SPRINGER (INDIA) PRIVATE LIMITED vs. ASSISTANT COMNIISSIONER OF INCOME TAX

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$~17 * IN THE HIGH COURT OF DELHI AT NEW DELHI +

ITA 1148/2017, CM APPL.45516/2017

SPRINGER (INDIA) PRIVATE LIMITED ..... Appellant

Through: Mr. Himanshu Sinha, Advocate.

versus

ASSISTANT COMNIISSIONER OF INCOME TAX ..... Respondent Through: Mr. Rahul Chaudhary, Sr. Standing Counsel with Mr. Sanjay Kumar, Jr. Standing Counsel.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SANJEEV SACHDEVA

O R D E R %

15.12.2017

Admit.

Issue notice. Mr. Rahul Chaudhary, Advocate accepts notice on behalf of revenue.

The question of law urged is with respect to the applicability of the other method for bench marking international transactions under Section 92C for which the assessee claimed applicability of Rule 10B (brought into force w.e.f. 2012-13).

The assessee who is a subsidiary of an international AE has specialisation in the scientific and technical journals. It is urged that revenue modals of the assessee and its AE are based upon the complex system of allocation of cost and revenue based upon collection and the expenses charged and allocated globally. For the

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allocation of costs, the AE gets the services of a Swiss based entity owned by it and then proceeds to allocate the costs of such analysis to the concerned subsidiaries/associated units based upon the number of articles, subscriptions etc. The assessee deployed the Transactional Net Margin Method (TNMM) for all previous years but sought to use residual method which was brought into force for the concerned assessment years.

In respect of the transactions that were not covered by the other method, the assessee used the TNMM - this much is evident from the transfer pricing report relied upon during the course of the assessments. The AO rejected the use of the other methods in totality and proceeded to apply the TNMM method. The Disputes Resolution Panel (“DRP”) sought the remand in the first instance and thereafter even proceeded to reject the AO’s remand report as perverse. However, it confirmed the adjustments made. The ITAT felt that the issue required re-examination but also at the same time proceeded to observe as follows: - “Admittedly, the assessee has not denied the fact that in the earlier years all the above transaction were bundled together by assessee itself in its TP study report. The Dispute Resolution Panel has noted that the assessee has itself determined the ALP in earlier periods by clubbing all the transaction and then compared with other similar entities. It is also not in dispute that there is no difference in the transactions of the assessee as well as the business model, terms of the agreement, and business strategy of the assessee in this year compared to earlier years. Therefore it casts heavier burden on the assessee to prove that the transaction stated by it to be „closely interlinked‟ in the earlier years are not so in this year and reasons for the changes in approach of the assessee to

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benchmark those transaction on „Transaction by transaction‟ basis. On reading of the TP study report we did not find any reasons stated therein for the change in the approach of the assessee for this year and further this aspect is also not dealt with in the order of the ld TPO/ld DRP.”

This Court is of the opinion that the TP’s report in the present instance clearly claims that the other method is the most appropriate method and proceeds to outline why the revisions for its adoptions in certain transactions even while using the TNMM for others. This aspect has not been examined by the ITAT - and also apparently by the DRP - which had at the same time rejected the AO’s remand report. Given these facts and the circumstances that the other method was introduced for the first time, and also given the fact that there does not appear to be much judicial thinking on the application of the other method as most appropriate method and all the considerations should weigh to the tax administrators in this regard vis-a-vis revenue and cost allocation, this Court is of the opinion that the ITAT should have proceed with the matter afresh instead of having remanded the matter totally to the TPO, as it did in the circumstances.

In these circumstances, the impugned order is modified. The ITAT is directed to go into the matter afresh and return the findings both on the question of law and the facts afresh.

All rights and contentions of the parties on the jurisdiction of the ITAT are reserved.

It is clarified that nothing stated in this order shall preclude the exercise of jurisdiction of the ITAT in any manner, to seek such

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remand reports as are necessary.

All rights and contentions are reserved.

S. RAVINDRA BHAT, J

SANJEEV SACHDEVA, J DECEMBER 15, 2017 /vikas/