIFICATION TO THE SET OF COMPARABLES) 29,47,00,000 IN THE DRAFT ASSESSMENT ORDER, THE LD. ASSESSING OF FICER RELIED UPON THE ORDER OF THE TPO AND ISSUED A DRAFT ASSESS MENT ORDER U/S 144C(1) OF THE ACT IN CONFIRMATION WITH THE ABO VE TRANSFER PRICING ADJUSTMENT AND MADE THE FOLLOWING ADDITIONS TO THE INCOME/LOSS OF THE ASSESSEE:- TRANSFER PRICING ADJUSTMENT TO RS.168,77,00,000/- PURSUANT TO THE ORDER DATED JANUARY 30, 2013 PASSED BY THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(3) OF THE ACT. THE ASSESSING OFFICER HAS CONSIDERED TO MAKE FOLL OWING ADJUSTMENT WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. AD HOC BIFURCATION OF EXPENSES IN RELATION TO COMMUNICATION, DATA COST AND DISTRIBUTION & PRODUCT FEE BETWEEN STP UNIT (10A UNIT) AND NON-STP UNIT RESULT ING IN TO REDUCTION OF DEDUCTION UNDER SECTION 10A OF T HE ACT BY RS.44,48,13,539/-. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED ASSES SING OFFICER HAS NOT APPRECIATED THE FACT, IN ALLOWING P ROFIT OF NON STPI UNITS TO BE SET OFF AGAINST THE LOSS OF ST P UNITS, CONSIDERING THE ADJUSTMENT MADE IN THE DRAFT ASSESS MENT ORDER UNDER SECTION 143(3) R.W.S. 144C(1) OF THE AC T. THE ASSESSING OFFICER HAS MADE AN ADDITION OF THOMSON REUTERS INDIA PRIVATE LIMITED . 9 RS.29,80,655 AS COLLECTED BY ASSESSEE TOWARD THE EMPLOYEE CONTRIBUTION TO PROVIDENT FUND AND NOT PAI D WITHIN THE PRESCRIBED DUE DATE UNDER THE RESPECTIVE ACT AND TREATED AS AN INCOME IN TERMS OF SECTION 2(24)( X) OF THE ACT. 3.3. ON APPEAL, BEFORE THE LD. DRP VIDE DIRECTION S DATED 30/12/2013, IT WAS OBSERVED THAT THE MOST RELEVANT DOCUMENT IS GLOBAL TRANSFER AGREEMENT WHICH WAS NOT FURNIS HED BY THE ASSESSEE, THEREFORE, IN THE ABSENCE OF THIS BASIC I NFORMATION, IT WAS DIFFICULT TO SPECULATE WHETHER THE IMPUGNED TRA NSFER WAS IN CONSEQUENCE TO GLOBAL ACQUISITION OR IT WAS A SEPAR ATE TRANSACTION. FINALLY, THE ACTION OF THE TPO IN BRI NGING SAME TO TAX WAS UPHELD WITH REGARD TO CHARGING INTEREST ON THE OUTSIDE BALANCE, IT WAS FOUND THAT THE TPO CHARGED INTEREST @ 15% WHICH WAS REDUCED TO 12.12%, BEING THE BANK PLR RAT E, SUBJECT TO THIS DEDUCTION, THE ADJUSTMENT MADE BY THE TPO W AS UPHELD. 3.4. EVEN BEFORE THE TPO/ADDL. CIT, WE FIND THAT A SHOW CAUSE NOTICE AS TO WHY THE ASSESSEE SHOULD NOT BE C ONSIDERED AS KNOWLEDGE PROCESSING OUTSOURCING WAS ISSUED TO T HE ASSESSEE. WE FIND THAT IN SPITE OF SPECIFICALLY AS KING BY THE TPO/ASSESSING OFFICER, THE GLOBAL BUSINESS TRANSFER AGREEMENT (DEEMED INTERNATIONAL TRANSACTION) WAS NEVER PRODUC ED BY THE ASSESSEE. THE LD. ASSESSING OFFICER/TPO DULY CONSID ERED THE EXTRACT FROM THE MEETING OF SHARE HOLDERS HELD ON 0 9/02/2008. THE RELEVANT OBSERVATION AS MADE IN PARA 2.4 IS REP RODUCED HEREUNDER FOR READY REFERENCE:- 1. THERE WAS A GLOBAL ACQUISITION OF REUTERS GROUP BY THOMSON GROUP, WHICH WAS COMPLETED BY 14 APRIL 2008 THOMSON REUTERS INDIA PRIVATE LIMITED . 