Income Tax Appellate Tribunal - Delhi
Concentrix Daksh Services India ... vs Dcit, Circle 4(2), Delhi on 21 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'I' : NEW DELHI)
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
and
MS. ASTHA CHANDRA, JUDICIAL MEMBER
ITA No.809/Del./2022
(ASSESSMENT YEAR : 2017-18)
Concentrix Daksh Services India Pvt. Ltd. vs. DCIT, Circle 4 (2),
DLF IT SEZ, Building No.14, Tower D, Delhi.
17th Floor, DLF Cyber City,
Sector - 24 & 25A, DLF Phase 3,
Gurgaon - 122 001 (Haryana)
(PAN : AABCD4187D)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Kamal Sahwney, Advocate
Shri Prashant Meharchandani, Advocate
Shri Nishank Vashistha, Advocate
REVENUE BY : Shri Mahesh Shah, CIT DR
Date of Hearing : 19.12.2022
Date of Order : 21.12.2022
ORDER
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of Assessing Officer dated 31.03.2022 passed under section 143(3) read with section 144(C)/144B of the Income-tax Act, 1961 (for short 'the Act') pursuant to the directions of the Dispute Resolution Panel (DRP).
2. The grounds of appeal raised by the assessee read as under :-
2ITA No.809/Del./2022 "1. Ground No. 1- On the facts and circumstances of the case and in law, the order of learned DRP/AO is bad in law and against principles of law which is liable to be set aside 1.1 The ground is general in nature.
Transfer Pricing Adjustments Ground No. 2 - Transfer pricing adjustment in relation to import of finished goods amounting INR 4,48,52,316 2.1 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in wrongfully rejecting functionally comparable companies namely, "Agmetal (India) Private Limited " and "Creative Peripherals & Distribution Ltd" selected by the Appellant in the TP documentation for the purpose of determining the arm's length price ("ALP") of international transaction pertaining to import of finished goods, without giving any cogent reasons for rejection of such comparable companies and without appreciating the fact that such companies are functionally comparable to the services rendered by the Appellant and also pass all the filters applied by the learned TPO.
2.2 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in wrongfully considering companies namely, "Sonal Infosoft India Private Limited", "Eco Recycling Limited", "Telexcell Information Systems Limited", and "Datasoft Network Solutions Private Limited", as comparable companies to the Appellant for the purpose of determining the ALP of the international transaction pertaining to import of finished goods, without appreciating the fact that such companies are not comparable to the Appellant.
2.3 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in computing the margins of certain comparable companies selected for benchmarking the international transaction pertaining to import of finished goods.
3ITA No.809/Del./2022
3. Ground No.3 - Transfer pricing adjustment in relation to notional interest on overdue receivables amounting INR 7,66,20,461 3.1 That on the facts of the case and in law, the learned AO/ learned TPO has erred in making an adjustment in relation to notional interest on overdue receivables of INR 7,66,20,461 in the final assessment order instead of INR 4,95,81,380 determined in the draft assessment order and upheld by the Hon'ble DRP.
3.2 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in not appreciating the fact that accounts receivable/ accounts payable arising out of the international transaction of provision of IT enabled services by the Appellant to its Associated Enterprises ("AEs"), are closely linked to the international transaction and since the Hon'ble DRP/ learned AO/ learned TPO has determined the primary international transaction at an arm's length price after considering working capital adjusted margins of comparable companies, no separate adjustment can be made for such inter- company receivables and the same has been favourably upheld by the Hon'ble ITAT in Appellant's case for AY 2015-16 (ITA No. 4453/De1/2019).
3.3 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in re-characterizing the inter-company receivables as a separate international transaction of unsecured loan and imputing interest on such transaction.
3.4 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred in making the adjustment even though no interest was charged for delayed realisation from third party customers as well.
3.5 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred, by not giving the benefit of set off the outstanding payables and advances from AEs while computing the subject TP adjustment.
4ITA No.809/Del./2022 3.6 That on the facts of the case and in law, the Hon'ble DRP/ learned AO/ learned TPO has erred, by considering the interest rate of LIB OR plus 400 basis points instead of LIB OR plus 200 basis points, as stipulated in the intercompany agreement, for computing the subject adjustment.
Corporate Tax Adjustments
4. Ground No.4 - Addition on account of deduction under section 10AA of the Act amounting to INR 6,88,32,004.
4.1 That on the facts and circumstances of the case and in law, the Hon'ble DRP has erred in adjudicating the issue of deduction under section 10AA of the Act basis the directions passed for AY 2016-17 without appreciating the fact that the issue involved in A Y 2016-17 is completely different from the issue raised for the subject AY.
4.2 That on the facts and circumstances of the case and in law, the Hon'ble DRP/learned AO has erred in making an addition of INR 4,39,52,873 under the head profits and gains of the business and profession, by alleging that claim of deduction under section 10AA of the Act made by the Appellant is excessive.
4.3 That on the facts and circumstances of the case and in law, the learned AO has erred in computing the deduction under section 10AA of the Act by considering unit wise profit before tax (book profits/accounting profits) instead of unit wise profits and gains from business (computed as per provisions of Income-tax Act, 1961).
