Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
The cross appeals filed by assessee and Revenue are against the order of CIT(A)-13, Pune, dated 05.12.2016 relating to assessment year 2012-13 against order passed under section 144C(3) r.w.s. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The cross appeals filed by assessee and Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience.
The assessee in ITA No.550/PUN/2017 has raised the following grounds of appeal:- 1 On the facts and in circumstances of the case and in law, the learned Deputy Commissioner of Income-Tax (International Taxation) Circle-2, Pune ('Ld. AO") has erred in making transfer pricing addition to the Appellant's income and the learned Commissioner of Income-tax (Appeals)-13, Pune ['Ld. CIT(A)'] has erred in partially upholding/confirming some actions of the Ld. AO in this regard. 2 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of disregarding the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Income-tax Act, 1961 ('the Act') read with Rule 10D of the Income-tax
ITA No.550/PUN/2017 3 ITA No.599/PUN/2017
Rules, 1962 ('the Rules') and thereby rejecting the transfer pricing documentation maintained by the Appellant. 3 On the facts and circumstances of the case, and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of not providing reasons to show that the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were not satisfied and not sharing the search strategy including the accept-reject matrices used before making an adjustment to the income of the Appellant. 4 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of applying the following filters as well as modifying the filters applied in the transfer pricing documentation: Rejecting the turnover filter of Rs. 0 - 30 Crores applied by the Appellant and selecting companies having turnover greater than Rs. 1 Crore with an upper limit of Rs.500 Crore. Rejecting the filter of export turnover being at least 25% per cent of total turnover and instead, applying a filter of export turnover being at least 75% percent of total turnover. Rejecting companies having financial year end other than 31 March 2012. 5 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of rejecting a comparable company on account of having a different financial year end and having incurred losses in the BPO services segment during AY 2012-13. 6 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of rejecting certain companies from the set of comparables as additionally identified by the Appellant despite them being functionally comparable. 7 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of selecting companies which are functionally different / earn supernormal profits. 8 On the facts and in the circumstances of the case and in law, the Ld. AO erred in and the Ld.CIT(A) further erred in confirming the action of the Ld. AO of not allowing an adjustment for the difference between the level of risk borne by the comparables and the Appellant as well as other factors as mandated by the provisions of Rule 10B(1)(e)(iii) of the Rules. 9 On the facts and in the circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of considering non-contemporaneous single year data for the margin computation of the comparables which was not available at the time of conducting the Transfer Pricing study and disregarding contemporaneous multiple year data which was considered by the
ITA No.550/PUN/2017 4 ITA No.599/PUN/2017
Appellant in accordance with the provisions of Rule 10B (4) of the Rules. 10 On the facts and circumstances of the case and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of not allowing the Appellant the benefit of 5% variation envisaged in the proviso to Section 92C(2) of the Act. 11 On the facts and circumstances of the case, and in law, the Ld. AO erred in and the Ld. CIT(A) further erred in confirming the action of the Ld. AO of initiating penalty proceeding under Section 271(1)(c) of the Act and levying interest under Section 234B of the Act.
The Revenue in ITA No.599/PUN/2017 has raised the following grounds of appeal:- 1. Whether the CIT(A) was correct in law and on facts in directing to include Informed Technologies Ltd. as a comparable ignoring substance against from that it is not exactly engaged in BPO business, hence functionally not comparable. 2. Whether the CIT(A) was correct in law and on facts in ignoring the fact that Informed Technologies Ltd. is in the business of providing services of financial research, Executive compensation data, Book publication and data process.
The learned Authorized Representative for the assessee at the outset pointed out that the CIT(A) has directed that the concern Informed Technologies Ltd. is to be included. He further pointed out that in assessment year 2009-10, the Tribunal had directed the inclusion of said concern as it was functionally comparable. In assessment years 2010-11 and 2011-12, the Transfer Pricing Officer (TPO) himself has included the said concern, since there is no doubt about the functional comparability of the said concern. The year under appeal is assessment year 2012-13. He also pointed out that though the authorities below have raised the issue of ‘AMD’, but no such issue has been raised by Revenue. He further stated that in case the Revenue’s appeal is dismissed, then the appeal of assessee would become academic.
ITA No.550/PUN/2017 5 ITA No.599/PUN/2017
The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.
We have heard the rival contentions and perused the record. The issue which arises in the present appeal is in respect of transfer pricing provisions, wherein there is no dispute about the method to be applied i.e. TNMM method and the margins of assessee and mean margins of the concerns finally selected in the hands of assessee. The limited issue which is raised by the Revenue is against functional comparability of the concern Informed Technologies Ltd. The grounds of appeal clearly reflect the issues raised by Revenue that the assessee was carrying on same activity in earlier years also. In assessment year 2009-10, while benchmarking international transactions, the Tribunal in ITA No.86/PN/2013, order dated 30.10.2015 held that the concern Informed Technologies Ltd. was functionally comparable and had directed its inclusion. The copy of said order is placed at pages 1 to 31 of Paper Book. Then, the TPO himself in assessment years 2010-11 and 2011- 12 vide orders placed at pages 36 to 79 of Paper Book had held it to be functionally comparable and included the same in final list of comparables. The year under appeal is assessment year 2012-13, wherein the assessee is carrying on the same activity as in earlier years. Consequently, we find merit in the order of CIT(A) in directing the inclusion of the concern Informed Technologies Ltd. Accordingly, upholding the same, we dismiss the grounds of appeal raised by Revenue.
The learned Authorized Representative for the assessee fairly pointed out that in case the appeal of Revenue is dismissed, then the grounds of
ITA No.550/PUN/2017 6 ITA No.599/PUN/2017
appeal raised by assessee would become academic. Hence, the same are also dismissed.
In the result, both the appeals of assessee and Revenue are dismissed.
Order pronounced on this 22nd day of April, 2019.
Sd/- Sd/- (D.KARUNAKARA RAO) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 22nd April, 2019. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : 1. अऩीऱाथी / The Appellant; 2. प्रत्यथी / The Respondent; 3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-13, Pune; The CIT (IT/TP), Pune; 4. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “ए” / DR 5. ‘A’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune