TRANSSYS SOLUTIONS PVT.LTD, CHENNAI V. DCIT 3(1), CHENNAI

ITTPA 26/CHNY/2021

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9776 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 25-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 25-09-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 04-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Additional evidence
• Section: 143(3); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण ‘डी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI माननीय ,ी महावीर िसंह, उपा23 एवं माननीय ,ी मनोज कु मार अ8वाल ,लेखा सद; के सम3। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./IT(TP) No.26/Chn y/2021 (िनधाCरणवषC / Assessment Year: 2016-17) M/s. TransSys Solutions Pvt. Ltd., No. 3/4,Rajendar Illam, Vedammal Avenue, Dr. Subrayan Nagar, Kodambakkam, Chennai – 600 024. बनाम/ V s . DCIT 3(1) Chennai. था यी ले खा सं. /जी आ इ आ र सं. /P AN /G IR N o. AAD C T- 4 6 03 -N (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri B. Ramakrishnan (CA) – Ld. AR थ कीओरसे/Respondent by : Ms. Ann L. Kapthuama (CIT) –Ld. DR सुनवाईकीतारीख/D a t e o f H e a ri n g : 26-09-2022 घोषणाकीतारीख /Date of Pronouncement : 26-10-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of final assessment order passed by learned Assessing Officer (AO) on 31.03.2021 u/s 143(3) r.w.s. 144C(13) pursuant to the directions of Ld. DRP u/s 144C(5) dated 26.02.2021.The draft assessment order was passed by Ld. AO on 27.11.2019 which incorporated the Transfer Pricing (TP) adjustment as proposed by Ld. IT(TP)A No.26/Chny/2021 - 2 - Transfer Pricing Officer, Circle 3(2) (TPO) in its order dated 31.10.2019. The assessee being resident corporate assessee is stated to be engaged in providing manpower support services to its Associated Enterprises (AE). In the appeal, the assessee is aggrieved by upward transfer pricing adjustment of Rs.354.16 Lacs relating to provision of software solution. 2. The Ld. TPO proposed Transfer Pricing (TP) Adjustment of Rs.354.16 Lacs which was confirmed by Ld. DRP. Aggrieved, the assessee is in further appeal before us. The arguments of Ld. AR are two-fold i.e., (i) Assessee’s Associated Enterprises (AE) should be considered as the Tested Party by admitting additional evidences; (ii) Adjustment in comparable entities. The assessee seeks exclusion of comparable entities i.e., M/s Larsen & Toubro Ltd. and M/s Mindtree Ltd. on account of turnover. Regarding M/s Tata Elxsi Limited, Ld. AR seek adoption of segmental margins for the purpose of comparison. In support of first argument, Ld. AR has filed Petition under Rule 29 and pleaded for admission of additional evidences. The Ld. Sr. DR opposed admission of the same and also opposed any interference in the final assessment order. Having heard rival submissions, the appeal is disposed-off as under. Proceedings before lower authorities 3.1 The assessee admitted income of Rs.94.34 Lacs in return of income filed on 15.10.2016. The case was picked-up for limited scrutiny and notice u/s 143(2) was issued on 27.07.2017. Since the assessee entered into international transactions with its Associated Enterprises (AE), the same were referred to Ld. TPO for determination of Arm’s Length Price (ALP). IT(TP)A No.26/Chny/2021 - 3 - 3.2 It transpired that the assessee provided software solutions to its AE namely Transsys Solutions FCZ UAE for Rs.2172.03 Lacs and benchmarked the same using Comparable Uncontrolled Price Method (CUP). A notice u/s 92CA(2) was issued by Ld. TPO on 18.12.2018. During pendency of proceedings, the assessee contested the validity of reference made by Ld. AO to Ld. TPO which finally stood dismissed by Hon’ble High Court of Madras in WA No.1133 & 1134 of 2020 dated 17.02.2021. The assessee’s Special Leave Petition (SLP) against the same stood dismissed by Hon’ble Supreme Court SLP Nos.6955- 6956/2021 dated 16.07.2021. 3.3 The Ld. TPO, rejecting CUP method as adopted by the assessee, adopted Transactional Net Margin Method (TNMM) and chose four comparable entities as under: - No. Name of Entity PLI (OP/OC) % 1. Cigniti Technologies Ltd. 19.25 2. Tata Elxsi Ltd. 19.86 3. Larsen & Toubro Infotech Ltd. 21.98 4. Mindtree Ltd. 24.51 Mean Margin 21.4 % The margin of the assessee was computed as 4.38%. Accordingly, applying mean margin of 21.4%, Ld. TPO proposed adjustment of Rs.354.16 Lacs which stood incorporated in draft assessment order and was subjected to assessee’s objections before Ld. DRP. 3.4 The Ld. DRP, in para 3.2, noted that the assessee did not submit any Transfer Pricing Documentation regarding benchmarking of its international transactions. The assessee’s submissions with respect to selection of comparable entities were rejected and the adjustments were upheld. Aggrieved, the assessee is in further appeal before us. IT(TP)A No.26/Chny/2021 - 4 - Our findings and Adjudication 4. From the fact, it emerges that the CUP method adopted by the assessee has been disregarded and TNMM method has been used to benchmark the transactions. The limited prayer of Ld. AR is that additional evidences may be admitted and foreign AE may be taken as the tested party. In the alternative, Ld. AR seek exclusion of two entities on turnover criteria and pleaded for adopting segmental result of M/s Tata Elxsi Limited. The assessee also challenged Transfer Pricing proceedings without any success. It could also be noted that no TP documentation has been submitted by the assessee before Ld. DRP. 5. Upon due consideration of material fact, we are not inclined to accept the plea of Ld. AR that fresh benchmarking should be done by taking AE as the tested party since no such benchmarking has been done by the assessee. If the said ground is allowed, it would undo the entire assessment proceedings and the efforts made by the revenue up-to this stage of proceedings would turn futile. No such plea was ever taken before lower authorities and no such benchmarking is shown to have been done by the assessee. Therefore, at this stage of proceedings, we dismiss this plea raised by Ld. AR. 6. So far as the argument of comparable entities is concerned, we deem it fit to grant another opportunity to the assessee to contest the issue of comparable entities before Ld. TPO. Therefore, for the said limited purpose, the issue of comparable entities stands restored back to the file of Ld. AO / Ld. TPO with a direction to the assessee to substantiate its stand as to how the comparable entities could not be accepted. In case of M/s Tata Elxsi Ltd., if the segmental results in IT(TP)A No.26/Chny/2021 - 5 - which assessee operates, are available in public domain, then it would be logical to adopt the same. To carry out these limited directions, the issue stand restored back to the file of Ld. AO / Ld. TPO. No other ground has been urged before us. 7. The appeal stands partly allowed for statistical purposes. Order pronounced on 26 th October, 2022 Sd/- (MAHAVIR SINGH) उपा23 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखासद; /ACCOUNTANT MEMBER चे+ई/ Chennai; िदनांक/ Dated : 26.10.2022 JPV JPVJPV JPV आदेशकीWितिलिपअ8ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकरआय ु त (अपील)/CIT(A)4. आयकरआय ु त/CIT 5. वभागीय त न ध/DR6. गाड फाईल/GF