Appeal details
Counselvise Citation
[2024] 139 COUNSELVISE.COM (IT) 8967 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 5 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-10-2024
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
18-09-2024
Assessment Year
2016-2017
Appeal Filed On
28-05-2021
Judgement Text
"आयकर अपीलीय अिधकरण, चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ \nIN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH \n \nHEARING THROUGH: HYBRID MODE \n \nŵी आकाश दीप जैन, उपाȯƗ एवं ŵी क\nृणवȶ सहाय, लेखा सद˟ \nBEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. SHRI. KRINWANT SAHAY, AM \n \nआयकर अपील सं./ ITA NO.129/Chd/2021 \n(Assessment Year: 2016-17) \n \n Parexel International Services \nIndia Private Limited \nDLF Building, Tower F, 2nd Floor, \nChandigarh Technology Park, \nChandigarh-160101 \nबनाम \n \nThe Asst. CIT \nCircle 5(1), Chandigarh \n˕ायी लेखा सं./PAN NO: AAHCP9488M \nअपीलाथŎ/Appellant \n \nŮȑथŎ/Respondent \n \n \nिनधाŊįरती की ओर से/Assessee by : Shri Dhanesh Bafna, CA, \n \n \n \n \n \nMs. Chandni Shah, CA, \n \n \n \n \n \nShri Yogesh Malpani, CA and \n \n \n \n \n \nMs. Tejal Saraf, CA \nराजˢ की ओर से/ Revenue by : \nShri Reuben Mathew Jacob, Addl. CIT, Sr. DR \n \nसुनवाई की तारीख/Date of Hearing : 18/09/2024 \nउदघोषणा की तारीख/Date of Pronouncement : 28/10/2024 \n \nआदेश/Order \n \nPER AAKASH DEEP JAIN, VP : \n \nThis is an appeal filed by the Assessee, wherein the assessee has raised \nthe following grounds: \n1. \nOn the facts and in the circumstances of the case and in law, the final \nassessment order passed by National e-Assessment Centre, Delhi, pursuant to \ndirections of the Dispute Resolution Panel (‘Ld. Panel’) under Section 143(3) read \nwith Sections 144C(13), 143(3A) and 143(3B) of the Act to the extent prejudicial to \nthe Appellant, is bad in law and is liable to be quashed. \n2. \nOn the facts and in the circumstances of the case and in law, the Ld. Panel \nerred in upholding the action of the Ld. Transfer Pricing Officer ('Ld. TPO') / Ld. \nAssessing officer ('Ld. AO’) in proposing an adjustment of INR 131,29,52,199 to the \ninternational transaction pertaining to sale of intangible assets by the Appellant to its \nassociated enterprise ('AE') by imputing a mark-up of 33.13%on the sale value. \nWhile doing so, the Ld. TPO/ Ld. AO/ Ld. Panel erred in: \n2.1 \nRejecting the transfer pricing methodology adopted by the Appellant in its \nTransfer pricing study which was in good faith and with due diligence for \n\n2 \n \ndetermining the arms' length price ('ALP') of the international transaction of sale of \nintangibles. \n2.2 \nNot considering the valuation report issued by an independent valuer relied \nby the Appellant to evaluate the arm's-length nature of the said international \ntransaction without giving any cogent reasons and simply brushing it aside. \n2.3 Incorrectly carrying out benchmarking analysis & applying Transactional Net \nMargin Method by not appreciating the fact that the said method is not applicable \nconsidering the business commercials / realities in place surrounding the \ntransaction. \n \n3. \nWithout prejudice to ground no. 2, on the facts and in the circumstances and \nin law, the Ld. AO/ Ld. TPO/ Ld. Panel erred in applying weighted operating profits/ \noperating cost (OP/OC) as the profit level indicator ('PLI’)which has no relevance \nfor benchmarking the transaction of sale of assets. \n4. \nWithout prejudice to ground nos. 2 and 3, on the facts and in the \ncircumstances of the case and in law, Ld. AO / Ld. TPO / Ld. Panel erred in selecting \nthe companies as comparable and using \ntheir operating profit to evaluate the arm's length nature of sale of intangible. \n5. \nOn the facts and in the circumstances of the case and in law, the Ld. AO / Ld. \nTPO erred in levying interest under Section 234B and 234C of the Act. \n6. \nOn the facts and in the circumstances of the case and in law, the Ld. AO/ Ld. \nTPO erred in imposing penalty under Section 271(1)(C) of the Act. \nThe Appellant prays that appropriate relief be granted. The above grounds are \nwithout prejudice to each other. \nThe Appellant craves leave to add to, alter, omit or substitute any or all of the above \ngrounds of appeal or produce further documents at any time before or at the time of \nthe appeal. \n \n2. \nThe Assessee has also raised an additional ground which reads as under: \n \n7. On the facts, in law and in the circumstances of the present case, the addition of \nRs. 1,31,29,52,199 made by the Ld. AO in the