TaxTMI 
TaxTMI 
2024 (12) TMI 549
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....le - 17(1), Hyderabad (`A0') u/s 143(3) read with section 144C(4) of the Income-tax Act, 1961 ('Act') and order dated 27 January 2015 issued by Transfer Pricing Officer ('TPO') u/s 92CA(3) of the Act, is bad in law and void ab-initio. Transfer Pricing General 2. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming transfer pricing adjustment made by learned AO/ TPO on account of provision of business support services by the Appellant to its Associated Enterprises ('AEs'). 3. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the rejection of the transfer pricing documentation maintained by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ('Rules'), and allowing undertaking a fresh economic analysis during the course of assessment proceedings, thereby holding the adjustment made by learned AO/ TPO to the international transactions as valid. Error in computation of net margin of the Appellant 4. That on the facts and circumstances of the case, the learned C....
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....to the learned AO, the matter relating to inclusion of the following comparable companies, and leaving it to the discretion of the learned AO: a) EDICL (India) Limited; and b) Quippo Valuers and Auctioneers Private Limited. Use of different financial year filter 13. That on facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the use of different financial year end filter for rejecting comparable companies while undertaking the fresh economic analysis. Use of multiple year data 14. That on facts and circumstances of the case and in law, the learned CIT(A) erred in rejecting the use of multiple year data and using data for FY 2010-11 only. Adjustment for risk differences 15. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in disregarding the risk profile of the Appellant vis-a-vis alleged comparable companies selected by the learned TPO and not allowing risk adjustment under the provisions of Rule 10B(1)(e) of the Rules. 16. That on the facts and circumstances of the case and in law, the learned CIT(A) has erred in disregarding the wo....
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....ies: a) Empire Industries Limited. b) India Cements Capital Limited. c)HSCC (India) Limited and d) Kitco Limited. 5. It is the contention of the Ld. AR that these comparable companies selected by the Transfer Pricing Officer ("Ld. TPO") and approved by the Ld. CIT(A) are functionally not comparable with the assessee, therefore, they are required to be excluded. In this regard, the Ld. AR had filed a written submission in support of his contention, which is to the following effect : "Exclusion of comparable companies chosen by TPO - Ground no. 9 In this Ground, the appellant is seeking exclusion of the following four companies: a) Empire Industries Ltd b) India Cements Capital Ltd c) HSCC(India) Ltd d) Kitco Ltd. Empire Industries Ltd. * This company is in the business of manufacture of glass bottles for pharma industry - Page No. 599 of Paper book * The company has reported two segments, namely Manufacturing, Trading & Indenting - Page No. 627 of Paper book * The TPO has erroneously considered the Trading & Indenting activity as purely "indenting" activit....
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....com 426 (S. No. 6 in case law compendium) - Page No. 174 to 178 of case law compendium iv) AT & T Communication Vs ACIT ITA No. 1016/Del/2015 (S.No. 7 in case law compendium) - Page No. 198 to 200 of case law compendium v) Boeing International Vs DCIT ITA No. 1127/Del/2015 (S. No. 8 in case law compendium) - Page No. 212 of case law compendium vi) Bechtel India Vs Addin CIT ITA No. 7234/B/Del/2017 - placed on record HSCC(India) Ltd. - Functionally dissimilar and Govt company - It is a Govt. Company and shares are held by Government of India and The President is authorised to issue directives - Page 696, 701, 711 and 713 of Paper Book - The company has MoU with Ministry for more than a decade- Page 699 of Paper book - The functions A.O. this company are architectural planning, Design Engineering & Project Management Services, not comparable with the support services of the appellant - Page 705 of paper book - This company has been specifically excluded from the set of comparables, for being a Govt company (Bechtel India at vi) above) KITCO - Functionally dissimilar and Govt Company - This is a ....
