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Income Tax Appellate Tribunal, DELHI BENCH : I-1 : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER Assessment Year: 2012-13 CRM Services India Pvt. Ltd., Vs ACIT, 220, Vinobha Puri, Circle-6(2), Lajpat Nagar-II, CR Building, New Delhi. New Delhi PAN: AABCC6211B (Appellant) (Respondent) Assessee by : Shri Neeraj Jain, Advocate & Shri Ramit Katyal, CA Revenue by : Shri Kumar Pranav, Sr. DR Date of Hearing : 10.10.2019 Date of Pronouncement : 18.10.2019 ORDER
PER R.K. PANDA, AM:
The appeal filed by the assessee is directed against the order dated 30.11.2016 passed u/s 143(3) r.w.s. 144C of the IT Act, 1961 relating to assessment year 2012-13.
Facts of the case, in brief, are that the assessee is a 99.99% owned subsidiary of TPUSA Inc., USA and during the relevant previous year was engaged in running of voice based call centre facilities in Gurgaon (Haryana). It filed its return of income on 29.11.2012 declaring total income of Rs.21,34,95,460/-. Since the assessee had entered into international transactions with its associated enterprise, the Assessing Officer made reference to the TPO for determining the ALP of the international transactions entered into by it. The Transfer Pricing Officer, vide order dated 29th January, 2016, passed u/s 92CA(3) of the Act has done an upward adjustment of Rs.2,83,07,290/- while determining the ALP of the international transaction. The Assessing Officer, therefore, asked the assessee to explain why a sum of Rs.2,83,07,290/- should not be added to the taxable income as done by the TPO. Rejecting the explanations given by the assessee, the Assessing Officer passed the draft assessment order on 4th March, 2016. The assessee approached the DRP, who, vide order dated 18.10.2016, following its order for assessment year 2009-10, directed the A.O./TPO to examine the facts and allow part of the royalty expenditure in accordance with the directions of the DRP for assessment year 2009-10.
Aggrieved with such order of the A.O./TPO/DRP, the assessee is in appeal before the Tribunal raising the following grounds:-
“1. That the assessing officer / Dispute Resolution Panel (DRP) erred on facts and in law in completing the assessment under section 144C/143(3) of the Income-tax Act, 1961 (the Act') at an income of Rs, 24,18,02 750 as against income of Rs. 21,34,95,460 returned by the appellant.
2. That the assessing officer/ DRP erred on facts and in law in making transfer pricing adjustment of Rs. 2,83,07,290 allegedly on account of difference in the arm’s length price of the international transaction of payment
of royalty holding that the appellant was not required to pay royalty in respect of services provided to the associated enterprise.
2.1 That the assessing officer/ DRP erred on facts and in law in holding that in terms of ‘Intangible and Proprietary Property and Licensing agreement' (“the Agreement") dated 02-01-2002, royalty was required to be paid only on the proportionate sales made to unrelated third parties.
2.2 That the assessing officer/ DRP erred on facts and in law in not appreciating that the entire revenues of the appellant are from sale of services to third parties - whether such third parties are direct customers of the assessee or customers of the associated enterprise, and accordingly royalty was payable on the total revenue.
2.3 Without prejudice, the assessing officer/ TPO erred on facts and in law in making transfer pricing adjustment of Rs. 2,83,07,290, being the entire amount of royalty paid to the associated enterprise, without giving effect to the binding direction of the DRP of allowing part relief as directed in the DRPs order for assessment year 2009-10, restricting the adjustment only to the extent of royalty paid on sales made to the associated enterprise.
2.4 That the assessing officer/ TPO erred on facts and in law in allegedly holding that the assessee has not submitted documentary evidence to verify and compute proportionate adjustment of royalty expense as directed by the DRP, when the entire details were already on record.
3. That the assessing officer/ TPO erred on facts and in law in making a transfer pricing adjustment of Rs. 2,83,07,290 allegedly applying CUP method for benchmarking the transaction of payment of royalty by undertaking cost benefit analysis without placing on record any comparable data for comparison.
3.1 That the assessing officer/ TPO erred on facts and in law in not appreciating that the transaction of payment of royalty has already been benchmarked applying TNM method as the most appropriate method and accordingly, no adjustment is required to be made on this account.
3.2 Without prejudice, that the assessing officer/DRP erred on facts and in law in not appreciating that the payment of royalty was made in respect of sale of services to the customers of the associated enterprise in terms of the agreement and was incurred wholly and exclusively for purposes of business.
The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal before or at the time of hearing.”
4. At the time of hearing, the ld. counsel for the assessee filed an application for filing additional evidence in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 in the shape of the following document:- “Addendum to Intangible and Proprietary Property and Licensing agreement by way of additional evidence.”
Referring to the copy of the order of the Tribunal in assessee’s own case, vide order dated 15th July, 2019 for assessment year 2011- 12, he submitted that under identical circumstances the Tribunal has restored the issue to the file of the A.O./TPO for deciding the issue afresh and in accordance with the law in the light of the directions of the Tribunal. He accordingly submitted that he has no objection if the matter is restored to the file of the A.O./TPO with similar directions as given in the immediately preceding assessment year.
