TaxTMI 
TaxTMI 
2025 (2) TMI 1333
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.... 2024 in conformity with the directions of the Hon'ble DRP dated 22 December 2023 under section 144C(10) r.w.s. 144C(13) of the Act, hence, the Assessment Order deserves to be quashed as void-ab-initio. 2. Reassessment proceedings in contravention of the applicable provisions of the Act 2.1. On the facts and in circumstances of the case and in law, the Learned AO erred in not accepting the return of income filed on 7 July 2021 pursuant to notice under section 148 of the Act. 2.2. On the facts and in circumstances of the case and in law, the Learned AO erred in not issuing notice under section 143(2) of the Act pursuant to the return filed in compliance to section 148 of the Act. Accordingly, reassessment proceedings under section 147 of the Act are invalid and bad in law. 3. Assessment Order passed by the Learned AO under section 144 rws 147 rws 144C(13) of the Act is barred by limitation under section 153 of the Act 3.1. On the facts and in the circumstances of the case and in law, the Assessment Order dated 17 January 2024 passed by the Learned AO under section 147 r.w.s. 144 r.w.s. 144C(13) of the Act is barred by limitation under sec....
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....es of the case and in law, the Hon'ble DRP/Learned AO/Learned TPO erred in not appreciating that there cannot be any adjustment under Chapter X in the absence of accrual of real income. 7. Valuation of IP - Adjustment amounting to INR 3,42,78,18,865 7.1. On the facts and circumstances of the case and in law, the Hon'ble DRP/Learned AO/Learned TPO erred in making an upward transfer pricing adjustment of INR 3,42,78,18,865 on international transaction of transfer of IP to the Appellant's AE i.e., Practo Pte. Ltd., Singapore. In doing so, Hon'ble DRP/Learned AO/Learned TPO erred in: 7.1.1. commenting that the Appellant has willfully undervalued the IP asset to reduce the tax liability of the country, without any credible basis; 7.1.2. not appreciating that certain intangibles were not transferred as part of this transfer process viz. Doctor Network, Customer Contracts and Databases were retained by the Appellant; 7.1.3. not appreciating that the value of the enterprise is different from the value of certain intangibles transferred to the AE; 7.1.4. not appreciating that the valuation reports (issued by M/s. MRV Krishna & Co and M/s....
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....arned AO/Learned TPO erred in: 8.2.1. Rejecting the high turnover filter of the Appellant while applying filter to reject companies with turnover less than 1 Crore. 8.2.2. Incorrect application of Rule 10B(5) to undertake a fresh search which is non-contemporaneous and against the principles contained under Rule 10D(4) of the Rules; and 8.2.3. Conducting a search which is not in good faith. 8.3. On the facts and circumstances of the case and in law, the Hon'ble DRP/Learned AO/Learned TPO erred in modifying and erroneously interpreting the facts provided by the Appellant in the TP documentation and various submissions. 9. Software development services segment - Adjustment amounting to INR 71,41,014 9.1. On the facts and in circumstances of the case and in law, the Hon'ble DRP / Learned AO/ Learned TPO erred in making an upward transfer pricing adjustment of INR 71,41,014 on the international transaction of provision of software development services to its AEs. 9.2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/Learned AO/Learned TPO erred in not adopting the upper turnover filter of INR 20....
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....s to its AEs. 10.2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/Learned AO/Learned TPO erred in not adopting the upper turnover filter of INR 200 crores while undertaking the comparability analysis for the Appellant's international transaction pertaining to provision of information technology enables services. Based on the application of the INR 1 to INR 200 crore turnover filter, the following companies ought to be excluded from the final list of comparable companies: 10.2.1. Tech Mahindra BPSL 10.2.2.Infosys BPO Ltd. 10.2.3.SPI Technologies India Pvt. Ltd. 10.2.4.MPS Ltd. 10.3. On the facts and in circumstances of the case and in law, the Hon'ble DRP / Learned AO/ Learned TPO erred in including certain companies in the comparability analysis which do not satisfy the test of comparability in relation to information technology enables services segment of the Appellant: 10.3.1. Cross Domain Solutions Private Limited 10.3.2.SPI Technologies India Private Limited 10.3.3.Infosys BPO Limited 10.3.4.E-Care India Private Limited 10.3.5.MPS Limited 1....
