TaxTMI 
TaxTMI 
2026 (6) TMI 1436
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....d with section 144B of the Income-tax Act, 1961 ('the Act') is bad in law and on facts. 1.2 The learned AO has grossly erred in passing the final assessment order without giving effect to the directions of the Hon'ble Dispute Resolution Panel ('Hon'ble DRP'), and in violation of the statutory procedure prescribed in sections 144C (10), 144C (13) and 144C (14) of the Act and is accordingly liable to be quashed. [Reliance has been placed on the adjudication in the case of M/s. Lenovo India Pvt. Ltd. vs Dy. Commissioner of Income Tax (I.T. (T.P) A. No. 511 /Bang/2015)] 1.3 The learned AO has failed to comply with the rules framed by the Central Board of Direct Taxes ('CBDT') under section 144C(14) of the Act i.e. Rule 12 of Income-tax (Dispute Resolution Panel) Rules, 2009, under which the learned AO is required to pass an order in conformity with the directions of the DRP. 1.4 The learned AO ought to have given relief as provided by the Hon'ble DRP in its directions. 2. Grounds related to transfer pricing The grounds mentioned hereinafter are without prejudice to one another. Erroneous adjustment amounting to INR 15,08,84,307 in r....
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....ilters applied for Software Development Services segment ("SWD segment"), Information Technology Enabled Services ("ITES segment") and Clinical Research Services ("CRO segment"): • The learned AO / learned TPO / Hon'ble DRP has grossly erred in rejecting the transfer pricing documentation maintained by the Appellant by invoking provisions of section 92C(3) of the Act, without any cogent reason. • The learned AO / learned TPO / Hon'ble DRP has grossly erred in rejecting the economic and comparability analysis undertaken in the transfer pricing documentation and in conducting a fresh comparability analysis by introducing various filters for the purpose of determining the ALP of the international transaction thereby following a non-transparent approach. • The learned AO / learned TPO / Hon'ble DRP has grossly erred in applying core service income filter exceeding 75% of the net services for SWD, ITES and CRO segment instead of 50%, thereby leading to a narrower set of comparable companies. • The learned AO / learned TPO / Hon'ble DRP has grossly erred in applying export revenue filter exceeding 75% of the revenue for SWD and ITES seg....
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.... excluding the payment towards IT cost allocation whose arm's length price is determined as 'Nil' from the cost base of the respective service segments thereby, inflicting double taxation on the Appellant. • Each one of our ground of objection is without prejudice to the other. • The Appellant reserves the right to amend, alter or add to the ground of objection. 2.10 Erroneous adjustment in relation to the adjustment in SWD segment: • The learned AO / learned TPO / Hon'ble DRP has grossly erred in law and on facts, in proposing a transfer pricing adjustment amounting to INR. 11,50,07,754/- with respect to the international transaction pertaining to SWD segment of the Appellant. • The learned AO / learned TPO has grossly erred in not including Cigniti Technologies Ltd in the final list of comparable companies for SWD segment of the Appellant, despite having the same accepted as a comparable in the Transfer Pricing ('TP') order. • The learned AO / learned TPO / Hon'ble DRP has grossly erred in rejecting the following independent comparable selected by Appellant in transfer pricing documentation without providin....
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....,89,330/- with respect to the international transaction pertaining to ITES Segment of the Appellant. • The learned AO / learned TPO / Hon'ble DRP has grossly erred in rejecting the following independent comparable selected by Appellant in transfer pricing documentation without providing any cogent reasons by altering / modifying existing filters and / or by applying additional filters: - Allsec Technologies Limited - Informed Technologies Limited - Cosmic Global Limited - Jindal Intellicom Limited - Microgenetic Systems Limited - R Systems International Limited • The learned AO / learned TPO / Hon'ble DRP has grossly erred in rejecting the following independent comparable selected by Appellant during the transfer pricing assessment proceedings without providing any cogent reasons by altering / modifying existing filters and / or by applying additional filters: - Ace BPO Services Private Limited - Crystal Voxx Limited - Sundaram Business Services Limited • The learned AO / learned TPO / Hon'ble DRP has grossly erred in selecting the following companies as comparabl....