The ld. DR, on the other hand, while supporting the order of the A.O./TPO/DRP, fairly conceded that the Tribunal in assessee’s own case in the immediately preceding assessment year has restored the issue to the file of the A.O./TPO. Therefore, he has no objection if the matter is restored to the file of the A.O./TPO for adjudication of the issue afresh in the light of the directions of the Tribunal in the immediately preceding assessment year.
We have considered the rival arguments made by both the sides and perused the orders of the A.O./TPO/DRP and the paper book filed on behalf of the assessee. We find, the DRP, following the order of the DRP for assessment year 2009-10 has directed the A.O./TPO to examine the facts and allow part of the royalty expenditure in accordance with the directions of the DRP for assessment year 2009-10. We find the Tribunal, vide order passed for assessment year 2009- 10 had accepted the additional evidence filed by the assessee in respect of the issue pertaining to ALP of royalty and restored the issue to the file of the A.O./TPO for deciding the issue of royalty afresh after duly considering the agreement after giving due opportunity to the assessee to present its case. We find, following the order of the Tribunal for assessment year 2009-10, the Tribunal for assessment year 2010-11 also restored the issue to the file of A.O./TPO. We find the Tribunal in assessee’s own case in the immediately preceding assessment year, following the order for assessment year 2010-11 has restored the issue to the file of A.O./TPO for deciding the issue afresh and in accordance with law by observing as under:-
“9. We have considered the rival arguments made by both the sides and perused the orders of the A.O./TPO/DRP and the paper book filed on behalf of the assessee. We find, in the immediately preceding assessment year i.e., 2010-11, vide order dated 27th July, 2018, the Tribunal has restored the issue to the file of the A.O./TPO for fresh adjudication by observing as under:-
“6. We have considered the submissions of both the parties and perused the material available on record. It is noticed that an identical issue having similar facts was a subject matter of the assessee’s appeal for the earlier assessment years 2008-09 and 2009-10 in those years also assessee furnished the additional evidences as has been done in the year under consideration. This Bench of the ITAT in assessee’s own case for the aforesaid assessment years 2008-09 and 2009-10 while deciding the identical issue in and 1630/Del/2014 has restored the issue back to the file of the AO / TPO. 5
The relevant findings have been given in para 7.1 to 9 which read as under:-
“7.1 As far as the assessee’s plea regarding adjustment in respect of royalty is concerned, we have duly considered the assessee’s application for admission of additional evidence which has been filed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and looking to the facts and circumstances, it is our considered opinion that this Addendum to the agreement goes to the very root of the matter and it will suitably assist the lower authorities did not have the benefit of examining this document, the matter has to be necessarily restored to the file of the Assessing Officer / TPO for deciding the issue of royalty afresh after duly considering this agreement and after giving due opportunity to the assessee to present its case. Accordingly, ground no. 17 in assessee’s appeal for assessment year 2008-09 also stands allowed for statistical purposes.
7.2 Since the Ld. AR has stated that if ground nos. 3 and 17 are decided in favour of the assessee, the other grounds will become academic in nature, we are not proceeding to hear the arguments of either of the parties on the remaining grounds at the present moment. We, however, note that the assessee will be at liberty to raise these grounds again before the Tribunal at a future date, if it is so required.
In the result, the assessee’s appeal stands partly allowed for statistical purposes in terms of our directions as contained in the preceding paragraphs.
9. Coming to the assessee’s appeal in ITA No. 1630/Del/2014, since we have already admitted additional evidence in respect of the issue pertaining to ALP of royalty in assessment year 2008- 09, on identical reasoning, we admit additional evidence in this year as well. Since the lower authorities did not have the benefit of examining this document, the matter has to be necessarily restored to the file of the Assessing Officer / TPO for deciding the issue of royalty afresh after duly considering this agreement and after giving due opportunity to the assessee to present its case.”
7. So respectfully following the aforesaid referred to order dated 14.5.2018 for the assessment years 2008-09 and 2009-10 in assessee’s own case. The issue under consideration in the present case relating to payment of royalty is also set aside to the file of the AO / TPO to be adjudicated afresh in accordance with law by keeping in view the directions given in the aforesaid referred to order dated 14.5.2018.”
Since the facts of the impugned assessment year are identical to the facts of the preceding assessment year, therefore, following the order of the Tribunal in assessee’s own case for the immediately preceding assessment years, we restore the issue to the file of the A.O./TPO with a direction to decide the issue afresh and in accordance with the law in the light of the directions of the Tribunal. The ground of appeal No.2 raised by the assessee is accordingly allowed for statistical purposes.”
8. Following the consistent view taken by the Tribunal in assessee’s own case in respect of ALP of royalty, we restore the issue to the file of the A.O./TPO for deciding the issue afresh in accordance with the law in the light of the directions of the Tribunal. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
The decision was pronounced in the open court on 18.10.2019.