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.... these segments. Information about Primary Business Segments Revenue 201--2011 (Rs. In lakhs) 2009-2010 (Rs. In lakhs) External Inter-segment Total External Inter-segment Total Manufacturing 8,447.05 -- 8,447.05 7,777.47 -- 7,777.47 Trading & Indenting 9,160.91 -- 9,160.91 7,487.94 -- 7,487.94 Others 4,325.10 -- 4,325.10 3,933.94 -- 3,933.94 Total Revenue 21,933.06 -- 21,933.06 19,199.35 -- 19,199.35 Result Segment Result Manufacturing 387.30 515.19 Trading & Indenting 1832.53 1506.87 Others 2407.10 2609.81 Total Result 4626.93 4631.87 Unallocated Expenditure Net of unallocated income (339.78) (380.47) Interest Expenses (448.10) (625.25) I....
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.... order of the TPO in selecting as a comparable. 8. India Cements Capital Ltd: The appellant has contended that the company is functionally different as it is classified as a Non-Deposit taking NBFC and mainly provides financial services in the nature of foreign exchange money changer, forex advisory service and ticketing service for domestic and international travel. Further, it is contended that the financial services cannot be compared with the low end business support services provided by the assessee. The company also fails RPT<10% filter applied by the assessee. 8.1 The summary of the Appellants contentions is: - India Cements is functionally not comparable as India Cements is a NBFC, operating under the directions of the Reserve Bank of India. -- The company fails RPT filter of 10% as applied by the Appellant -- Without prejudice, incorrect margin calculations of 19.26% need to be corrected to 17.96% 8.2 The Company is providing financial services, which is in the nature of business support services similar to taxpayer. Further, the profile of this comparable is similar to Provestment Services Limited, which is selected by....
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.... no segmental information available with respect to the indenting services business. In view of the above, it was submitted that, this company is required to be excluded. The Ld.AR relied upon the decisions rendered by the Tribunal in the case of Aavya India Pvt. Ltd. 2020(3) TMI - 278 - ITAT Delhi dated Aug 30, 2019 - AY 2011-12, in which it was held as under : "21. Turning to Empire Industries Limited, while referring to the annual report of this company, the contention of the assessee is that this company is functionally dissimilar to the assessee inasmuch as Empire Industries Ltd. is engaged in the business of manufacturing and distribution of hightech machines and pharmaceuticals. It also has been engaged in trading of goods, apart from which they receive commission on trading and indenting business. He submitted that this aspect has been covered by the decisions of Philip Morris Services India SA (India Branch) v. ADIT [2016] 73 taxmann.com 264 (Delhi-Trib) 22. The learned Departmental representative heavily placed reliance on the orders of the authorities below. 23. We have gone through the record. In the director's report, in respect of operat....
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....wnership of intangibles, risk factors can be allowed. In aforesaid view of the matter, we are inclined to accept the view favorable to the assessee. We therefore uphold the direction of the CIT(A) in this regard in allowing the benefit of risk adjustments at 1%. Accordingly, the ground raised by the department is dismissed." Following the said decision, we direct the AO/TPO to allow the risk adjustment in accordance with the Rule 10B(1)(e) considering the fact that assessee is a captive service provider to its AEs. Accordingly, ground raised by the assessee is allowed for statistical purposes." 6.1 In view of the submission made by the Ld. AR, we find that this company is predominantly into trading activity and is not comparable to the assessee. Accordingly, we exclude this company from the list of comparable. India Cements 7. With respect to India Cements as a comparable company, the profile of the company is entirely different for the assessee. This company is into financial services which is in the nature of providing services like NBFC. On perusal of the financials of this company also, it is clear that this company is into business of financial services and o....
