M/S. IMS HEALTH ANALYTICS SERVICES PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 3(1)(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER

IT(TP)A No. 943/Bang/2022 Assessment Year : 2018-19

M/s. IMS Health Analytics Services Pvt. Ltd., Omega Block, The Deputy Embassy Tech Square, Commissioner of Marathahalli-Sarjapur Outer Income Tax, Vs. Ring Road, Circle – 3(1)(1), Kadubeesanahalli, Bangalore. Bangalore – 560 103. PAN: AADCP1532C APPELLANT RESPONDENT

Assessee by : Shri Darpan Kirpalani, Advocate : Shri Sunil Kumar Singh, CIT-2 Revenue by (DR)

Date of Hearing : 21-06-2023 Date of Pronouncement : 22-06-2023

ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 29.07.2022 passed by the Ld.DCIT, Circle – 3(1)(1), Bangalore for A.Y. 2018-19 on following grounds of appeal:

Page 2 IT(TP)A No. 943/Bang/2022 Tax effect Sl.No. Grounds of Appeal (in INR) The Order/ Directions are bad in 1. NA law and on facts The assessment order passed by the Ld. Deputy Commissioner of Income Tax, Circle — 3(1)(1) ('Ld AO') under Section 143(3) read with Section 144C (13) of the Income-tax Act, 1961 ('the Act'), is bad in law and on facts and is in violation of the principles of natural justice. 1.1 Without prejudice to the generality of the above, the order issued by the Ld. AO is bad in law in so far as the fact that the Ld. AO did not issue to IMS Health Analytics Services Private Limited (`the Appellant or 'the Company'), a show cause notice for such reference, as per proviso to Section 92C(3) of the Act. The Ld. AO has erred in law in making a reference to the Deputy Commissioner of Income Tax, Transfer Pricing Officer — 1(2)(2) ('Ld. TPO'), inter alia, since he has not recorded an opinion that any of the conditions in Section 92C(3) of 1.2 the Act were satisfied in the instant case. Accordingly, the order passed by the Ld. TPO is without jurisdiction, and the proceedings, including Directions issued by the Dispute Resolution Panel ('Ld. Panel') is bad in law. The Ld. AO and Ld. TPO have erred in not demonstrating that the motive of the Assessee was to shift profits outside of India by manipulating the 1.3 prices charged in its international transactions, which is a pre-requisite condition to make any adjustment under the provision of Chapter X of the Act. Transfer pricing 52,863,592 Determination of arm's length price 2. of international transactions 2.1 The Ld. TPO/Ld. Panel have erred in

Page 3 IT(TP)A No. 943/Bang/2022 facts and in law, in making an addition of INR 152,749,625 to the total income of the Assessee, on account of transfer pricing matters, by re-determining arm's length price for payment of interest on compulsorily convertible debentures ('CCDs') and computing interest on delayed receivables thereby incorrectly rejecting the arm's length price determined by the Appellant. Computation of notional interest on 3. delayed receivables The Ld. AO/ Ld. TPO/ Ld. Panel erred in law and on facts by treating the delayed receivables as unsecured loan advanced by the 3.1 Appellant to its AE and treating the delayed receivables as an international transaction and computing notional interest on the same. Without prejudice, in any event the delayed receivables cannot be treated as a separate international 3.2 transaction and if at all, ought to be aggregated with the principal transactions. Without prejudice, the Ld. Panel erred in determining the interest by 3.3 applying SBI PLR interest rate although the invoices are raised by the Appellant in foreign currency. Recharacterization of Compulsorily Convertible Debentures ('CCDs') as 4. an equity instrument and re- computing the arm's length price of the interest paid thereon The Ld. AO/ Ld. TPO/ Ld. Panel erred in law and in facts, in re- characterizing the CCDs as an 4.1 equity instrument and re-computing the arm's length price of the interest paid thereon as 'Nil'. The Ld.Panel erred in not 4.2 considering the judicial pronouncement in the Appellant's

Page 4 IT(TP)A No. 943/Bang/2022 own case [IMS Health India Pvt Ltd. Now merged with Appellant] for AY 2015-16, wherein the Hon'ble ITAT has pronounced that CCDs prior to its conversion, are to be treated as debt instrument and not as equity. Corporate Tax NA Non-grant of relief in respect of 5. foreign taxes under section 90 of the NA Act The Ld. AO erred in not granting relief under section 90 of the Act 5.1 amounting to INR 1,270,475 claimed in the return of income. Erroneous levy of interest under 6. NA section 234A of the Act The Ld. AO erred in levying interest under section 234A of the Act amounting to INR 1,777,416 disregarding the original return of 6.1 income for AY 2018-19 filed within the due date for filing return of income prescribed under section 139(1) of the Act. 7. Short grant of TDS credit NA The Ld. AO erred in granting TDS credit only to the extent of INR 10,493,798 (as against INR 7.1 13,521,375 claimed in the return of income) thereby resulting in short grant of TDS credit of INR 3,027,577. Short grant of credit for advance tax 8. NA paid The Ld. AO erred in granting credit for advance taxes paid only to the extent of INR 122,000,000 (as against INR 147,000,000 claimed in 8.1 the return of income) thereby resulting in short grant credit for advance taxes amounting to INR 25,000,000. Short grant of credit for refunds 9. NA adjusted against AY 2018-19 The Ld. AO erred in not granting credit for all adjustment of refunds 9.1 pertaining to other AYs adjusted against AY 2018-19 thereby

