Income Tax Appellate Tribunal - Delhi
Ameriprise India Pvt. Ltd., Gurgaon vs Assessee on 27 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR
ITA No. 5694/Del/2011
Asstt. Yr: 2007-08
Ameriprise India Pvt. Ltd., Vs. DCIT Cir. 1(1),
Plot no. 81, Sector 32, New Delhi.
Gurgaon.
PAN/GIR No. AAFCA3489B
(Appellant) ( Respondent )
Appellant by: Sh. G.C. Srivastava Adv.; &
Ms. Priti Bhardwaj Adv.
Respondent by : Sh. Piyush Jain CIT DR
ORDER
PER R.P. TOLANI, J.M :
This is assessee's appeal against the order of DCIT dated 27-10-2011 passed u/s 143(3)/r.w.s. 144C of the I.T. Act, 1961 (pursuant to DRP directions dated 10-10-2011), relating to A.Y. 2007-08. Following grounds are raised:
"That On the facts and circumstances of the case and in law,
1. The Assessing Officer ("AO")/ Dispute Resolution Panel ("DRP") has erred in making an addition of Rs. 21,856,752 to the total income of the appellant on account of adjustment in the arm's length price of the international transaction entered by the appellant with its associated enterprises.
2. The TPO/AO has erred in rejecting the comparables selected by the appellant and in conducting a fresh search and selecting a new set of comparables for the ITA 5694.Del/10
2 Ameriprise India Pvt. Ltd.
determination of the ALP of the impugned international transaction.
3. The TPO/ AO has erred in
(a) Rejecting the data used by the appellant which was available to it at the relevant time and proceeding to use the data which was available only at the time of TP audit and
(b) Using data for a single year (for FY 2006-07 only) instead of multiple year data (for the period FY 2004-05 & FY 2005-06 & FY 2006-07).
4. The TPO/AO has erred by rejecting certain comparable companies identified by the appellant for untenable grounds such as:
(a) Turnover < Rs. 1 Crore as a comparability criterion.
(b) Difference in accounting year.
(c) Misconceived difference in economic performance.
5. The TPO/AO has erred in exercising his powers under section 133(6) of the Act to obtain information which was not available in public domain and relying on the same for comparability purposes.
6. The TPO/AO has erred by selecting certain companies which are earning super normal profits as comparable to the appellant and adding certain companies in the final set of comparables on an ad hoc basis.
7. The TPO/AO has erred by not making suitable adjustments to account for differences in the risk profile of the appellant vis a vis the comparables."
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2. Learned counsel for the assessee pleaded that assessee submitted various comparables to justify its arms length pricing. TPO instead of examining the comparables or using public domain data, which is the recognized method, issued notices u/s 133(6) calling T.P. information from individual companies. The information provided by the TPO office regarding the comparable companies using power to obtain information u/s 133(6) of the Act was not confronted to the assessee. Thus, the assessee had to face various difficulties in meeting comparables proposed by TPO for its Transfer price working. Based on the limited information obtained from the companies to whom notices u/s 133 of the Act were sent, assessee has not been given proper opportunity. Without evaluating all the comparability factors/ parameters as specified in the Income-tax Rules, 1962, it would not be possible to consider these companies as comparables. Thus, TPO has adopted a distorted process while making T.P. additons. 2.1. While the AO in the initial phase requested for information from the identified companies mentioned in its notice, the TPO has not gathered complete information from these companies as specified under Rule 10B(2) for ascertaining comparability analysis. Besides, in case of certain companies considered as comparable by the TPO, the responses filed by the companies do not answer all the questions asked in the notice served u/s 133(6) of the Act.
2.2. It is settled proposition that if the TPO proposes to use information gathered u/s 133(6) of the Act, it is necessary that the TPO uses the powers conferred by this provision to obtain or disclose all information required for judging comparability of a transaction rather than obtaining or disclosing to the assessee only information on a selective and arbitrary basis. Further, all the information, required for ascertaining comparability, obtained by the ITA 5694.Del/10 4 Ameriprise India Pvt. Ltd.
TPO, should be shared with the assessee in order to ensure its completeness and cross verify the claims made by the TPO.
2.3. Reliance is placed on the following judgments of the ITAT:
- M/s Genisys Integrating Systems (India) Pvt. Ltd. [ITA no.
1231(Bang.)/2010].
- M/s Kodiak Networks (India) Pvt. Ltd. [ITA no. 1413/Bang./2010]
- M/s Centillium India Pvt. Ltd. Vs. DCIT [ITA no. 1354/Bang/2010]
- M/s Electronics for Imaging India Pvt. Ltd. Vs. DCIT [ITA no.
1171/Bang/2010] 2.4. It is pleaded that the entire exercise carried out by the TPO is arbitrary and without giving appropriate opportunity to the assessee. The crucial information relied on by TPO as specified u/s 10B(2) for judging comparability was not provided to the assessee. The allegation of TPO that assessee was not able to respond to the issue of margins earned by the comparable companies, is baseless and contrary to record Ld. counsel pleads that the TP adjustment made thus need to be reversed. Alternatively, if ITAT deems it fit, then the matter may be set aside, restored back to the file of AO with directions to TPO to make the transfer pricing report afresh, after giving the assessee an opportunity of being heard about the 133(6) information in respect of comparables.
3. Ld. DR, on the other hand, supported the orders of lower authorities.
4. We have heard rival contentions and gone through the relevant material available on record. It emerges from the record that:
(i) Assessee was not provided opportunity to meet out the comparability factors and the parameters as prescribed by relevant T.P. rules in respect of 133(6) companies.
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(ii) TPO has completed T.P. report without gathering complete information as mandatory rule 10(B).
4.1. While judging the comparability, the assessee needs to be made aware about the relevant T.P. information, in the absence whereof, the order becomes deficient on the principles of natural justice. Since the DRP system is new and the ITAT virtually become first appellate authority, in these circumstances it will be harsh to reverse the T.P. adjustments. Consequently, in the interest of natural justice and fair play, we accept the alternative submission of the assessee and relying on the above referred ITAT judgments, we are inclined to set aside the matter back to the file of AO/TPO to make a proper TP report and decide the issues after giving the assessee an opportunity of being heard in accordance with law. We order accordingly.
5. In the result, assessee's appeal is allowed for statistical purposes only.
Order pronounced in open court on 26-03-2012.
Sd/- Sd/-
( T.S. KAPOOR) ( R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26-03-2012.
MP
Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR
ITA 5694.Del/10
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