M/s Dell International Services India Pvt Ltd , Bangalore V. Joint Commissioner of Income TAx (LTU) , Bangalore

MA 12/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1829 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K R SUBASH
• Keywords: Transfer pricing; Opportunity of being heard; International transaction
• Section: 133(6); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER M.P. NOS. 12 & 13/BANG/2019 (IN IT (TP) A NO S . 53 & 86 /BA NG/201 4 ) ASSESSMENT YEAR : 200 9 - 10 M/S. DELL INTERNATIONAL SERVICES INDIA PRIVATE LIMITED, NO. 12/1, 12/2A, 13/1A, DIVYASHREE GREENS, CHALLAGHATTA VILLAGE, VARTHUR HOBLI, BANGALORE 560 071. PAN: AABCD1741M VS. THE JOINT COMMISSIONER OF INCOME TAX, LTU, BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SMT. RASHMI, ADVOCATE REVENUE BY : DR. K.R. SUBASH, JCIT (DR) DATE OF HEARING : 07 . 0 6 .201 9 DATE OF PRONOUNCEMENT : 14 . 0 6 .201 9 O R D E R PER SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER; THESE TWO M.PS. ARE FILED BY THE ASSESSEE AND IT IS CONTENDED IN THESE M. PS. THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE TRIBUNAL ORDER DATED 13.07.2018 AS PER WHICH THE CROSS APPEALS OF ASSESSEE AND REVENUE WERE DECIDED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2009-10. 2. IT IS STATED IN THESE M.PS. THAT AS PER PARA 6 OF THE IMPUGNED TRIBUNAL ORDER, THE TRIBUNAL HAS DECIDED THE ISSUE REGARDING TP ADJUSTMENT IN RESPECT OF NON-US AES BY FOLLOWING THE EARLIER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07. IT IS STATED IN THE M.P. THAT THE TRIBUNAL HAS NOT ADJUDICATED UPON THE OBJECTIONS RAISED BY ASSESSEE IN REVISED GROUNDS OF APPEAL BEING GROUND NOS. 2 TO 8 PERTAINING TO APPLICATION OF VARIOUS FILTERS AND INCLUSION / EXCLUSION OF CERTAIN COMPANIES. 3. IN COURSE OF HEARING OF THESE M.PS., LD. AR OF ASSESSEE SUBMITTED A COPY OF THE TRIBUNAL ORDER IN M.P. NO. 33/BANG/2017 DATED 31.03.2017 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT M.P. NOS. 12 & 13/BANG/2019 (IN IT(TP)A NOS. 53 & 86/BANG/2014) PAGE 2 OF 5 IN THE PRESENT YEAR I.E. ASSESSMENT YEAR 2009-10, THE TRIBUNAL HAS DECIDED THE ISSUE REGARDING TP ADJUSTMENT BY FOLLOWING ITS EARLIER ORDER IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2006-07. HE POINTED OUT THAT IN ASSESSMENT YEAR 2006-07 ALSO, SIMILAR M.P. WAS FILED BY ASSESSEE AND SAME WAS DECIDED BY THE TRIBUNAL AS PER ORDER DATED 31.03.2017 IN M.P. NO. 33/BANG/2017. HE SUBMITTED THAT ON SIMILAR LINE, THE M.PS. OF ASSESSEE IN PRESENT YEAR SHOULD ALSO BE DECIDED. THE LD. DR OF REVENUE SUBMITTED THAT THERE IS NO APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARA NOS. 5 AND 6 FROM THE IMPUGNED TRIBUNAL ORDER IN THE PRESENT YEAR I.E. ASSESSMENT YEAR 2009-10. THE SAME ARE AS UNDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN VIEW OF THIS