M/s. Louis Dreyfur Commodities India Pvt. Ltd., Gurgaon V. ACIT, New Delhi

MA 35/DEL/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8692 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-02-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 04-01-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 06-02-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 14A; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’ : NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER MA No.35/Del/2022 (in ITA No.2479/DEL/2015) (Assessment Year: 2010-11) M/s. Louis Dreyfur Commodities India Pvt. Ltd., vs. ACIT, 2 nd Floor, Tower 9B, DLF Cyber City, New Delhi. DLF Phase – III, Gurgaon (Haryana). (PAN : AAACL7361E) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ravi Sharma, Advocate Ms. Shruti Khimta, AR Ms. Nikita, CA REVENUE BY : Shri Vivek Kumar Upadhyay, Sr. DR Date of Hearing : 05.01.2024 Date of Order : 16.02.2024 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : The assessee seeks rectification of mistake apparent from record under section 254 (2) of the Income-tax Act, 1961 (for short ‘the Act’) in the order dated 30.09.2021 of the ITAT in ITA No.2479/Del/2015 for AY 2010-11. 2. The submissions of the assessee in this regard are reproduced as under:- 2 MA No.35/DEL/2022 “Application u/s 254(2) of Income Tax Act, 1961 with a prayer for rectification of the order passed by the Hon'ble ITAT dated September 30, 2021 1. The captioned appeal was heard by the Hon'ble I-1 Bench of the Income Tax Tribunal on September 8, 2021 and the appeal was disposed off vide Order dated September 30,2021 (enclosed Annexure A). 2. The instant rectification application is being filed with a prayer to rectify certain mistakes that have crept in the order passed by the Hon'ble Tribunal, under the facts and circumstances detailed hereinbelow: Background I. Back-office Support service 3. That in the captioned appeal, one of the ground (Ground No.3 of the Appellant's appeal) was with regard to the adjustment made by the Ld. TPO in the Back-office Support service segment on the issue of inclusion of certain comparables. 4. That in the facts of the case, the Appellant provides back-office support services for various agri-based commodities to its AEs. These services include provision of logistic support, accounting and internal audit, trade and travel support along with inspection services. 5. That while disposing of the appeal in respect of the exclusion of comparables, the Hon'ble Tribunal made observations with regard to the comparability analysis of one of the Comparable' namely Global Procurement Consultants Limited selected by the Ld. TPO in back-office service segment. The findings of the Hon'ble Tribunal are reproduced hereinbelow for your Honours' ready reference: Quote 2. Global Procurement Consultants Ltd .............................. 2.2 Before us, the learned Counsel of the assessee referred to page 42 of the Annual Report Compendium and submitted that company is mainly in providing consultancy services in the procurement field, whereas the assessee is engaged in providing back-office support services. He further relied on the decision of the Tribunal in the case of Exxon Mobile Gas (India) Private Limited Vs. ACIT in ITA No. 1491/Del/201sfor assessment year 2010-11. 3 MA No.35/DEL/2022 ...................... ....................... 2.4 We have heard rival submission of the parties on the issue in dispute and perused relevant material on record. The dispute is regarding whether the services rendered by the company are in the nature of the consultancy or in the nature of support services. On perusal of annual report of the company, we find that on page 42 of the Annual Report Compendium, the critical activity of the company has been mentioned as monitoring of all procurement activities including project management from concept to commissioning so as to ensure timely supply and delivery, quality control, through inspection and evidence of cost overruns to the client. Further on perusal of the Annual Report Compendium pages 44 to 61, we find that the company has provided procurement related advisory and auditing services for multilaterally funded project across a range of developing countries including India. The company has also provided procurement management services in India..... 2.5 The company has also carried out performance review of various projects of Asian Development Bank, which were executed in India, survey of health facilities under UNICEF etc. In view of all this activity reported in annual report of the company, we are of the view that company is no longer engaged in providing consultancy but it is providing support services for execution of the various projects and, thus, primarily it is engaged in back-office support services. Accordingly, it is functionally similar to assessee; therefore, the Learned AO/TPO is directed to retain this company for the purpose of set of comparables. Unquote Emphasis supplied 6. In this regard, the counsel of the Appellant, placed reliance on several extracts from Annual Report as cited between Page no 42 to 61 of the Annual Report Compilation (ARC) filed with Hon'ble Tribunal and extracted below: S.No. Extract ARC Page No. 1. Scope : GPCL's consultancy services encompass: • Preparing and reviewing technical specifications. • Estimation of costs. • Selection of vendors. • Inspection and expediting. • Quality control and time management. 