9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 874 - AT - Income TaxMiscellaneous application u/s 254(2) - since ground of Appeal Nos. 10 to 22 has not been resolved pursuant to the provisions of the VSV Act therefore assessee seeks to resolve the said dispute under the normal provisions of the Act - assessee submitted that issues / grounds filed by NTT GDS the successor company could not be settled under Vivad Se Vishwas Scheme necessitating present misc. application under section 254(2) requesting for reinstitution of the appeal with respect to grounds pertaining to transfer pricing adjustment in relation to non-US transactions and corporate tax issues which were dismissed with a liberty to reinstitute. HELD THAT - We find considerable cogency in the contention of the Ld. AR that since ground of Appeal Nos. 10 to 22 has not been resolved pursuant to the provisions of the VSV Act therefore assessee deserve to resolve the issues/dispute under the normal provisions of the Act. Accordingly we recall the Tribunal s order 2020 (11) TMI 1127 - ITAT DELHI qua the following ground nos. 10 to 22 only and direct the Registry to fix the appeal for hearing in the normal course. Miscellaneous application of the assessee is allowed.
The primary issue presented for consideration is whether the Tribunal's earlier order dated 16.11.2020 in ITA No. 1877/Del/2015 (AY 2010-11), which was dismissed and consigned to records in view of the assessee's intention to settle disputes under the Direct Tax Vivad Se Vishwas (VSV) Act, 2020, can be recalled to reinstitute the appeal with respect to unresolved grounds, specifically Grounds 10 to 22 relating to transfer pricing adjustments in non-US transactions and corporate tax matters.
Further, the issues underlying Grounds 10 to 22 themselves raise several core legal questions, including:
Each of these issues was considered in the context of the miscellaneous application seeking recall of the earlier order and reinstitution of the appeal for adjudication under the normal provisions of the Act. Issue-wise Detailed Analysis Recall of Tribunal Order and Reinstitution of Appeal The Tribunal initially dismissed the appeal and consigned it to records based on the assessee's expressed intention to settle disputes under the VSV Act. The legal framework under section 254(2) of the Income-tax Act empowers the Tribunal to recall any order passed by it if sufficient cause is shown. The Court examined whether the grounds of appeal (Nos. 10 to 22) were indeed settled under the VSV Act. Since these grounds remained unresolved, the Tribunal found cogency in the assessee's contention that the disputes deserved resolution under the normal provisions of the Act. The Court accordingly exercised its jurisdiction under section 254(2) to recall the earlier order only with respect to these grounds and directed reinstitution of the appeal for hearing in the normal course. This decision reflects the principle that the VSV Act is a scheme for settlement of disputes, and where disputes are not settled under it, normal adjudicatory processes must continue. The Tribunal's reasoning underscores the procedural fairness in allowing the assessee to have unresolved issues adjudicated rather than being foreclosed by dismissal premised on an unconsummated settlement. Transfer Pricing Adjustments Relating to Non-US Transactions (Grounds 10 to 18) The legal framework governing transfer pricing adjustments is primarily contained in sections 92 to 92F of the Income-tax Act, 1961, and the associated rules, including the requirement of determining ALP of international transactions. The DRP's directions under section 144C(5) and the AO's obligation to give effect to such directions under section 144C(13) are also critical. The Tribunal noted that the AO erred in completing the assessment without giving effect to all directions of the DRP, rendering the order void ab initio. This is a fundamental procedural defect, as the AO's order must reflect the DRP's directions unless legally unsustainable. On the merits of transfer pricing adjustments, the AO/TPO made an addition of approximately INR 11.9 crores to the appellant's total income, asserting that the ALP for software development services with non-US AEs was not established. The assessee challenged the AO/TPO's methodology, arguing that the economic analysis and transfer pricing documentation complied with statutory provisions and rules. The AO/TPO's use of only FY 2009-10 data, unavailable to the assessee at the time of documentation, was criticized as unfair and contrary to the principle of contemporaneous evidence. Further, the AO/TPO's rejection of comparable companies was contested on multiple grounds:
The Tribunal found that the AO/TPO applied unreasonable comparability criteria, leading to inappropriate rejection of comparables. Additionally, failure to consider gains or losses from foreign exchange fluctuations in computing operating margins was identified as a factual and legal error, given the material impact of currency movements on profitability. The AO/TPO's failure to adjust for differences in risk profiles between the appellant and comparables further undermined the reliability of the ALP determination. Finally, the AO/TPO did not apply the statutory benefit of +/- 5% tolerance under the proviso to section 92C, which is designed to provide a margin of error in ALP determination, thereby exacerbating the harshness of the adjustment. The Tribunal's analysis reflects adherence to established precedents emphasizing the need for a reasoned, balanced, and comprehensive comparability analysis, including acceptance of contemporaneous data, reasonable filters, and appropriate adjustments for differences in risk and other factors. Corporate Tax and Other Grounds (Grounds 19 to 22) The AO denied deductions under sections 10A/10AA in respect of interest income and miscellaneous income, which the assessee contended formed part of business income eligible for such deductions. Sections 10A and 10AA provide tax incentives for profits derived from specified undertakings or enterprises, and denial of such deductions must be justified on strict legal grounds. The AO's failure to grant full credit for TDS and advance tax payments was challenged as erroneous, since proper credit is a fundamental principle to avoid double taxation and ensure accurate tax liability computation. The AO's determination of total income and tax liability, including interest levies under sections 234B (interest for default in payment of advance tax), 234C (interest for deferment of advance tax), 234D (interest on failure to deduct TDS), and 244A (interest on refund), was also disputed. The correctness of such levies depends on the factual matrix, including timing and adequacy of tax payments and deductions. The Tribunal's order does not delve into detailed factual adjudication of these grounds at this stage but acknowledges the errors alleged by the assessee as sufficient to warrant reinstitution of the appeal for full hearing and determination. Significant Holdings The Tribunal held:
Core principles established include the Tribunal's power under section 254(2) to recall its orders where grounds remain unresolved under a settlement scheme; the necessity for AO to give effect to DRP directions under sections 144C(5) and 144C(13); the requirement for reasoned and balanced comparability analysis in transfer pricing adjustments; and the entitlement of the assessee to deductions and tax credits as per statutory provisions unless validly denied. Final determinations on each issue remain pending as the appeal has been reinstated for hearing. However, the Tribunal's order sets the procedural and legal framework for adjudication, emphasizing procedural compliance, reasonableness in transfer pricing methodology, and adherence to substantive tax provisions.
|
