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Income Tax Appellate Tribunal, MUMBAI BENCHES “K”, MUMBAI
Before: Shri Amit Shukla, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal is filed by the Assessee against the orders of Disputes Resolution Panel -II, Mumbai {in short, ‘DRP’}, for the assessment year 2008-09.
2 Symantec Software 2. During the course of hearing, arguments were made by Shri A.V. Sonde (Ld. Counsel) on behalf of the Assessee and by Shri N.K. Chand, Departmental Representative (Ld. CIT-DR) on behalf of the Revenue.
During the course of hearing Ld. Counsel has submitted the additional ground as under: “Symantec Software Solutions Private Limited ('the Appellant') craves leave to prefer an appeal on the following additional ground against the final order passed by the learned Deputy Commissioner of Income-tax - 10(1), Mumbai under section 143(3) r.w.s144C(13) of the Income-tax Act, 1961 ('the Act'). On the facts and circumstances of the case and in law, the learned AO/ DRP: 15. erred in considering Man Diesel India Limited as a comparable company to the Appellant even though Man Diesel India Limited has significant related party transactions during FY 2007-08.”
3.1. It was submitted that the additional ground is purely legal ground and can be decided on the basis of facts on record. On the other hand, Ld. CIT-DR has submitted that the assessee cannot change its stands at this stage by filing additional ground before the Tribunal, and therefore, the additional ground should not be admitted.
3.2. We have gone through the submissions made by both the sides. It is noted that this issue can be decided on the basis of facts already on record before the lower authorities. In the interest of justice and in view of judgment of Hon’ble Supreme
3 Symantec Software Court in the case of National Thermal Power Co. Ltd. 229 ITR 383, we admit this ground for adjudication.
3.3. During the course of hearing, Ld. Counsel has made submissions with respect to additional ground only. No arguments have been made on the main grounds raised with the appeal memo. Therefore, in these circumstances, all the grounds raised with the appeal memo are dismissed.
Additional Ground: In this ground the assessee has challenged the action of lower authorities in considering the company ‘M/s. Man Diesel India Limited’, as comparable company to the assessee company, even though said company has significant related party transactions during the F.Y. 2007-08.
4.1. The brief background of the case is that the business profile of the assessee company is that it was primarily engaged in the business of providing marketing, technical support services exclusively to of its AE. The mechanism followed by the company was on the basis of cost plus 2% of net sales for the value of services provided of its AE. The methodology followed for benchmarking international transactions was TNMM method, as per its Transfer Pricing Study Report. The TPO accepted the methodology of TNMM, however certain comparables given by the assessee company were rejected and few others were added by him in the final Accept-Reject matrix. Only five comparables were left, out of 4 Symantec Software which ‘M/s Man Diesel India Ltd.’ is one of the comparables. The said company was included in the list of comparables in the TP study report submitted by the assessee company.
4.2. However, now the assessee has submitted additional ground before the Tribunal, contending that as per law the said company could not have been included in the list of comparables for the reason that this company has significant related party transactions. During the course of hearing, Ld. Counsel of the assessee has drawn our attention on various pages of the paper book showing annual accounts of the said company wherein amount and other particulars of related party transactions of Man Diesel India Ltd. are given. He has drawn our attention on page no. 57 of the paper book, showing that related party transactions of the said company are as under: RPT (Income)/ Revenue from operations- 45.76% RPT (Expenses + Income)/ Revenue from operations- 65.39% 4.3. Further attention was drawn on page no. 48 of the paper book which is relevant portion of ‘Notes to Accounts’ of the balance sheet of the said company, wherein complete breakup and details of related party transactions of the said company have been given. It was submitted that the related party transactions are far above the limit of 15% and even 25%, and therefore, viewed from any angle, this company could not have been included in the list of comparables, and therefore, the TP adjustment made by the lower authorities is contrary to law
5 Symantec Software and facts, on the face of it. It was submitted that any tax collected without the authority of the law is not permitted. In support of his claim that an assessee can dispute a comparable before the Tribunal for the first time, reliance has been placed on the following judgments:
1• Deputy Commissioner of Income Tax Vs Quark Systems Pvt Ltd. 132 TTJ (Chd) (S B) 1 2. CIT Vs Quark Systems India (P) Ltd 62 DTR 182 (P&H) 3. Akzo Nobel Chemicals (India) Ltd., Vs ACIT
4. CISCO Systems (India) Private Ltd. Vs DCIT IT(TP)A No271/Bang/2014 5. ACIT Vs Convergys India Service (P) Ltd., ITA No.4291/Del/2009 6. Deloitte Consulting India Pvt. Ltd., Vs DCIT 155 TTJ (Hyd) 367 7. Four Soft Pvt. Limited, Vs DCIT ITA No. 1903/Hyd/11 8. IVY Comptech Pvt. Ltd Vs ACIT ITA No. 1 558/Hyd/2010 9. Parexel International (India) Private Limited vs ACIT (ITANo.144/Hyd/2014). 10. Q Logic (India) Private Limited Vs DClT ITA No.227/PN/2014. 11. Stream International Services Pvt. Ltd Vs Asst. CIT 23 ITR (Trib) 70 (Mumbai) 12. Sumitomo Corporation India Private Limited, Vs DCIT ITA No.2307/Del/2009 13. Techbooks International Private Limited Vs ACIT ITA No.4990/Del/2011 14. United Health Group Information Services Pvt. Ltd. Vs ACIT ITA No. 6312/Del/2012 4.4. It has been submitted by the Ld. Counsel that prayer of the assessee is within the frame work of law, and therefore no 6 Symantec Software illegal action should be allowed to be sustained. It was submitted by him that in all fairness, this matter should be sent back to AO for verification of the facts already on record and then applying the correct position of law.
4.5. On the other hand, Ld. CIT-DR has opposed the submissions of the Ld. Counsel. It has been submitted by him that it has not been demonstrated that RPT filter was applied by the assessee or PTO, and since this filter was not applied, this issue cannot be raised here before the Tribunal. However, he was fair enough to admit that the balance sheet and other connected facts pertaining to the aforesaid company are held on record. He has placed reliance on the judgment of Hon’ble Delhi Bench ITAT in the case of NOKIA INDIA (P) LTD. in dated 31.10.2014.
4.6. We have gone through the submission made by both the sides. The undisputed facts on record are that the aforesaid company was having RPT transactions which appear to be well above the accepted limits. Requisite documents evidencing these facts are already held on record. But, these facts were not examined by the lower authorities. In view of the judgments relied upon by the Ld. Counsel, we find that since this issue goes to the root of the matter, the assessee should be given opportunity to raise a legal plea even at this stage before the Tribunal. In all fairness and to meet ends of justice, we find it appropriate to send this issue back to the file of AO/TPO for a fresh decision with respect to the said company.
7 Symantec Software The assessee shall put forth all requisite material before the AO/ TPO in support of its claim, for which proper opportunity should be provided. With these directions, we send this issue back to the file of the AO/TPO. Thus, additional ground is treated to be allowed for statistical purposes.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 16th December, 2015.