10 AND WAS AGREED UPON BY THOMSON GROUP ON MAY 15, 2007 ITSELF. (SUPRA). THIS LEAD TO PARTIAL AMALGAMA TION OF THE BUSINESS IN INDIA. RIPL BASED IN INDIA SOLD THE STPI UNIT TO TCIPL. THIS WAS BASED ON THE GLOBAL ARRANGEMENT BETWEEN THOMSON AND REUTERS WHICH HAVE BECOME ONE ENTITY AS THOMSON REUTERS. 2. THERE WAS AN ARRANGEMENT BETWEEN THOMSON AND REUTERS GROUP ABROAD REGARDING THE SALE OF THE LOCAL STPI UNIT BY RIPL TO TCIPL. AS A CONSEQUENT OF THIS, RIPL SOLD THE STPI UNIT TO TCIPL. THE GLOBAL TRANSFER AGREEMENT BETWEEN THOMSON AND REUTERS WAS ASKED FOR BUT WAS NOT PROVIDED BY THE ASSESSEE . THUS, IT CAN BE CONCLUDED THAT THE TRANSACTION OF S ALE OF STPI UNIT BY ASSESSEE TO TCIPL IS A DEEMED INTERNAT IONAL TRANSACTION UNDER SECTION 92B(2) OF THE I.T. ACT, 1 961. THIS IS EVIDENT FROM THE STATEMENT OF THE ACQUIRING GROUP. BY COMBINING THOMSONSS STRENGTH IN NORTH AMERICA WITH REUTERS STRENGTH IN EUROPE, THE MIDDL E EAST AND ASIA. THOMSON REUTERS WILL CREATE A BUSINESS WITH A GLOBAL BRAND AND PRESENCE THAT WILL HAVE OPPORTUNITIES TO GROW FASTER THAN EITHER THOMSON OR REUTERS COULD ON ITS OWN. THOMSON REUTERS WILL SERVE THE LEGAL, FINANCIAL SERVICE, TA X AND ACCOUNTING, SCIENTIFIC, HEALTHCARE AND MEDIA MARKETS. BY THIS SALE, THE GLOBAL BRAND INCREASES ITS BUSINE SS SHARE IN ASIA WHICH HAS BEEN BASED ON THE GLOBAL ARRANGEMENT, BETWEEN THOMSON AND REUTERS AND WHICH HAS MERELY BEEN GIVEN EFFECT TO IN INDIA BY SALE OF STP UNIT BY RIPL TO TCIPL 3.5. ON THE ISSUE OF METHOD USED BY THE ASSESSEE F OR FAIR THOMSON REUTERS INDIA PRIVATE LIMITED . 11 VALUATION OF STP UNIT, A SHOW CAUSE NOTICE DATED 11 /01/2013 WAS ISSUED TO THE ASSESSEE, WHICH HAS BEEN REPRODUC ED AT PAGE 14 ONWARDS OF THE ASSESSMENT ORDER/TPO. EVEN AT PA GE-16, IT HAS BEEN MENTIONED THAT THE GLOBAL TRANSFER AGREEME NT WAS NOT SUPPLIED TO THE ASSESSING OFFICER/TPO IN SPITE OF S PECIFICALLY ASK FOR. IF THE PROVISION U/S 92F OF THE ACT WITH RESPECT TO THE TERM TRANSACTION IF ANALYZED IT INCLUDES AN ARRAN GEMENT, UNDERSTANDING OR ACTION IN CONCERNED WHETHER OR NOT SUCH AN ARRANGEMENT UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING OR WHETHER OR NOT SUCH AN ARRANGEMENT/UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDINGS. SO FAR AS, MEANING OF INTERNATIONAL TRANSACTION IS CONCERNED (FOR THE PURPOSE OF THIS SECTION AND SECTION 92, 92C, 92D, 9 2E) INTERNATIONAL TRANSACTION MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS , IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY OR PROVISION OF SER VICES OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTIO N HAVING A BEARING ON PROFITS, INCOME, LOSSES OR ASSET OF SUCH ENTERPRISES, AND SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATI ON OR APPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST, OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BEN EFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE O R MORE OF SUCH ENTERPRISES. WITHOUT GOING INTO MUCH DELIBERATION AND KEEPING IN VIEW, THE TOTALITY OF FACTS, WE FIND THAT, IN SP ITE OF REPEATED ASKING, THE ASSESSEE DID NOT PROVIDE THE GLOBAL TRA NSFER AGREEMENT NEITHER BEFORE THE ASSESSING OFFICER/TPO NOR BEFORE THE LD. DRP. EVEN BEFORE THIS TRIBUNAL, SUCH GLOBAL TRANSFER AGREEMENT WAS NOT PROVIDED, THEREFORE, KEEPING IN V IEW, THE THOMSON REUTERS INDIA PRIVATE LIMITED . 