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....and in law, the Learned AO/ Learned TPO erred in not following the directions of the Hon'ble DRP and not including certain companies in the comparability analysis which satisfy the test of comparability in relation to the marketing support services segment of the Appellant: 11.5.1. Showhouse Event Management Pvt Ltd 11.5.2.Fusion Events Pvt. Ltd 11.6. On the facts and in circumstances of the case and in law, the Hon'ble DRP / Learned AO/ Learned TPO erred in not including certain companies in the comparability analysis which satisfy the test of comparability in relation to the marketing support services segment of the Appellant: 11.6.1. MCI Management India Pvt. Ltd. 11.6.2. Competent Automobiles Co. Ltd. (Service & Spares) (Tax Effect: INR 29,26,238) Grounds relating to Corporate Tax matters 12. Method of computation of capital gains on transfer of IP to AE Practo Pte Ltd., Singapore (Without prejudice to Ground of Appeal No. 8) 12.1. On the facts and circumstances of the case and in law, the Hon'ble DRP/Learned AO erred in bringing to tax the gains on transfer of IP without appreciating the fact that the c....
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.... and in law, the Hon'ble DRP / Learned AO erred in disallowing AMP expenses to the tune of INR 3,48,14,372 by alleging the same to be capital in nature and are not wholly or exclusively incurred for the purpose of business. 14.2. On the facts and circumstances of the case and in law, the Learned AO has erred in: 14.2.1. Not following the directions of the Hon'ble DRP while passing the Assessment Order and not considering the factual report submitted by the Learned AO to the Hon'ble DRP whereby INR 4,04,15,218 out of the total AMP expense (of INR 4,35,17,965) should be treated as revenue expense and on the balance amount, depreciation under section 32 of the Act ought to be allowed.; and 14.2.2. Treating balance AMP expenditure of INR 31,02,747 as capital in nature even though it was incurred for the purpose of day-to-day business operations of the Appellant and is within the 20% threshold adopted by Learned AO making the said adjustment. The Learned AO has erred in not appreciating that balance AMP expenditure of INR 31,02,747 is therefore allowable expenditure under section 37 of the Act. (Tax effect: INR 1,18,33,405) 15. Levy of interest und....
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....r the assessment year 2015-16, the Assessee company filed its return of income under section 139(1) of the Act on 30.11.2015 declaring a total loss of Rs. 11,82,20,816/- after setting off short term capital gain income of Rs. 37,28,537/- on sale of sale of equity share / unit of equity oriented Mutual Fund under section 111A. 3.2 Subsequent to a survey conducted under section 133A, proceedings under section 147 of the Act were initiated accordingly notice under section 148 of the Act dated 25.03.2021 was issued, requiring the Assessee to file a return of income within 5 days from date of issue of notice. Due to the paucity of time allowed in notice under section 148 of the Act, the Assessee filed a letter with the Joint / Deputy Commissioner of Income Tax, Circle 1(3), Bangalore ('assessing officer' or 'AO') on 30.03.2021 seeking additional time to file the return of income however no response to the request for extension of time was received from the AO. 3.3 The return of income in response to the notice under section 148 of the Act was e-filed by the Assessee on 07.07.2021. However, due to technical glitches on the e-filing portal, the Assessee was unable to registe....
