TaxTMI 
TaxTMI 
2025 (7) TMI 116
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation as per section 153 of the Act and is void and hence, deserves to be quashed forthwith. 2. The impugned order of the Ld. AO passed under section 143(3) r.w.s 92CA(3) r.w.s 144C(13) r.w.s 144B of the Act dated 21.10.2024 is contrary to the law, facts and circumstances of the case. GROUNDS 3 TO 7- relationship of AE existed only for 2 months 3. The Ld. TPO/ the Ld. DRP have failed to appreciate that the appellant and Medtech Global Limited, Australia (Medtech) were Associated Enterprises (AE) only for two months during the subject AY (i.e. April 2020 to May 2020) and the international transactions were INR 1,86,55,212/- ( i.e. pertaining to 2 months). 4. The Ld. TPO/ Ld. DRP have disregarded the fact the appellant has mentioned the value of international transactions in the Audited Financial Statements of the subject AY in the "Related Parties Transaction'" disclosure as INR 1,86,55,212/- ( i.e. pertaining to 2 months) 5. The Ld TPO/ Ld. DRP have disregarded the fact and documents furnished before them during the proceedings to prove that the AE relationship existed between the Appellant and Medtech only for 2 months merely on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oftware Pvt. Ltd - Geojit Technologies Pvt. Ltd 13. The Ld. DRP have erred in dismissing the contention of the appellant that the abovementioned comparable companies satisfies the RPT filter <25%% applied by the- Ld.TPO and excluded the several comparable companies, when such comparable companies satisfies the employees cost filter >25% adopted by the appellant. 14. The Ld Ld. DRP has erroneous understanding the TPO has adopted the employees cost filter >25% as against the using of employees cost filter >60% and wrongly upheld the exclusion of comparable companies by the Ld.TPO, which are otherwise to be included as comparable companies. GROUNDS 15 16 - Erroneous exclusion of comparables - loss making companies - Xeplomac Design And Tech Ltd - Mindpo0l Technologies Ltd - DRC Systemms India Ltd -Cranes Software International Ltd - Highbar Technocrat Ltd - Octaware Technologies Ltd - Intellect Commerce Ltd 15. Both the Ld. TPO and the Ld. DRP have erred in not considering the fact that a comparable company is considered to be a persistent loss making company only when it incurs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee submitted that only the international transactions for the two-month period should be considered, rather than those for the entire period of 12 months. The assessee submitted the following details / documents before the TPO / DRP to substantiate that the AE relationship existed only for 2 months: - On 20.10.2023 the assessee submitted the addendum to Form 3CEB with an updated international transaction value of Rs.1.86 Crores (Apr and May 2020) (Paper Book - Pg.No. 240) - On 20.09.2023 the assessee submitted the following details w.r.t change in shareholding structure: i. Organisation Structure before and after sale of shares (PB - Pg No.154) ii. Australian Securities and Investment Commission Report of Medtech Global Ltd. (PB - Pg. No.172) iii. Securities Transfer Form of Medtech Global Ltd. (PB- Pg.No.169) iv. Notice of Resignation of Mr. Vinogopal Ramayah (Director) from Medtech Global Ltd, Australia (PB - Pg.No.171) On 15.07.2024, the assessee submitted the TP Documentation and Certified Segmented Profit & loss (2 months and 10 months period) account as additional evidences before the DRP. Summary of the Actions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and non-AE was provided by the assessee. ii. Also, pt. no. 18 of Form 3CEB asks about the transactions arising out/being part of business restructuring or reorganizations. But, no disclosure of business restructuring was made in Form 3CEB. iii. Also, as per sec 92E of IT Act, 1961 "Every person who has entered into an international transaction or specified domestic transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed." Hence, the Form 3CEB which the assessee is duty bound to file for AE transaction and after verification by accountant is mandated by Statute and holds utmost significance with regards to the disclosure of International transaction undertaken by the assessee and hence, the disclosure by the assessee can be taken as true until proven otherwise. 