AI Drafter 
TaxTMI 
TaxTMI 
2020 (6) TMI 817
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....er to avoid the repetition of discussion. 2. Appellant, FIS Global Business Solutions India Private Limited, the taxpayer, by filing the present appeals sought to set aside the impugned orders both dated 12.10.2018 passed by the ld. Commissioner of Income-tax (Appeals)-43, New Delhi challenging the orders passed by the ld. TPO/AO qua the assessment year 2010-11 on the grounds inter alia that :- "ITA NO.422/DEL/2019 1. That on the facts and circumstances of the case and in law, the Learned Assessing Officer ("Ld. AO")/ Commissioner of Income Tax(Appeals) ("Ld.CIT(A)")! Transfer Pricing Officer ("Ld.TPO") has erred in assessing the total income of the Appellant under section 143(3) read with section144C of the Act, for the relevant assessment year at INR 51,94,13,025 as against the returned income of INR 33,64,00,315. 2. That on the facts and circumstances of the case and in law, the AO/ CIT(A) have erred in not appreciating that the reference made by the Ld. AO to the Ld. TPO for determination of arm's length price was void ab-initio and bad in law as the Ld. AO failed to provide copy of approval granted by the Commissioner of Income-tax and affordi....
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....t year (i.e. financial year 2009-10) data for comparability despite the fact that at the time of comparison done by the Appellant, data for financial year 2009-10 was not available within the public domain. 5. That the Ld. AO/ TPO/ CIT(A) erred by not giving due cognizance to the fact that the Appellant has entered into Advance Pricing Agreement with CBDT for identical international transactions and has erred in not applying the terms of Advance Pricing Agreement to international transactions with AEs despite the fact that there is no change in the Functions, Assets and Risks ("FAR") of the Appellant in the relevant year compared to the years covered under APA. 6. On the facts and circumstances of the case, the Ld. AO has erred in levying interest under section 234B of the Act. 7. On the facts and circumstances of the case, the Ld. AO has erred both in facts and in law in initiating penalty proceedings under section 271(1)(c) of the Act." "ITA NO.423/DEL/2019 1. That on the facts and circumstances of the case and in law, the Assessing Officer ("AO") Commissioner of Income Tax(Appeals) ("Ld.CIT(A)")/ Transfer Pricing Officer ("Ld.TPO") ha....
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.... in FY 2004-05, FY 2006-07, FY 2007-08 and FY 2008-09. 3.9 The Ld. AO/ TPO/ CIT(A) considered the current year (i.e. financial year 2009-10) data for comparability despite the fact that at the time of comparison done by the Appellant, data for financial year 2009-10 was not available within the public domain. 4. That the Ld. AO/ TPO/ CIT(A) erred by not giving due cognizance to the fact that the Appellant has entered into Advance Pricing Agreement with CBDT for identical international transactions and has erred in not applying the terms of Advance Pricing Agreement to international transactions with AEs despite the fact that there is no change in the Functions, Assets and Risks ("FAR") of the Appellant in the relevant year compared to the years covered under APA. 5. On the facts and circumstances of the case, the Ld. AO has erred in levying interest under section 234A of the Act, ignoring the fact that the return was filed within the statutory due date as extended by CBDT. Further, the Ld. CIT(A) erred in not giving any specific finding in relation to incorrect levy of interest under section 234A of the Act. 6. On the facts and circumstances of t....
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....s process outsourcing centre for the customers of its associated enterprises. 6. During the year under assessment, the taxpayer entered into international transaction with its AE as under :- S.No. International Transaction Amount (in Rs.) 1 Software Development Services 684,304,076 2 Business Process management and call centre services 1,579,457,268 3 Interest received (Loan with interest 6.25%) 41,392,674 4 Interest received (loan with interest 6.00%) 23,796,074 7. The taxpayer in order to benchmark its international transactions qua "Software Development Services" (SDS) adopted Transactional Net Margin Method (TNMM) with Operating Profit/ Operating Cost (OP/OS) as Profit Level Indicator (PLI) as the Most Appropriate Method (MAM) chosen 11 comparables and computed average margin by using multiple year data at 13.94% as against its own margin of 15.64% and found its transactions at arm's length. However, ld. TPO accepted the method of TNMM with OP/OC as Profit Level Indicator (PLI) adopted by the taxpayer after applying various filters enumerated in para 2.1 of the TP order and after calling objections of the taxpayer, finally sele....
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..../DEL/2019 AND GROUND NO.5 OF ITA NO.422/DEL/2019 GROUND NO.4 OF ITA NO.423/DEL/2019 (REVENUE'S APPEALS) GROUND NO.1 OF ITA NO.579/DEL/2019 GROUND NO.1 OF ITA NO.3087/DEL/2019 15. Ground Nos.1 to 4 & 4.1 to 4.9 and Grounds No.1 to 3 & 3.1 to 3.9 of ITA Nos.422/Del/2019 & 423/Del/2019 respectively raised by the taxpayer regarding transfer pricing adjustment made by the AO/TPO/CIT(A) have not been pressed during the course of arguments rather ld. AR for the taxpayer argued Ground No.5 & Ground No.4 of ITA Nos.422/Del/2019 & 423/Del/2019 respectively seeking relief on the basis of Advance Pricing Agreement (APA) entered into with Central Board of Direct Taxes (CBDT) on 29.08.2016 for consecutive 5 years from FY 2014-15 to FY 2018-19 (referred to as 'APA years') and consecutive 4 years from FY 2010-11 to FY 2013-14 (referred to as 'Rollback years'. 16. Ld. AR for the taxpayer contended that AO/TPO/CIT(A) have not taken cognizance of the fact that the taxpayer has entered into Advance Pricing Agreement (APA) with CBDT for identical international transactions thus not applied the terms of the APA to international transactions with its AE despite the fact that there....
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....016 and 3I India Pvt. Ltd. vs. DCIT in ITA No.581/Mum/2015 rendered by the coordinate Bench of the Tribunal. 20. Undisputedly, arm's length margin (Operating Profit / Operative Cost) (OP/OC) agreed upon in the APA is 16.60% for both the segments viz. SDS segment and ITES segment whereas during the year under assessment consolidated margin (OP/OC) of the taxpayer is 19.26% (i.e. SDS segment 18.68% and ITES segment 18.57%). The taxpayer computed the consolidated margin (OP/OC) for the year under consideration as per APA at 19.26% (i.e. 21.20% for SDS segment and 18.39% for ITES segment), available at page 57 of the paper book, which is extracted as under:- Particulars Software Development Service Segment (A) ITES/ BPO Service Segment (B) Non Operating Item (C) Total (A+B+C) Reco as per Audited Financials FY 2009-10 Income Revenue 71,81,31,453 1,56,43,92,305 2,28,25,23,758 2,28,25,23,758 Add : Non Operating Income 2,75,61,058 2,75,61,058 9,71,13,873 Interest Income on FD 6,51,88,748 6,51,88,748 Interest Income on Loans &n....
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....at contention raised by the ld. DR is not tenable for the reason that when undisputedly there is no change in the FAR of the taxpayer in the year under assessment vis-à-vis years covered under APA and consolidated margin (OP/OC) computed as per APA at 19.26% is much more than the consolidated margin agreed upon between the taxpayer and the CBDT for the years covered under APA at 16.60% for both the segments, APA though not specifically applicable to the year under assessment, is having persuasive value to the dispute between the parties for other years. 23. Hon'ble Delhi High Court in the case of PCIT vs. Ameriprise India Pvt. Ltd. (supra) held that when under the APA entered into between the taxpayer and the CBDT under section 92CC aforementioned cost plus pricing methodology has been implicitly accepted, the APA has persuasive value to the dispute in question for other years. 24. Coordinate Bench of the Tribunal in the case of 3I India Private Ltd. vs. DCIT (supra) also relied upon APA entered into between the taxpayer and the CBDT for the subsequent years and has held as under :- "18 Whence, on similar functions and the transactions the Arm's length price h....
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....st appropriate transfer pricing method and arm's length price of these transactions have already been agreed upon between the taxpayer and CBDT and there is no change in the FAR and nature of international transactions entered into during the year under consideration vis-à-vis earlier years and subsequent years, principle laid down in the APA for benchmarking the international transactions in question shall have a guidance value. Moreso these days, it is endevour of the Union of India to stop avoidable litigations and this case falls in the category of cases where litigation can be minimized. 27. For the sake of repetition, it is brought on record by the taxpayer the consolidated margin (OP/OC) for the year under assessment as 19.26% as against ALP agreed upon between the parties to the appeal under APA at 16.60%. So, we are of the considered view that transfer pricing adjustment made by the AO/TPO/CIT(A) by applying Transfer Pricing principles is not sustainable, hence ordered to be deleted subject to the verification of computation of margin made by the taxpayer as per APA referred in the preceding para no.20. Consequently, Ground No.5 & Ground No.4 of ITA Nos.422/Del/2....