Page 5 IT(TP)A No. 943/Bang/2022 resulting in short grant of credit for such refund adjustments in the assessment order for AY 2018-19. Erroneous computation of interest 10. NA under Section 2348 of the Act The Ld. AO erred in computing interest under Section 234B, 10.1 amounting to INR 44,494,044 which is consequential to the additions/disallowances made. Erroneous computation of interest 11. NA under Section 234C of the Act The Ld. AO erred in levy interest under Section 234C, amounting to 11.1 INR 1,091,756 as against a sum of INR 67,092 computed in the return of income. 12. Initiation of penalty proceedings NA The Ld. AO has erred in initiating penalty proceedings under section 12.1 270A of the Act for under-reporting of income. 2. Brief facts of the case are as under: 2.1 The assessee is a company and filed its return of income for AY 2018-19 on 30/11/2018 declaring total income of Rs.43,18,30,710/-. Consequent to amalgamation, the assessee filed revised return of income for AY 2018-19 on 29.03.2019 declaring total income of Rs. 48,68,84,840/-, considering details of both the entities. The assessee declared income under the head(s) House property, Profit and Gains from Business or Profession and Income from Other Sources. 2.2 Notice under section 143(2) of the Act was issued requiring the assessee to submit necessary details in support of claim, with regard to the return of income. Subsequently, notices u/s.

Page 6 IT(TP)A No. 943/Bang/2022 142(1) of the Act were issued, and the assessee filed details from time to time as called for. 2.3 It is submitted that, M/s. IMS Health Technology Solutions India Pvt. Ltd. is amalgamated with the assessee being M/s. IMS Health Analytics Services Pvt. Ltd. under a scheme of amalgamation, approved by the Hon'ble National Company Law Tribunal, Bengaluru Bench vide order dated 25.03.2019. It is submitted that the appointed date as per the scheme of amalgamation approved was 01.04.2017, and the assessee filed revised return of income for AY 2018-19 on 29.03.2019 considering details of both the entities. 2.4 The Ld.AO noticed that as the assessee entered to International Transactions with its Associate Enterprises(AE), a reference was made to Transfer Pricing Officer (TPO) u/s.92CA of the Act on 04.06.2020, after obtaining necessary approval of the Competent Authority. The order of the Ld.TPO u/s. 92CA(3) was passed on 30.07.2021. 2.5 The Ld.TPO in his order has concluded the Arm's length Price of transactions and an adjustment of Rs. 75,40.48,209/- was proposed to the value of the international transactions pertaining to the year under consideration. 2.6 On receipt of the order u/s. 92CA, the Ld.AO passed draft assessment order on 29.09.2021. In the draft assessment order, the Ld.AO proposed the following additions. Total Income as per the ROI 48,68,84,840 under normal provision Add: TP adjustment/s 92CA 75,40,48,209 Total Assessed Income 124,09,33,049

Page 7 IT(TP)A No. 943/Bang/2022 Aggrieved by the draft assessment order the assessee filed objection before the DRP. 2.7 The DRP vide its direction dated 28.06.2022 gave direction to the Ld.TPO/AO. Consequent to the direction of DRP, the TP adjustment was reduced to Rs.15,27,49,625/- and an OGE dated 18.07.2022 was passed. 2.8 The Ld.AO on receipt of the OGE, passed the impugned order by making addition in the hands of assessee amounting to Rs.15,27,49,625/-. 3. At the outset, the Ld.AR submitted that assessee wishes to withdraw the grounds relating to transfer pricing adjustment pursuant to APA dated 23.03.2023. Accordingly, ground nos. 2-4 raised by assessee stands dismissed as withdrawn. 4. It is submitted that Ground no. 1 is general in nature and therefore do not require any adjudication. 5. The Ld.AR submitted that Ground no. 5 is in respect of non- granting of foreign tax credit as per section 90 of the Act. 5.1 The Ld.AR submitted that, the assessee filed form 67 before the authorities below which has not been considered. Referring to page 2474, the Ld.AR submitted that, the assessee is eligible for foreign tax credit amounting to Rs.1,217,475/-. The Ld.CIT.DR relied on the orders passed by authorities below. In the interest of justice, we remand this issue to the Ld.AO/TPO to consider the claim of assessee in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes.

Page 8 IT(TP)A No. 943/Bang/2022 6. Ground no. 6 is in respect of levy of interest u/s. 234A of the act. It is the submission by the Ld.AR that, the assessee had filed the return of income on 30.11.2018 for the relevant Assessment Year which is placed at page 2476 of the paper book. He submitted that the return of income was filed within the due date and therefore interest u/s. 234A cannot be computed. In the interest of justice, we remand this issue to the Ld.AO to verify the claim and to consider in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes. 7. Ground nos. 7 & 8 are in respect of short grant of TDS credit and short grant of credit for advance tax paid respectively. 7.1 The Ld.AR submitted that the details in respect of the same were filed before the Ld.AO however has not been considered. The Ld.CIT.DR relied on the orders passed by authorities below. In the interest of justice, we remand these issues back to the Ld.AO. Assessee is directed to once again file all the relevant details in respect of the TDS paid and the advance tax paid. The Ld.AO is directed to verify the same and consider the claim of assessee in accordance with law. Accordingly, this ground raised by the assessee stands allowed for statistical purposes. 8. Ground no. 9 is in respect of short grant of credit for refund adjusted against the year under consideration. 8.1 The Ld.AR submitted that the Ld.AO has not granted credit for the adjustment in respect of the refunds pertaining to other Assessment Year that was adjusted against the year under consideration. Assessee is directed to once again file all the

Page 9 IT(TP)A No. 943/Bang/2022 relevant details in respect of the TDS paid and the advance tax paid. The Ld.AO is directed to verify the same and consider the claim of assessee in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed as indicated hereinabove. Order pronounced in the open court on 22nd June, 2023.

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 22nd June, 2023. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order

Assistant Registrar, ITAT, Bangalore