2024 (3) TMI 942 - AT - Income Tax

TP Adjustment - bilateral Advance Pricing Agreement (APA) between India and the USA - international transaction pertaining to receipt of information technology enabled services and payment towards K-Net charges - whether international transactions between the Applicant and its AEs as Covered Transactions? - HELD THAT - As the year under consideration is covered under the APA bilateral Advance Pricing Agreement APA between India and USA, the assessee filed its modified return of income which we have been told has been processed. Since the modified return of income is now available with the AO, we deem it fit to restore the impugned quarrel to the file of the Assessing Officer. The Assessing Officer is directed to consider the modified return of income in light of APA and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. Accordingly, Ground No. 1 with all its sub-grounds is allowed for statistical purposes. Foreign Tax Credit - HELD THAT - HCL Comnet Systems And Services Ltd 2023 (11) TMI 1238 - DELHI HIGH COURT has decided the issue in favour of the assessee as relying on Wipro Ltd. case 2015 (10) TMI 826 - KARNATAKA HIGH COURT Short credit of TDS - HELD THAT - We are of the considered view that this issue needs verification and we direct the Assessing Officer to verify the details of TDS and allow credit as per provisions of law. Ground No. 5 is allowed for statistical purposes.

Summary

Issues Involved:
1. Transfer Pricing Adjustment
2. Corporate Tax Issues regarding Foreign Tax Credit (FTC)
3. Short Credit of TDS
4. Penalty Proceedings under Section 270A
5. Charging of Interest under Sections 234B and 234C

Summary:

Transfer Pricing Adjustment:
The assessee contested the adjustment of INR 2,17,53,662 related to international transactions for information technology-enabled services and K-Net charges. The Tribunal noted that the methodology used (Profit Split Method) had been accepted in a Bilateral Advance Pricing Agreement (APA) between India and the USA for the relevant assessment year. The Tribunal directed the Assessing Officer to consider the modified return of income in light of the APA and decide the issue afresh, allowing Ground No. 1 for statistical purposes.

Corporate Tax Issues regarding Foreign Tax Credit (FTC):
The assessee argued that the Assessing Officer erred in not allowing the complete credit of foreign taxes paid, disregarding the Karnataka High Court's decision in the Wipro case. The Tribunal referred to the Delhi High Court's decision in HCL Comnet Systems And Services Ltd, which agreed with the Karnataka High Court's view. Consequently, Ground Nos. 2 to 4 were allowed following the jurisdictional High Court's decision.

Short Credit of TDS:
The Tribunal directed the Assessing Officer to verify the details of TDS and allow credit as per the provisions of law, allowing Ground No. 5 for statistical purposes.

Penalty Proceedings under Section 270A:
The Tribunal noted that Ground No. 6 was premature and did not require a decision at this stage.

Charging of Interest under Sections 234B and 234C:
The Tribunal stated that charging interest is mandatory, but interest under Section 234C should be charged on the returned income, ordering accordingly.

Conclusion:
The appeal for A.Y. 2017-18 (ITA No. 498/DEL/2022) was allowed for statistical purposes, and the appeal for A.Y. 2018-19 (ITA No. 2257/DEL/2022) was allowed, following the same reasoning as for A.Y. 2017-18. The order was pronounced in the open court on 11.03.2024.