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....sly erred in selecting the following companies as comparable to the CRO segment of the Appellant - Rubicon Research Private Limited - GVK Biosciences Private Limited - Thyrocare Technologies Limited - Aurigene Discovery Technologies Limited • The learned AO / learned TPO/ Hon'ble DRP has grossly erred in computing the margin of the following companies: - TC G Lifesciences Private Limited - Aurigene Discovery Technologies Limited • Each one of our ground of objection is without prejudice to the other. • The Appellant reserves the right to amend, alter or add to the ground of objection. 3. Grounds related to non-grant of deduction claimed under section 80G of the Act 3.1. The learned AO has erred in disallowing deduction claimed under section 80G of the Act amounting to Rs 34,00,000 considering that the same is Corporate Social Responsibility ('CSR') related expenditure incurred by the assessee. 3.2. The learned AO ought to have appreciated that, the contribution made by the assessee to registered NGO's are eligible for deduction under Section 80G of the Act. Thus, ....
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....earing of this appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided. 3. The assessee has raised following additional grounds of appeal by filing a petition dated 28.6.2021 for admission of these additional grounds, which are reproduced below: PETITION FOR ADMISSION OF ADDITIONAL GROUNDS Your Petitioner humbly prays that the additional ground of appeal filed herein be allowed in the interest of justice and equity. 1. Transfer pricing ground 1.1 Background Aggrieved by the Transfer Pricing ("TP") adjustment made pursuant to the Final Assessment Order dated 30 April 2021, the Petitioner has preferred the subject appeal before Your Honours. Your Petitioner wishes to raise an additional ground of appeal to support its arguments. The Petitioner humbly prays that this additional ground of appeal be admitted for the reasons stated hereunder. 1.2 Reasons for raising additional ground of appeal Erroneous adjustment amounting to INR 57,87,48,659 in relation to service segments: 1.11 Erroneous adjustment in relation t....
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.... be raised during appellate proceedings also. Without prejudice to the above submission, Your Petitioner wishes to rely on the following judicial precedents in support of its additional ground: The Petitioner wishes to place reliance on the case of Microchip Technology (India) Private Limited vs. ACIT dated 3 May 2017, wherein the Hon'ble Bangalore ITAT has held that where Petitioner' s turnover of international transactions was to be considered for rejecting/ accepting comparable companies, 10 times of Petitioner' s turnover on both sides shall be applied as a turnover filter for selecting/ rejecting comparable companies. Similarly, in the case of Radisys India Private Limited vs. ITO dated 4 September 2015, the Hon'ble Bangalore ITAT held as below: " ... we find that the TPO himself has rejected the companies which are making losses as comparables. This shows that there is a limit for the lower end for identifying the comparables. In such a situation, we are unable to understand as to why there should not be an upper limit also. What should be upper limit is another factor to be consider. We agree with the contention of the learned counsel for ....
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....tax' and 'secondary and higher education cess on income-tax' for the year under consideration, while assessing the total income of the Appellant 2.1 Background The Assessee was incorporated and registered as a private limited company in India on 4 December 2002. The Company was principally engaged in providing services like data processing, data management, measurement and analysis including bio statistical analysis to pharmaceutical industry throughout the world. It also provides information Technology (IT) and other support services to group companies. The Company filed its return of income for AY 2016-17 on 30 November 2016 declaring a total income of Rs. 1,43,99,60,061. The return of income was selected for scrutiny by issue of notice under Section 143(2) of the Act on 25 September 2017. the tax officer had passed Draft Assessment Order dated 18 December 2019 incorporating the proposed adjustment amounting to INR 73,30,32,966. Aggrieved with the Draft Assessment Order, the Assessee had filed objections before the Dispute Resolution Panel ("DRP") and the DRP issued its directions under section 144C vide directions dated 09 March 2021.....
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.... Ground No. 6 raised now may kindly be admitted and adjudicated on merits. 2. PRAYER Under the above circumstances, Your Petitioner humbly prays that the additional ground of appeal be admitted by exercising the power vested under Rule 11 of the Income-Tax Appellate Tribunal Rules, 1963 ("Rules") and allow the aforesaid additional ground. Based on the facts and circumstances of the case, M/s. IQVIA RDS (India) Private Limited ("The Appellant" or "The Petitioner"), respectfully submits the following additional grounds of appeal for admission before Your Honours: 2. Erroneous adjustment amounting to INR 57,87,48,659 in relation to service segments: 2.13. Erroneous adjustment in relation to filters applied for Software Development Services segment ("SWD segment"), Information Technology Enabled Services ("ITES segment") and Clinical Research Services ("CRO segment"): • The learned AO / learned TPO ought to have applied the upper limit turnover filter while selecting comparable companies. 6. Deduction in respect of 'education cess on income-tax' and 'secondary and higher education cess on income-tax' for the year under ....
