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M/s. Polaris Consulting Services Ltd. Versus The Joint Commissioner of Income Tax and The Deputy Commissioner of Income Tax, Company Circle V (i) , Chennai

2015 (11) TMI 1312 - MADRAS HIGH COURT

Determination of arm’s length price - selection of comparable - the impugned order passed by the first respondent challenged on the premise that it was reiterated on earlier findings without making de novo assessment - Held that:- There is absolutely nothing wrong in adopting the comparables selected by the TPO in erstwhile order, dated 26.10.2010 by the first respondent in determining the arm’s length price of the international transaction of the petitioner while passing the impugned order. If .....

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also considered the eight comparables newly identified by the petitioner using information collected from responses to letters issued under Section 133(6) and thereby determined the arm’s length revenue at ₹ 57,05,68,292/- which is considerably lower than the erstwhile draft assessment, wherein, it was determined at ₹ 110.27 crores. Hence, the contention that the first respondent has reiterated the earlier findings, cannot be accepted. Therefore, it seems that the petitioner is not .....

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da ORDER The case of the petitioner in the writ petition in brief, as set out in the affidavit filed in support of the writ petition, is that the petitioner/assessee filed its return of income for the assessment year 2007-08, declaring a total income of ₹ 189,193,357/-. It was selected for scrutiny and a reference was made to the Transfer Pricing Officer (in short, TPO ) for the determination of arm s length price of the international transactions. Consequently, by order, dated 26.10.2010, .....

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by the Assessing Officer. 2. For arriving at the arm s length price of the international transactions of the petitioner, the TPO had considered certain information, which was not available in the public domain by issuing notices under Section 133(6) of the Income Act. The petitioner made several requests for providing information, however, as no such information was not furnished, the petitioner has approached this Court by way of writ petitions in W.P.Nos.23564 and 24976 of 2011. By order, date .....

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making an upward adjustment to ₹ 57.05 crores. Aggrieved by the same, the petitioner has come forward with the present writ petition. 3. A counter affidavit has been filed on behalf of the respondents, wherein, it is stated that the petitioner is a software solution provider and effects considerable nature of international transactions qualifying for assessment in terms of Sec.92CA of the IT Act 1961. The Petitioner filed its return of income for AY 2007-08 on 31.12.2007 declaring a total .....

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the TPO along with certain other additions proposed by him. The Petitioner filed its objections before the Disputed Resolution Panel ( DRP ) against the draft assessment order and the same was confirmed by the proceedings dated 28.9.11. In the above background the petitioner preferred W.P.23546 of 11 seeking to quash the orders passed by the DRP dated 28.9.11 and the orders of the TPO dated 26.10.10 and the draft assessment order dated 31.12.10. A separate Writ Petition challenging the assessmen .....

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t petition was only with reference to the above information collated u/s 133(6) not having been provided to the petitioner. This Court, vide its order dated 15.11.11 in WP. Nos.23564 and 24976 of 2011, allowed the writ petitions on limited grounds of violation of principles of natural justice. 5. In pursuance and due obedience to the order of this Court in the WPs mentioned supra, the collated information/materials in terms of Sec.133(6) were furnished to the petitioner and objections thereof we .....

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and while providing opportunity, passed the impugned order. 6. It is further stated that the present writ petition has been filed by the petitioner to adopt dilatory tactics to keep matters pending and prevent finality. The petitioner by way of this writ petition seeks to raise a fresh plea regarding most appropriate method adopted by the TPO to arrive at ALP, from CUP method to TNMM method in respect of the international transactions relating to citi group entities. The petitioner is making err .....

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were duly furnished to the Petitioner based upon which objections/submission dated 11.3.14 were filed by the petitioner and the same were considered in accordance with the provisions of the Act and rules made there under. This aspect is evident from the fact that eight comparables were added at the instance of the Petitioner to the various filters for re-computing the income which was made at ₹ 110.27 crores and consequently reduced to ₹ 57.05 crores. Thus, the impugned order and da .....

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hing of information/material collected u/s 133(6) of the Act for adopting TNM Method for computing the ALP of the Petitioner s international transaction. Therefore, based on the above plea, this Court has directed to furnish the same. Hence the petitioner cannot now agitate an issue, for which no direction was given by the Hon ble Court in the said order. The petitioner in the present writ petition now seeks to enlarge the scope of the order dated 15.11.11 passed by this Court in the said WPs me .....

