TaxTMI 
TaxTMI 
2022 (5) TMI 1612
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....A. No. 665/2021, wherein, the Hon'ble Apex Court taking note of the challenge faced by the litigants across the country on account of Covid-19, had extended the period of limitation in filing petitions/applications/suits/appeals etc. Thus, it was submitted, the delay in filing the appeal may be condoned. 3. Learned Departmental Representative did not oppose condonation of delay. 4. Keeping in view the contents of the petition filed by the assessee seeking condonation of delay and the order of the Hon'ble Supreme Court, referred to above, we are satisfied that the delay in filing the appeal was due to reasonable cause. Accordingly, we condone the delay of 25 days and admit the appeal for adjudication on merit. 5. The assessee has raised the following grounds: "1. On the facts and circumstances of the case, & in law the assessment order passed by the Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income-tax Officer, National e-Assessment Centre ("the Ld. AO') under Section 143(3) read with section 143(3A) & 143(3B) of the Income tax Act, 1961 ("the Act') is erroneous and bad in law; Grounds of objections relating to Transfer Pr....
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.... against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Appellant on account of this fact, thereby disregarding the law, international guidance and judicial precedents in this regard. 4. On the facts and circumstances of the case, & in law the Ld. TPO/Ld. AO, following the directions of the Hon'ble Dispute Resolution Panel ("the Hon'ble DRP') has erred in enhancing the income of the Appellant by Rs. 14,859,894 holding that the Appellant's international transaction pertaining to provision of sales and post-sales support services to its AE does not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in: 4.1. not appreciating that none of the conditions set out in section 920(3) of the Act are satisfied in the present case and disregarding the ALP as determined by the Appellant in the TP documentation maintained by it in terms of Section 92D of the Act read with Rule 10D of the Rules; 4.2. rejecting comparability analysis undertaken by the Appellant in the TP documentation and in conducting a fresh comparability analysis based on appli....
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....("CUP') method as the most appropriate method to benchmark the impugned international transaction and determining the arm's length price of the impugned transaction as Nil, without identifying any controlled transactions/without duly establishing suitability thereof; Grounds of objections relating to Corporate Tax Matters 6. On the facts and circumstances of the case, and in law the Ld. AO/Ld. DPR has erred in making an addition of Rs. 26,383,589 by denying deduction claimed by the Appellant under section 10AA of the Act; 6.1. On the facts and circumstances of the case, and in law the Ld. AO/Ld. DRP has erred in disregarding the details filed by the Appellant that the formative conditions prescribed under section 10AA(4) of the Act have been satisfied in the year of formation; 6.2. On the facts and circumstances of the case, and in law the Ld. AO/Ld. DRP has erred in disregarding the fact that the disallowance under section 10AA of the Act in the year of formation has been deleted and thus, no disallowance is warranted in the subject year; 6.3. On the facts and circumstances of the case, and in law the Ld. AO has erred in alleging that....
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....ssessee, previously known as Comverse Network System India Pvt. Ltd., is a resident company. Assessee is a part of Comverse Network System India Pvt. Ltd., which provides digital communication solution for communication service providers, enterprises and application providers worldwide. Assessee's parent company offers various communication solutions, including, voicemail, visual voicemail, call completion, short messaging services (SMS) and various other kind of services. Whereas, the assessee company being a captive service provider provides sales support services including services related to promotion and marketing the products of the group companies and identifying potential customers in India. The assessee also provides post sales support services including installation and test run the equipment and the existing network, post-communication maintenance, including, warranty, extended warranty and post warranty services for products sold directly by the overseas associated enterprises (AEs) to customers in India. Of course, the assessee provides software development services and management services. During the year under consideration, the assessee reported Revenue in the f....
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....attention to the annual report of the company placed in the paper book, learned counsel submitted, the company is functionally different from the assessee as it is engaged in totally different set of activities. He submitted, unlike the assessee, this company is not a service provider and acts as agent for various foreign principals for sale of dredgers, dredging equipment, steerable rudder propellers etc. 15. Drawing our attention to the P & L account, he submitted more than 94% of its operational income was in form of commission income from its agency function. He submitted, the annual report does not provide segmental details of products, commission services and after sales support services. Thus, he submitted, the company cannot be treated as comparable. In support of such contention, he relied upon the following decisions: i) Bergen Engines India Pvt. Ltd. Vs. ACIT-ITA No. 7802/Del/2017 dated 27.4.2020; ii) Hyundai Rotem Co. Vs. ACIT-ITA No. 7569/Del/2019 dated 02.03.2020; & iii) Veolia India Pvt. Ltd. Vs. DCIT-ITA No. 6770/Del/2015 dated 11.10.2019. 16. Strongly relying upon the observations of TPO and learned DRP, learned Departmental Represe....