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....es themselves to subject the amount concerned to tax, the Appellate Tribunal had the discretion to permit point of law to be raised for the first time in appeal because the question went to the root of the case. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 held that undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Accordingly, we are inclined to admit the additional legal grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and these are critical for a fair adjudication of the matter. 5. The brief facts of the case are that the assessee was incorporated and registered as a private limited company in India on 4.12.2002. The assessee company is principally engaged in providing services like Data processin....
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....oposed to be made in the draft assessment order dated 18.12.2019 consisting of an addition of Rs. 72,96,32,966/- in respect of international transactions carried out by the assessee with its AEs and disallowance of deduction claimed u/s. 80G of the Act amounting to Rs. 34,00,000/- and completed the assessment proceeding on the total assessed income of Rs. 216,95,93,026/- by making total addition of Rs. 73,30,32,966/ -. 6. Aggrieved by the final assessment completed u/s. 143(3) r.w.s. 144C(13) of the Act dated 30.4.2021, the assessee has filed the present appeal before this Tribunal. The assessee has also filed voluminous paper books along with the synopsis in support of its contentions. 7. Before us, the ld. AR of the assessee Shri Ketan Ved, CA at the outset, by raising the ground no. 1.2, which is purely legal in nature vehemently contended that the final assessment order passed without giving effect to the directions of Hon'ble DRP is illegal and bad in law as it is in violation of statutory procedure prescribed in sections 144C(10), 144C(13) and 144C(14) of the Act and accordingly liable to be quashed. In this regard, our attention was drawn to the fact that the AO origin....
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.... the other hand submitted that the final assessment order was passed on 30/04/2021 subject to the rectification of adjustment made by the TPO in the OGE to the DRP's directions dated 9.3.2021 and therefore, no prejudice is caused to the assessee as the assessment order itself says subject to rectification u/s. 154 of the Act. Further, the ld. DR submitted that since the transfer pricing officer did not forward the OGE to the DRP direction to the AO, therefore, the AO was compelled to pass final assessment order considering the time constraint for passing the final assessment order. 9. We have heard the rival submissions and perused the materials available on record. On going through the impugned order of assessment passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act dated 30.4.2021, we observed that the AO noted that the ld. DRP Panel-1 Bengaluru has passed directions dated 9.3.2021 u/s. 144C(5) of the Act, however proceeded to pass final assessment order as the order giving effect to DRP directions was not received from the TPO. Further, quite surprisingly, the AO has categorically stated that the additions/disallowances proposed to be made in the draft assessment order p....
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....considered opinion that u/s. 144C(10) of the Act, every direction issued by the ld. DRP shall be binding on the AO and u/s. 144C(13) of the Act, the AO is duty bound to pass the assessment order in conformity with the directions within one month from the end of the month in which such directions are received. We also take note of the fact that the assessing officer had, although recorded in the assessment order that the ld. DRO-1, Bengaluru had passed directions dated 09/03/2021 but proceeded to pass the final assessment order disregarding the directions issued by the ld. DRP which in our opinion is in clear violation of section 144C of the Act. We are also of the considered opinion that the AO is bound by the directions issued by the DRP and required to pass the assessment order in conformity with the directions issued within one month from the end of the month in which such directions are received. Therefore, the final assessment order passed by the AO which is nothing, but the replica of the draft assessment order is illegal, bad in law and liable to be quashed. In holding so, we also rely upon the decision of the coordinate bench in the case of Flextronics Technologies (India) ....
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....impugned order in pursuance of and in conformity with the binding directions of the DRP issued u/s. 144C(5) of the Act, within the time specified for this purpose, has rendered the said impugned final order of assessment unsustainable in law. We, therefore, quash the impugned final order of assessment for asst. year 2009-10 passed by the AO u/s. 143(3) r.w.s 92CA of the Act dated 17/1/2014 in the case on hand. W hold and direct accordingly. Consequently, ground No. 17 of assessee's appeal is allowed." 10. Respectfully following the aforesaid view of the Tribunal, we quash the impugned order of assessment. Since the impugned order of assessment is quashed on the ground that the same is not in conformity with the provisions of section 144C of the Act and further on the ground that the time for passing the final order of assessment is barred by time, we are of the view that the other issues raised by the assessee in its grounds of appeal and the grounds raised by the revenue in its appeal does not require any consideration. As far as the decision cited by the learned DR in the case of H & M Hennes & Mauritz India (P) Ltd. (supra) is concerned, we find that in the said decisio....