9. Without prejudice to the above, no revised Form 3CEB is filed, till date, had the claim of the assessee is true. Assessee was given enough opportunity to represent i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....il and May 2020. The assessee submits that this addendum was provided in lieu of a Revised Form 3CEB, as there is no option to file a Revised Form 3CEB after the due date. The failure to file Form 3CEB is only a procedural defect. Further, ld.AR prayed to grant an opportunity to file / submit the Revised Form 3CEB for FY 2020-21. The ld.AR submitted that there are various judicial precedents which states that the failure to furnish any audit report is only the procedural defect and the same can be filed during the Appellate proceedings. This principle was upheld in the case of CIT Vs. Shahzadanand Charity Trust wherein the court allowed the submission of the audit report at the appellate stage. Rebuttal to Point No. (v) of the above TPO Comments 12. The ld.AR further submitted that to benchmark the international transactions, the assessee proposed an alternative method, the Comparable Uncontrolled Price (CUP) method, demonstrating that it consistently charged an hourly rate of AUD 20 to Medtech Global Ltd, Australia, throughout the year, irrespective of its status as an AE. TPO rejected the CUP Method stating that AE relationship existed for entire year hence CUP Method canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owever, on without prejudice basis and purely in the interest of natural justice, the documents were sent to the TPO for his comments. After perusal of the documents it is evident that the same are not reliable as being discussed further..... Para 2.10 (Pg No. 18 of the Directions) ......TPO is held to be correct to consider the international transaction of INR 11.2 Crores for the TP Analysis and subsequent ALP adjustment. Para 3.10 (Pg No. 18 of the Directions) Panel: Having considered the submissions, we note that the assessee wants to use CUP method as the Most Appropriate Method (MAM) for benchmarking the transactions with the AE. On this issue the TPO has already rejected the use of CUP method stating that there is no breakup or segmentation as per AE and non-AE was provided by the assessee. Also, there is no disclosure of business restructuring was made in form 3CEB. 15. In summary, the DRP disposed of all the Objections of the assessee and upheld the TPO's adjustment. 16. The ld.AR stated that the assessee reproduced all the evidences and details to the DRP that had previously been submitted before the TPO. Rebuttal to Para 2.1 of the DRP's Directi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P rejected the alternative method (CUP method) proposed by the assessee without considering the fact that assessee has consistently charged an hourly rate of AUD 20 to Medtech Global Ltd, Australia, throughout the year, irrespective of its status as an AE. The assessee submits that there is no business restructuring happened in the company. The ld.AR stated that restructuring has occurred at the AE company and no such restructuring has taken place in the assessee's company. Therefore, no business restructuring has occurred that would warrant the rejection of the CUP method. 24. The Hon'ble DRP rejected the assessee's submissions concerning the change in shareholding structure, the notice of resignation of the common director to substantiate that the AE relationship existed only for two months, the TP Study, and the Certified Segmented Profit and Loss Account. Consequently, the DRP upheld the TPO's order. 25. Further, it is submitted that only an "international transaction" can be subjected to arm's length price computation as per plain reading of Section 92 of the Act which says "Any income from an International transaction....." and an international transaction is only that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rities along with submissions and case laws relied upon by both the parties. 30. Ground No. 1 and 2 are general in nature and do not require specific adjudication. 31. With respect to the Ground Nos.3 to 6, firstly, upon careful consideration, we observe that there have been certain procedural irregularities committed by the assessee, as rightly pointed out by the TPO and DRP, such as filing the addendum to the Form 3CEB instead of filing an entire set of revised Form 3CEB for the fresh consideration (though in substance the addendum to Form 3CEB contained the amended quantum of international transactions). But it is settled law that such irregularities, especially in audit reports, should not lead to substantial justice being denied to the assessee. We find that the Hon'ble Supreme Court, in the case of Sambhaji and Others v. Gangabai and Others, reported in (2008) 17 SCC 117, held that: "that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be constru....