2020 (2) TMI 1563 - AT - Income Tax

Tribunal directs reexamination of margins for UK transactions, emphasizes speaking order & hearing opportunity for assessee

The Tribunal allowed the appeal for statistical purposes, directing the Commissioner of Income Tax (Appeals) to reexamine the margins adopted for UK and ... TP Adjustment - margin adopted for UK transactions and non-UK transactions - MAP proceedings of mark up - contention of the learned Authorized Representative that there is no finding by the CIT(Appeals) and non-adjudication of Map percentage on other entities - HELD THAT:- We restore the disputed issue to the file of CIT(Appeals) for fresh adjudication and findings on the margin adopted for UK transactions and non-UK transactions and pass a speaking order, and the assessee should be allowed adequate opportunity of hearing and shall cooperate in early disposal of appeal and allow the grounds of appeal of assessee for statistical purposes. Issues:Appeal against order of Commissioner of Income Tax (Appeals), Transfer Pricing Adjustment, Disallowance under Section 40a(ia), Margins on Map and non-Map transactions.Analysis:The appeal was filed against the order of Commissioner of Income Tax (Appeals) by the assessee, who provides services to group companies, including software customization and implementation. The case involved international transactions exceeding the limit, leading to a Transfer Pricing Officer determining the Arm's Length Price (ALP). The TPO rejected the documentation maintained by the assessee, selected comparables, and calculated a Transfer Pricing Adjustment of Rs. 320,581,011 in software services. Subsequently, a final assessment order was passed with Transfer Pricing Adjustments and disallowance under Section 40a(ia) of Rs. 364,157. The CIT(Appeals) partially allowed the appeal, leading to the assessee filing an appeal with the Tribunal.During the hearing, the Authorized Representative argued for applying the same percentage for non-map entities, emphasizing that the CIT(Appeals) did not adjudicate on non-MAP activities. The Departmental Representative supported the CIT(Appeals) order, citing a coordinate bench decision. The Tribunal noted the absence of findings by the CIT(Appeals) on the non-adjudication of Map percentage on other entities. Referring to a previous tribunal decision, the Tribunal decided to restore the disputed issue to the file of CIT(Appeals) for fresh adjudication on margins adopted for UK and non-UK transactions, directing a speaking order and adequate hearing opportunity for the assessee. The appeal was allowed for statistical purposes.