TaxTMI 
TaxTMI 
2019 (2) TMI 2126
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....e and in law, the assessment order passed by the Learned Assessing Officer ('Ld. AO') pursuant to the directions of Learned Dispute Resolution Panel ('Ld. DRP') is bad in law and void ab-initio." 3. This ground of appeal is general in nature and hence does not require separate adjudication by us. 4. Ground No. 2 for assessment year 2010-11 and ground no. 2 for assessment year 2011-12 reads as under: AY: 2010-11 "2. TP adjustment with respect to business process outsourcing ('BPO') services segment from Associated Enterprises other than IBM World Trade Corporation ('IBM WTC') and IBM United Kingdom Ltd. ('IBM UK') That on the facts and circumstances of the case and in law, the Ld. AO (following the directions of the Ld. DRP), erred on facts and in law in enhancing the income of the Appellant by Rs. 30,11,35,718 holding that the international transaction pertaining to provision of BPO services with its Associated Enterprises, other than IBM WTC and IBM UK, do not satisfy the arm's length principle envisaged under the Income-tax Act, 1961 ('the Act'), and in doing so have grossly erred in: 2.1. rejecting the Transfer Pricing ('TP') documentation maintained by....
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....me-tax Act, 1961 ('the Act ), and in doing so have grossly erred in: 1.1. rejecting the Transfer Pricing ('TP') documentation maintained by the Appellant and in invoking provisions of 926(3) of the Act contending that the information or data used in the computation of the arm's length price is not reliable or correct. 1.2. using data available at the time of assessment proceedings, instead of using data available at the time of preparing the TP documentation for comparable companies. In doing so, the Ld. Transfer Pricing Officer ('Ld. TPO') has ignored the fact that this data was not available to the Appellant at the time of complying with the TP documentation requirements. 1.3. rejecting comparability analysis undertaken by the Appellant in the TP documentation, ignoring that such analysis was in accordance with the provisions of the Act read with the Income Tax Rules, 1962, ("the Rules"). 1.4. rejecting certain companies identified by the Appellant in the TP documentation, although such companies are comparables. 1.5. including additional companies as part of the final set of companies, although such companies do not satisfy the test of comparability. 1.6. apply....
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....C S E-Serve Ltd. 63.42% 72.65% Average 33.52% 45.01% 6. The TPO observed that the results submitted by the taxpayer are as under: Particulars Amount Operating Revenues 6,456,729,000 Operating Expenses 5,867,844,000 Operating Profit 588,885,000 OP/OC 10.04% Method used TNMM PLI OP/OC No. of comparables 7 Mean Margin of (Adjusted) Comparables 14.31% 7. Thereafter, the AO computed the arm's length price of the BPO transaction of the assessee as under: Operating Cost 5,867,844,111 Arm's Length Price at a Margin of 33.52% 7,834,745,457 Price Received 6,456,729,194 105% of the Price Received 6,779,565,654 Proposed of the Price Received 1,378,016,263 Thereby made an addition of Rs.137,80,16,263/-. 8. The assessee carried the matter in appeal before the DRP who confirmed the action of the TPO following the decision of the DRP in assessee's case for assessment year 2009-10 and reasoning given therein. 9. Before us, the AR of the assessee submitted that as the matter with the United Kingdom Associated Enterprises and the United States of America Associated Enterprises has been settled under the Mutual Agreement Procedure as per copy forwarded by the ....
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....and UK was agreed upon at 14.99% for the assessment year 2010-11 and at 15.01% for the assessment year 2011-12. Thus, it is now settled between the parties that in respect of turnover of 77% in the assessment year 2010-11 net margin is to be calculated at 14.99% and in respect of the assessment year 2011-12 in relation to 75% of the turnover net margin is to be calculated at the rate of 15.01%. 14. Thus, the issue which is still in dispute is the margin which is to be calculated in respect of turnover of non-USA and UK countries which is 23% of the total turnover in the assessment year 2010-11 and 27% of the total turnover in the assessment year 2011-12. 15. We find that it is not in dispute that the nature of transaction which was entered into with associated enterprises situated in US and UK were same as associated enterprises situated in non-US and UK countries. The TPO has also applied same net profit margin rate for turnover of non-USA and UK countries as was applied for USA and UK countries. We, therefore, do not find any good reason why the margin rate agreed upon under MAP in respect of USA and UK business should not be applied for business transaction of other countries ....
