TMI Blog2023 (2) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... back to the file of the A.O - thus in the interest of justice, therefore, this ground should be remanded back to the file of the A.O for re-adjudication. Addition u/s 37 - lease rental paid which was held as inadmissible expenses - office of the assessee has not started functionin g - Counsel submitted that the assessee was unable to submit evidences regarding merits of this issue before the A.O and also before the ld. D.R.P. due to covid pandemic prevailing at that point of time - HELD THAT:- The contentions raised by the ld. Counsel for the assessee are valid and true. The evidences on the issue of lease rental paid could not be submitted by the assessee due to the circumstances prevailing at that point of time viz. covid pandemic. In the interest of justice, therefore, we admit the evidences as additional evidences and remand this ground to the file of the A.O for readjudication as per law complying with the principles of natural justice while considering the evidences furnished by the assessee. Ground No. 2 is allowed for statistical purposes. Disallowance of Primary Rate Interface (PRI) line charges paid to telecom companies - HELD THAT:- This ground is covered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 1.1 Erred in retaining the transfer pricing adjustment made to software development segment (amounting to INR 21,49,88,149) and IT enabled service segment (amounting to INR 11,33,91,099) in the final assessment order despite the fact the Appellant has signed an Advance Pricing Agreement (,APA) with the Central Board of Direct Taxes ('CBDT') and the Appellant has offered additional income in the Modified Return of Income filed within statutory timeline revising its income in accordance with the APA agreement. 1.2. While retaining the transfer pricing adjustment as stated in serial no. 1.1 as above, failed to appreciate the provisions of section 92CD( 4). It provides that where assessment or reassessment proceedings for an Assessment Year (AY) relevant to Previous Year (PY) to which the agreement (APA) applies are pending on the date of filing of modified return as per Section 92CD(1), the AO shall proceed to complete the assessment or reassessment in accordance with agreement (APA) after taking into account modified return so furnished. 1.3. Erred in not considering the extended timeline for completion of assessment i.e. twelve months provided under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to law. 4. Ground No. 1 contested in this appeal by the assessee can be understood in consonance with para 2.4.4 of the ld. D.R.P‟s finding which is as follows: 2.4.4 The assessee signed a APA agreement with CBDT on 15-12-2021, a copy of which has also been submitted before the DRP. This agreement is applicable to nine consecutive years commencing from A.Y. 2011-12 to F.Y. 2019-20 relevant to A.Ys 2012-13 to 2020-21. Hence the captioned A.Y vis. A.Y. 2017-18 is covered in the APA agreement. In view of the above, the assessee has requested to withdraw the objections pertaining to the Transfer Pricing adjustments which are Objection Nos. 2 to 13. Accordingly, these objections are dismissed as not pressed/withdrawn. 5. The ld. Counsel for the assessee, at the time of hearing submitted that since the assessee has signed a APA agreement with CBDT, objection raised in A.Y. 2017-18 was therefore, covered by the APA agreement. In view of this fact, the assessee had withdrawn objections pertaining to Transfer Pricing adjustments which were objections No. 2 to 13 before the ld. D.R.P. Accordingly, the ld. D.R.P dismissed these objections as not pressed/withdrawn. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O for giving appropriate consideration to the modified return filed by the assessee. The ld. D.R did not raise any objection if the ground is remanded back to the file of the A.O. We are of the considered view, in the interest of justice, therefore, this ground should be remanded back to the file of the A.O for re-adjudication as per law complying with the principles of natural justice. We order accordingly. Ground No. 1 is allowed for statistical purposes. 8. In ground No. 2, the assessee is aggrieved with the addition of Rs. 6,73,37,383/- being the lease rental paid which was held as inadmissible expenses and the amount was disallowed u/s 37 of the Act. The ld. Counsel submitted that the assessee was unable to submit evidences regarding merits of this issue before the A.O and also before the ld. D.R.P. due to covid pandemic prevailing at that point of time. He demonstrated that the order of the A.O is dated 10-09-2021 which was the period of on-going pandemic and the ld. D.R.P. had given their findings on 25-04-2022 and during this period the office of the assessee has not started functioning. The ld. Counsel in this regard placed before us a letter from the Country Head o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hone with high quality of network is required for such work. Therefore, it is technical service and hence TDS has to be deducted u/s 194J of the Act . The A.O has also observed that similar addition was confirmed by the D.R.P. in assessee s own case for A.Y. 2014-15 and 2015-16. In the assessment order, this issue has been dealt with on page 9 para 6.3 onwards. The A.O held therefore, that it is a technical service and TDS has to be deducted u/s 194J of the Act. Similarly, the ld. D.R.P have given their findings on this issue from para 14.2 of their order and at para 16.6 and 16.7 it was held as follows: 16.6 The above mentioned contentions of the assessee have been carefully examined and they are found to be untenable for the following reasons: (a) While the A.O. stated that the payments made by the assessee to the telecom service providers are towards dedicated leased lines, the assessee claimed that the payments were made towards use of PRI lines which are not dedicated leased lines. However, it is noticed that the assessee has not furnished any documentary evidences in support of this factual