2023 (3) TMI 88 - AT - Income Tax

Tribunal grants relief to assessee in appeal, emphasizing judicial consistency and adherence to precedents

The Tribunal partly allowed the assessee's appeal, directing fresh verification and computation for various issues including transfer pricing adjustments, ... TP adjustment - fee for advisory and other services involving its overseas associated enterprises “AE's” whose price has been taken by the TPO at NIL as affirmed in the DRP’s directions - HELD THAT:- As decided in assessee own case [2021 (7) TMI 892 - ITAT PUNE] Tribunal has passed orders starting from assessment year 2009-10 to 2015-16, whose copies have been placed on record. In the lead order, which has been followed in later years, the application of the TNMM as the most appropriate method has been accepted in preference to the CUP method as applied by the TPO. After giving certain directions, matter has been sent back to the AO/TPO for deciding the issue accordingly. The ld. DR fairly conceded that the facts and circumstances of the instant appeal are mutatis mutandis similar to those of earlier years. Respectfully following the precedent, we set-aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue afresh in accordance with the directions given by the Tribunal in assessee’s own case for the earlier assessment years. Thus we direct the learned TPO to decide the instant first and foremost ground afresh as per law after taking into consideration all the said preceding assessment years developments on the very issue. ALP adjustment - international transactions with overseas associated enterprises involving the provision of oracle support services in the relevant previous year - Comparable selection - HELD THAT:- We make it clear that neither of the learned lower authorities holds the entity M/s. Crystal Vox Ltd. as not a functionally comparable entity. This is indeed coupled with the assessee’s pleadings on merits that both the learned lower authorities had not made available the corresponding financial statements. Mr. Bafna further highlighted the fact that the receivables in the said company of merely Rs.97,391/- out of Rs.2,21,26,002/- exceed 06 months time period as per the corresponding financial statements. Be that as it may, the Revenue could hardly dispute that even if the said outstanding receivables are accepted as having more than four months, the same would hardly effect the relevant profit margin in the very segment. Sec.92B Explanation-(c) also treats such receivables as an international transaction itself. We further observe at the cost of repetition that we are yet to see even a single observation from the learned lower authorities rejecting M/s. Crystal Vox Ltd. as not satisfying “FAR” analysis. Faced with the situation, we accept the assessee’s corresponding substantive ground no.6(i) herein to this effect and direct the TPO to frame his afresh computation in very terms. Weighted deduction u/s 35(2)(AB) - Disallowance on the ground prescribed authority i.e., Department of Science and Industrial Research [“DSIR”] has not issued Form 3CL qua the same - HELD THAT:- It emerges during the course of hearing that the said prescribed authority has now issued Form 3CL to the assessee on 25.04.2022 before us. Faced with the situation, we restore the assessee’s instant ground to the Assessing Officer for his afresh factual verification as per law preferably within three effective opportunities of hearing. Disallowance to employees contribution as deposited beyond the due date - HELD THAT:- Hon’ble apex court’s recent landmark decision in Checkmate Services P. Ltd. & Ors. vs. CIT & Ors. [2022 (10) TMI 617 - SUPREME COURT] has already decided the instant issue against the assessee and in department’s favour that such a contribution ought to be deposited before the due date under the corresponding statute than that of filing sec.139(1) return. We accordingly uphold the impugned disallowance. Mismatch of TDS credit as against correct sum is restored back to the file of Assessing Officer for his afresh factual verification as per law since not requiring any substantive adjudication at our level. Issues Involved:1. General substantive ground.2. Transfer pricing adjustment related to advisory and other services.3. Transfer pricing adjustment related to provision of oracle support services.4. Disallowance of weighted deduction under section 35(2AB).5. Disallowance under section 36(1)(va) for delayed deposit of employees' contributions.6. Mismatch in TDS credit.7. Levy of interest under sections 234B and 234C.8. Initiation of penalty proceedings under section 270A read with section 274.Detailed Analysis:1. General Substantive Ground:The assessee's first substantive ground was treated as general in nature and was rejected accordingly.2. Transfer Pricing Adjustment - Advisory and Other Services:The assessee contested the transfer pricing adjustment of Rs.15,75,65,912/- related to fees for advisory and other services to associated enterprises (AEs), which was determined as 'Nil' by the TPO and affirmed by the DRP. The Tribunal noted that in previous assessment years (2010-11 to 2016-17), similar adjustments were adjudicated against the department. The Tribunal directed the TPO to decide the issue afresh, considering the precedents from earlier years.3. Transfer Pricing Adjustment - Oracle Support Services:The assessee challenged the ALP adjustment of Rs.51,90,680/- related to oracle support services. The Tribunal focused on the rejection of Crystal Vox Ltd. as a comparable entity due to outstanding receivables of more than four months. The Tribunal found that the lower authorities did not reject Crystal Vox Ltd. based on functional analysis and directed the TPO to reconsider the computation. The assessee did not press other sub-grounds, and the Tribunal accepted the ground partly for statistical purposes.4. Disallowance of Weighted Deduction - Section 35(2AB):The assessee challenged the disallowance of Rs.18,63,37,428/- under section 35(2AB) due to the non-issuance of Form 3CL by the Department of Science and Industrial Research (DSIR). The Tribunal noted that Form 3CL was issued on 25.04.2022 and restored the issue to the Assessing Officer for fresh factual verification.5. Disallowance under Section 36(1)(va):The assessee contested the disallowance of Rs.72,05,345/- for delayed deposit of employees' contributions. The Tribunal upheld the disallowance based on the Supreme Court's decision in Checkmate Services P. Ltd. & Ors. vs. CIT & Ors., which mandates deposit before the due date under the corresponding statute.6. Mismatch in TDS Credit:The assessee highlighted a mismatch in TDS credit of Rs.1,93,22,300/- against the claimed Rs.1,93,86,299/-. The Tribunal restored the issue to the Assessing Officer for fresh verification.7. Levy of Interest - Sections 234B and 234C:The issues related to the levy of interest under sections 234B and 234C were treated as consequential. The Tribunal directed the Assessing Officer to compute the interest as per the provisions of the Act.8. Initiation of Penalty Proceedings - Section 270A read with Section 274:The assessee contested the initiation of penalty proceedings under section 270A read with section 274 without being given an opportunity to present its case. The Tribunal directed the Assessing Officer to drop the penalty proceedings.Conclusion:The assessee's appeal was partly allowed, with several issues restored to the Assessing Officer for fresh verification and computation. The Tribunal emphasized judicial consistency and adherence to precedents in deciding transfer pricing adjustments and other substantive grounds. The order was pronounced in open court on 17th February 2023.