2019 (5) TMI 1741 - AT - Income Tax

Tribunal Adjusts Transfer Pricing, Issues Directions on Tax Matters

The Tribunal partly allowed the appeal, directing the exclusion of certain comparables for benchmarking international transactions due to functional ... TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Assessee company is engaged in providing local logistics of freight forwarding services in India which includes cargo consultation services, international freight forwarding services, warehousing management services and other local logistic support services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Government owned companies cannot be construed as a comparable. Chargeability of interest u/s. 234A - HELD THAT:- AR stated that due date of filing return of income for the A.Y.2010-11 was extended by CBDT to 15th October 2010 for which he placed on record the order passed by the CBDT on 27/09/2010. The return of income was filed by the assessee on 15/10/2010 i.e., on the due date. Hence, no interest u/s.234A of the Act could be levied on the assessee. Accordingly, the ground raised by the assessee is allowed. Issues Involved:1. Inclusion/Exclusion of Comparables for Benchmarking International Transactions.2. Adoption of Correct Margins of Comparables.3. Short Credit of Tax Deducted at Source.4. Chargeability of Interest under Section 234A.5. Chargeability of Interest under Section 234B.6. Chargeability of Interest under Section 234D.7. Initiation of Penalty Proceedings under Section 271(1)(C).Detailed Analysis:1. Inclusion/Exclusion of Comparables for Benchmarking International Transactions:- TSR Darashaw Ltd.: The Tribunal found that TSR Darashaw Ltd. is involved in business process outsourcing services, which are functionally different from the assessee's logistics and freight forwarding support services. The Tribunal referred to previous judicial precedents, including the Delhi Tribunal's decision in Trend Micro India Pvt. Ltd. and the Delhi High Court's affirmation. Consequently, TSR Darashaw Ltd. was excluded from the list of comparables.- Apitco Ltd.: The Tribunal noted that Apitco Ltd. is a State Government company involved in consulting services for SMEs. Citing the Bombay High Court's decision in Thyssenkrupp Industries India (P) Ltd. and the Delhi High Court's decision in International SOS Services India Pvt. Ltd., the Tribunal held that Government companies are not suitable comparables for private enterprises. Thus, Apitco Ltd. was excluded.- Global Procurement Consultant Ltd.: The Tribunal acknowledged that Global Procurement Consultant Ltd. is a Government company established to provide procurement and management services for Government departments. Following the same rationale as for Apitco Ltd., the Tribunal directed its exclusion from the list of comparables.- HCCA Business Services Pvt. Ltd.: The Tribunal referred to the DRP's order for A.Y.2013-14 in the assessee’s own case, which had excluded HCCA Business Services Pvt. Ltd. on the grounds of functional dissimilarity. The Tribunal upheld this exclusion.The Tribunal directed the TPO to re-compute the ALP after excluding the aforementioned comparables and determine if any adjustment is needed.2. Adoption of Correct Margins of Comparables:The Tribunal directed the TPO to verify the correct margins of the remaining comparables while re-computing the revised ALP, as per the directions given.3. Short Credit of Tax Deducted at Source:The Tribunal directed the AO to verify the assessee's claim of short credit for tax deducted at source and grant the credit as per law if found eligible.4. Chargeability of Interest under Section 234A:The Tribunal noted that the due date for filing the return of income for A.Y.2010-11 was extended to 15th October 2010 by the CBDT, and the assessee filed the return on this date. Therefore, no interest under Section 234A could be levied, and the ground was allowed.5. Chargeability of Interest under Section 234B:The Tribunal noted that the chargeability of interest under Section 234B is consequential and does not require specific adjudication.6. Chargeability of Interest under Section 234D:The Tribunal directed the AO to verify whether any refund was actually granted to the assessee before deciding the chargeability of interest under Section 234D.7. Initiation of Penalty Proceedings under Section 271(1)(C):The Tribunal held that the adjudication of the initiation of penalty proceedings under Section 271(1)(C) would be premature at this stage.Conclusion:The appeal of the assessee was partly allowed, with specific directions to the TPO and AO to re-compute ALP, verify claims, and apply the law accordingly. The Tribunal's order was pronounced in the open court on 29/05/2019.