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TMI Blog2018 (6) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr. Adv. & Sh. Aditya Vohra, Adv Respondent by : Sh. H.K. Choudhary, CIT(DR) ORDER Per O.P. Kant, A. M. This appeal by the assessee is directed against order dated 31/01/2017 passed by the Assistant Commissioner of Income Tax, Circle 6(2), New Delhi (in short 'the Assessing Officer') for assessment year 2012-13, in pursuance to the direction of the Ld. Dispute Resolution Panel (DRP). The grounds raised in the appeal are reproduced as under: 1. That the Assessing Officer ('AO') erred on facts and in law in completing the assessment under section 144C read with section 143(3) of the Income-tax Act, 1961 ('the Act') at an income of ₹ 8,27,23,461 as against income of ₹ 1,09,68,920 returned by the appellant. 2. That the AO erred on facts and in law in making an addition of ₹ 3,95,61,889 allegedly on account of difference in the arm's length price of the 'international transactions' on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ('TPO') 2.1 The AO/TPO erred on facts and in law in disregarding the benchmarking analysis undertaken by the appellant applying internal TNMM in the Transfer Pricing Documentation al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to the comparable companies who were independent comparable companies. 2.8 Without prejudice that the AO/TPO erred on facts and in law in incorrectly computing the transfer pricing adjustment at ₹ 3,95,61,889 as against the correct adjustment of ₹ 80,83,424. 3. That the AO erred on facts and in law in disallowing under section 40(a)(i) of the Act, inter-company fees payments of ₹ 2,17,63,132 made by the appellant to its group companies located outside India on the ground that tax has not been withheld therefrom under section 195 of the Act. 3.1 That the AO erred on facts and in law in disentitling the appellant from claiming benefits available under the Double Taxation Avoidance Agreement on the ground that the appellant did not furnish Tax Residency Certificate(s), not appreciating that there was no such requirement in law in the relevant assessment year. 3.2 That the AO erred on facts and in law in confirming the directions issued by the Dispute Resolution Panel ('DRP') without appreciating that the DRP had failed to consider challans evidencing deduction and deposit of tax at source in financial year 2016-17_by the appellant in respect of inter- c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udited financial statement. The Ld. TPO chose external TNMM as most appropriate method for determination of arm's length value of the international transaction. The Ld. TPO computed operating profit/operating cost (OP/OC) of the assessee at 1.79%. The assessee, using external TNMM as secondary analysis, selected 5 comparables and computed their mean margin (OP/OC) at 5.52% using multiple year data. The Ld. TPO, however, using current year data computed mean margin of those five comparables proposed by the assessee at 6.87%. After considering submissions of the assessee, the Ld. TPO finally selected following four comparables and computed mean margin at 25.29%: No. Name of company OP/OC(%) i. Cholamandalam MS Risk Services Ltd. 36.82% ii. Apitco Limited 20.46% iii. ICRA Management Consulting Services Ltd. 6.62% iv. Ladderup Corporate Advisory Pvt. Ltd. 37.25% Average 25.29% 2.2 Accordingly, he computed the adjustment of ₹ 3,95,61,889/- as under: Operation Cost 168,380,063 Arm's Length Price at a margin of 25.29% 210,963,381 Price received 171,401,492 105% of price received 179,971,567 Proposed adjustment u/ 92CA 39,561,889 2.3 The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also filed copy of the order of the Ld. TPO for assessment year 2010-11 , passed in consequence to the order of the Tribunal. 4.3 The Ld. DR also agreed that the assessee has been wrongly characterized by the Ld. TPO as engaged in providing financial advisory and in earlier years, matter was restored to the Ld. TPO for re-characterization and fresh comparability. Accordingly, he also concurred with the Ld. counsel of the assessee that matter need to be restored to the Ld. TPO for carrying out fresh search of comparables in the light of correct characterisation of the assessee. 4.4 We have heard the rival submissions and perused the relevant material on record. We find that the Tribunal in ITA No. 979/Del/2015 for assessment year 2010-11 has restored the issue to the Ld. TPO for re-characterization and selection of the comparables observing as under: "8.3. Accordingly, considering the ratio of the decision of the Jurisdictional High Court in Text Hundred India Private Limited (cited supra), we find that the assessee has successfully demonstrated that since the very nature of assessee's business activity has not been correctly understood the conclusion drawn for characterisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to do substantial justice in the matter. It is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence bfore the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect." (emphasis provided) 8.4. We further find our conclusion supported by a decision of the Co-ordinate Bench in the case of UCB India Pvt. Ltd Vs. ACIT, Circle 7(3), Mumbai, 121 ITD 131, wherein it is held as under: "In all fairness, the assessee should not be pinned down to his submissions in the first round of Transfer Pricing proceedings. It should be appreciated that Transfer Pricing regulations are relatively new provisions and the case does require special consideration. The assessee is free to support his case in any manner it deems fit b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable companies. The contention of the assessee before us in the year under consideration is that the comparables selected by the Ld. TPO are engaged in providing financial advisory and stock broking etc. services, which are functionally dissimilar to the assessee. 4.7 Since, the Tribunal in earlier years has sent the issue of characterization of the profile of assessee and selection of comparables to Ld. TPO, respectfully following the finding of the Tribunal, in the year under consideration also, we redirect the Ld. AO/TPO for choosing external TNMM as most appropriate method and after characterization of the assessee in view of the transfer pricing study of the assessee and evidences produced, make fresh selection of comparables functionally similar to the assessee and then decide the arm's length price of the international transaction accordingly in accordance of law. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. 5. On the issue of taking only cost related to AE transactions for applying mean margin of comparables and computing the arm's length price of the transaction, we agree with the contention of the Ld. counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for his decision. The assessee has failed to controvert the findings of the AO. Considering the facts and reasons given in the draft assessment order, the addition made by the AO is justified and is upheld. The Grounds are dismissed." 6.4 We find that the Ld. DRP has confirmed the disallowance without any detailed reasoning and taking into account the documentary evidences of deposit of tax deducted at source filed by the assessee. In such circumstances, the action of the Ld. DRP is not justified being in violation of principle of natural justice and matter should be considered afresh by the Ld. DRP. Since the grounds related to transfer pricing adjustment has already been restored to the file of the Ld. AO/TPO, restoring this ground to the Ld. DRP will give rise to multiple proceedings and, therefore, we feel it appropriate to restore this issue also to the file of the Ld. AO for deciding afresh after providing adequate opportunity of being heard to the assessee. The assessee is directed to file all the documentary evidences on the issue in dispute before the Ld. AO. Accordingly, the grounds related to disallowance under section 40(a)(i) of the Act are allowed for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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