TaxTMI 
TaxTMI 
2012 (10) TMI 285
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Services Private Limited India. Assessee has provided services to Fidelity International Services and Fidelity Outsourcing Services (FIS & FOS) respectively. The Transfer Pricing Officer was of the view that the entire services were to the group entity/entities, provisions of transfer pricing will apply to assessee. Another reason for considering that transfer pricing provisions are applicable is also on the basis that the assessee has filed Form No.3CEB as prescribed in section 92E of the Act and maintained documents as prescribed in section 92D r.w.r 10D of the I.T. Rules. It was a submission of the assessee that the assessee being a joint venture between Peninsula Capital Services India Ltd., (80% share holding) and Sanchez Computer Associates Inc. USA (20% share holding) is an individual provider of I.T. Product and services. It was the contention of the assessee that even though they submitted Form No.3CEB by way of abundant precaution, these two entities (FIS & FOS) are not associated enterprises and did not satisfy any conditions prescribed under section 92A of the I.T. Act. The AO in his brief reasoning rejected the objection stating that "plea is not acceptable as the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee consistently for purposes of transfer pricing and stated to be at arm's length. It is only in the TP study filed during the audit process of transfer pricing before the TPO that it is stated that these 2 companies are not associated enterprises but were declared so as an abundant precaution. The TP report, however, continues to analyse the transactions with these 2 companies and selecting the most appropriate method in assessee's case to establish that the transactions with these 2 companies were at arm's length. In similar facts and circumstances in earlier years, the TPO passes an order u/s 92CA(3) of the Income Tax Act, 1961 though no adjustments were made. Nevertheless, on the issue of associate enterprise the assessee had neither challenged the TPO/AO's orders in appeal nor u/s 264 or in any other forum. The emerging facts indicate that in similar facts and circumstances assessee had earlier furnished its return of income accompanies with Form 3 CEB showing these 2 companies as associate enterprises and accepted order u/s 92CA(3) with regard to transactions with those companies. It is only in AY 07-08 i.e. the present proceeding where an adjustment has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is no associated party relationship with the assessee and FIS & FOS. Since FIS can only be stated to be holding 20% in assessee company indirectly. It was his submission that none of the other conditions prescribed in sec 92A(2) are fulfilled in the assessee's case. He then referred to the detailed objections filed with reference to 'no associated enterprise relationship' and the objections raised before the DRP placed in paper book from page No.35 to 43 and detailed explanation given for each of the provision u/s 92A to submit that there cannot be any associated enterprise relationship. He then referred to the order of the DRP to submit that DRP also did not give any finding about this associated relationship on the reason that complete details of holding of Peninsula Capital Services Inc, in turn Zenta group of USA, have not been placed. He then referred to the letter filed before the authorities dated 3.10.2011 signed by Chairman and CEO of Zenta stating that Zenta LLC, Delaware, USA does not currently have and has never had in the past any associated enterprises relationship with the Fidelity Information Services, USA. He also then placed share holding pattern o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ises become "associated enterprises" under sub-section (1) of section 92A, there is no need to consider the deeming provisions as contained in sub-section (2) of section 92A of the Act. In the case of the assessee there is no need to go to the provisions of section 92A(2) of the Act, since the assessee and FIS & FOS become associated enterprises in terms of provisions of section 92A(1)(b) of the Act". He also placed on record written submissions without prejudice to the arguments including the reliance on the Hon'ble Bombay HC judgment in the case of CIT v. Gopal Purohit [2010] 188 Taxman 140 for consistency on the reason that the assessee has been consistently filing Form No.3CEB showing assessee and the FIS/FOS as associated enterprises. 11. The learned AR in reply, however, objected to the arguments of the DR to submit that the memorandum explaining the provisions in the Finance Bill, 2002 reported in Vol.254 ITR Statute 190 particularly Page No.215 explaining the provisions of Transfer Pricing areas under: "Under the existing provisions contained in section 92 of the Income Tax Act, any income arising from an international transaction shall be computed having re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has given detailed explanation how these provisions are not applicable so as to hold the two companies as associated enterprises. However, it is not clear on record whether there is any relationship as prescribed u/s 92A(1)(a)(b) which specify that an associated enterprise in relation to another enterprise means, an enterprise (a) which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or (b) in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise. 13. This aspect of participating directly or indirectly in the management and control or capital of other enterprises is being examined by the TPO in assessment year 2008-09 consequent to the details filed by assessee in assessment year on the directions of the DRP. Since inquiries are pending before the TPO to examine whether there is any direct or indirect participation of Sanc....