2020 (1) TMI 1171 - AT - Income Tax

TP adjustment - assessee is primarily aggrieved against the selection of comparables - contention of assessee is that though with the set of comparables selected by the CIT(A) OP/OC ratio of the comparables is within /- 5% range, however, in principle Goldman Sachs and AGM India Advisors Pvt. Ltd. cannot be selected as comparables as they do not qualify RPT filter - HELD THAT - Assessee is providing Investment Advisory Services and has declared margin of 20%, we find merit in the contentions of the assessee. If the said entities fail to qualify RPT filter, they cannot be selected as comparables. We deem it appropriate to restore this issue back to the file of Assessing Officer/TPO for the limited purpose to verify whether Goldman Sachs and AGM India Pvt. Ltd. qualify RPT filter or not. If both these entities fail to qualify the said filter, they should be removed from the list of comparables. The ground No.1 2 of the appeal by the assessee are allowed for statistical purpose in the terms aforesaid. Addition of TDS amount deducted but not deposited by the deductor to the Government exchequer - HELD THAT - Bombay High Court in the case of Yashpal Sahni 2007 (7) TMI 7 - HIGH COURT , BOMBAY has held that where the assessee has been able to establish that the tax has been deducted at source, section 205 of the Act bars to recover TDS amount from the assessee (deductee) - if assessee is able to establish that tax has already been deducted at source on interest payments, the TDS amount cannot be recovered from the assessee again. The issue is restored back to the file of Assessing Officer for the limited purpose to verify whether TDS amount has been deducted from interest payments. The assessee shall furnish necessary documents to substantiate deduction of TDS on the interest payment received by it. The Assessing Officer after examining the documents, if satisfied that the TDS has already been deducted, shall delete the addition. Ground No.3 of the appeal is allowed for statistical purpose, in the terms aforesaid.

Summary

Issues:
1. Transfer Pricing Adjustment - Selection of Comparables
2. Addition on Account of Mismatch in Form 26AS
3. Recovery of TDS Amount Deducted but Not Deposited

Transfer Pricing Adjustment - Selection of Comparables:
The appellant, providing Investment Advisory Services, applied the Transactional Net Margin Method (TNMM) for benchmarking international transactions. The TPO accepted TNMM but excluded some comparables selected by the appellant, making an upward adjustment. The CIT(A) granted partial relief, deleting some comparables but erred in accepting Goldman Sachs and AGM India Advisors Pvt. Ltd. as comparables. The appellant contended that these companies fail the Related Party Transaction (RPT) filter. The Tribunal agreed, directing the issue back to verify RPT qualification. The appeal was allowed for statistical purposes.

Addition on Account of Mismatch in Form 26AS:
Apart from transfer pricing adjustment, the Assessing Officer made an additional amount due to a mismatch in Form 26AS. The appellant received interest income with TDS deduction, but the deductor failed to deposit the TDS amount, leading to the mismatch. Citing legal precedents and a CBDT Office Memorandum, the appellant argued against the addition. The Tribunal referred to a judgment of the Hon'ble Bombay High Court and the CBDT Memo, concluding that if TDS was deducted, it cannot be recovered again. The issue was remanded to verify TDS deduction, and the appeal was allowed for statistical purposes.

Recovery of TDS Amount Deducted but Not Deposited:
Regarding the recovery of TDS amount not deposited by the deductor, the Tribunal upheld the appellant's contention based on legal provisions and the CBDT Memo. Following the judgment of the Hon'ble Bombay High Court, the Tribunal directed the Assessing Officer to verify TDS deduction on interest payments. If TDS was deducted, the addition should be deleted. The appeal was allowed for statistical purposes.

This comprehensive analysis covers the key issues addressed in the legal judgment by the Appellate Tribunal ITAT MUMBAI, providing a detailed understanding of the transfer pricing adjustment, mismatch in Form 26AS, and the recovery of TDS amount deducted but not deposited.