Income Tax Appellate Tribunal - Mumbai
Hitachi Data Systems India P.Ltd, ... vs Asst Cit 14(2)(1), Mumbai on 4 May, 2018
IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 आयकर अपीलीय अिधकरण "के"
ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "K" BENCH, MUMBAI ी श जीत दे , ाियक सद एवं ी मनोज कुमारअ वाल, ले खा सद के सम ।
BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./I.T.A. No.1012/Mum/2016 (िनधा रणवष / Assessment Year: 2011-12) Assistant Commissioner of Income Hitachi Data Systems India Pvt. Ltd.
Tax-14(2)(1) 6th Floor, C-Wing, Laxmi Tower
बनाम/ Bandra Kurla Complex
Room No. 474, 4th Floor Vs .
Aaykar Bhawan, M.K.Road Bandra (East)
Mumbai - 400 020 Mumbai - 40 051
थायीले खासं . /जीआइआरसं . /P AN/GIR No. AABCH-4372-C (अपीलाथ!/Appellant) : ("#थ! / Respondent) & CO. No.54/Mum/2016 (िनधा रणवष / Assessment Year: 2011-12) Hitachi Data Systems India Pvt. Ltd. Assistant Commissioner of 6th Floor, C-Wing, Laxmi Tower Income Tax-14(2)(1) Bandra Kurla Complex बनाम/ Room No. 474, 4th Floor Bandra (East) Vs .
Aaykar Bhawan, M.K.Road Mumbai - 40 051 Mumbai - 400 020 थायीले खासं . /जीआइआरसं . /P AN/GIR No. AABCH-4372-C (अपीलाथ!/Appellant) : ("#थ! / Respondent) Revenueby : V.Jenardhanan, Ld. DR Assessee by : M.P.Lohia & Nikhil Tiwari, Ld. ARs सुनवाईकीतारीख/ : 03/05/2018 Date of Hearing घोषणाकीतारीख / : 04 /05/2018 Date of Pronouncement आदे श / O R D E R 1 IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 Per Manoj Kumar Aggarwal (Accountant Member)
1. The captioned appeal by revenue for Assessment Year [AY] 2011-12 contest the final assessment order dated 31/12/2015 passed u/s 143(3) read with Section 144C(13) of the Income Tax Act, 1961 by Ld. Assistant Commissioner of Income Tax-14(2)(1) pursuant to the directions of Ld. Dispute Resolution Panel [DRP] wherein the returned income of Rs.376.08 Lacs e-filed by the assessee on 29/09/2011 has been accepted. The revenue is aggrieved by relief provided by Ld.DRP to the assessee against certain Transfer Pricing [TP] Adjustment as proposed by Ld. Transfer Pricing Officer [TPO] in an order u/s 92CA(3). The assessee, challenging the directions of Ld. DRP on certain issues relating to transfer pricing adjustment, has filed cross-objections against the same.
2. The registry has noted that the appeal has been filed with a delay of 37 days. However, upon perusal of Form No. 36 filed by the revenue, it is noted that the date of communication of order appealed against in Column No. 9 has wrongly been mentioned as 24.11.2015 whereas the date of passing of impugned order is 31/12/2015. The same has been clarified by the revenue during hearing before us. Prima facie, the appeal is in order and therefore, we proceed to dispose-off the same on merits.
3.1 Facts in brief are that certain International transactions as carried out by the assessee during the impugned AY with its Associated 2 IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 Enterprises [AE] as reported in Form No. 3CEB were referred for determination of Arm's Length Price [ALP] to Ld. TPO u/s 92CA(1) on 17/12/2013. The assessee was engaged in the business of providing marketing and support services like promoting the sales of AE's products in India, marketing presentation to potential customers of its AE, general corporate communications, public relations, advertisement and channel communications among other activities. The dispute under appeal is related with determination of ALP of marketing support services fees of Rs.35.66 crores received by the assessee from its AE which has been benchmarked in the Transfer Pricing [TP] study using Transactional Net Margin method [TNMM], Profit Leven Indicator [PLI] being operating profit / operating cost [OP/OC] and the assessee being the tested party. The assessee computed its own PLI of 9.40% as against mean PLI of 10.36% as reflected by six comparable entities and therefore, claimed the transactions to be at ALP. The Ld. TPO while accepting assessee's five comparables, added six more comparables and computed mean PLI of eleven comparables as 15.47% as against assessee's PLI of 9.40% and worked out TP adjustment of Rs.240.54 Lacs against the same.
