9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (9) TMI 1507 - AT - Income TaxTPA - selection of wrong comparables for benchmarking the international transaction - Held that - Four comparables (i) Allsec Technologies Ltd., (ii) Maple E-solutions Ltd.; (iii) Asit C. Mehta and (iv) Vishal Information Technologies Ltd. (Coral Hub Ltd.) - et aside the matter to the file of the Assessing Officer/TPO to examine the validity of grievances shown by the assessee before the ITAT on the issue of choosing of the above four comparables for benchmarking the assessee s international transactions after affording opportunity of being heard to the assessee. Inclusion of functionally dissimilar companies as comparables for benchmarking the international transaction during the year - Held that - This issue requires fresh consideration of the submissions of the assessee to meet the ends of justice. We thus set aside the matter to the file of the Assessing Officer to decide the issue of application of the twelve comparables with the assessee for benchmarking its international transaction and to decide as to whether the international transaction entered into by the assessee during the year are at arm s length. Disallowance of deduction under sec. 10A in respect of assessee s undertaking at Hyderabad acquired by way of slump sale from Digital Think (India) Pvt. - Held that - We find that there is substance in the contention of the Learned AR that mere change in ownership does not result in denial of the deduction under sec. 10A of the Act. The only dispute raised in the ground is as to whether sec. 10A(2) of the Act applies or not. The CBDT Circular F. No. 178/84/2012 ITA-1 dated 17.1.2013 has made it clear in relation to availability of tax benefit under sec. 10A, 10AA and 10B of the Income-tax Act, 1961 in case of slump sales of an undertaking that on the sole ground of change in ownership of an undertaking, the claim of assumption cannot be denied to an otherwise eligible undertaking and the tax holiday can be available of for the unexpired period at the rate as application for the remaining years, subject to fulfillment of prescribed condition. We thus set aside the matter to the file of the Assessing Officer to decide the issue afresh in view of the above submissions of the assessee supported by the CBDT Circular and the decisions relied upon after affording opportunity of being heard to the assessee. Ground N0.4 is accordingly allowed for statistical purposes. Disallowance of interest paid to Kotak Mohindra Primus Ltd. (KMPL) under sec. 40(a)(ia) of the Act for not withholding taxes - Held that - We prima facie, find substance in the contention of the Learned AR that the assessee was under the bona fide belief that no tax was required to be deducted at source from the payment made to KMPL in terms of the exceptions carried out in sec. 194A of the Act as the provisions of sec.194A shall not apply where income is credited or paid to any banking company to which the Banking Regulation Act, 1949 applied, especially when there is no dispute that Kotak Mohindra Bank Ltd. is a banking company to which the Banking Regulation Act, 1949 applies and further that section 19 of Banking Regulation Act, 1949 provides that a banking company shall not form any subsidiary company except a subsidiary company formed for under taking of any business which is permissible for a banking company to undertake. Again there is substance in the alternative submission of the assessee that the amendments made by the Finance Act, 2012 to section 201 and Section 40(a)(ia) of the Act sought to be applied to cases prior to 01.07.2012 since the amendments are procedural in nature and are intended to remove the hardship being faced by the assessee, the amendments are declaratory and curative in nature and shall have retrospective effect. We thus set aside the matter to the file of the Assessing Officer to examine the submission of the assessee that KMPL had duly furnished the return of income and had considered the interest income received from the assessee while computing its total income for the year under consideration and further that the taxes had also been paid by KMPL on such interest income for the year under consideration and decide the issue afresh in view of above submissions and cited decisions by the Learned AR after affording opportunity of being heard to the assessee. The ground No. 5 is accordingly allowed for statistical purposes.
Issues Involved:
1. Validity of the assessment order. 2. Transfer Pricing adjustments and selection of comparables. 3. Risk adjustment in Transfer Pricing. 4. Disallowance under Section 10A for the Hyderabad unit. 5. Disallowance under Section 40(a)(ia) for interest paid to Kotak Mahindra Primus Ltd. 6. Addition of reversal of provisions made in the previous year. Detailed Analysis: 1. Validity of the Assessment Order: The assessee contested the validity of the assessment order passed by the Assessing Officer (AO) pursuant to the directions of the Dispute Resolution Panel (DRP). The Tribunal did not find it necessary to independently adjudicate this ground as it was general in nature. 2. Transfer Pricing Adjustments and Selection of Comparables: The main grievance of the assessee was regarding the selection of wrong comparables for benchmarking international transactions. The Tribunal noted that the Transfer Pricing Officer (TPO) had rejected the segmental bifurcation undertaken by the assessee and clubbed the segments under ITES. The TPO relied on 14 companies with a mean operating profit margin of 22.61%, leading to an adjustment of Rs. 31,21,61,763/-. Key Points: - The Tribunal found substance in the assessee's contention that the selected comparables were not functionally similar. - The Tribunal noted that the authorities below did not consider material aspects such as extraordinary events, different risk profiles, and functional dissimilarities. - The Tribunal set aside the matter to the AO/TPO for fresh examination of the comparables after affording an opportunity to the assessee. 3. Risk Adjustment in Transfer Pricing: The assessee argued that the TPO disallowed the claim for risk adjustment based on reasons that were specifically dealt with in the case of Motorola Solutions India Pvt. Ltd. The Tribunal restored the matter to the AO/TPO to consider the computation of risk adjustment as per the CAPM model by availing the services of technical experts. Key Points: - The Tribunal directed the AO/TPO to reconsider the risk adjustment claim in light of the Motorola Solutions case. - The Tribunal allowed the ground for statistical purposes. 4. Disallowance under Section 10A for the Hyderabad Unit: The assessee claimed a deduction under Section 10A for the Hyderabad unit acquired from Digital Think (India) Pvt. Ltd. The AO disallowed the claim, arguing that the conditions under Section 10A(2) were not fulfilled. The Tribunal found substance in the assessee's contention that mere change in ownership does not result in denial of deduction under Section 10A. Key Points: - The Tribunal relied on CBDT Circulars and judicial precedents to support the assessee's claim. - The Tribunal set aside the matter to the AO to decide afresh in view of the submissions and supporting documents. 5. Disallowance under Section 40(a)(ia) for Interest Paid to Kotak Mahindra Primus Ltd.: The assessee argued that no tax was required to be deducted on interest paid to KMPL as it is a subsidiary of Kotak Mahindra Bank Ltd. The AO disallowed the interest payment under Section 40(a)(ia) for non-deduction of tax at source. The Tribunal found substance in the assessee's bona fide belief and alternative submission supported by judicial precedents. Key Points: - The Tribunal directed the AO to examine whether KMPL had furnished its return of income and considered the interest income while computing its total income. - The Tribunal allowed the ground for statistical purposes. 6. Addition of Reversal of Provisions Made in the Previous Year: The assessee contested the addition of Rs. 1,51,14,384 out of Rs. 6,33,13,953, which merely represented the reversal of provisions made in the previous year. The Tribunal found that the issue required fresh consideration in light of judicial precedents and the facts presented by the assessee. Key Points: - The Tribunal set aside the matter to the AO to decide afresh after examining the facts and submissions. - The Tribunal allowed the ground for statistical purposes. Conclusion: Both appeals were allowed for statistical purposes, with directions to the AO/TPO to reconsider the issues in light of the Tribunal's observations and after providing an opportunity to the assessee to present its case.
|
