Income Tax Appellate Tribunal - Delhi
American Express (India) Pvt. Ltd., New ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'C': NEW DELHI
BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA No. 295/Del/2012
Assessment Year: 2007-2008
American Express (India) DCIT,
P. Ltd., Circle 1(1),
First Floor, Mercantile Vs. New Delhi.
House, 15, Kasturba
Gandhi Marg,
New Delhi.
AAACA8163F
(Appellant) (Respondent)
Appellant by : S/Sh. Vijay Iyer, Manoneet Dalal, Jagdeep Singh
Respondent by : Sh. Piyush Jain, Sr. DR
ORDER
PER S.V. MEHROTRA, A.M.
This appeal filed by the assessee is directed against the order of ld. AO dated 31.10.2011 for A.Y. 2007-08 passed in terms of directions of Dispute Resolution Panel (DRP) u/s 144C(5) dated 10.08.2011.
2. Brief facts of the case are that the assessee company, a service provider, filed its return of income declaring income of Rs. 66,65,99,500/-. The assessment was completed at total income of Rs. 162,46,39,575/- after making following additions: -
i) transfer pricing adjustments;
ii) withdrawal of 10A deduction of Rs. 40,71,12,732/-.ITA No. 295/D/2012 2
3. Both these adjustments were made by the AO on the basis of directions given u/s 144C(5) by Dispute Resolution Panel (in short "DRP").
4. Being aggrieved with the order of AO passed u/s 143(3) read with sec. 144C, the assessee is in appeal before us and has taken following grounds of appeal: -
1. "The final assessment order dated October 31, 2011 passed by the Deputy Commissioner of Income Tax, Circle 1(1), New Delhi ('Learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel ('Hon'ble DRP'), draft asstt. order dated December 20, 2010 passed by Learned AO and the order dated October 26, 2010 passed by Additional Commissioner of Income Tax, Transfer Pricing-1(1), New Delhi ('Learned TPO'), are bad in law and void-ab-initio.
2. That on facts and in law, the ld. AO has erred in computing the total income of the Appellant at Rs.
1,624,639,580 as against the returned income of Rs. 666,599,500.
Part I - Transfer pricing grounds of appeal
3. That the Statutory onus on the ld. TPO to establish that an Appellant's case is covered under any of
(a) to (d) clause of sec. 92C(3) of the Act has not been discharged by the ld. TPO.
4. That on facts and in law, the ld. TPO/AO have erred in rejecting the economic analysis undertaken by the appellant and conducting a fresh search to identify certain companies as comparable to the appellant.
5. That on facts and in law, the ld. TPO/AO have erred by determining the arm's length margins/prices using only FY 2006-07 data which was not available to the appellant at the time of complying with the TP documentation requirements.
6. The TPO erred by applying inappropriate additional filters for selecting/rejecting companies as comparable to the appellant.
ITA No. 295/D/2012 37. That on facts and in law, the ld. TPO/AO have erred in cherry picking comparables to accomplish pre-conceived conclusions, with the sole objective of rejecting comparables selected by the appellant and arriving at skewed results.
8. That on facts and in law, the ld. TPO/AO have erred by selecting certain companies which are earning super normal profits as comparable to the appellant.
9. That on facts and in law, the ld. TPO/AO have erred by exercising his powers u/s 133(6) of the I.T. Act, 1961 ('the Act') to obtain information which was not available in public domain and relying on the same for comparability purposes.
10. That the ld. TPO has failed to make appropriate adjustments to account for differences in varying risk profile of the appellant vis-à-vis the comparables and in the process also ignored Indian transfer pricing regulations and judicial precedence.
11. That on facts and in law, the ld. TPO/AO have erred by not considering that the adjustment to the arm's length price, if any, should be limited to the lower end of the 5 percent range as the appellant has the right to exercise this option under the pre- amended second proviso to section 92C(2) of the Act.
Part II - Corporate tax grounds of appeal
12. That on the facts of the case and in law, the Hon'ble DRP has erred in confirming and accordingly, the ld. AO has erred in denying the deduction u/s 10A of the Act amounting to Rs. 407,112,732 in respect of the AEGSC (STP) unit, set up by the appellant during FY 2002-03 on the alleged ground that the said STP unit was set up after splitting up its existing business of FCE (EOU) unit.
Part III - General grounds of appeal
13. Without prejudice to the above ground, the Hon'ble DRP has erred in confirming the conclusions drawn by the ld. AO in levying interest ITA No. 295/D/2012 4 u/s 234B and 234D of the Act while completely disregarding the provisions of the Act and the judicial precedents.
14. That on the facts and circumstances of the case and in law, the Hon'ble DRP has erred in confirming and accordingly, the ld. AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act."
5. Ground no. 1 & 2 are general and, therefore, do not call for any adjudication.
6. Brief facts apropos ground nos. 3 to 11 are that a reference u/s 92CA was made by the Assessing Officer to Transfer Pricing Officer for determination of Arm's Length Price of International Transactions undertaken by the assessee with the Associated Enterprise. TPO passed the order u/s 92CA(3), wherein he made the upward adjustment of Rs. 55,99,65,116/- to the income of the assessee, being the difference between Arm's Length Price and the price charged by the assessee.
7. After considering the assessee's reply, the AO passed the draft order and proposed the addition of Rs. 55,99,65,116/-. The assessee filed objections before DRP, which after considering them, directed the TPO to recompute ALP as per directions.
8. Ld. Counsel for the assessee submitted that TPO had obtained information from companies u/s 133(6) which was not completely provided to assessee.