42 (referred to in para 2.2 of the impugned order) 4 MA No.35/DEL/2022 2. Procurement Review GPCL has won, in the face of international competition, major consultancy assignments, Inter alia, In conducting Independent Procurement Review (IPR) of multilaterally funded protects spread across the globe. (referred GPCL is perhaps the only company from India that has proven expertise in providing procurement related advisory and auditing services for multilaterally funded projects across a range a developing countries. Some of the motor assignments carried out by GPCL are highlighted below: 44 (referred to in para 2.4 of the impugned order) 3. Latin America and the Caribbean Against International Competition, GPCL was awarded a consultancy contract by Civil Defense Commission, Guyana, to carry out biannual Technical and Procurement audit over a penal of three years, in reviewing the Procurement performance of the agencies implementing the World Bank aided EI Nino Emergency Assistance 55 (referred to in para 2.4 of the impugned order) The reference of these pages from Annual Report also finds a reference in the order passed by the Hon'ble Tribunal (supra). 7. It can therefore be seen that the Global Procurement is in fact engaged in rendering consultancy services during the year in question. Thus, the findings that "company is no longer engaged in providing consultancy" returned in para 2.5 of the impugned order constitutes mistake apparent from the record which may kindly be rectified with suitable directions or modifications. II. Disallowance of expenditure incurred in relation to exempt income under section 14A of the Act 8. That the issue of disallowance of expenditure was raised by the revenue in its appeal for the reason that the Hon'ble Dispute Resolution Panel (‘DRP') had accepted the contention of the Appellant that in case if the average value of investment is nil, no disallowance u/s 14A read with Rule SD is called for. 9. That during the course of argument, the Appellant raised an alternative plea that in case if the Hon'ble Tribunal is in agreement with arguments of revenue then also the adjustment should be restricted to the extent of exempted income only. In this regard, the Appellant would like to highlight the fact that the Hon'ble Tribunal 5 MA No.35/DEL/2022 accepted its contentions that since the average value of investment during the year was 'Nil', there can be no disallowance in accordance with Rule 8D(2)(iii) of the Rules. Thus, the plea of the revenue was not accepted by the Hon'ble Tribunal and in such circumstance, the disallowance or even the alternative plea of the Appellant doesn't survive. However, the Hon'ble Tribunal sustained a disallowance to the amount Rs.94,929/- as the total expense incurred for earning the exempted income. 10. The relevant observations of the Hon'ble Tribunal are extracted below: Quote 8.2 We have heard rival submission of the parties and perused the relevant material on record. During the year under consideration, assessee has made purchase and sale of mutual funds of huge amounts and, therefore, incurring of expenditure for earning exempt income cannot be denied in terms of section 14A of the Act. However, if Rule 8D of the Rules is invoked, there would not be any disallowance in view of no opening and closing stock value of mutual funds. In the circumstances, we accept the alternative claim of the assessee to restrict the disallowance to the extent of exempted income following the decision of the Hon'ble Delhi High Court in the case of Joint Investment Private Limited versus CIT [2015] 59 taxmann.com 295/233 Taxman 117 (Del. HC) and accordingly direct to restrict the disallowance to the amount of Rs.94,929/-. The ground of the appeal of the Revenue is accordingly allowed partly. Unquote Emphasis supplied 11. It is humbly submitted that the above mistake in the order i.e. upholding a disallowance of Rs.94,929/ - when the Hon'ble Tribunal has accepted the contentions of the Appellant that invocation of Rule 8D would not lead to any disallowance constitutes mistake apparent from the record which may kindly be rectified with suitable directions or modifications. Prayer 12. In view of the above, it is most humbly prayed that the order dated September 30, 2021 may kindly be recalled/rectified and the mistakes apparent from record may kindly rectified by passing an appropriate order u/s 254(2) of the Act.” 6 MA No.35/DEL/2022 3. Per contra, ld. DR for the Revenue submitted that assessee is seeking review in the garb of rectification and the same is not permissible u/s 254 (2) of the Act. 4. Upon hearing both the parties and carefully perusing the records, we find that the first issue on which assessee seeks rectification is selection of a comparable, namely, Global Procurement Consultants Limited. The Tribunal after appreciating the evidence and material at that time observed that the company is no longer engaged in providing consultancy. Now, the assessee wants us to reappreciate the evidences stating that the said company is providing consultancy. We are of the opinion that this is clearly review of the order in the garb of the rectification of mistake and the same is not permissible, hence it is rejected. 5. Another issue on which assessee seeks rectification of mistake is disallowance of expenditure incurred in relation to exempt income under section 14A of the Act. The ITAT following the Hon’ble High Court decision restricted the disallowance of exempt income. Now, the assessee wants that there should not be any disallowance on the ground that if Rule 8D is invoked then there would not be any disallowance in view of no opening and closing stock value of mutual funds. We find that this is again assessee’s plea to re-appreciate the case laws relied upon. We are of the opinion that following the Hon’ble jurisdictional High Court decision, 7 MA No.35/DEL/2022 cannot be said to be a mistake apparent on record. Hence, in the background of the aforesaid discussion, we are of the opinion that the assessee’s claim of rectification u/s 254 (2) of the Act is misplaced and the same is dismissed. 6. In the result, the misc. application filed by the assessee is dismissed. Order pronounced in the open court on this 16 th day of February, 2024. Sd/- sd/- (CHALLA NAGENDRA PRASAD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 16 th day of February, 2024 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A). 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.