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2019 (1) TMI 1901 - AT - Income TaxTP Adjustment - Comparable selection - whether orders passed by learned DRP and by this Tribunal in the case of Vodafone India Services Pvt. Ltd. 2014 (12) TMI 563 - ITAT MUMBAI could be used in the hands of the assessee herein? - HELD THAT - We find that the very same business carried out by the assessee up to 4.12.2007 was carried out by Vodafone India Services Pvt. Ltd. for the remaining part of the financial year. We also find that the very same seventeen comparable companies were selected by learned TPO while framing transfer pricing assessment in the hands of Vodafone India Services Pvt. Ltd. for A.Y. 2008-09. Hence, we hold that there is no harm in following learned DRP‟s order and order of this Tribunal for assessee-herein. From the aforesaid table, it could be seen that average of final eight comparable works out to 15.85%, whereas assessee‟s margin was 15.65%. Giving credit to the assessee for range of plus/minus 5%, we hold that assessee‟s margin would be at arm‟s length.
Issues Involved:
1. Determination of Arm's Length Price (ALP) for international transactions. 2. Selection and exclusion of comparable companies for benchmarking. 3. Verification of margins and claims. 4. Initiation of penalties under sections 271G and 271(1)(c) of the Income Tax Act. 5. Levy of interest under sections 234B and 234C. Issue-wise Detailed Analysis: 1. Determination of Arm's Length Price (ALP) for International Transactions: The assessee provided IT-enabled services to its Associated Enterprises (AEs) amounting to ?145,65,31,831/-. The ALP was determined using the Transactional Net Margin Method (TNMM) with the Operating Profit to Total Cost ratio as the Profit Level Indicator (PLI). The assessee's PLI was 15.65%, while the average PLI of the comparables was 4.86%. The Transfer Pricing Officer (TPO) selected seventeen comparables, resulting in an average margin of 32.33% and made an adjustment of ?21,00,73,042/- to the ALP. 2. Selection and Exclusion of Comparable Companies for Benchmarking: The TPO's selection of seventeen comparables was contested. The Dispute Resolution Panel (DRP) excluded seven comparables, and the Tribunal further excluded two more, leaving eight comparables. The final eight comparables had an average margin of 15.85%, which was within the permissible range of the assessee's margin of 15.65%, considering a plus or minus 5% tolerance limit. 3. Verification of Margins and Claims: The Department Representative (DR) argued for remanding the issue to the Assessing Officer for verification of margins and claims. However, the Tribunal found that the same business was carried out by Vodafone India Services Pvt. Ltd. for the remaining part of the financial year, and the same comparables were used by the TPO in both cases. Thus, the Tribunal saw no harm in following the DRP's and its own previous orders for the assessee. 4. Initiation of Penalties under Sections 271G and 271(1)(c) of the Income Tax Act: Ground II regarding the initiation of penalty under section 271G was deemed premature and dismissed. Similarly, Ground III concerning the initiation of penalty under section 271(1)(c) was also considered premature and dismissed. These issues were left to be decided afresh by the Assessing Officer while giving effect to the Tribunal's order. 5. Levy of Interest under Sections 234B and 234C: Ground IV related to the levy of interest under sections 234B and 234C was deemed consequential in nature and did not require adjudication. Conclusion: The appeal was partly allowed. The Tribunal concluded that the assessee's margin was at arm's length after excluding the nine comparables, thus allowing Grounds 1, 2(e), and 2(k). The other grounds were either academic or premature and were dismissed accordingly. Corrigendum: A corrigendum was issued to correct factual inaccuracies in the original order. Specifically, it clarified the correct sequence of business transfer and the correct comparables excluded in the Tribunal's previous order. The corrections were made without requiring a hearing, as the errors were apparent on the face of the record.
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