TMI Blog2017 (12) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 12-04-2012 passed by learned Commissioner of Income-tax (Appeals)-15, Mumbai (hereinafter called the CIT(A) ) for assessment year 2007-08, appellate proceedings had arisen before learned CIT(A) from the assessment order dated 18.02.2011 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143 of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The brief facts of the case are that assessment has been framed by the A.O u/s. 143(3) of the 1961 Act vide assessment order dated 18.02.2011 wherein , inter-alia , transfer pricing additions to the tune of ₹ 33.10 crores have been made by adjustment to arm lengths price with respect to the international transaction entered into by the assessee with its Associate Enterprise (A.E) , the TP additions made by the AO in the assessment order were in turn based upon orders dated 28.10.2010 passed by Transfer Pricing Officer(TPO) u/s. 92CA(3) , wherein an adjustment of ₹ 33.10 crores was proposed by TPO to the Arms Length Price of International Transaction entered into by the assessee with its AE s with respect to the investment banking services rendered by the assessee. It is claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no comparable company in the segment in which the assessee dealt with. It was submitted by the assessee before the TPO that the functions performed in the AE segments related to Investment Banking Division and concerns Underwriting, Leverage Finance, Private Placement, Mergers and acquisitions, Restructuring etc. . It was stated by the assessee s that by no stretch of imagination, such functions be benchmarked with the non-binding investment advisory services proposed in the show cause issued by TPO. The TPO could not find comparable w.r.t. IBD division , wherein comparables were chosen by TPO from ITES/BPO segment , as under: SI. No. Name of the company 2006-07 1 B 2 K Corp. Pvt. Ltd. NA 2 B N R Udyog Ltd. 30.73 3 CMC Limited t 32.91 4 Cosmic Global Ltd. 11.31 5 Datamatics Technologies Ltd. 4.03 6 Fortune Infotech Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 12.04.2012 . 3. Aggrieved by the appellate order dated 12.04.2012 passed by learned CIT(A), the assessee has come in an appeal before the tribunal . 4. At the outset , Ld. Counsel for the assessee pleaded that there was an extra ordinary situation prevailing during assessment proceedings arising out of the collapse of Lehman Brothers worldwide which was liquidated in 2009 and because of that proper representation and explanation could not be made before the authorities below leading to huge additions to the tune of ₹ 33.10 crores to ALP by way of TP additions . It is prayed and stated before us by the Ld. Counsel for the assessee that if an fresh opportunities is granted to the assessee by setting aside the matter to the file of A.O./TPO, the assessee is now in a position to offer proper explanations and make proper representation before the authorities below to justify its methodology of benchmarking of international transactions with its A.E.as well computation of ALP as was made by it in its TP study. It is claimed by the learned counsel for the assessee that the method adopted by the assessee for bench marking of international transactions with AE being Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO , he could have modified it to Profit Split method to compute ALP but outright rejection of the method was not warranted and TNMM as adopted by Revenue which was later confirmed by learned CIT(A) is not suitable method keeping in view business matrix of the assesse. The assessee again reiterated that the assessee business of IBD involves integrated, inter-connected and seamless business operations wherein several Lehman Brother entities worldwide as well clients and banks are involved to successfully compete transactions and hence Revenue/profit split is the most suitable method. It is also stated before us that due to collapse of Lehman Brothers worldwide and its liquidation in 2009 , the assessee employees left the organisation wherein the assessee could not effectively make representations before the authorities below and due to this extra ordinary situation prevailing when assessment was progressing , the additions were made due to lack of proper representations by the assessee . It was stated by learned counsel for the assessee that if an fresh opportunities is now given to the assessee , it will submit explanations along with all necessary evidences to support its contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other activities associated with debt and equity products. With respect to its investment banking Division transaction with its AE, the assessee submitted its transfer pricing study wherein arm length price(ALP) of revenues from IBD was computed and offered for taxation by the assessee with respect to its international transactions with A.E. based on Revenue Split method which was claimed to be based on Global Policy of Lehman Brothers Group worldwide being made applicable to all its entities since 1999-00 which was also claimed to have been applied to the assessee for computing ALP of its international transactions with AE . The Revenue was claimed to be allocated among all entities of Lehman Brothers worldwide with regard to compensation, head count and revenue allocation and an arm length range was then derived for each entity from these combinations of aforesaid allocations, wherein assessee s share in global revenues of IBD was claimed to be computed at 0.56% of the total IBD revenue, which worked out to U.S. Dollar s 41,28,055/- equivalent to Indian ₹ 28,88,26,985/- , computed as ALP of the IBD division with respect to the International transactions with its A.E. . T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Datamatics Technologies Ltd. 4.03 6 Fortune Infotech Ltd. 12.82 7 Galaxy CommerciaIs Ltd 14.22 8 HCL Technologies Ltd. 20.06 9 KPIT Cummins Global Business Solutions Ltd 19.93 10 T S R Darashaw Ltd. 44.64 - --. Arithmetical mean 21.18 It was also claimed by the assessee that it is the first year of operations in India and there are certain extra ordinary expenses such as start up cost and non-recurring expenses which were incurred by the assessee such as signup bonuses , relocation expenses, recruitment expenses etc. which need to be factored in and excluded while computing ALP. It was also claimed the assessee has not operated at full capacity during the previous year relevant to the impugned assessment year being the first year of operations as the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to non appointment of employees being first year of operation, signup bonuses being given to employees on joining the assessee and recruitment cost incurred in the initial phase of appointment of the new employees as assessee s base being setup in India which deserves to be seen by the authorities below on merits in accordance with law before arriving ALP of its international transactions with AE .The assessee has prayed and agreed for open set-aside to enable it to make effective representation before the authorities below in de-novo proceedings wherein necessary evidences and explanations could be furnished and authorities below can take view on isuses which arises or may arise during de-novo assessment proceedings on merits in accordance with law after hearing the assessee. Ld. DR has also after considering the factual matrix of the case and concession granted by the learned counsel for the assessee fairly agreed for an open set aside wherein all the issues which arises or may arise in assessment are kept open and TPO/AO will be free to adjudicate all such issue s afresh on merits in accordance with law after hearing the assessee and considering the material placed on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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