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....nd also the documents before us. The company, HSCC (India) Ltd. is primarily into construction contract activity. This company is compared with the profile of the assessee and it is clear that the assessee is comparable with the HSCC (India) Ltd. as the comparable company is also into back end services. While applying the TNMM method, this company is a comparable company with the assessee since the activities of this company are into primarily undertaking software services. Therefore in our opinion the functions of this company are similar to. Further we are of the opinion that merely the HSCC (India) Ltd. is an government undertaking that will not make it not comparable with the assessee. In view of the above, we disapprove the contention of the assessee and refuse to exclude this company from the list of comparables. Kitco Ltd. 9. With respect to this company, the TPO has mentioned that this company is into consultancy services which are in nature of business support service similar to services provided by the assessee. 9.1 Feeling aggrieved, the assessee has raised the issue before the Ld. CIT(A). The Ld. CIT(A) has rejected the assessee's contention under paras no.....
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....o stipulation u/s 10AA of the Act, which explicitly provide that, the time line for realisation of export proceeds should be within period of six months from the date of export. It was also submitted by the Ld. AR that the ground of the assessee's claim u/s. 10AA of the Act is covered in favour of the assessee by the decision of the Tribunal in the case of Uni Design Jewellery Pvt. Ltd. Vs. DCIT (ITA No.3006 to 3008/Mum/2022 Dt.28.02.2023), wherein at para no 18 to 20 the order, the Tribunal had held as under : "18. We have considered the rival submissions and perused the material on record. 19. We find that the solitary issue raised in the present appeal stands decided in favour of the Appellant/Assessee by the decision of Delhi bench of the Tribunal bench in the case of BT e- Server (India) Private Limited (Supra) wherein it was held as under: "24. Ground Nos. 14 to 22 are with respect to disallowance of deduction of Rs. 16639234/- u/s. 10AA of the Act on the basis that export proceeds have not been realized within a period of six months from the end of the previous year. Ld Assessing Officer was of the view that as the assessee is a unit established un....
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....tside India. Explanation 1 (ii) defines export as "export in relation to the Special Economic Zones" taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise. Therefore primarily there should be export and consideration for export should be brought in to India. The Ld. assessing officer as well as the Ld. DRP has disallowed the claim of the assessee on the sum of Rs. 75085404/. The above sum comprises a sum of Rs. 480000000/-being foreign currency received of the export amount received by the assessee on 04/02/2011 and 24/2/2011. A sum of Rs. 27085404/- is unbilled revenue of the assessee. The unbilled revenue is like work in progress in case of ITES industries. The explanation 1 (ii) defines export means taking goods or providing services out of India from SEZ by land, sea, or by any other mode whether physical or otherwise. Regarding the unbilled revenue the assessee has not exported the goods and therefore such sum do not fall in the definition of export and therefore it cannot fall into the definition of export turnover. Hence, according to us the deduction under section 10 AA of....
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....Section 10AA cannot be denied to an Assessee merely because the export proceeds were realized after the expiry of 6 months from the end of relevant previous year in which export sales were made. In our view, in case an assessee is able to show that the consideration in respect of exports was received in India or brought into India, the deduction under Section 10AA of the Act should be allowed. In the present case the Appellant had filed the details of realization of export sales with the Assessing Officer and the CIT(A). Therefore, we direct the Assessing Officer to allow deduction to the Appellant under Section 10AA of the Act by taking into account the export sales realized by the Appellant. Accordingly, the order passed by the Assessing Officer and the CIT(A) are set aside. Ground No. 1 raised in the appeal is allowed. In result the present appeal by the Assessee is allowed." 10.1 On the basis of the aforesaid submission, the Ld. AR also submitted that, there is no stipulation u/s 10AA of the Act, which explicitly provide that, the time line for realisation of export proceeds should be within six months from the date of export and hence the assessee is entitled for deduction ....
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.... been dismissed as withdrawn and the revenue cannot be permitted to take a contrary view is concerned, it is to be noted that the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) has been dismissed as withdrawn due to there being low tax effect and the question of law has specifically been kept open. Therefore, withdrawal of the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) cannot be held against the revenue. 14. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the o....