4.4 That on the facts and circumstances of the case and in law, the learned AO has erred in considering incorrect turnover amounting to INR 1,74,60,18,557 instead of INR 1,72,51,39,999 of the Gurgaon Unit as declared by the appellant in Form 56F.
4.5 Without prejudice to the above grounds, that on the facts and circumstances of the case and in law, the learned AO has erred in disallowing an amount of INR 6,88,32,004 instead of INR 4,39,52,87,3 under section 10AA of the Act, thereby 5 ITA No.809/Del./2022 disallowing an excess amount of INR 2,48,79,131 under section 10AA of the Act The Appellant has filed a rectification application before the learned AO for rectification of the above mistake and the aforesaid ground shall not be pressed where the application is allowed by the learned AO.
5. Ground No.5 - Incorrect income considered while computing the assessed income 5.1 That on the facts and circumstances of the case and in law, while passing the assessment order, the learned AO has erred in considering the income of lNR 3,58,19,44,910 as per intimation issued under section 143(1) by the Central Processing Centre, Bengaluru 'CPC') instead of returned income of INR 3,53,60,71,750.
5.2 That on the facts and circumstances of the case and in law, the learned AO has erred in making an addition of INR 4,58,73,160 towards employees' contribution to Provident Fund, Employee State Insurance ('ESI') and other labour welfare funds deposited after the due date as per section 36(1)(va) of the Act but before the due date of filing return of income for the subject AY
6. Ground No.6 - Excess levy of interest under section 234C of the Act 6.1 That on the facts and circumstances of the case and in law, the learned AO has erred in charging excess interest under section 234C of the Act.
The Appellant has filed a rectification application before the learned AO for rectification of the above mistake and the aforesaid ground shall not be pressed where the application is allowed by the learned AO.
7. Ground No.7 - Initiation of penalty proceedings under section 270A of the Act 6 ITA No.809/Del./2022 7.1 That on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 270A of the Act against the Appellant on account of the above adjustments made in the assessment order."
3. At the outset in this case, ld. Counsel of the assessee submitted that he shall not be pressing Grounds No.2 &3 as these issues are now covered under APA. Hence, grounds no.2 & 3 are dismissed as not pressed.
4. Apropos ground no.4 : on this issue, assessee has raised grounds for correction of errors in computation and submitted that assessee has already moved rectification petition in this regard and this ground shall not be pressed if the rectification application is allowed by AO. The ld.
counsel of the assessee has summarized his plea as under :-
"a. At page 42 of Appeal Set, the amount of 'Total Turnover of Unit' 2 (Gurgaon Unit) wrongly mentioned as INRI74,60,18,557/- ought to be replaced with INR 172,51,39,9991- as mentioned in the 10AA computation as well as in Form 56F of the Appellant [Refer Submissions before AO @pg 120 of PB, third line item from bottom; also see Form 56F@pg 110 of PB, line item 15(b)] b. At page 42 of Appeal Set, the 'Profit of the Unit' 1 mentioned in Row 1 of the table amounting to INR 16,23,53,7511- (Profit as per books) ought to be replaced with INR 17,78,20,301/- (Profit as per Income Tax Act computed and mentioned in the 10AA computation @pg 121 of PB, fourth line item from below and Form 56F @pg 111 of PB , line item 12). Accordingly, the income eligible for deduction in Row 4 of the same table at page 42 of Appeal Set wrongly mentioned as INR 16,23,53,751/- will automatically become INR 17,78,20,3011-;
c. At page 42 of Appeal Set, the 'Profit of the Unit' 2 mentioned in Row 1 of the table amounting to INR 19,62,77,516/- (Profit as per books) ought to be replaced with INR 22,56,40,858/- (Profit as per Income Tax Act computed and mentioned in the 10AA computation @pg 120 of PB, fourth line item from below and Form 56F @pg 109 of PB , line item 12). Accordingly, the income eligible for deduction in Row 4 of the same table 7 ITA No.809/Del./2022 at page 42 of Appeal Set wrongly mentioned as INR 17,42,13,1091- will automatically become INR 20,26,99,432/-; and d. At page 47 of the Appeal Set, the amount against line item 11 (Deduction u/s 10A or 10AA) wrongly mentioned as INR 35,56,40,6021- ought to be replaced with INR 38,05,19,733/-.
9. Once the above mistakes are rectified, the entire addition amounting to INR 6,88,32,0041- will get deleted.
5. Ld. DR of the Revenue, on the other hand, submitted that these are factual issue and AO may verify the same.
6. Consequently, we remit this issue to the file of AO to examine the correction pleaded by ld. counsel of the assessee and decide as per correct facts and as per law.
7. Apropos Ground No.5 : On this issue, the assessee vide letter dated 16.12.2022 submitted that it wishes to withdraw this issue raised, in view of Hon'ble Apex Court judgment in Checkmate Services P. Ltd. vs. CIT vide order dated 12.10.2022. Accordingly, this issue is dismissed as withdrawn.
8. In the result, the assessee's appeal is partly allowed for statistical purposes.
Order pronounced in the open court on this 21st day of December, 2022.
Sd/- sd/-
(ASTHA CHANDRA) (SHAMIM YAHYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 21st day of September, 2022
TS
8
ITA No.809/Del./2022
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.DRP
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.