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....erved, in course of proceedings before the TPO, assessee had specifically objected to selection of this company as a comparable due to insufficient information available in public domain regarding the financials of the company. In other words, it is the contention of the assessee that audited annual report of the company is not available in public domain. On perusal of the impugned orders of the TPO and learned DRP, it is very much clear, they have not addressed the aforesaid specific objection of the assessee. Thus, when the audited financial statement of the company is not available on public domain, it will not be safe to include the company as a comparable. More so, when there is no material on record to suggest the source from which the TPO has obtained the information regarding this company and the authenticity of such information. It doesn't appear on record that the TPO has made any independent inquiry with this company either by issuing notice under section 133(6) of the Act or in any other manner. 23. In view of the aforesaid, we exclude this company from the list of comparables. III. Info Edge India Ltd.: 24. Objecting to selection of this company, learned c....
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....eptional year of operation for the company as its profit has increased by almost 102.15%. He submitted, it also owns substantial intangibles. Thus, he submitted, the company cannot be treated as comparable. 31. Learned Departmental Representative strongly relied upon the observations of the TPO and learned DRP. 32. We have considered rival submissions and perused the material on record. 33. On a perusal of the annual report of the company placed in the paper book, it is noticed that this company provides offshore recruitment and staffing solutions. These activities of the company certainly cannot be compared to the sales and post sales services provided by the assessee. It is also observed that the company has reported huge increase in its profit margin. Therefore, without properly analyzing the factors leading to abnormal increase in profit margin, it would not be safe to include this company as a comparable. In any case of the matter, fact remains that the company is functionally dissimilar to the assessee. For this reason alone, it cannot be included as comparable. 34. Before parting, we must observe, though, learned Departmental Representative has contended before u....
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....imilar. The only contention of the learned counsel for the assessee is, TPO has incorrectly computed the margin of these comparables by disregarding the working given by the assessee. 37. Having considered rival submissions, we direct the assessing officer to examine the working of margin computation of the comparables stated to have been furnished by the assessee and correctly compute the margin of these three comparables after providing due opportunity of being heard to the assessee. 38. In ground No. 5, assessee has challenged the addition of Rs. 62,13,464, being the transfer pricing adjustment made to the ALP of payment made to the AE towards availing of management services. 39. Briefly, facts are that during the year under consideration, assessee had paid an amount of Rs. 62,13,464 to the AEs towards cost of management services. Further, in the TP study report, assessee benchmarked the transactions under TNMM and claimed it to be at arm's length. Noticing this, the TPO called upon the assessee to furnish all necessary details relating to the nature of services availed and the benefits derived etc. 40. After perusing the detailed submissions of the assessee, the....
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....e cases of Himachal Futuristic Communications Ltd. and Tele-communications Consultants India Limited, the TPO has contradicted himself in as much as he rejected these comparables by taking filters which he himself has considered for selection of comparables. 15. In its rebuttal, the Ld. DR pointed out that there is nothing wrong in rejecting these comparables as the assessee does not have any turn key project as was in the case of Himachal Futuristic Communications Ltd. 16. In so far as comparables used by the TPO, the Ld. AR pointed out that each comparable is functionally different to which the Ld. DR pointed out that if the application of TNMM is expanded, then the comparables used by the TPO also deserve to be included if the comparables used by the assessee have to be considered. It is the say of the Ld. DR that if the TNMM is used at entity basis, then all the services qualify as comparable. At this stage, the Ld. Counsel drew out attention to the decision of the coordinate bench in assessee's own case in A.Y. 2008-09 in ITA No. 6334/DEL/2012 wherein the findings read as under: "6. We find that in view of our direction to exclude the comparables....
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.... is directed to decide the issue afresh after considering the detailed submissions/documentary evidences furnished by the assessee. The assessee is directed to furnish the details of services utilised by it ITA No. 6133/Del/2018 Mavenir India Pvt. Ltd. for which it has made the payments to its AEs. The assessee is further directed to demonstrate what benefits it has received from its AEs. The TPO is directed to consider the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. 22. As mentioned elsewhere, the issue relating to provisions of management and support services is common in ITA Nos. 7328 & 408/DEL/2017. Both these appeals are disposed of accordingly." 6. So, respectfully following the aforesaid referred to order dated 31.07.2018 in ITA Nos. 408 & 7328/Del/2017 for the assessment years 2012-13 & 2013-14 respectively, the issues raised in the present appeal are remanded back to the file of the TPO to be decided as has been directed in the said order. 44. Facts being identical, following the consistent view of the Tribunal in assessee's own case, as discussed above, we restore the issue to the assessing ....
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....d. 51. It is evident, while the assessing officer has disallowed assessee's claim of deduction under Section 10AA of the Act on the reasoning that assessee failed to furnish the complete details called for, learned DRP upheld the disallowance by relying upon its decision in assessment year 2015-16. 52. On perusal of material on record, it is observed, in assessment year 2015-16 assessee's claim of deduction was rejected on the ground that assessee had not set up any new unit/project in terms with the conditions enshrined under Section 10AA of the Act. The departmental authorities have held that the nature of work undertaken by the SEZ unit is the same as the existing unit. Further, the employee and fixed assets details do not demonstrate that they were exclusively for the SEZ unit. 53. On perusing the directions of learned DRP in assessment year 2015-16, it is further observed that learned DRP has recorded a factual finding that compared to the investment made in fixed assets in the SEZ unit, the investment made in existing unit was more than double. Thus, ultimately, the departmental authorities have concluded that the SEZ unit is nothing but an extension of the e....