FACT THAT IN RESPECT OF TP ADJUSTMENT FOR US TRANSACTIONS, THE ISSUE HAS BEEN FINALIZED AS PER MAP AND NOW THIS IS THE REQUEST OF LD. AR OF ASSESSEE BEFORE US THAT THE PRICE ADOPTED FOR US TRANSACTIONS MAY BE ADOPTED FOR NON-US TRANSACTIONS ALSO AND IN SUPPORT OF THIS CONTENTION, RELIANCE HAS BEEN PLACED ON TRIBUNAL ORDER RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07. WE, THEREFORE FIRST REPRODUCE THE RELEVANT PARAS OF THIS TRIBUNAL ORDER BEING PARA NOS. 5, 9 AND 10 AND THESE PARAS ARE AS UNDER. 5. USE OF CONTEMPORANEOUS DATA A) THE HONOURABLE DRP AND THE LEARNED AO ERRED IN CONCLUDING THAT THE APPELLANT OUGHT TO HAVE EMPLOYED CONTEMPORANEOUS DATA IN THE PREPARATION OF THE TRANSFER PRICING REPORT. B) THE HONOURABLE DRP AND THE LEARNED AO ERRED IN INTERPRETING THE WORD 'SHALL' IN RULE 10B (4) TO MEAN THAT DATA FOR THE SAME FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION WAS ACTUALLY ENTERED INTO IS A MANDATORY REQUIREMENT. ALSO THE HONOURABLE DRP AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE TRANSFER PRICING REGULATIONS PROVIDE CONTEMPORANEOUS DOCUMENTATION TO BE MANDATORY, AND NOT USE OF DATA FOR THE SAME FINANCIAL YEAR. C) THE HONOURABLE DRP AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THE FACT THAT THE OBJECTIVE UNDERLYING THE USE OF MULTIPLE-YEAR DATA WAS TO ENSURE THAT THE OUTCOMES OF THE INTERNATIONAL TRANSACTIONS FOR THE YEAR UNDER CONSIDERATION WERE BASED ON ALL THE EARLIER PERIODS WHICH WERE RELEVANT FOR DETERMINATION OF TRANSFER PRICE. 9. THE EMPLOYEE COST FILTER OF 25% OF REVENUE NEEDS TO BE APPLIED BY THE TPO B) THE LEARNED DRP AS WELL AS THE LEARNED AO FAILED TO APPRECIATE THE FACT THAT THE LOGIC OF APPLICATION OF THIS FILTER TO THE IT SEGMENT SHOULD M.P. NOS. 12 & 13/BANG/2019 (IN IT(TP)A NOS. 53 & 86/BANG/2014) PAGE 3 OF 5 HAVE BEEN EXTENDED TO THE ITES SEGMENT AS WELL AS EVEN IN THE ITES SEGMENT, EMPLOYEES CONSTITUTE THE PREDOMINANT ASSET. C) THE HONORABLE DRP AND THE LEARNED AU HAVE ERRED IN NOT ELIMINATING THE FOLLOWING COMPARABLES: COSMIC GLOBAL LTD VISHAL INFORMATION TECHNOLOGIES LTD ASIT C MEHTA FINANCIAL SERVICES LTD GOLDSTONE LNFRATECH LTD SPANCO LTD ACE SOFTWARE EXPORTS LTD A) COMPANIES ELIMINATED ERRONEOUSLY CITING INADEQUATE INFORMATION SHOULD BE ACCEPTED AS COMPARABLES. A) THE HONOURABLE DRP AND THE LEARNED AU HAVE ERRED IN UPHOLDING TPO'S CONTENTION OF REJECTING THE FOLLOWING COMPARABLES ON THE GROUNDS OF INADEQUATE INFORMATION: NITTANY OUTSOURCING SERVICES PVT. LTD CAMEO CORPORATE SERVICES LTD B) THE HONOURABLE DRP AND THE LEARNED AU OUGHT TO HAVE APPRECIATED THAT THE LEARNED TPU FAILED TO BE CONSISTENT IN HIS APPROACH BY NOT ISSUING THE REQUISITE NOTICES UNDER THE PROVISIONS OF SECTION 133(6) OF THE ACT NOTICES TO THESE COMPANIES AS WELL. 10. DATAMATICS FINANCIAL SERVICES LTD (DATAMATICS) SHOULD BE