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....f the AO with the very same direction as given in assessment year 2009-10. Thus, this ground of appeal of the assessee is allowed for statistical purposes. 22. Ground No. 4 for assessment year 2011-12 reads as under: "4. Power of the DRP to enhance is restricted to disallowances/ variations proposed in the draft order. 4.1. That the Ld. DRP has erred in law in directing the Ld. AO to enhance the income of the Appellant by invoking the provisions of section 144C(8) of the Act without appreciating that there is no disallowance/ variation proposed by the Ld. AO under section 4o(a)(i) of the Act in the draft assessment order nor are there any objections raised by the Appellant in this regard before the DRP. 4.2. That on the facts and circumstances of the case and in law, the Ld. DRP failed to appreciate that the insertion of explanation below sub section 8 of section 144C of the Act was to make an enhancement on the variation proposed in the draft assessment order and not to raise a fresh issue which is not the subject matter of either the draft assessment order or any issue raised by the Appellant before the Ld. DRP. 4.3. That on the facts and circumstances of the case and....
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....g considered the arguments advanced by the counsel for the parties, we are in complete agreement with the decision of the Bombay High Court in the case of Gem Plus Jewellery(supra). In order to avoid prolixity, we set out the relevant portion of the decision of the Bombay High Court in Gem Plus Jewellery and endorse the same. The relevant portion of the said decision is as under: "6. The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator inasmuch as the export turnover is a part of the total turnover. 7. The export turnover, in the numerator must have the same meaning as the export turnover which is a constituent element of the total turnover in the denominator. The Legislature has provided a definition of the expression "export turnover" in Explanation 2 to Section 10A by which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in, or brought ....
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....Court in the case of Genpact India (supra), we set aside of the orders of lower authorities and direct the AO to compute deduction u/s 10A of the Act after deducting the Telecommunication expenses both from export turnover and total turnover of the assessee. Thus, this ground of appeal of the assessee is allowed. 28. At the time of hearing, the AR of the assessee submitted that as enhanced deduction was allowed to the assessee in assessment year 2011-12, therefore, this ground of appeal is not pressed in assessment year 2011-12. Hence, this ground of appeal is dismissed for want of prosecution. 29. Ground no. 5 of the appeal for assessment year 2010-11 and ground no. 7 for assessment year 2011-12 read as under: AY: 2010-11 "5. The Ld.AO erred in only allowing part credit of taxes deducted amounting to Rs. 29,62,20,870 instead of Rs. 29,92,72,786 claimed in the Return of Income." AY: 2011-12 "6. On the facts and in the circumstances of the case and in law, the Ld. AO erred in only allowing part credit of taxes deducted at source while calculating the tax liability of Appellant." 30. At the time of hearing, the AR of the assessee submitted that this issue should be res....
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....levant DTAA. 5.3. That on the facts and in the circumstances of the case and in law, Ld. DRP erred in not appreciating that the decision of Centrica (reported in 44 taxmann.com 300) was distinguishable and not applicable to the instant case." 37. At the time of hearing, the AR of the assessee did not press this ground of appeal. Therefore, this ground of appeal is dismissed for want of prosecution. 38. Ground no. 7 of the appeal for the assessment year 201011 and ground no. 8 of the appeal for assessment year 201112 are directed against levy of interest u/s 234B, 234C and 234D of the Act. 39. At the time of hearing, the AR of the assessee submitted that charging of interest is consequential. Therefore, these grounds of the appeal of the assessee are dismissed. 40. Ground no. 8 of the appeal for assessment year 2010-11 and ground no. 9 for assessment year 2011-12 are directed against initiation of penalty proceedings u/s 271(1)(c) of the Act. 41. This ground of appeal is pre-mature and is accordingly dismissed. 42. In the revenue's appeal for assessment year 2010-11, the sole issue is directed against the order of DRP holding that gain on buyback of shares is to be taxed u....
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....ection 115QA. We quote Section 115QA as under: 115QA. (1) Notwithstanding anything contained in any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount of distributed income by the company on buy-back of shares (not being shares listed on a recognised stock exchange) from a shareholder shall be charged to tax and such company shall be liable to pay additional incometax at the rate of twenty per cent on the distributed income. Explanation.-For the purposes of this section,- (i) "buy-back" means purchase by a company of its own shares in accordance with the provisions of [any law for the time being in force relating to companies]; (ii) "distributed income" means the consideration paid by the company on buy-back of shares as reduced by [the amount, which was received by the company for issue of such shares, determined in the manner as may be prescribed], (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on the distributed income under subsection (1) shall be pa....