9. Ld. Counsel for the assessee submitted that in identical circumstances in the case of Agilent Technologies (International) Pvt. Ltd. vs. ACIT, ITA No. 5352/Del/2011 dated 15.06.2012, the matter has been ITA No. 295/D/2012 5 restored back to the file of AO. He submitted that it was incumbent upon TPO to furnish such information to the assessee before arriving at ALP.
10. Ld. DR referred to page 55 of Transfer Pricing Officer's order and pointed out that TPO has observed that all the information received from the companies was provided to the tax payer for its comments.
11. In the rejoinder, ld. Counsel for the assessee submitted that in case of the following companies the information gathered u/s 133(6) was not provided. In this regard ld. Counsel has filed a detailed chart, which is kept on file: -
"S.No. Company Name
1. Accentia Technologies Ltd. (Seg.)
2. Aditya Birla Minacs Worldwide
3. Allsec Technologies Ltd.
4. Apex Knowledge Solutions Ltd.
5. Appollo Healthstreet Ltd.
6. Asit C. Mehta Financial Services Ltd.
7. Bodhtree Consulting Ltd. (Seg.)
8. Caliber Point Business Solutions Ltd.
9. Cosmic Global Ltd.
10. Datamatics Financial Services Ltd. (Seg.)
11. Eclerx Services Ltd.
12. Flextronics Software Systems Ltd. (Seg.)
13. Genesys International
14. HCL Comnet Systems & Services Ltd. (Seg.)
15. ICRA Techno Analytics Ltd.
16. Informed Technologies India
17. Infosys BPO Ltd.
18. Isservices India Pvt. Ltd.
19. Maple eSolutions Ltd.
20. Mold-Tek Technologies Ltd. (Seg.)
21. R. Systems International Ltd.
22. Spanco Ltd. (Seg.)
23. Triton Corp. Ltd.
24. Vishal Information Technologies Ltd.
25. Wipro Ltd. (Seg.)
26. Apex Advance Technologies Private Limited"ITA No. 295/D/2012 6
12. Ld. Counsel submitted that same CD was provided in the case of Agilent Technologies (International) and in case of assessee in respect of information obtained u/s 133(6). He submitted the data in respect of aforementioned companies which was utilized by TPO was missing in CD.
13. We have considered the submissions of both the parties and have perused the record of the case. We find that Tribunal has observed as under in the case of Agilent Technologies vide ITA No. 5352/Del/11:
"5. We have heard rival contentions and gone through the relevant material available on record. From the material placed before us it emerges that TPO has utilized information for comparability from the companies which are not in public domain. The information has been obtained by issuing notices u/s 133(6) and the gathered information is not supplied to assessee to enable it to meet the objections. The principle of natural justice enunciate that before proceeding to use some material against assessee, the same should be supplied and the issue should be decided after hearing the objections in this behalf. This view is supported by the coordinate benches of the ITAT in the cases of M/s Genisys Integrating Systems (India) Pvt. Ltd. and M/s Kodiak Networks (India) Pvt. Ltd. (supra). Consequently, we are of the view that such information gathered by the TPO u/s 133(6) should be provided to the assessee to enable it to verify the comparable figures with a right to file objection/apply thereon. The TPO shall arrive at the ALP after providing the assessee adequate opportunity of being heard in accordance with law. Consequently, we set aside the matter back to the file of AO/TPO accordingly."
14. Respectfully following the aforementioned decision, we set aside the matter back to the file of AO/TPO in terms of directions given in the said order.
15. In the result, ground nos. 3 to 11 are allowed for statistical purposes.
ITA No. 295/D/2012 716. Brief facts apropos ground no. 12 are that assessee had claimed deduction of Rs. 40,71,12,732/- u/s 10A. The AO disallowed the assessee's claim following earlier years order as the matter was subjudice.
17. Ld. Counsel filed before us a copy of order in assessee's own case for AY 2003-04 and pointed out that Tribunal has held that AEGSC unit is a newly set up unit and has not been created by splitting up of the existing unit. He, therefore, submitted that assessee was entitled for deduction u/s 10A.
18. We have considered the submissions of both the parties and have perused the record of the case.
19. We find that Tribunal in assessee's own case for AY 2003-04 has held as under: -
"36. We have heard both the parties and perused the material placed before us. We find that the CIT(A) has considered all the parameters which may be necessary for adjudicating whether the set up of the new unit is by way of splitting up of the existing business or it is a new set up over and above the existing set up. He has recorded the finding that the physical location of both the units is different. The nature of activities is different, separate license is obtained for the new unit, separate infrastructure is created in the new unit, fresh funds have been invested in the new unit and even after the setting up of the new unit, the turnover of the old unit has not reduced but, on the other hand, increased. During AY 2002-03, when no new unit was in existence, the turnover of old unit was Rs. 129 crores which, after the setting up of the new unit, has increased to Rs. 294 crores in AY 2008-09. In view of the above facts, we do not find any infirmity in the order of ld. CIT(A). The same is sustained and ground no. 3 of the Revenue's appeal is rejected."ITA No. 295/D/2012 8
20. Respectfully following the decision of Tribunal we hold that assessee was entitled for deduction u/s 10A as it had established a new unit. This ground is allowed.
21. Ground no. 13 is consequential and ground no. 14 is misconceived as no penalty order has been passed.
22. In the result, ground no. 13 is dismissed being consequential and ground no. 14 is dismissed being misconceived.
23. In the result, the assessee's appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 24/08/2012 Sd/- Sd/-
(A.D. JAIN) (S.V. MEHROTRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 24.8.12
*Kavita
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, New Delhi.
TRUE COPY
By Order
DEPUTY REGISTRAR