TMI Blog2018 (6) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent by : Sh. H.K. Choudhary, CIT(DR) ORDER Per O.P. Kant, A. M. This appeal by the assessee is directed against order dated 31/01/2017 passed by the Assistant Commissioner of Income Tax, Circle 6(2), New Delhi (in short the Assessing Officer ) for assessment year 2012-13, in pursuance to the direction of the Ld. Dispute Resolution Panel (DRP). The grounds raised in the appeal are reproduced as under: 1. That the Assessing Officer ( AO ) erred on facts and in law in completing the assessment under section 144C read with section 143(3) of the Income-tax Act, 1961 ( the Act ) at an income of ₹ 8,27,23,461 as against income of ₹ 1,09,68,920 returned by the appellant. 2. That the AO erred on facts and in law in making an addition of ₹ 3,95,61,889 allegedly on account of difference in the arm s length price of the international transactions on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ( TPO ) 2.1 The AO/TPO erred on facts and in law in disregarding the benchmarking analysis undertaken by the appellant applying internal TNMM in the Transfer Pricing Documentation allegedly holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive service provider as opposed to the comparable companies who were independent comparable companies. 2.8 Without prejudice that the AO/TPO erred on facts and in law in incorrectly computing the transfer pricing adjustment at ₹ 3,95,61,889 as against the correct adjustment of ₹ 80,83,424. 3. That the AO erred on facts and in law in disallowing under section 40(a)(i) of the Act, inter-company fees payments of ₹ 2,17,63,132 made by the appellant to its group companies located outside India on the ground that tax has not been withheld therefrom under section 195 of the Act. 3.1 That the AO erred on facts and in law in disentitling the appellant from claiming benefits available under the Double Taxation Avoidance Agreement on the ground that the appellant did not furnish Tax Residency Certificate(s), not appreciating that there was no such requirement in law in the relevant assessment year. 3.2 That the AO erred on facts and in law in confirming the directions issued by the Dispute Resolution Panel ( DRP ) without appreciating that the DRP had failed to consider challans evidencing deduction and deposit of tax at source in financial year 2016-17_b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xi. Cost recharged TNMM OP/OC 29,249,611 xii. Commission Income TNMM OP/OC 4,557,770 xiii. Reimbursement of expenses CUP NA 7,246,646 xiv. Recovery of expenses CUP NA 3,908,073 2.1 The assessee used internal TNMM for benchmarking the International Transactions, which was rejected by the Ld. TPO on the ground that AE and Non-AE segment wise profitability analysis was not appearing in audited financial statement. The Ld. TPO chose external TNMM as most appropriate method for determination of arm s length value of the international transaction. The Ld. TPO computed operating profit/operating cost (OP/OC) of the assessee at 1.79%. The assessee, using external TNMM as secondary analysis, selected 5 comparables and computed their mean margin (OP/OC) at 5.52% using multiple year data. The Ld. TPO, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be adjudicated. 4. The ground Nos. 2 to 2.8 relate to Transfer Pricing Addition of ₹ 3,95,61,889/-. 4.1 Before us, the Ld. counsel of the assessee did not press ground No. 2.1 challenging rejection of internal TNMM by the Ld. TPO/DRP. Addressing ground No. 2.8, the Ld. Counsel submitted that the Ld. TPO has applied the mean margin of comparables over entire cost of the assessee company including cost towards non-AE transactions. According to him for computing the arm s length value of international transaction, the Ld. TPO should have applied, the mean margin of the comparables over the cost in respect of international transaction with AE only. 4.2 Addressing ground No. 2.2, the Ld. Counsel submitted that the Ld. TPO has wrongly characterized the assessee company as provider of financial advisory services and comparing the assessee with companies engaged in the business of stock broking and trading of shares. The Ld. Counsel submitted that identical issue of wrong characterization of the assessee was raised before the Tribunal in the case of the assessee for assessment year 2010-11 and 2011-12 and the Tribunal after verifying the facts, restored the matter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer definitely renders which is evident from the extract of the redacted agreements entered into by the assessee company with its customers the nature of the activity impacting its FAR needs to be addressed. It is seen that even if the nature of activities impact the ultimate decision-making qua the financial information provided however, by no stretch of imagination the assessee can be compared with companies who are trading in shares and investments. Accordingly holding the fresh evidences as relevant and crucial to determine the issues, the fresh evidence is admitted. Support is drawn from the decision of the Jurisdictional High Court in the case of CIT vs Text Hundred India Pvt. Ltd. (cited supra). The following extract of the said decision is reproduced hereunder:- 13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motto of the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g observations: 5. These facts set out in the TP study Report on the basis of Distribution and Sales Agreement entered into by the assessee and its AE have admittedly not been considered and the characterization based on past precedent by the TPO has been followed in haste. Accordingly, considering the judicial precedent and the material available on record, in the light of submissions of the parties before the Bench, we deem it appropriate to admit the fresh evidences filed. These evidences have been discussed in detail and are identical to what has been filed in ITA No. 979/Del/2015 in order dated 27.09.2016. The evidences have been considered to be relevant and crucial for determining the issues as to elaborate and support the original claims of the tax payer. Accordingly following the judicial precedent the evidence is admitted. Since the evidences have to be considered for the first time again following the precedent these are remitted to the TPO with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 4.6 Further, on perusal of the order of the TPO passed for assessment years 2010-11 and 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, the grounds related to transfer pricing addition are allowed partly for statistical purposes. 6. The ground No. 3 to 3.2 of the appeal relate to disallowance under section 40(a)(i) of the Act amounting to ₹ 2,17,63,132/- for non-deduction of tax at source on inter-company fee payments. 6.1 Before us, the Ld. counsel of the assessee submitted that the Ld. DRP did not consider the documentary evidences including challans evidencing deduction and deposit of tax at source by the assessee. According to the Ld. counsel, the action of the Ld. DRP in dismissing the contentions of the assessee on the issue in dispute without reasoning, is not justified and matter need to be restored back to either the Ld. DRP or the Assessing Officer for reconsideration of the evidences filed before the Ld. DRP. 6.2 The Ld. DR, could not controvert the above facts and concurred that, matter might be restored to either the file of the Ld. DRP or the Ld. AO for deciding of afresh in the light of additional evidences furnished by the assessee before the Ld. DRP. 6.3 We have heard the rival submissions and perused the relevant material on record. The relevant part of the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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