3.2 Incorporating the order of Ld. TPO, draft assessment order u/s 144C(1) dated 23/03/2015 was passed, which was assailed by the assessee with partial success before Ld. DRP vide directions u/s 3 IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 144C(5) dated 02/11/2015. The Ld. DRP directed for exclusion of one comparable namely Empire Industries Ltd. as selected by Ld. TPO by making following observations:-
Apparently, the TPO has taken segmental result of trading and indenting activity. Looking at the fact that the assessee is providing marketing support services to its AE whereas Empire industries Ltd. is earning 40% of its revenue from trading activities, we are of the opinion that the companies are functionally different and therefore, the AO is directed to drop Empire Industries Ltd. from the list of comparables.
The exclusion of the said comparable has resulted into TP adjustment being reduced to 'Nil'. Aggrieved, the revenue is in further appeal before us.
4. The Ld. Departmental Representative [DR] supported the stand of Ld. TPO whereas Ld. Authorized counsel for Assessee [AR], relying on certain judicial pronouncements, supported the stand of Ld. DRP by submitting that the said entity was not comparable to the assessee and therefore, rightly been excluded by Ld. DRP.
5. We have heard the rival contentions and perused relevant material on record. Upon due consideration, we find that the methodology used to benchmark the transactions is TNMM which require only broad functional comparability of the entities. However, at the same time, it is also imperative that entities being selected as comparable to carry out TP study are functionally similar to the assessee on broad parameters. A predominantly trading entity could not be compared with predominantly service providing entity. It is undisputed fact that the impugned entity namely Empire Industries 4 IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 Limited was into trading segment and a major chunk of its revenue was coming from trading activity as against the assessee, which was predominantly a service providing entity. Therefore, finding the stand of Ld. DRP quite fair and reasoned one, we dismiss Ground Numbers 1 & 2 of revenue's appeal.
6. In Ground Number 3, the revenue is aggrieved by treatment of certain AMC expenses as prior period expenditure while arriving at assessee's margins. However, upon perusal of orders of lower authorities, we find that no such adjustment is proposed / envisaged and the ground seems to have been raised erroneously. Therefore, the same stand dismissed in limine. Rest of the grounds is general in nature.
7. Since, we have already dismissed revenue's appeal as above, the cross-objections raised by the assessee becomes merely academic in nature and therefore, dismissed.
8. Finally, the appeals as well as cross-objection stand dismissed.
Order pronounced in the open court on 04th May, 2018.
Sd/- Sd/-
(Saktijit Dey) (Manoj Kumar Aggarwal)
या यक सद य / Judicial Member लेखा सद य / Accountant Member मंब ु ई Mumbai; !दनांक Dated : 04.05.2018 Sr.PS:-Thirumalesh 5 IT(TP)A No.1012/Mum/2016 & CO. No. 54/Mum/2016 Hitachi Data System India Private Limited Assessment Year:2011-12 आदे शक त ल पअ े षत/Copy of the Order forwarded to :
1. अपीलाथ:/ The Appellant
2. >?यथ:/ The Respondent
3. आयकरआयुCत(अपील) / The CIT(A)
4. आयकरआयुCत/ CIT- concerned
5. Kवभागीय> त नOध, आयकरअपीलQयअOधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाडUफाईल / Guard File आदे शानस ु ार/ BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपील.यअ/धकरण, मंब ु ई / ITAT, Mumbai 6