12 IMPORTANCE OF THE DOCUMENT, IT IS NOT POSSIBLE FOR US TO REACH TO A PARTICULAR CONCLUSION, THEREFORE, THE ASSESSEE IS DIRECTED TO PRODUCE THE GLOBAL TRANSFER AGREEMENT BEFORE THE ASSESSING OFFICER/TPO FOR HIS EXAMINATION. THE LD. TPO/ASSES SING OFFICER IS FREE TO ASK ANY OTHER DOCUMENT FOR HIS SATISFACT ION AND AFTER EXAMINING THE SAME DECIDE THE ISSUE IN ACCORDANCE W ITH LAW. NEEDLESS TO MENTION HERE THAT DUE OPPORTUNITY OF BE ING HEARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, I N SUPPORT OF ITS CLAIM BE PROVIDED TO THE ASSESSEE. THUS, THIS ISSU E/CONNECTED GROUNDS ARE REMANDED BACK TO THE FILE OF THE LD. AS SESSING OFFICER/TPO FOR FRESH ADJUDICATION. OUR THIS VIEW W ILL ALSO APPLICABLE FOR THE ALTERNATIVE SUBMISSIONS MADE BY THE ASSESSEE AS THE MAIN ISSUE HAS BEEN REMANDED BACK T O THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 4. SO FAR AS, PROVISION OF INFORMATION TECHNOLOG Y ENABLED SERVICES (GROUNDS NO.8 AND 9 IN THE GROUNDS OF APPE AL) IS CONCERNED, WE HAVE PERUSE THE RECORD AND ALSO GONE THROUGH THE DIRECTION OF ASSESSMENT YEAR 2010-11, ORDER OF THE TRIBUNAL IN BRINTONS CARPETS ASIA PVT. LTD. VS DCIT )ITA NO . 1296/PN/2010) DATED 15/06/2011 AND IN M/S LENOVO (I NDIA) PVT. LTD. VS ACIT (ITA NO.1457/ BANG/2010) ORDER DA TED 16/03/2012, THEREFORE, BOTH THESE GROUNDS ARE ALSO SENT TO THE FILE OF THE ASSESSING OFFICER/TPO TO DECIDE AFRESH IN ACCORDANCE WITH LAW, THUS, BOTH THESE GROUNDS ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. 5. SO FAR AS, APPORTIONMENT OF OPERATING EXPENSES I S CONCERNED, THE LD. COUNSEL CONTENDED THAT THIS ISSU E AROSE FOR THE FIRST TIME FOR ASSESSMENT YEAR 2005-06 AND THE ASSESSMENT YEARS 2006-07 TO 2008-09 ARE PENDING, THEREFORE, GR OUND NO.10 THOMSON REUTERS INDIA PRIVATE LIMITED . 13 (A & B) ARE ALSO SET ASIDE TO THE FILE OF THE ASSES SING OFFICER/TPO TO CONSIDER THE ORDER OF THE TRIBUNAL A ND AFTER CONSIDERING THE FACT DECIDE AFRESH, THUS, THIS GROU ND IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE NEXT GROUND I.E. 12 PERTAINS TO DOUBLE DISAL LOWANCE OF DELAYED PAYMENT OF EMPLOYEE CONTRIBUTION TO THE PRO VIDENT FUND. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT UNDISPUTEDLY THE AMOUNTS HAD BEEN DEPOSITED BEFORE THE DUE DATE OF THE FILING OF THE RETURN UNDER SECTION 139( 1) OF THE ACT AND, THEREFORE, EMPLOYER'S CONTRIBUTION TOWARDS ESI , PF AND PENSION FUND IS AN ALLOWABLE DEDUCTION FOLLOWING TH E RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC). IN SO FA R AS THE EMPLOYEE'S CONTRIBUTION IS CONCERNED, THE LEARNED C OUNSEL POINTED OUT THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF JASRA GRAPHICS P. LTD. PUNE V DCIT IN ITA NO 374/PN /09 ORDER DATED 08/10/2010 HAS ALLOWED THE CLAIM OF THE ASSES SEE FOLLOWING THE JUDGMENT OF THE HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT V AIMIL LTD. 321 ITR 508 (DEL). APART T HEREFROM, RELIANCE HAS ALSO BEEN PLACED ON THE JUDGMENT OF TH E HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. L AKHANI RUBBER WORKS 326 ITR 415 (P&H). 