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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SMT BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SMT BEENA PILLAI, JUDICIAL MEMBER IT(TP)A Nos.1319, 1320/Bang/2016 Assessment years : 2009-10, 2010-11 M/s. Brillio Technologies Pvt. Ltd., The Deputy Commissioner (Formerly known as M/s. Collabera of Income Tax , Solutions Pvt. Ltd.,) Vs. Circle – 11(2), 5th Floor and 6th Floor, Bengaluru. Subramanya Arcade, Tower D, No.12, Bannerghatta Road, Bengaluru – 560 076. PAN : AABCP 2354 A APPELLANT RESPONDENT Assessee by : Shri. Ajay Vohra, Revenue by : Shri. Manjeet Singh, Addl. CIT-DR Date of hearing : 29.07.2020 Date of Pronouncement : 14.08.2020 O R D E R Per A. K. Garodia:
Both these appeals are filed by the assessee and these are directed against the common order of learned CIT(A)-1, Bengaluru, dated 25.04.2016 for Assessment Years 2009-10 and 2010-11. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
In both the years, the assessee has raised several ground regarding TP adjustment made by the AO of Rs.5,82,69,872/- in Assessment Year 2010-11 and in addition to that, there is one more ground raised by the assessee in IT(TP)A Nos. 1319, 1320/Bang/2016 Page 2 of 6 respect of corporate tax issue as per ground No.2 in both these years regarding the disallowance of club expenses of Rs.36,711/- in Assessment Year 2009-10 and Rs.3,847/- in Assessment Year 2010-11 by holding that the same is of capital in nature.
In the course of hearing regarding TP issues in both years, it was submitted by learned AR of the assessee that in assesseee’s own case for later 2 years for Assessment Years 2011-12 and 2012-13 in IT(TP)A Nos.518/Bang/2016 and 354/Bang/2017 dated 19.01.2018, it was held by the Tribunal that to bench mark the AE transaction, the AO should adopt internal TNMM in preference to external TNMM. In this regard, he submitted that this Tribunal order is available on pages 777 to 789 of the Paper Book and in particular, our attention was drawn to para 7 of this Tribunal order. He also submitted that in Assessment Year 2013-14 also, similar issue was decided by the Tribunal in assesseee’s own case by following the earlier order of Tribunal for Assessment Years 2011-12 and 2012-13 and this Tribunal order for Assessment Year 2013-14 is available on pages 790 to 794 of the Paper Book in IT(TP)A No.1897/Bang/2017. He submitted that in the present 2 years also, the matter to be restored back to the file of AO/TPO for fresh decision with similar direction. As against this, learned DR of the Revenue supported the orders of CIT(A) but he could not point out as to how earlier Tribunal orders are not applicable in the present 2 years.
IT(TP)A Nos. 1319, 1320/Bang/2016 Page 3 of 6
We have considered the rival submissions and we deem it appropriate to reproduce para 6 of the later Tribunal order for Assessment Year 2013-14 in which para 7 of the earlier Tribunal order is also reproduced. This para 6 of the Tribunal order for Assessment Year 2013-14 reads as under:
“6. Being aggrieved, the assessee is before us. At the outset, we find that in the assessee's own case for the assessment year 2011-12 and 2012-13, this Tribunal vide order in IT(TP)A Nos. 518/Bang/2016 and 354/Bang/2017 dated 189/1/2018 has restored the matter to the file of the AO/TPO to bench mark the AE transactions by adopting internal TNMM as it is held that internal TNMM is to be preferred over external TNMM. The relevant para of the order is reproduced below.
"7.Having carefully examined the orders of lower authorities and the documents placed before us we find that the assessee has placed the relevant evidence with respect to scope of work, nature of services rendered for AE and non-AE in the same countries. But these aspects were not examined by the TPO. Therefore, we set aside the order of the AO passed consequent to the order of the Hon'ble DRP and restore the issue to the AO/TPO to re-examine the issue of determination of ALP for IT(TP)A Nos. 1319, 1320/Bang/2016 Page 4 of 6 international transactions in the light of the transactions made with non-AEs in the same countries. It is settled position of law that if internal benchmarking is possible, the TPO should go with the internal benchmarking instead of going for external benchmarking by collecting various comparables from the database. In the instant case, since the assessee has placed the evidence to establish that the assessee has rendered similar type of services to AE and non-AE in the same countries, the internal benchmarking is possible. We therefore restore the matter to the AO/TPO to re-examine the issue of determination of ALP in the light of assessee's contentions. If the assessee is able to establish that he has undertaken the similar international transaction with AEs and non-AEs in the same countries, the internal benchmarking will be done, otherwise the AO/TPO will act in accordance with the law."
Respectfully following the decisions and to maintain consistency we remand the mater back to the AO/TPO to undertake fresh analysis by adopting internal TNMM.”
Respectfully following the earlier Tribunal orders and to maintain consistency, we remand the matter back in the present two years also to AO/TPO to undertake fresh analysis to bench mark the AE’s transaction by IT(TP)A Nos. 1319, 1320/Bang/2016 Page 5 of 6 adopting internal TNMM in preference to external TNMM and if the assessee is able to establish that he has undertaken similar international transaction with AE and non-AE in the same countries, external benchmarking will be done otherwise the AO/TPO will act in accordance with law. The entire TP issue in both the years is restored back to AO/TPO with the above directions for fresh decision by a speaking and reasoned order after affording reasonable opportunity of being heard to the assessee.
Now we take up the corporate tax issue raise by the assessee in both years in respect of disallowance out of club expenses. In this regard, it was submitted by learned AR of the assessee that this issue should also be restored back to the file of AO/TPO for a fresh decision because neither the AO nor learned CIT(A) have examined the applicability of relevant judgments available on this issue being the judgments of Hon’ble Bombay High Court rendered in the case of Otis Elevator Co. (India) Ltd. Vs. CIT as reported in 195 ITR 682 and in the case of American Express International Banking Corporation vs. CIT as reported in 258 ITR 601. Learned DR of the Revenue supported the order of learned CIT(A) on this issue also.
We have considered the rival submissions and we find that learned CIT(A) has decided the issue in cryptic manner without any discussion in respect of any judicial pronouncement on this issue. The judgment as noted above is very much relevant for deciding this issue and since the entire TP
IT(TP)A Nos. 1319, 1320/Bang/2016 Page 6 of 6 issue is being remanded to the AO/TPO for a fresh decision, we feel it proper to remand this issue also to the file of AO for a fresh decision after considering all judicial pronouncements on this issue along with the judgments noted above after allowing reasonable opportunity of being heard to the assessee and the AO should pass a speaking and reasoned order on this issue also. Accordingly, ground 2 is allowed for statistical purposes in both years.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Pronounced in the open court on the date mentioned on the caption page.