TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 1612
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....ex 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 Pricing Matters 2. On the facts and circumstances of the case, &....
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....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 application of the additional/revised filters in determining the ALP; 4.3. not providing the search strategy and accept-reject reasons of the fresh econo....
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....ctions/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 the Appellant failed to submit details pertaining to section 10AA of the Act despite several opportunities; 6.4. On the facts and circumstances of the case, and in law the evidences placed and the material available on record have not been properly ....
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....see'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 following segments: i) Provisions of sales and support sales services Rs. 153,18,017; ii) Provision of software development services Rs. 62,34,676; iii) Provision of professional services Rs. 24,02,52,405; iv) Provision of management services Rs. 53,82,969; & v) Availing of managemen....
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....er 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 Representative submitted, TNMM requires broad comparability. He submitted, minor functional variation in case of comparables would not be of any significance. Drawing our attention to the functional profile of the assessee as well as of the comparable, learned Departmental Representative submitted, the DRP has carefully analyzed the facts and has concluded that the company is functionally similar to the assessee. He sub....
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.... 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 counsel for the assessee submitted, the company is functionally dissimilar, as, primarily it is in the business of internet based service delivery operating in four service verticals, such as, matrimony, recruitment, real estate and education through various web portals. He submitted, the company derives revenue from subscription based activity, owns significant intangible and has significant advertising expenses. Further, he submitt....
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.... 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 us that TNMM requires broad comparability and minor differences in the functional profile may not be relevant, however, it needs to be observed, in case of Avenue Asia Advertising Vs. DCIT (2017) 398 ITR 120 (Del), the Hon'ble Delhi High Court while deliberating on the issue of comparability under TNMM has observed as under: "20. A perusal of the above decision reveals that the following steps ought to be undertaken in identification of comparable pricing method is adop....
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....enged 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 TPO held that the assessee could not establish on record that any of the benefits stated to have been received are tangible or real. He observed, under a comparable uncontrolled transaction, no such payment would have been made by an unrelated party. He observed, it is only an arrangement to change the tax base without any economic substance in the transaction. Thus, he ultimately held that the ALP of the transaction has to be determined at nil. The aforesaid decision of the assessing officer was also upheld by learned DRP. 41. Befo....
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....mparable 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 chosen the TPO and one comparable chosen by the assessee as well as exclusion of the remaining two comparables by the TPO not challenged by the assessee before us, has left with no comparable in the sales and post sale support segment for determination of arm's length price. In view of the above ITA No. 6133/Del/2018 Mavenir India Pvt. Ltd. facts and circumstances, we restore the matter to the TPO for carrying out a fresh search and selection of comparables having functions similarity to the segment of sales and post sales support and compute the adjustment accordingly ....
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....t 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 officer for considering afresh keeping in view the earlier directions of the Tribunal. 45. In ground No. 6, assessee has challenged the disallowance of deduction claimed under Section 10AA of the Act. 46. Briefly, the facts are that in the return of income filed for impugned assessment year, the assessee had claimed deduction of Rs. 2,63,83,589 under Section 10AA of the Act. 47. In course of assessment proceedings, assessing officer called upon the assessee to furnish relevant details relating to the deduction claimed and also to justify that it is eligible for such deduction. As alleged by the assessing officer, the asse....
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.... 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 existing unit, hence, not eligible to claim deduction under Section 10AA of the Act. 54. Undisputedly, the fact whether the assessee had fulfilled the conditions of Section 10AA of the Act was never decided by the Tribunal, since, the appeal of the assessee was decided on a legal ground and the assessment order was quashed. Therefore, the allegation of the departmental authorities that the SEZ unit is nothing but an extension of the existing unit, by splitting up or even otherwise, requires to be examined. More so, when the Assessing Officer has alleged that assessee failed to furnish the complete details. The contention of learned counsel fo....