final assessment order pursuant to the \norder of the Ld. TPO is bad in law and liable to be deleted, being made in \nconsequence to invalid and non-est orders/communications issued in violation of the \nCircular No. 19/2019 issued by the Central Board of Direct Taxes. \n \n3. \nThe additional ground is admitted as it is a legal ground going to the root \nof the matter and not requiring any fresh material to be gone into. \n \n4. \nGround Nos. 2 to 4 relate to the Transfer Pricing adjustment order, which \nis under challenge before us. \n\n3 \n \n5. \nVide order dt. 31/03/2021, assessment was finalised by the National e-\nAssessment Centre, Delhi, pursuant to directions of the Dispute Resolution \nPanel, under section 143(3) r.w.s. 144C(13) read with sections 143(3A) and \n143(3B) of the Income Tax Act. Aggrieved therewith, the assessee is in appeal \nbefore us. \n6. \nThe facts relating to the order under appeal are that the assessee Parexel \nInternational Services India Private Limited (‘Parexel India’) is a wholly owned \nsubsidiary of Parexel International (IRL) Ltd.(‘Parexel Ireland’). Parexel Ireland \nwas incorporated on 26/12/2014. It is engaged in provision of information \ntechnology enabled services in relation to pharmacovigilance services, in other \nwords, drug safety testing, to its associated enterprises, on a cost plus mark-up \narrangement. Its commercial operations started from A.Y. 2016-17, i.e., the year \nunder consideration. It has provided services of Rs. 154,22,70,844/- to Parexel \nIreland during the year under consideration. A Slump Sale Agreement was \nentered into between the assessee and Dr. Apurva Goswamy, the sole proprietor \nof Quantum Solutions India, ‘QSI’ for short. Pursuant to such agreement, on \n13/04/2015, the assessee acquired the business of QSI, on a going concern \nbasis, for a lumpsum consideration of Rs. 597 crores. Such business comprised \nof assets, liabilities, employees, rights and obligations under contracts, \nalongwith the goodwill associated therewith, as an inseparable whole. Out of \nthe total consideration of Rs. 597 crores, an amount of Rs. 387,72,70,024/- was \nallocated to certain intangible assets, which were in the nature of trade name, \n\n4 \n \ncustomer contracts and customer relationships. The valuation report of an \nindependent valuer formed the basis of such allocation. These intangible assets \nwere, vide deed of assignment dt. 13/04/2015 , transferred by the assessee to \nParexel Ireland, for a lumpsum consideration of Rs. 396,30,31,086. On this sale \ntransaction, a profit of Rs. 8,57,61,062/- was recorded, as available at APB-60. \nThe assessee reported such sale in its Form 3CEB. In its Transfer Pricing Study, \nthe assessee benchmarked this sale by applying the Other Method, on the basis \nof the report of the independent valuer. As available at APB 327 to 367, the \nvaluation report valued the intangibles at $ 6,23,90,000/-, or Rs. 387,72,70,024, \nat the conversion rate of Rs. 62.14 per US dollar. The assessee considered the \nsaid value determined to be the arm’s length price of the international \ntransaction of sale of intangibles. Accordingly, it was concluded by the assessee \nthat the international transaction pertaining to the sale of intangibles was \nconducted at arm’s length, on application of the Other Method. \n \n7. \nIn the Transfer Pricing proceedings before the TPO, other than the \ninternational transaction of sale of intangibles for Rs. 396,30,31,086/-, the TPO \naccepted all the international transactions undertaken by the assessee, at arm’s \nlength. The reason for not accepting the sale of intangibles at Rs. \n396,30,31,086/- was that the AO did not accept the arm’s length price taken by \nthe assessee, observing that in a normal market scenario, no person would \nacquire or sell any asset without a margin having been earned on the cost \nincurred for the purchase made; and that this being so, the assessee ought to \n\n5 \n \nhave charged the mark up for valuation of the sale of intangibles. The TPO, \naccordingly, sought to bench mark the transaction under the Cost Plus method, \nor the CPM. For this, the TPO imputed the cost plus mark up of \n16.68%(operating profit / operation cost) on the sale value of the intangibles, \nwhich is equivalent to the margin earned by the assessee in provision of its \nservices. It was, as such, that the TPO proposed the TP adjustment of Rs. \n66,10,33,585/-. \n \n8. \nThe ld. DRP initially held the CUP method to be highly relevant for \nbench marking of intellectual