6.1. ON THE OTHER HAND, THE LEARNED CIT-DR POINTED OUT THAT THE RATIO OF THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD (SUPRA) IS APPLICABLE ONLY FOR EMPLO YER'S CONTRIBUTION SINCE THE SAME IS COVERED BY THE PROVI SIONS OF SECTION 43B OF THE ACT, WHILE IN SO FAR AS THE EMPL OYEES' CONTRIBUTION IS CONCERNED, ALLOWABILITY OF THE SAME IS GOVERNED BY SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE ACT AND, THOMSON REUTERS INDIA PRIVATE LIMITED . 14 THEREFORE, THE SAME HAVING BEEN PAID BEYOND THE DUE DATE, IT IS LIABLE TO BE DISALLOWED. 6.2. HAVING CONSIDERED THE RIVAL SUBMISSIONS, THE IMPUGNED GROUND IS DISPOSED OFF IN VIEW OF THE JUDG MENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD. 319 ITR 306 (SC). WE FIND THAT OUR CO-ORDINATE BENCH IN THE CASE OF JASRA GRAPHICS P LTD. (SUPRA), FOLLOWING TH E RATIO OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (SUPRA) HAS UPHELD THE PLEA OF THE ASSESSEE. SINCE THE FACTS AN D CIRCUMSTANCES ARE IDENTICAL, FOLLOWING THE DECISION OF OUR CO- ORDINATE BENCH, THE ASSESSING OFFICER IS DIRECTED T O EXAMINE WHETHER THERE IS DOUBLE DISALLOWANCE OF DELAYED PAY MENTS OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND, IF S O, DECIDE THE ISSUE IN THE LIGHT OF THE AFORESAID DECISION FROM H ONBLE APEX COURT IN ALOM EXTRUSIONS LTD. (SUPRA). 7. SO FAR AS, GROUND NO. 13, GRANTING SHORT CREDIT OF TDS TO THE EXTENT OF RS.79,25,166/- IS CONCERNED, IT IS CO NSEQUENTIAL IN NATURE, THEREFORE, IS BEING SENT TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE IN ACCORDANCE WITH LAW. THE A SSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD, IF SO DESIRED. 8. SO FAR AS, GROUND NO. 14, LEVYING EXCESS INTERES T U/S 234B IS CONCERNED, IN VIEW OF THE DECISION IN M/S PMP AU TO COMPONENTS PVT. LTD. VS DCIT (ITA NO. 1484/MUM/2014 ) ORDER DATED 22/08/2014, THIS ISSUE IS ALSO SENT BACK TO T HE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AND THEN DECIDE IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVE N OPPORTUNITY OF BEING HEARD, IF SO DESIRED. THOMSON REUTERS INDIA PRIVATE LIMITED . 15 9. GROUND NO. 15 IS PREMATURE, THEREFORE, REQUIRES NO DELIBERATION FROM OUR SIDE. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 11/02/2015. '. + /01 2'311/02/2015 0 + 8 SD/- (N.K.BILLAIYA) SD/- (JOGINDER SINGH) !'# !'# !'# !'# / ACCOUNTANT MEMBER !'# !'# !'# !'# / JUDICIAL MEMBER MUMBAI; 2' DATED : 11/02/201 5 F{X~{T? P.S/. .!. '. + 9) :1) '. + 9) :1) '. + 9) :1) '. + 9) :1)/ COPY OF THE ORDER FORWARDED TO : 1. ;< / THE APPELLANT 2. 9=;< / THE RESPONDENT. 3. > ( ) / THE CIT, MUMBAI. 4. > / CIT(A)- , MUMBAI 5. @8 9) , , / DR, ITAT, MUMBAI 6. 8A' B / GUARD FILE. '.! '.! '.! '.! / BY ORDER, !=) 9) //TRUE COPY// C CC C/ // /!D * !D * !D * !D * (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI