Income Tax Appellate Tribunal - Panji
M/S. Everest Business Advisory India ... vs Dcit, New Delhi on 25 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I-2", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.5211/Del/2014
Assessment Year : 2009-10
Everest Business Advisory India DCIT, Circle- 11(1),
Private Limited, New Delhi.
Vs.
A-1/B-27, Janak Puri,
New Delhi.
PAN : AABCE2871R
(Appellant) (Respondent)
Appellant by : Ms. Vandana Bhandary, Adv.
Respondent by : Shri H. K. Choudhary, CIT-DR
Date of hearing : 14-09-2017
Date of pronouncement : 25-09-2017
ORDER
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 31.07.2014 passed by the CIT(A)-XX, New Delhi relating to assessment year 2009-10.
2. Facts of the case, in brief, are that the assessee is a company engaged in the business of strategic advisory services on outsourcing and providing independent research on outsourcing. It filed its return of income on 29.09.2009 declaring total income of Rs.Nil. However, the book loss has been shown at Rs.1,79,32,633/- which was revised on 15.10.2010 declaring Nil income. Since the assessee company has entered into the international transactions, the 2 ITA No.5211/Del/2014 Assessing Officer made a reference to the TPO to determine the arm's length price of such transactions u/s 92CA of the I.T. Act. The TPO in her order dated 29.01.2013 computed the arm's length price of the international transaction for the impugned assessment year at Rs.5,56,72,149/- instead of Rs.5,10,30,585/- as recorded by the assessee in the books of account. The difference in book value of international transaction of the arm's length price which has been worked out by the Assessing Officer is as under :-
(Amount in Rs.) Operation Cost - Total 44,374,421 Arm's Length Price at a Margin of 25.46% 55,672,149 Price received 51,030,585 105% of International Transaction 53,582,114 Proposed Adjustment u/s 92CA 46,41,564
3. The Assessing Officer issued the show-cause notice asking the assessee to explain as to why the adjustment of Rs.46,41,564/- should not be made.
Rejecting the various explanations given by the assessee and referring to the elaborate order passed by the TPO, the Assessing Officer made adjustment of Rs.46,41,564/- being the difference in the value of the international transaction and the arm's length price of the transaction.
4. The assessee filed an appeal before the CIT(A) who gave partial relief to the assessee.
5. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal with the following grounds of appeal :-
3ITA No.5211/Del/2014
"That on the facts and circumstances of the case, and in law;
1. That the CIT(A) has erred on facts and in law in upholding the order of AO. That on the facts and circumstances of the case the order passed by the AO and upheld by the CIT (A) is bad in law and void ab initio.
2. The Ld. CIT-A has erred both in facts and in law in confirming the action of the Ld. Assessing Officer ("AO") as the reference made by the Ld. AO suffers from jurisdictional error. The Ld. AO has not recorded any reasons in the draft assessment order based on which he reached the conclusion that it was 'necessary or expedient' to refer the matter to the Ld. Transfer Pricing Officer ('TPO') for computation of the arm's length price ('ALP'), as is required under section 92CA(1) of the Income-tax Act 1961 ('Act').
3. The ld AO erred in law and on facts in increasing the income of the appellant by Rs 46,41,564/- and ld CIT (A) erred in law and on facts in giving only partial relief and sustaining the comparables chosen by AO for arm's length determination. Further, the Ld CIT (A) erred in law and on facts in not directing the AO that the case of the appellant falls within + /-5% range as permitted by proviso to section 92C(2) and therefore be considered at Arm's length.
4. The Ld. CIT-A has erred both in facts and in law in confirming the action of the Ld. TPO in:
4.1 not appreciating that the assessee had prepared the detailed contemporaneous Transfer Pricing documentation bona fide and in compliance with the Act and Income Tax Rules 1962 ("the Rules"). 4.2 In rejection of the filters applied by the Assessee in search for comparables and in arbitrary adoption of the additional filters. 4.3 In disregarding the functional and risk profile of the Assessee and comparing it with companies which have an entirely different functional, risk profile, having varied cost structure and inconsistent performance. 4.4 In not appreciating the risk free nature of the Assessee and not granting adjustment on account of differential risk borne by the comparables Also, in not giving the benefit of working capital adjustment.
4.5 by treating the assessee as a profit center and not considering the fact that the assessee is operating as a cost plus unit and thereby characterizing the appellant as a full risk bearing entrepreneur.
4.6 In using single year data for computation of margin of comparable companies by rejecting the multiple year data used by the Assessee. 4.7 Computing the profit margins of the comparable companies by taking arbitrary decisions in respect of inclusion/ exclusion of certain items of cost/ revenue and arithmetical errors;
5. That the explanation given and the evidence produced, material placed and available on record has not been properly considered and judicially interpreted.
6. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in charging interest u/s 244A & 234D of the Act and CIT(A) erred in upholding the same.
The above objections are without prejudice to each other. The assessee craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before 4 ITA No.5211/Del/2014 or during the hearing."
6. Ld. counsel for the assessee only pressed ground no.3 and submitted that the following details to substantiate that the case of the assessee falls within +/- 5% range prescribed by proviso to section 92C(2) of the I.T. Act :-
1.1. COMPARABLES AFTER GIVING EFFECT TO THE ORDER OF CIT(A):
PARTICULARS OP/OC
COSMIC GLOBAL 48.2
INFOSYS BPO LTD. 15.83
ICRA ONLINE 19.81
MICROGENETIC 9.98
ADITYA BIRLA 0.5
1.2. +/-5% BENEFIT AS PER PROVISO TO SEC 92C(2):
OPERATING COST OF ASSESSEE 4,43,74,421 ALP AT 118.864% OVER OPERATING COST 5,27,45,212 +5% (UPPER LIMIT) 5,53,82,472
-5% (LOWER LIMIT) 5,01,07,951 PRICE OF INTERNATIONAL TRANSACTION 5,10,30,585
7. She further submitted that there is a typographical error in the order of the TPO at page 3 wherein it has wrongly been stated that OP/OC is 13% whereas the same is 15% which is very clearly coming from the figures given in the table at page no.3 of the order of the TPO. She accordingly submitted that the matter may be restored to the file of the Assessing Officer with a direction to allow the benefit of +/- 5%.
8. So far as other grounds are concerned, she submitted that she is not pressing the same at present since the assessee succeeds on ground no.3. 5 ITA No.5211/Del/2014
9. Ld. DR has no object for the issue being set-aside to the file of the TPO with direction to verify as to whether the case of the assessee falls within +/- 5% after giving appeal effect.
10. In view of the above submission made by both the sides, we restore the issue to the file of the Assessing Officer with direction to verify as to whether the price of international transactions is within +/- 5% range as prescribed by proviso to section 92C(2) of the I.T. Act. The Assessing Officer shall decide the issue in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly.
11. In the result, the appeal filed by the assessee is allowed in the terms indicated above.
Order pronounced in the open court on 25th September, 2017.
Sd/- Sd/-
Sd/- Sd/-
(KULDIP SINGH) (R. K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25-09-2017.
Sujeet/ Binita
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi
6
ITA No.5211/Del/2014
S.No. Details Date Initials Designation
1 Draft dictated on 14.09.2017 Sr. PS/PS
2 Draft placed before author 14.09.2017 Sr. PS/PS
Draft proposed & placed before the 25.09.2017
3 JM/AM
Second Member
Draft discussed/approved by Second 25.09.2017
4 AM/AM
Member
5 Approved Draft comes to the Sr. PS/PS 25.09.2017 Sr. PS/PS
6 Kept for pronouncement on 25.09.2017 Sr. PS/PS
7 Date of uploading of Order 25.09.2017 Sr. PS/PS
8 File sent to Bench Clerk 25.09.2017 Sr. PS/PS
Date on which the file goes to the Head
9
Clerk
10 Date on which file goes to the A.R.
11 Date of Dispatch of order