M/s. MarketRx India Pvt. Ltd., Chennai V. ITO, New Delhi

ITA 954/DEL/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1227 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-10-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 15-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Business income; Transfer pricing; Double taxation relief; International transaction
• Section: 143(3); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘I’ BENCH, NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No. 954/DEL/2015 [A.Y 2010-11) M/s Market India Pvt. Ltd., [Now merged with Cognizant Technologies Solutions India Pvt Ltd. 6 th Floor, Menon Eternity Building 165/110, St Mary’s Road, Alwarpet Chennai – 600 018. PAN: AADCM 5050 C Vs. The I.T.O Ward 16(2) New Delhi. (Applicant) (Respondent) Assessee By : Shri Nageshwar Rao,Adv Shri Shatanik Chakraborty, Adv Shri Akshay Uppal, Adv Department By : Shri Bhaskar Goswami, CIT- DR Date of Hearing : 04.10.2022 Date of Pronouncement : 11.10.2022 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 14.01.2015 framed u/s 144C r.ws. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to Assessment Year 2010-11. 2 2. The revised and modified grounds of appeal raised by the assessee read as under: “The grounds mentioned herein are without prejudice to one another. 1. Based on the facts and circumstances of the case the learned Income Tax Officer Ward 16(2), New Delhi (‘Ld. AO’) erred in making an upward adjustment of INR 6,36,08,648 to the income of the Appellant. The Appellant prays that the aforesaid addition be deleted. 2. The Appellant objects to the order dated 14.01.2015 passed under section 143(3) r.w.s. 144%) of the Income-tax Act, 1961 (‘the Act’) for the aforesaid assessment year on the following among other grounds: 2.1 That the Ld. AO and the learned Dispute Resolution Panel (‘Ld. Panel’) erred in mark-up computation (OP/TC) of the final set of comparable companies chosen as per the TP order. 2.2 The Ld. AO erred in denying natural justice by selecting comparable companies that were neither part of the search conducted by the Appellant nor part of the comparables proposed in the show cause notice by the learned Additional Commissioner of Income - tax (Transfer Pricing) - 1(3) (‘Ld. TPO’). 3 2.3 The Ld. AO and the Ld. Panel erred in rejecting AOK In- House BPO Services Ltd. by stating that the company has service income of 6.21% of total income. 2.4 The Ld. AO and the Ld. Panel erred in applying only current year data (i.e., FY 2009-10) for the purpose of comparability analysis. 2.5 The Ld. AO and the Ld. Panel erred in applying export earnings filter of 75% to total sales and a lower turnover fdter of INR 5 crores. 2.6 The Ld. AO and the Ld. Panel erred in rejecting Tata Services Limited as a comparable company by stating that the company has significant Related Party Transaction. 2.7 The Ld. AO and the Ld. Panel has erred in accepting companies that are not functionally comparable. 2.8 The Ld. AO erred in total tax demand computation.” 3. The assessee moved an application for admission of the following additional ground of appeal: 4 “Ground 5 The appellant submits that in the facts and circumstances of the case, having regard to the similarity of functions performed, assets employed, and risks assumed by the Appellant in rendering the services to all its Associated Enterprises (AEs) (i.e. (a) AEs covered under MAP resolution between the US and Indian competent authorities and (b) other AEs not covered under MAP), the resolution (i.e. arm’s length mark- up on cost) achieved under India-US Mutual Agreement Procedure (MAP) for transactions with MarketRx Inc., USA, ought to be accepted as the arm’s length mark-up on cost for international transactions entered into with other AEs which are not covered under the India-US MAP . ” 4. At the very outset, the ld. counsel for the assessee stated that he is not pressing Ground Nos. 1 to 4. Therefore, the same are dismissed as not pressed. 5. Addressing to the additional ground, the ld. counsel stated that transfer pricing adjustment of Rs.6,36,08,648/– was made by the TPO towards international transaction of provision of ITES undertaken by the assessee with its AEs. It is the say of the ld. counsel that the assessee had invoked MAP provisions under article 27 of the India- USA DTAA in respect of international transactions with its AE in USA. MAP application has been resolved by the competent authorities of India 5 and USA and the assessee has accepted to the proposed resolution and, therefore, the assessee has withdrawn the grounds in respect of the adjustment made to the value of international transactions entered with its AEs in USA. 6. The ld. counsel further stated that with the additional ground, the assessee has prayed for appropriate directions vis a vis the MAP resolution. 7. Per contra, the ld. DR fairly stated that the Tribunal may decide the additional ground vis a vis the MAP resolution. 8. We have given careful consideration to the orders of the authorities below. There is no dispute that the assessee has invoked MAP provisions under Article 27 of the India-USA DTAA. It is also not in dispute that the dispute relating to AEs in USA has been settled under the India-USA MAP process. Since the TPO has benchmarked the international transactions with AEs, therefore it would be fair and just to benchmark the international transactions with non-AEs, which are not in USA in the same line as has been accepted under MAP resolution. 6 9. We, therefore, deem it fit to restore the issue raised vide additional ground (supra ) to the file of the TPO /AO with a direction to decide the issue afresh in line with the MAP resolution in respect of international transactions of the assessee with its AEs in USA. Our view is based upon the reasoning that the lower authorities have not given any findings with regard to margin which will affect as per geographical area. The additional ground so raised is allowed for statistical purposes with the above directions. 10. In the result, the appeal of the assessee in ITA No. 954/DEL/2015 is allowed for statistical purposes. The order is pronounced in the open court on 11.10.2022. Sd/- Sd/- [C.M. GARG] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: October, 2022. VL/ 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order