REJECTED A) THE HONOURABLE DRP AND THE LEARNED AU HAVE ERRED IN ACCEPTING THE LEARNED TPU'S CONTENTION OF TAKING DATAMATICS AS A COMPARABLE IGNORING THE SUBMISSION MADE BY THE APPELLANT. B) THE HONOURABLE DRP AND THE LEARNED AU OUGHT TO HAVE APPRECIATED THAT DATAMATICS SHOULD BE REJECTED BASED ON THE FOLLOWING REASONS- THE COMPANY DOES NOT HAVE SEGMENTAL INFORMATION PERTAINING TO THE ITES SEGMENT OF THE COMPANY FOR FYE 2006. THE ITES REVENUE COMPRISES 28.04% OF THE TOTAL REVENUES AND DOES NOT QUALIFY THE REVENUE FILTER POSTULATED BY THE LEARNED TRANSFER PRICING OFFICER. 6. FROM THE ABOVE PARAS REPRODUCED FROM THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, IT IS SEEN THAT IN THAT YEAR ALSO, THE PRICES WERE FIXED UNDER MAP IN RESPECT OF US AES AND THIS WAS THE CLAIM OF THE ASSESSEE BEFORE THE TRIBUNAL THAT THE SAME PRICE MAY BE ADOPTED IN RESPECT OF NON-US AES. THE TRIBUNAL HAS RESTORED BACK THE MATTER TO THE FILE OF AO/TPO FOR FRESH DECISION WITH THE DIRECTION THAT THE MATTER SHOULD BE ANALYZED BY AO/TPO ON THE SAME LINE FOR NON-US TRANSACTIONS AND IF IT IS FOUND THAT FACTORS INFLUENCING THE PRICE ARE SIMILAR BETWEEN US AND NON-US TRANSACTIONS, THE PRICE ADOPTED FOR US TRANSACTIONS MAY BE ADOPTED FOR NON-US M.P. NOS. 12 & 13/BANG/2019 (IN IT(TP)A NOS. 53 & 86/BANG/2014) PAGE 4 OF 5 TRANSACTIONS ALSO. THIS WAS ALSO DIRECTED BY TRIBUNAL THAT IT WAS OPEN TO TPO TO EXAMINE THE VALIDITY OF THE PROPOSITION THAT PRICE ADOPTED UNDER MAP MECHANISM CAN BE ADOPTED IN RESPECT OF OTHER COUNTRIES ALSO WHERE MAP WAS NOT RESORTED TO. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE RESTORE THE TP MATTER BACK TO THE FILE OF AO/TPO FOR FRESH DECISION WITH THE SAME DIRECTIONS. THE TP ISSUE STANDS DECIDED IN THIS MANNER. 5. FROM THE ABOVE PARAS REPRODUCED FROM THE IMPUGNED TRIBUNAL ORDER, IT IS SEEN THAT WHILE DECIDING THE ISSUE REGARDING TP ADJUSTMENT IN PRESENT YEAR, THE TRIBUNAL HAS SIMPLY FOLLOWED THE EARLIER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07. IN ASSESSMENT YEAR 2006-07 ALSO, SIMILAR M.P. WAS FILED BY THE ASSESSEE AND THE SAME WAS DISPOSED OF BY THE TRIBUNAL IN M.P. NO. 33/BANG/2017 DATED 31.03.2017. PARA NO. 2 OF THIS ORDER OF THE TRIBUNAL IN THIS M.P. FOR ASSESSMENT YEAR 2006-07 IS RELEVANT AND HENCE, THE SAME IS REPRODUCED HEREINBELOW. 2. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THIS TRIBUNAL, WHILE PASSING THE IMPUGNED ORDER VIDE PARA.9 HAD CLEARLY HELD THAT: 9. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN APPEAL IS WHETHER THE PRICE DETERMINED UNDER MAP MECHANISM CAN BE ADOPTED EVEN IN RESPECT OF NON-MAP TRANSACTIONS. IT IS THE SUBMISSION OF THE ASSESSEE-COMPANY THAT THE SAME PRICE FIXED UNDER MAP IN RESPECT OF US AES CAN BE ADOPTED EVEN IN RESPECT OF NON-US AES. WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE CAN BE DECIDED ONLY BY THE TPO AFTER UNDERTAKING FAR ANALYSIS OF NON-US TRANSACTIONS WITH A VIEW TO FIND OUT WHETHER THERE IS ANY DISTINCTION IN THE FACTORS INFLUENCING THE PRICE BETWEEN US AND NON-US TRANSACTIONS. EVEN IN THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE HONBLE TRIBUNAL HAD RENDERED A CATEGORICAL FINDING THAT THERE IS NO SUCH DISTINCTION. WE, THEREFORE, DIRECT THE TPO TO ADOPT THE SAME PRICE. IN THE PRESENT CASE, NO ATTEMPT HAS BEEN MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE TO BRING OUT THE SIMILARITIES OF THE FACTORS THAT INFLUENCED THE PRICE BETWEEN US AND NON-US TRANSACTIONS. IN THE ABSENCE OF THIS ANALYSIS, COMPARABILITY MAY NOT BE IN TERMS OF THE PROVISIONS OF RULE 10B (1)(2) OF THE IT RULES, 1962. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER BE RESTORED TO THE FILE OF THE TPO/AO FOR FRESH ANALYSIS ON THE LINES BETWEEN US AND NON-US TRANSACTIONS AND IF IT IS FOUND THAT FACTORS INFLUENCING THE PRICE ARE SIMILAR BETWEEN US AND NON-US TRANSACTION, THE PRICE ADOPTED FOR US TRANSACTIONS MAY BE ADOPTED FOR NON-US TRANSACTIONS ALSO. THIS TRIBUNAL IN PARA.9 OF ITS ORDER, RESTORED THE ISSUE OF COMPARABILITY OF NON-USA TRANSACTIONS WITH THAT OF USA TRANSACTIONS TO FIND OUT SIMILARITIES OF THE FACTORS INFLUENCING PRICE BETWEEN USA AND NON-USA M.P. NOS. 12 & 13/BANG/2019 (IN IT(TP)A NOS. 53 & 86/BANG/2014) PAGE 5 OF 5 TRANSACTIONS. IT IS THE CONTENTION OF THE ASSESSEE-COMPANY THAT IN CASE IT IS FOUND THAT THERE ARE NO SIMILARITIES OR FACTORS FIXING THE PRICE BETWEEN USA AND NON-USA TRANSACTIONS, THE COMPARABILITY HAS TO BE EXAMINED BY APPLYING VARIOUS FILTERS UNDERTAKING FAR ANALYSIS. IN THE ABSENCE OF THIS DIRECTION, TPO MAY NOT UNDERTAKE THIS EXERCISE. WE FIND MERIT IN THE SUBMISSION OF THE ASSESSEE-COMPANY. THEREFORE, WE DIRECT THE AO/TPO TO ADJUDICATE THE ISSUE OF COMPARABILITY OF VARIOUS ENTITIES WITH THAT OF ASSESSEE-COMPANY BY APPLYING VARIOUS FILTERS UNDERTAKING FRESH FAR ANALYSIS IN ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE-COMPANY. 6. AFTER CONSIDERING THE FACTS IN ITS ENTIRETY, WE ARE SATISFIED THAT THERE IS SIMILAR APPARENT MISTAKE IN THE PRESENT YEAR ALSO AND THE SAME IS RECTIFIED ON SIMILAR LINE AND WE HOLD THAT WHILE DECIDING THE ISSUE AS PER THE DIRECTIONS OF THE TRIBUNAL IN PARA 6 OF THE IMPUGNED TRIBUNAL ORDER IN THE PRESENT YEAR, IF IT IS FOUND THAT THERE IS NO SIMILARITY OF THE FACTORS FIXING THE PRICE BETWEEN USA AND NON-USA TRANSACTIONS, THE COMPARABILITY FOR NON-USA TRANSACTIONS HAS TO BE EXAMINED BY APPLYING VARIOUS FILTERS AFTER UNDERTAKING FAR ANALYSIS IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, BOTH THE M.PS. FILED BY THE ASSESSEE STANDS ALLOWED ON THESE LINES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 14 TH JUNE, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.