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itioner and the learned standing counsel for the respondents and perused the entire materials available on record. 10. Mr.N.Venkataraman, learned senior counsel would contend that in compliance of the orders of this Court in W.P.Nos.23564 & 24976 of 2011, the first respondent ought to have made the assessment de novo after considering the objections made by the petitioner, however, the first respondent without considering the objections, reiterated the same findings, which is nothing but an .....

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ent and that he has not considered the objections raised by the petitioner regarding the CUP method for benchmarking transactions with Citi Group and no reasons were provided by the TPO as to why comparable companies selected in its documentation were found to be incorrect, etc., which are crucial in nature, holding that they were already considered by his predecessor and upheld by the DRP, which would cause great prejudice to the petitioner and thereby, the first respondent again violated the p .....

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ly to be adversely affected by the action of theauthorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind. Violation of either of them could in the given facts and circumstances of the case, vitiate the order itself. Such rule being applicable to the administrative authorities certainly requires that the judgment of the Co .....

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versus Union of India & Others made in W.P.(L) No.3359 of 2013, wherein, it has been held as under: 6. We have considered the rival submissions. Normally we would not entertain a petition under Article 226 of the Constitution of India where an alternative remedy in the form of appeal is provided in the statute. In the present case, the order of the Assessment dated 29 November 2013 is an order from which an appeal would lie under Section 246-A of the Act to the Commissioner of Income Tax (A .....

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ation of our obligation to ensure that justice is done. Therefore the availability of an alternative remedy would not by itself bar the exercise of our writ jurisdiction, if the facts of the case so deserve. Therefore, the learned senior counsel would contend that the impugned order is not sustainable. 12. On the other hand, the learned counsel appearing for the respondents would contend that in compliance to the orders of this Court in earlier writ petitions, the department has furnished all ma .....

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ontentions, the learned counsel would submit that the impugned order requires not interference. Hence, he sought for dismissal of the writ petition. 13. Before proceeding with the matter on merits, it is relevant to refer the order, dated 15.11.2011 passed by this Court in W.P.Nos.23564 and 24796 of 2011, which reads as under: 12.Going by the complexities thus involved in the second respondent arriving at his decision on the assessee s transaction as not at arm s length, on the limited question .....

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filing an objection remains a real and effective opportunity and not a paper opportunity. 13. In the circumstances, I have no hesitation in setting aside the order of the second respondent, consequently that of the first respondent. Accordingly, the order passed by the first and second respondents dated 28.9.2011 and 26.10.2010 respectively are set aside. 14. In the result, both the writ petitions are allowed on the limited ground of violation of principles of natural justice and this Court rem .....

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nnected MPs are closed. No merits. 14. A plain reading of the above, it is clear that this Court has set aside the orders impugned in the above said writ petitions, having noted that the petitioner was not furnished with the relevant information regarding the method of filtering which resulted in taking 28 comparable cases, the detailed search process carried by the department, the notices issued to the companies under Section 133 (6), etc., which crippled the petitioner to make an effective rep .....

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sidered the objections raised by the petitioner, the first respondent determined the arm s length price of the international transaction of the petitioner by selecting the following sets of companies as comparables, viz., i) Comparables selected by the TPO in earlier order, dated 26.10.2010; and ii) Comparables newly identified by the assessee using information collected from responses to letters issued under Section 133(6) and ultimately determined the arm s length revenue at ₹ 57,05,08,2 .....

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s also meet the filters adopted by the TPO and hence, they should also be considered while determining the Arm s length revenue. The contention raised by the learned senior counsel, in my opinion, does not merit acceptance. It is no doubt true that this Court has set aside the earlier assessment made by the Assessing Officer based on the TPO s findings who selected comparables in its order, dated 26.10.2010. However, it is pertinent to note that the order, dated 15.11.2011 passed by this Court w .....

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absolutely nothing wrong in adopting the comparables selected by the TPO in erstwhile order, dated 26.10.2010 by the first respondent in determining the arm s length price of the international transaction of the petitioner while passing the impugned order. If at all the petitioner is aggrieved in such adoption, it is needless to state that the petitioner is always at liberty to challenge the impugned order in the manner known to law as the impugned order passed by the first respondent is not fin .....

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