TaxTMI 
TaxTMI 
2016 (9) TMI 1395
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....on facts and in law in making Date of Hearing 30.06.2016 Date of Pronouncement 27.09.2016 an addition of Rs. 30,43,842 allegedly on account of difference in the arm's length price of the 'international transaction' of provision of risk consultancy services on the basis of the order passed under section 92CA(3) of the Act by the TPO. 2.1 That the DRP/TPO erred on facts and in law in rejecting the Transfer Pricing Documentation alleging that the appellant has not provided complete information/documents for the purpose of determination of arm's length price of the international transactions. 2.2 That the DRP/TPO erred on facts and in law in inadvertently characterizing the business of the appellant, as provider of 'financial advisory services' and also erred in comparing the appellant with the companies engaged in the business of stock broking and trading of shares. 2.3 The DRP/TPO erred on facts and in law in rejected the internal TNMM applied by the appellant in the Transfer Pricing Documentation allegedly holding that: (i) The segmental accounts are not available in the annual report. (ii) The internal TNMM, applied by the appellant, is ....
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....g the fact that the TPO himself rejected ISSSDB Security Services Ltd. which is engaged in providing similar services. 2.12 That the DRP/TPO erred on facts and in law in not allowing appropriate risk adjustment to establish comparability on account of the appellant being a low-risk-bearing captive service provider as opposed to the comparable companies who were independent service providers. 3. That the DRP/AO erred on facts and in law in disallowing an amount of Rs. 1,43,951 on account of interest on late deposit of TDS allegedly holding the same to be of penal nature. 4. That the Assessing Officer erred on facts and in law in levying interest u/s 234A, 234B and Section 234D of the Act. The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal." 2. Addressing the grounds raised, it was submitted by the Ld.AR that considering the peculiar facts and circumstances of the case although the assessee is confident that it would succeed in its prayer for seeking inclusion of comparables which have not been included and also seeking the exclusion of comparables which ....
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....dated 27.01.2014 placed at pages 55 to 146 of the appeal set filed. Attention was invited to specific page 66 so as to highlight that the TPO has considered that the taxpayer was engaged in providing "Investment and other financial advisory". Referring to the said page and the discussion which carries on to page 67 it was his submission that as a result of non-appreciation of the assessee's activity the comparable selection process of the TPO is full of flaws. As an illustration, attention was invited to appeal set page 126 internal page 73 of the TPO's order wherein the following comparable companies have been selected by the TPO:- Sl No. Name of the Company OP/OC 1 ICRA Management Consulting Services Ltd. 1.94 2 Ajcon Global Services Ltd. 32.88 3 Future Cap. Inv. 17.61 4 Ladderup Corporate Advisory Pvt. Ltd. 15.07 5 Pushpak Financial Services Ltd. 76.72 6 Apitco Ltd. 40.09 7 Cyber Media research Ltd. 14.85 8 Global Procurement 37.19 9 HCCA Business Services Pvt. 20.05 10 TSR Darashaw L....
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.... was referred to and specific emphasis was laid on para B of the same in order to emphasize the nature of the activity. 6.4. For ready- reference, the relevant extract from the said page is reproduced hereunder:- DISTRIBUTION AND SALES AGREEMENT "This Agreement is made on 6th January 2010. Between:- 1. The companies listed in Schedule 1 to this Agreement ("Seller"); and 2. The companies listed in Schedule 2 to this Agreement ("Service Provider") Background A. The Sellers and Service Providers listed in Schedules 1 and 2 are all direct and indirect subsidiaries of Control Risks Group Holdings Limited ("CRGHL"). B. Service Providers are engaged in the provision of crisis and security consultancy, outsourced security management, crisis response, investigative services, forensics and other risk management consultancy services (' the Consultancy Services') in the territory in which they operate ("Territory")." (emphasis provided) 6.5. Attention was also invited to pages 32 to 84 of the paper book which is the transfer pricing documentation. Specific attention was invited to page 38 and 39 of the same so as to ....
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....sk Advisory Group, Live Group and, in Asia Pacific-Hill & Associates. "CRIPL was incorporated in August, 2007 for offering a comprehensive range of consultancy services that assist clients to manage political, security, operational and integrity risks at every stage of an investment." 6.6. It was his submission that no doubt the socio- political environment of a country would impact the financials however the taxpayer is not dealing or trading in shares as considered by the TPO. As a result of this incorrect factual appreciation, it was submitted the TPO has drawn a wrong conclusion and has proceeded to select the comparable. On account of this mistake which has occurred it was submitted remand was requested for. In order to facilitate the correct appreciation of facts, it was his submission that the assessee has filed a petition under Rule 29 seeking permission to place additional evidence on record. 6.7. Reading from the said petition, it was his submission that the TPO has inadvertently considered the business of the assessee as a provider of financial advisory services and has erred consequently in comparing the assessee with companies engaged in the business of ....
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....63 (Delhi) pleading that procedures relating to filing of additional evidence is handmaid of Justice and Justice should not be allowed to be choked only because of some inadvertent error or oral omission on the part of the parties and the evidence may be taken into consideration. Reliance is also placed on CIT Vs. Hewlett Packard India: 314 ITR 55 (Del HC); CIT Vs. Chandra Kant Sahu Bhai: 202 Taxman 262 (Del HC); CIT Vs. Betterways Finance: ITA 995 of 2009 (Del HC); Jatia Investment Co V. CIT: 206 ITR 718 (Cal Hon'ble HC); Electra (Jaipur) Ltd. Vs. IAC: 26 ITD 236 (Del ITAT); and Y.W.C. A of India Vs. IAC: 29 ITD 620 (Del ITAT). 6.9. Accordingly, it was his submission that by allowing the prayer of the assessee, the issue may be remanded. 7. Considering the peculiar facts and circumstances of the case the Ld. Sr. DR who initially had submitted that the fresh evidence may not be taken into consideration. However, considering the fact that the evidence on record would assist the Revenue in correctly characterising the taxpayer and the issue is not to be decided at this stage and has to go back, it was his submission that he would have no objection if it is admitted and rest....
