WILLS TOWERS WATSON INDIA P.LTD.,GURGAON vs. ACIT, CIRCLE- 4(1), GURGAON

Briefly stated facts are that the assessee company is a subsidiary of Watson Wyatt Holdings (Mauritius) and is engaged in providing consulting services in the area of human capital, employee benefits and insurance. For the assessment year 2014-15 they have filed their return of income on 28/11/2014 declaring an income of Rs. 87, 28, 560/-. Since the assessee has entered into certain international transaction, learned AO referred the matter to the learned TPO for determination of the ALP of the international transaction entered into by the assessee. Learned TPO during the course of TP assessment proceedings, noted that the assessee has rendered such services to its AE for an amount of Rs. 48.91 crores and determined the ALP using CUP method as the most appropriate method wherein it came to compare the per diem rates of its employees to render services to its AEs as well as third parties and concluded the transaction to be at arm's length. Learned TPO rejected the analysis of the assessee in absence of insufficient documentary evidence produced during the course of proceedings and owing to geographical differences between such transactions proceeded to apply TNMM as the most appropriate method and finally learned TPO selected 10 comparables whose average margin was 16.54% as against 2.17% of the assessee and computed the proportionate adjustment for the international transaction of the assessee at Rs. 4, 22, 58, 831/-under section 92CA of the Act.

The DRP noticing the method applied by the Ld. Transfer Pricing Officer for the assessment years 2009-10 to 2013-14 as a TNMM, and also that the taxpayer has not furnished the electricity details regarding the provision of services to its AEs when compared with the services rendered to 3rd parties, upheld the TPO's approach of rejecting the CUP method as most appropriate method and upheld the TNMM method applied by the AO. The DRP further upheld the various comparables selected by the TPO. However, it directed working capital adjustment with certain directions.

Learned Assessing Officer, accordingly, in the final order passed on 12/9/2018, made an addition of Rs. 4, 06, 11, 746/-to the total income of the assessee and determined the total income at Rs. 4, 93, 40, 310/-.

Insofar as grounds No. 1 to 9 are concerned, at the outset, Ld. AR brought to our notice that in assessee’s own case for the assessment years 2011-12 and 2013-14 a coordinate Bench of this Tribunal in and ITA No. 7826/del/2017 respectively held that CUP as the most appropriate method. He submitted that for A.Y. 2012-13, no TP assessment was made for which no appeal has been filed. He submitted that once the CUP is held as the most appropriate method in the light of the decision of the Tribunal in assessee's own case for A.Y. 2011-12 and 2013-14, the other grounds will become academic in nature.

Ld. DR, on the other hand, heavily relied on the order of the TPO/DRP, and submitted that the lemonade TPO has given justifiable reason as to why CUP method cannot be applied as the most appropriate method. He further submitted that each assessment year is separate and principle of res judicata does not apply to income-tax proceedings. Therefore, the order of the authorities below should be upheld.

Ld. Counsel, in his rejoinder, submitted that all objections raised by the TPO has been considered by the Tribunal while deciding the issue in the earlier years and since there is no change in the facts or law the consistent view taken by the Tribunal for the assessment years 2011-12 and 2013-14 may be followed.

We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also gone through the decision of the Tribunal in assessee's own case for the assessment years 2011-12 and 2013-14. We find, the Tribunal, vide order dated 11th March, 2019, and ITA No. 7826/del/2017 by order dated 11/9/2020 has thoroughly discussed the issue in question and held that CUP is the most appropriate method in the instant case. Relevant observation of the Tribunal for the assessment year 2011-12 read that,- "19. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below qua the issue. Facts on record reveal that the time is recorded on rate per hour methodology. The AEs are charged on the basis of hours spent on services rendered to them. Though the UREs are also charged on hourly rate basis, but due to cut-throat competition in this line, pre- determined fixed rate is billed and if the hourly rate is higher than the pre-determined fixed rate, then difference is written off. In our considered opinion, this is a standard practice followed by the enterprises providing similar consultancy services. Further, we find that the assessee has to assume total risk when it is providing services to the UREs whereas when the services are provided to AEs, the risk is that of the AEs whose client has been serviced.

We do not find any force in the contention that the evidences are not brought on record. The invoices raised to AEs and non AEs are exhibited in the paper book. Whether the same person is providing service to both the AEs and non AEs is irrelevant, so as long as the evidences of services provided are available. The services are provided by different set of personnel, having different qualification and it would not be justifiable to ask for invoices of the same person who has provided service to AEs and also to non AEs.

Moreover, considering the nature of services provided by the assessee, we do not find the geographical locations relevant because the consulting services provided by the assessee would remain the same whether the service receiver is located in 'X' country or 'Y' country as long as service provider is in India. Our view is fortified by the fact that the price charged to non AEs, [irrespective of geographical location] is comparable to the price that is charged to Indian entities. Moreover, rate per hour for consultant, once decided, does not change irrespective of country and whether it is related or unrelated entity.

As mentioned elsewhere, risk and responsibility to the client is direct in Indian non AEs and for AEs the overall responsibility to the client is of the AE itself. In this line, work is assigned to different team members [whether relating to AE or non AE] based on the specific job skill-set requirement, available resources and overall deliverable expected, meaning thereby, that if the work requires more time of a junior consultant, he/she is assigned that work whereas if a senior's assistance is required, they devote time. Accordingly, a proper team composition is there to take care of the nature and technical difficulties of the project. Even the OECD Guidelines of July 2010 preferred internal CUP over other methods, since it bears a more direct and closer relationship to the transaction under review.

Considering the totality of the facts in the light of invoices relating to AEs and non AEs exhibited in the paper book, we are of the considered opinion that CUP is the MAM and has been rightly adopted by the assessee to bench mark its transactions for provision of consulting services rendered. This grievance is, accordingly, allowed."

Since the facts of the instant case are identical to the facts for the A.Y. 2011- 12 and AY 2013-14, therefore, respectfully following the decision of the Tribunal in assessee's own case and in absence of any distinguishable features brought to our notice, we are of the opinion that CUP is the most appropriate method in the instant case which has been applied by the assessee for benchmarking the transactions for provision of consultancy services rendered. We hold and direct accordingly. Since this issue is decided in favour of the assessee, the other grounds relating to the transfer pricing issue become academic in nature and need no adjudication.

Insofar as the non-grant of mat credit under section 115 JAA of the Act and short grant of tax deducted at source covered by grounds No. 10 and 11, we deem it proper to restore this issue to the file of the learned Assessing Officer with a direction to verify the record and give proper credit in respect of the same. Needless to say, the learned Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. Grounds No. 10 and 11 raised by the assessee are allowed for statistical purposes.

Ground No. 12 relates to levy of interest u/s 234B which, in our opinion, is mandatory and consequential in nature. Accordingly, this ground by the assessee is dismissed.

In the result, appeal of the assessee is allowed in part and for statistical purpose.