property. However, the application of the CPM by \nthe TPO was upheld as the most appropriate method for bench marking the \ntransactions entered into by the assessee. The ld. DRP directed that these \ntransactions should be bench marked by considering uncontrolled transaction \nand not the margin earned by the assessee during the year. A remand report was \nsought from the TPO for a bench-marking analysis, consisting of uncontrolled \ntransactions in the comparable set. \n \n9. \nPursuant to the direction of the ld. DRP, a fresh search of comparable \ncompanies were conducted by the TPO, upon which, a set of 20 companies \nengaged in IT enabled services were considered by the TPO, holding them to be \ncomparable to the assessee. To arrive at the arm’s length price, the net margin, \ni.e., the Operating Profit / Operating Cost (OP/OC) of these 20 companies, as \nearned during the regular course of their business, was considered by the TPO. \nAs a result thereof, the TPO, as available at APB 378-379, proposed an arm’s \n\n6 \n \nlength margin of 15.86%. Vide direction dt. 15/02/2021, the ld. DRP issued \nfurther direction to the TPO. The TPO was directed to verify certain facts in \nrelation to each of the 20 companies selected by the TPO. The TPO was to \nretain only those companies which involved sale of intangibles. \n \n10. \nOrder dt. 25/03/2021 was passed by the TPO, giving effect to the \ndirection issued by the ld. DRP. The TPO retained 2 out of the 20 companies \nselected earlier, i.e., Cignex Datamatics Technologies Ltd. and ICRA Ltd. The \nTPO considered 33.13%, i.e., the average of the operating margin earned by \nthese two comparables, to be the arm’s length margin. The TPO made a \ntransfer pricing adjustment of Rs. 131,29,52,199/- by applying this average of \n33.13% on the sale value of Rs. 396/- crores. As such, the cost plus mark up of \n33.13% was imputed on the sale value of the intangibles. Thus, though the DRP \nprincipally held that the CUP method was the most relevant method for bench- \nmarking the transfer of intangible assets, it upheld the CPM, as adopted by the \nTPO. However, the adjustment made was ultimately enhanced by invoking the \nTNMM. \n \n11. \nThe grievance sought to be raised by the assessee by way of Ground Nos. \n2 to 4 is that the authorities below were not justified in imputing an arm’s length \ncost plus mark up on the amount of the sale consideration of the intangibles by \nthe assessee, by applying the CPM/TNMM, overriding the application of the \nOther Method, as employed by the assessee, for bench marking the transaction. \n \n\n7 \n \n11.1 Beside arguing the matter before us, the parties have also placed on \nrecord their respective written submissions, which have been taken into \nconsideration. \n12. \nHeard. On behalf of the assessee, it has been contended that the \nTPO/DRP illegally resorted to erroneous / arbitrary reasons to recompute the \narm’s length price of the transaction. It has been submitted that the authorities \nbelow have erred in holding that no person even acquires or sells any kind of \nasset without earning a margin on the cost incurred for the purchase thereof. In \nother words, as per the assessee, business exigency for such sale has wrongly \nbeen called in question by the authorities below. Here, we find that the assessee \nrightly contends that what is to be seen is as to whether the transfer pricing \nprovisions require only that the sale of the assets ought to fetch an arm’s length \nprice. It is not within the purview of the taxing authorities to see that profit was \nnecessarily earned. Once the transaction of sale of an asset is at an arm’s length \nprice, it is immaterial whether any margin was earned by the assessee, this \nbeing a business decision of the assessee, falling within the exclusive domain of \nthe way of the carrying on of their business by the assessee. There may be a \ntransaction where a loss rather than a profit is the result. This, however, cannot \nbe challenged by the authorities. They are only to ensure that the transaction \nwas at arm’s length price. Questioning the commercial expediency is nowhere \nthe purview of the TPO while testing the international transaction carried out by \n\n8 \n \nthe assessee, as between associated enterprises, to hold against the assessee, \nwhere there is no margin earned on the sales made. \n \n13. \nIt was oblivious of the above undisputed position of the law of Transfer \nPricing that it was held that no asset is acquired and sold without earning a \nmargin on the cost incurred for the acquisition thereof. While doing so, the \nbench marking analysis conducted by the assessee in its Transfer Pricing Study \nwas illegally disregarded and ignored. \nFurther, though the ld. DRP initially upheld the CUP in principle, it upheld the \nCPM, as applied by the TPO, and it went on to ultimately make the TNMM the \nbasis for the adjustment to determine the arm’s length price of the transaction. It \nalso has rightly been called in question as not being as per law. As we shall \npresently see, it was only the Other Method and neither the CUP, nor the CPM, \nnor even the TNMM, which was applicable. \n \n14. \nRule 10C of the Income Tax Rules provides that for the purpose of \nSection 92C(1) of the Act, the most appropriate method shall be the method best \nsuited to the facts and circumstances of each particular international transaction \nand which method provides the most reliable measure of an arm’s length price \nin relation to the international transaction. The Rule further provides that while \nselecting the most appropriate method, the nature and class of the international \ntransaction, the class or classes of associated enterprises entering into the \ntransaction and the functions performed by them, considering the assets \n\n9 \n \nemployed and the risk assumed by them, the availability, coverage and \nreliability of data necessary for application of the method, the degree of \ncomparability that existed between the international transaction and the \nuncontrolled transaction, the degree of comparability existing between the \nenterprises which enter into such transaction, the extent to which reliable and \naccurate adjustment can be made to account for any difference between the \ninternational transaction and the comparable uncontrolled transaction, the extent \nto which reliable and accurate adjustment can be made to account for any \ndifference between the enterprises entering into such transaction, and the nature, \nextent and reliability of assessment required to be made in the application of a \nmethod, are to be considered. \n \n15. \nIt is seen that Rule 10B provides the requisite conditions for the \napplication of the CPM/Cost Plus Method. It clearly states that it is the direct \nand indirect cost of production incurred by the enterprise in respect of property \ntransferred or services provided to an associate enterprise, which are determined \nby the CPM. The transaction under consideration being a transaction in the \nnature of just intangible assets, therefore, cannot attract the Cost Plus Method, \neven as per the relevant Rule 10B itself. The Other Method, on the contrary, we \nfind, is the method applicable. One of the foremost requirements for the \nselection of the most appropriate method to a transaction, a laid down in Rule \n10C of the Rules is the degree of comparability between the controlled and \nuncontrolled transactions. The second most important requirement is coverage \n\n10 \n \nand reliability of the available data. The intangible assets subjected to sale were \nundisputedly of the nature of trade name, customer contracts, and customer \nrelationship developed by QSI over the years in relation to the \npharmacovigilance services provided to the pharmaceutical industry. It was a \nsimilar transaction of sale of such nature of intangibles, which was required to \nbe identified and evaluated for the purpose of bench marking. Now, it remains \nundisputed that so far as regards Cignex Datamatics Technologies Ltd., i.e., the \nfirst comparable chosen, there is no transaction of sale of intangibles by this \ncompany,for the year under consideration. Rather, the cash flow statement \n(APB 662) carries a recital of profit on sale of investment. Further, even as per \nthe Notes of Intangible Assets, in the Fixed Assets Schedule (APB-654) does \nnot show any sale of any intangible during the year. ICRA Ltd., i.e., the other \ncomparable chosen, again, was selected out of place. This is so, since the \ncompany’s operating margin was not on the sale of any intangible. Rather, it \nwas earned during the regular course of its business of credit rating. \nFurther, the related party transaction of Cignex Datamatics Technologies Ltd., \nas seen from APB 398, 657 and 659, accounted for 83.63% of the sales, that is, \nmuch beyond the related party transaction filter of 25%. \n \n16. \nICRA, on the other hand, showed sale of intangible assets in computer \nsoftware, amounting to Rs. 1.02 lakhs. APB 604 shows that this figure of Rs \n1.02 lacs has been taken from the Consolidated Financial Statement of the \ncompany. As opposed to this, only its stand-alone financial statement could \n\n11 \n \nlegally have been considered. It has not been shown as to how the intangibles \nsold by ICRA, were in any way, in the nature of the intangibles sold by the \nassesse, which, to reiterate, were in the nature of trade name, customer contract \nand customer relationship. Apples, and this cannot be over-stressed, can be \ncompared with apples only. This apart, whereas the assessee’s sale transaction \nfetched a whopping Rs. 396.00 crores, ICRA sold computer software, as \ndepicted at APB 561, for a paltry Rs. 10,000/- and that too, juxtaposed with \nICRA’s total revenue of Rs. 193.8 crores for the year. Evidently, therefore, \nthere is no basis for making any comparison of the assessee with either Cignex \nDatamatix Technologies Ltd., or ICRA. \n17. \nUnder the circumstances, the authorities have not been able to lay their \nhands on any comparable entity, where the exclusive business carried on by the \nassessee is also undertaken, i.e., providing of pharmacovigilance services to the \npharmaceutical industry, or simply put, drug safety testing. Still further, the sale \ntransaction carried out by the assessee is of such a nature that it does not have \nany directly comparable uncontrolled transactions available. Else, the same \nwould obviously have been brought into play. \n \n18. \nThis being so, the question of the second important requirement, \nenvisaged under Rule 10C(referred to hereinabove), i.e., coverage and \nreliability of data does not even rise. Since in the absence of comparability, \nthere is no availability of data, the coverage and reliability thereof obviously \ncannot be considered. \n\n12 \n \n \n19. \nEvidently, the basis remains the same so far as regards the applicability of \nthe CUP and the TNMM. The transactions of the assessee undisputedly involves \nintangibles which are unique by their very nature. The CUP, on the other hand, \nrequires a very strict standard of comparability. As available and discussed, \nsuch similar, much less exact, data is nowhere to be seen. To reiterate, the \ncomparables applied by the authority are, in fact, no comparables at all. \nTherefore, the CUP method is not applicable. \n \n20. \nLikewise, in the absence of reliable data and due to lack of comparability, \neven the TNMM was wrongly applied. \n21. \nThe Other Method, on the contrary, has been specifically provided for to \nbe applied to scenarios akin to the one obtaining herein, this method having \nbeen introduced especially to broaden the scope of determination of arm’s \nlength price, as the sixth Method. Even the Institute of Chartered Accountants \nrecognizes the position that the Other Method may be selected as a most \nappropriate method for bench marking transactions involving sale of unique \nintangibles. It is nowhere the case of the authorities below that the transactions \nentered into by the assessee does not fall within the category of, firstly, \nintangibles, and then, unique intangibles, at that. The factum of the intangibles \ndealt in by the assessee being unique intangibles cannot be over stressed. It is \nevident from the position that even the authorities below could not find any \ncomparable for the same and the only two comparables retained ultimately, out \n\n13 \n \nof list of the 20 comparables originally chosen, are not even by far, in any \nmanner, comparable to the transactions entered into by the assessee, as \ndiscussed elaborately hereinabove. \nFurther, the position that it is only the Other Method which is best suited for \nunique intangibles, stands recognised also in the Guidance Note on Report \nunder section 92E of the Income Tax Act, 1961 (2022) issued by the Institute of \nChartered Accountants of India. The relevant extract thereof read as follows: \n'6.56 The introduction of the Other Method as the sixth method allows the use of 'any \nmethod' which takes into account (i) the price which has been charged or paid or (ii) \nwould have been charged or paid for the same or similar uncontrolled transactions, \nwith or between non-associated enterprises, under similar circumstances, \nconsidering all the relevant facts. The various data which may possibly he used for \ncomparability purposes could be: \n(a) \nThird party quotations/ invoices; \n(b) \nValuation reports: \n(c) Tender/Bid documents; \n \n……….. \n6.57 .... The wide coverage of the Other Method would provide flexibility in \nestablishing arm's length prices, particularly in eases where the application of the five \nspecific methods is not possible due to reasons such as difficulties in obtaining \ncomparable data due to uniqueness of transactions such as intangibles or business \ntransfers, transfer of unlisted shares, sale of fixed assets, revenue allocation/splitting, \nguarantees provided and received, etc. \n \n6.58 The application of the sixth method may be understood with the following \nexamples: \nIllustration A \n \nAE1 ltd. is an Indian Company. \n \n \nAE1 Ltd. owns certain registered patents which it has developed by undertaking \nresearch and development. \n \n \nIt is a subsidiary of AE2 Ltd., a foreign company. AE1 Ltd. has sold its registered \npatents to AE2 Ltd., for '50 crores. The price has been determined based on a \nvaluation report obtained from an independent valuer. \n \nThe sale of patents is a unique transaction and AE1 Ltd or AE2 Ltd. has not entered \ninto similar transactions with third parties and hence no internal or external CUP is \navailable. \n \n\n14 \n \nAE1 Ltd. may select the Other Method as the most appropriate method and use the \nindependent valuation report for comparability purposes.\" \n \n \nPara 6.57 of the Guidance Note clearly states, inter alia that difficulties in \nobtaining comparable data due to unique transactions such as intangibles would \nrequire application of the Other Method for establishing arm’s length price. \n22. \nThe above position remains undisputed. \n \n23. \nStill further, even the Income Tax Department itself accepts that it is the \nOther Method under which the arm’s length valuation of intangibles would fall. \nThe Department, in its guidance on the Other Method, as published on the \nwebsite, states (relevant portion) as follows: \n\"7.10-ANYOTHER METHOD-RULE 10AB \n \nA few examples of any other method are: \n1. Arm's length valuation of intangibles by Income method or capitalisation method \n(Discounted Cash flow Methods) \n2. Valuation of unlisted shares which are transferred...\" \n \n23.1 The Department has argued with much emphasis and vehemence that it is \nonly as a last resort that the Other Method may be taken recourse to. This, \nhowever, is found to be not the correct position in law. As noted hereinbefore, \nRule 10C of the Rules unequivocally lays down that it is the method best suited, \nwhich will be the most appropriate method for the purposes of section 92C(1). \nThe application of a particular method would, in other words, depend solely on \nthe level or measure of reliability of a particular method qua a particular \ntransaction. This aspect has been dealt with earlier in this order, while \n\n15 \n \ndiscussing as to why the CUP, or the TNMM, or the CPM, is not applicable. \nTherefore, the OM is not a residual method, as the Department would have us \nbelieve. Rather, all the methods, including the OM are at parity with each other. \nIt is only that it is the method which is the most suited to a particular scenario, \nwhich needs must be applied. And herein, it is the OM which is the one which is \nthe most suited, to the transaction entered into by the assessee. ‘Toll Global \nForwarding India(P) Ltd. Vs. DCIT’; 51 Taxmann.com 342, rendered by the \nDelhi ITAT is directly on the issue. It holds that ‘the other method is not a \nresidual method in the sense that it is not a condition precedent for the \napplication of this method that all other methods, i.e., the methods set out in \nsections 92C(1(a) to 92C(1)(e) and as elaborated under rule 10B(1)(a) to (e), \nmust fail and only then this method can be applied. This method is at par with \nall other methods… Therefore, as long as the method covered by rule 10AB, \nwhich is duly covered by section 92C(1) satisfies the test of being the ‘most \nappropriate method’, it can be applied to a fact situation.’ \n24. \nBesides, the assessee is also right in contending that the valuation report \nof the intangibles was an independent valuation report carried out by an \nindependent valuer, which has not been called in question by the authorities \nbelow. Rather, the same was rejected, holding that it was obtained at the time of \nacquiring the business, whereas the sale of the intangibles was made at a later \ndate. Now, the undisputed factual position is that it was on 13/04/2015, that the \nbusiness of QSI was acquired by the assessee and it was on this very date, that \n\n16 \n \nthe deed of assignment of the intangibles by the assessee to Parexel Ireland was \nentered into. The sale proceeds were received immediately thereafter, i.e., \nwithin five business days. This being so, the reason for the rejection is but only \na specious reason and as such, the rejection of the independent valuation report \nis bad in law, particularly when the contents of the report, though having been \ntaken seisin of by the authorities, could not be dubbed as unsustainable. \nMoreover, such a valuation report can be used for bench marking under the \nOther Method. Apparently, the dates of the purchase and sale transactions were \nnot correctly appreciated. It was this that led to the valuation report being \nerroneously rejected. \n24.1 In ‘Social Media India Ltd. Vs. Asst. CIT’, vide order (ACLPB-7 to 18) \ndt. 04/10/2013, passed by the ITAT, Hyderabad Bench, for A.Y. 2008-09, in \nITA No. 1711/Hyd/2012, it has, on the issue, been held that in the absence of \nany counter report by the TPO/DRP, or separate valuation done by the TPO, the \nassessee’s valuation had to be accepted, as it was supported by an independent \nvaluer, who determined the cost price on the actual expenditure incurred by the \nAE. The position is much the same in the case at hand. There is no counter \nreport by the TPO/DRP. There is no separate valuation done by the TPO. The \nassesee’s valuation, on the other hand, is a valuation carried out by the \nindependent valuer. No decision opposed to ‘ Social Media India Ltd.’ has been \ncited before us. \n \n\n17 \n \n24.2 Then, in ‘TPG Growth II Markets Ptd. Ltd. Vs. DCIT’, vide order \n(ACLPB 19- 55) dt. 06/06/2023, passed by the ITAT, Mumbai Bench for A.Y. \n2017-18, in ITA No. 1387/Mum/2022, applicability of the Other Method has \nbeen considered. It has been held that Rule 10B of the Rules deals with the \nmanner of determination of ALP using different methods; that in that case, \napplication of the CUP and the Other Method was up for consideration; that as \nregards the Other Method, Rule 10B(1)(f) r.w. Rule 10AB provides that the \nOther Method shall be any method which takes into account the price which has \nbeen charged / paid or would have been charged / paid, for the same or similar \nuncontrolled transaction with or between non associated enterprises, under \nsimilar circumstances, considering all the relevant facts, for example, a \nvaluation of shares obtained from an independent expert determining the value \n/ price of shares that would have been charged in case of purchase / sale of such \nshares by two independent third parties. As discussed, the valuation report of \nthe assessee is a report of an independent valuer. The valuation report, as \nconsidered, was not found fault with on merits. The same, thus, ought to have \nbeen used for benchmarking under the Other Method, accepting the same as a \nvalid comparable. ‘TPG Growth II Markets Pte. Ltd.’ (supra) has not been \nshown to be not applicable to the facts of the present case, nor has any decision \nopposed to it been brought to our notice. \n25. \nFor the above discussion, it is held that the ld. DRP went wrong in \nconfirming the action of the TPO in proposing an adjustment of Rs. \n\n18 \n \n1,31,29,52,199/- pertaining to the international transaction of sale of intangible \nassets by the assessee to its AE, by wrongly imputing the mark up of 33.13% on \nthe sale value. We hold that it is the Other Method which is required to be \nadopted as the most appropriate method for computation of the arm’s length \nprice of the transaction of sale of intangible assets by the assessee to Parexel \nIreland. In accordance with the same, the TP adjustment of Rs. 131,29,52,199/- \nis ordered to be deleted. Ground Nos. 2 to 4, therefore, are accepted. \n26. \nGround No. 5 & 6 are consequential. \n27. \nIn view of the decision on merits, the additional ground is not required to \nbe gone into. The parties were also not called upon to argue the merits thereof. \n28. \nIn the result, the appeal of the Assessee is partly allowed. \nOrder pronounced in the open Court on 28/10/2024. \n Sd/- \n \n \n \n \n \n \n Sd/- \n क\nृणवȶ सहाय \n \n \n \n \n \n आकाश दीप जैन \n (KRINWANT SAHAY) \n \n \n \n \n \n (AAKASH DEEP JAIN) \nलेखा सद˟/ ACCOUNTANT MEMBER उपाȯƗ/VICE PRESIDENT\n \n \nAG \n \nआदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : \n1. अपीलाथŎ/ The Appellant \n2. ŮȑथŎ/ The Respondent \n3. आयकर आयुƅ/ CIT \n4. आयकर आयुƅ (अपील)/ The CIT(A) \n5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, \nCHANDIGARH \n6. गाडŊ फाईल/ Guard File \nआदेशानुसार/ By order, \nसहायक पंजीकार/ Assistant Registrar \n"
Mehul