claim. In the absence of the same, this claim of the assessee needs to be disreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and consequently does not qualify as fees for technical services. In this regard, at the very outset, the ld. Counsel submitted that the issue is squarely covered by the decision of the Hon‟ble Jurisdictional High Court in favour of the assessee in the case of Pr. CIT-2 Vs. Lee Murihead (P) Ltd. [2020] 119 taxmann.com 499 (Bombay). It was held by the Hon‟ble Bombay High Court as follows: The last question (i.e. question No. (d) pertains to the disallowance u/s 40(a)(ia) of the Act on account of non-deduction of tax at source by the assessee while making payment to Vi9desh Sanchar Nigam Ltd. Towards leased line charges. On merits, the Revenue had placed reliance on a decision of this Court in case of CIT Vs. Kotak Securities Ltd. [2012] 20 taxmann.com 846/340 ITR 333 (Bom. The Tribunal however, held that the amount in question was below Rs. 10 lakhs which was a minimum monetary limit enabling the Revenue to prefer appeal against the Commissioner s Appellate orders before the Tribunal. Revenue argues before us that the Tribunal should have seen the monetary limit of the combined appeals of the assessee as well as the Revenue arising out of the common judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (hereinafter referred to as 'Act'), against the order dated 30 May 2022 (received on 30 May 2022) passed by the Assistant Commissioner of Income Taxi Circle 1 (1), Pune (hereinafter referred to as 'learned AO') under section 143(3) r.w.s. 144C(13) of the Act in pursuance of the directions dated 28 April 2022 issued by the Honorable Dispute Resolution Panel (hereinafter referred to as 'Hon'ble DRP'), on the following grounds: On the facts and in the circumstances of the case and in law, the Hon'ble DRP and consequentially the learned AO have: 1. Grounds of Objections in respect of transfer pricing adjustment 1. Erred in retaining the transfer pricing adjustment of INR 38,88,58,313 while passing the final assessment order 1.1 Erred in retaining the transfer pricing adjustment made to software development segment (amounting to INR 19,53,92,483) and IT enabled service segment (amounting to INR 19,34,65,830) in the final assessment order despite the fact the Appellant has signed an Advance Pricing Agreement ('APA) with the Central Board of Direct Taxes ('CBDT') and the Appellant has offered additional income in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 270A of the Act without appreciating the facts that transfer pricing adjustment to the international transactions of the Appellant and corporate tax adjustment made is on account of difference of opinion as to application of selection criterion for selection of comparable companies, incoherent approach, interpretation of the provisions, interpretation of case laws etc. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Honourable Income-tax Appellate Tribunal to decide this appeal according to law. 15. At the outset, the ld. Counsel for the assessee submitted that the grounds in this appeal are absolutely similar and identical with the grounds in ITA No. 597/PUN/2022 for A.Y. 2017-18. That in ground NO. 3, it is regarding disallowance of expenses made pursuant to ESOP scheme floated by the assessee‟s parent company. However, for this ground and also for ground No. 2, the assessee wants to file additional evidences making the same submissions as were made for in ITA No. 597/PUN/2022 for A.Y. 2017-18. The ld. D.R conceded to these su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law in denying the risk adjustment by providing irrational illogical reasons 3. Failed to appreciate that proceedings for AY 2006-07 post remand by the Hon'ble ITAT on the issue of granting risk adjustment never reached finality and therefore TPOIDRP has erred in applying the Ratio decidendi of AY 2006-07 to the impugned proceedings: 3.1 The learned TPO IDRP has held that in A Y 2006-07 in similar circumstances the risk adjustment had not been granted without appreciating the fact that application u/s 154 has never been disposed by TPO and hence ratio decidendi of A Y 2006- 07 is not applicable to these proceedings. 3.2 The DRP has very conveniently ignored the fact that the appellant has not produced application /order u/s 154 for AY 2006-07 , shrugging the responsibility that DRP is duty bound to call for explanation from TPO about pending proceedings for A Y 2006-07 being internal record of the department and no exclusive onus in this regards lies on the appellant. The action of TPO/DRP in rejecting adjustment is untenable on this ground. 3.3 The TPOIDRP erred in recording the same reasonings for non- granting risk adjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the assessee, the same is not to be allowed. 44. We have heard the rival contentions and perused the record. The plea raised vide this proposition is the allowance of risk adjustment to the assessee. The assessee claims that its business model was such, wherein it is being reimbursed the services at cost plus mark-up and there was no possibility of incurring any losses since it was providing the services to its associate enterprises totally. With regard to the comparables, the claim of the assessee before us is that they are normal risk bearing entities and the TPO at no place has given a finding that comparable concerns picked up were risk mitigated. In such circumstances, various Benches of Tribunal in the case of captive service provider are of the view that since captive service provider does not assume any risk or takes lesser risk as compared to the concerns, which undertake higher risk, then the risk adjustment is to be allowed. The learned Authorized Representative for the assessee in this regard has placed on record the methodology prescribed by Bangalore Bench of Tribunal in Philips Software Centre India Pvt. Ltd. Vs. ACIT (2008) 119 TTJ (Bang) 721. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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