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....t thereof the characterization i.e the FAR analysis itself is flawed. For ready-reference, we extract the Annexure "I" u/Rule 29 for readyreference:- "We understand that in acquired the business of and the of brand. At the time, was one of the leading Indian manufacturers of equipment. As part of the acquisition the two promoters of the company (" ") and (" ") also joined the newly formed company and the residual business of the erstwhile was spun off as .Control Risks was informed that during the acquisition the promoters signed a non-compete agreement with stating that would not enter the business for a three year period following the acquisition and the two promoters for five years. In a whistle blower made allegations that (" ") supplier to and a company reportedly owned by a member of family, was manufacturing equipment. The whistle blower, in speaking of the other suppliers understood that had been placing orders for sub-assemblies used in the manufacturing of from other suppliers. Initial research on the Ministry of Corporate Affairs ("MCA") did not reveal a listing for this company; however we note that sole proprietorship and partnership firms are not req....
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....rol Risks. Control Risks understands the Client is considering an investment into in India is founded and managed by and . As such, the Client would like Control Risks to undertake in-depth research into the background of the company and its key principals to ensure there are no undisclosed commercial, legal, ethical or regulatory issues in relation to their backgrounds. Control Risks research would also focus on any issues of concern from an international regulatory and compliance perspective, including the recently passed UK Bribery Act. The Client has indicated that which are not required to register with India's companies house, the Ministry of Corporate Affairs. As such, corporate filings including incorporation details and financial information are not available in the public domain. However, Control Risks understands that the Client has initiated the financial due diligence process and may have additional background information. The following summarises Control Risks' proposed approach ('the Services'). To accept this approach and instruct Control Risks to proceed with this assignment, please sign and return a copy of the client acc....
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.... _ Evidence of improper relationships with government officials or individuals of influence; _ Designation on financial 'blacklists' maintained by domestic or international agencies; Phase two: Discreet source enquiries Control Risks will perform discreet source enquiries to provide greater context to information uncovered in Phase 1; to fill in gaps in (he public record; and to establish the reputation and trustworthiness of the principals. Although the scope of our enquiries would depend in part on any issues identified in Phase I, we would expect to cover the following key areas in Phase II: • Identify and assess the impact of any allegations of unethical or illegal business practices, major business disputes, or controversies surrounding the principals, which are no? part of the public record. • Assess the professional reputation and perceived integrity of the principals, including their track record with other partners, associates and suppliers. Have they been involved in any disputes / litigation? if so, what was their approach and what was the outcome? • Have there been any allegations....
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....ayer definitely renders which is evident from the extract of the redacted agreements entered into by the assessee company with its customers the nature of the activity impacting its FAR needs to be addressed. It is seen that even if the nature of activities impact the ultimate decision-making qua the financial information provided however, by no stretch of imagination the assessee can be compared with companies who are trading in shares and investments. Accordingly holding the fresh evidences as relevant and crucial to determine the issues, the fresh evidence is admitted. Support is drawn from the decision of the Jurisdictional High Court in the case of CIT vs Text Hundred India Pvt. Ltd. (cited supra). The following extract of the said decision is reproduced hereunder:- "13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motto of the Tribunal.....
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....- "During the year under consideration the assessee company claimed interest expenses amounting to Rs. 10,17,083/- on account late deposit of Service tax and TDS vide this office letter dated 18/2/2014 the assessee company was requested to provide the details of Service tax an TDS and also show cause as to why these expenses should not be disallowed being penal in nature. In response the assessee company vide letter dated 26/2/2014 submitted as under:- The assessee company has paid interest of Rs. 10,17,083/- on account of late deposit of Service Tax accounting to Rs. 73,132/- and late deposit of TDS amounting to Rs. 1,43,951/-. It should not be added to the income because it is not penal in nature interest was paid suo mouo. Assessee has made late payment of service tax and accordingly it has pay interest u/s 75 of the Finance Act 1994 under service tax provisions. The ;amount of interest paid for delayed payment of service tax is compensatory in nature and has the same character at service tax and it is not in nature of any penalty or fine allowable as expenses u/s 37 of the Income Tax Act 1961. The submission of the assessee has been considered by not ....
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....nsidered by the DRP which has been followed by the AO, we reject the ground of the assessee. The relevant extract of the DRP's order is reproduced hereunder for ready-reference:- 11.2. "A perusal of the draft assessment shows that during the year under consideration the taxpayer claimed interest expenses amounting to Rs. 10,17,083/- on account late deposit of Service Tax and TDS. The AO accepted the argument of the taxpayer that the interest under section 75 of the Finance Act 1994 for late payment of service tax is compensatory in nature, has the same character as service tax and it is not in nature of any penalty or fine allowable under section 37 of the income tax Act 1961. Accordingly, he allowed the said interest paid on late deposit of service tax. However, the interest paid on late deposit of TDS amounting to Rs. 1,43,951/- not allowed and proposed to be added to the income. 11.3. The Ld. AR of the taxpayer submitted that according to the provisions of section 37(1) of the Act, any expenditure incurred wholly and exclusively for the purposes of business is allowable as deduction, provided the same was not incurred for the purpose of any offence or which is ....