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....gth mark-up was computed at 24.30%, as against the 15% earned by the Assessee. 1,456,456 3 Marketing Support Services ('MSS') A set of 11 comparable companies was determined and the median arm's length mark-up was computed at 22.88%, as against the 10% earned by the Assessee. 10,372,814 4 Valuation of intangible asset transferred to AE The value of intangible was determined to be 75% of the value of the firm as computed by MRV Krishna & Co. 3,466,757,250 TOTAL 3,487,865,338 3.8 The AO passed a draft assessment order under section 144C(1) of the Act on 30.03.2023, determining the total income of the Assessee at Rs. 340,68,58,962 after incorporating the TP adjustments as above and making certain disallowances under section 14A and section 37 of the Act. It may be noted that the draft assessment order was passed post the date of condonation of delay in e-verification of the return. 3.9 The Assessee filed its objections with the Dispute Resolution Panel ('DRP') in Form 35A, as per section 144C(2) of the Act on 28.04.2023. The DRP issued its directions on 22.12.2023. Some issues were partially decided in favor of the Ass....
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.... a valid notice u/s 143(2) of the Act, and without issue of a show cause notice proposing to complete the assessment under section 144 (on the alleged failure to furnish the return). Further, ld. AR of the assessee company submitted that even reference to TPO without issue of notice under section 143(2) of the Act is invalid and subsequent order is bad-in Law. 6. The ld. DR on the other hand supported the Order of the Authority below & submitted that since the assessee company had filed the return but was not e-verified within the time allowed and even condonation application was not accepted till that time, there was no valid ROI in response to notice u/s 148 of the Act and accordingly it was communicated to the assessee that the notice issued u/s 143(2) of the Act is non-est. The ld. DR also submitted that the status of the condonation application, whether it was accepted or rejected, was not intimated by the assessee to the AO. Lastly the ld Dr submitted that the assessee neither submitted any supporting evidence/screenshot from the e-filing /CPC portal to substantiate its claim that the company faced system related issues in e-verifying the ITR nor has produced any details o....
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....led a physical copy of the return of income and ITR-V with the Assessing officer along with its letter dated 22.07.2021. The Assessee has discharged its duty of filing the return of income electronically and filing a copy of the same with the AO to be considered as valid return of income. The learned AO has also completed the assessment by relying on the return of income filed by the Assessee on 07.07.2021. This is evident from Para 7.1 and 7.2 of the final assessment order. The Hon'ble High court of Delhi in the case of PCIT v. S.G. Portfolio (P.) Ltd [2023] 151 taxmann.com 307 (Delhi), has held that when a return was in place in the form of original return filed, the AO was required to issue a notice under section 143(2) and recourse to section 144 of the Act was incorrect. 7.4 Further during the relevant period, vide the Circular No. 21/2021 [F. No. 225/140/2021/ITA-II], dated 28.12.2021 and Circular No. 13/2020 [F. No. 225/59/2020/ITA -II], dated 13.7.2020, the CBDT had provided a relaxation for verification of income-tax returns e-filed for assessment year 2020-21 and AY 2015-16 to AY 2019-20 respectively, which were pending for verification (placed at Page 1851 & 1852 o....
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.... of the Act without issue of a valid notice under section 143(2) of the Act, and without issue of a notice proposing to complete the assessment under section 144 on the alleged failure to furnish the return. 7.7 Further, we are also of the firm opinion that as rightly contended by the AR of the assessee, the AO had also not served any show cause notice of intention to complete the assessment under section 144 of the Act to the Assessee as required by first proviso to section 144(1) of the Act. The preconditions of the section, to enable a best judgement assessment had not been met, making even the assessment order under section 144 of the Act being illegal & bad in law. 7.8 Further as observed by the Hon'ble Supreme Court in the case of ACIT & Anr. Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC), the omission on the part of the AO to issue notice under sec.143(2) can not be held to be a procedural irregularity, and the same is not curable. The failure of AO in reassessment proceeding to issue a valid notice under section 143(2) of the Act prior to finalizing the reassessment order can not be condoned. It was held by the Hon'ble Supreme Court that for the purpose of framing of a v....