9911796707
TMI Blog2023 (7) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny and statutory notices were issued to the assessee. The case was referred to the TPO vide order dated 25.1.2021 proposed a transfer pricing (TP) adjustment of Rs.2,70,90,67,556 in respect of the international transactions, which was incorporated in the draft assessment order along with other corporate tax additions made by the AO. On objections filed by the assessee, the ld. DRP issued its directions on 30.12.2021. Consequently final assessment order was passed by the AO on 28.1.2022 against which the assessee is in appeal before the Tribunal on the following grounds:- "General Grounds: 1. On the facts and in the circumstances of the case and in law, the assessment order framed under section 143(3) read with section 144C(13) of the Income tax Act, 1961 ('the Act') passed by the Learned Assessing officer ('Learned AO') dated 28 January 2022 incorporating directions of the Hon'ble Dispute Resolution Panel - 2 ('Hon'ble DRP') dated 30 December 2021 to the extent prejudicial to the Appellant, is bad in law, contrary to the facts and circumstances of the case and is liable to be quashed. 2. On facts and in the circumstances of the case and in law, the Hon'ble DRP/ Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersistent Systems Ltd as comparable companies to the SWD services segment of the Appellant, though they fail the RPT filter. 6.4. Conducting a fresh comparability analysis by applying additional/modified filters and including additional comparables which are not functionally comparable to the Appellant; 6.5. Including the following companies even though such companies are not fulfilling the filters applied by Learned TPO: * OFS Technologies Ltd. * Aptus Software Labs Pvt Ltd 6.6. Including the following companies even though such companies are functionally different from the Appellant: * Larsen and Toubro Infotech Ltd * Nihilent Ltd * OFS Technologies Ltd. * Aptus Software Labs Pvt Ltd * Infosys Ltd * Infobeans Technologies Ltd * Persistent Systems Ltd * Cygnet Infotech Pvt Ltd * Cybage Software Pvt Ltd * Consilient Technologies Pvt Ltd * Mindtree Ltd * Tata Elxsi Ltd * Threesixty Logica Testing Services Pvt Ltd 6.7. Excluding the following company even though the same is functionally comparable to the Appellant: * Evoke Technologies Pvt. Ltd. 6.8. Erred in treating foreign exchange loss or gain as operating in nature for the purpose of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the Hon'ble DRP erred in setting aside the issue of AMP for further benchmarking and making an adjustment, which is in violation of the provisions of section 144C(8) of the Act. 13. Without Prejudice to Ground no. 11 & 12, on facts and in the circumstances of the case and in law, the Hon'ble DRP failed to give any show cause notice to the Appellant before directing the Learned AO to benchmark the AMP expenses separately which is in violation of provisions of section 144C(11) of the Act. 14. Without Prejudice to Ground no. 11 & 12, on facts and in the circumstances of the case and in law, the Learned AO erred in benchmarking the AMP expenses on its own without referring it to the Learned TPO which is in complete violation of CBDT Instruction No. 3/2016 dt. 10 March 2016. 15. Without prejudice to the Ground No. 11 - 14, on the facts and in the circumstances of the case and in law; the Hon'ble DRP erred in directing the Learned AO to treat the AMP expenses incurred by the Appellant in India as an international transaction as per Section 92B of the Act. 16. Without prejudice to the Ground No. 11 - 14, on the facts and in the circumstances of the case and in law the Hon'ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 18.2 arbitrarily selecting comparable engaged in marketing support services without following a structured search process for computation of the aforementioned mark-up. The Appellant therefore prays that entire AMP adjustment of Rs. 22,03,14,960 be deleted in the interest of justice. b) Grounds relating to Direct Tax matters 19. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in upholding the addition made by Learned AO of INR 25,00,157/- on account of waiver of Royalty receivable on intellectual property licensed to Practo Pte Ltd (Singapore). 20. On the facts and in the circumstances of the case and in law, the learned AO has erred in not granting the set-off of the brought forward business losses and unabsorbed depreciation of prior years against the income assessed. 21. On the facts and in the circumstances of the case and in law, the learned AO erred in granting credit of the tax deducted at source amounting to INR 51,91,605 instead of INR 83,11,493 as claimed by the Applicant in its return of income. 22. On the facts and in the circumstances of the case and in law, the learned AO erred in levying interest of INR 41,35,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties on the admission of additional grounds. These additional grounds are already available on the record of lower authorities and do not require fresh investigation into facts. Therefore, following the Hon'ble Supreme Court judgment in the case of M/s National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383 (SC), the additional grounds are admitted for adjudication. 6. At the outset, the ld. AR first contended the legal issue raised vide additional grounds No.24 & 25. He submitted that the Ld. DRP issued its directions under section 144C(5) of the Act on 30.12.2021. However, the said directions, when served upon the Appellant's Authorised Representative vide email on 31.12.2021, did not bear "Document Identification Number" ('DIN'), which has been mandated by the Central Board of Direct Taxes ('CBDT') vide Circular No. 19/2019 dated 14.08.2019. Subsequently, on 06.01.2022, the Appellant received a copy of the DRP directions dated 30.12.2021 vide post, along with the intimation letter dated 31.12.2021. In the said copy of the DRP directions, a wrong DIN was handwritten. In this regard, the sequence of events furnished by the assessee are reproduced below:- Sr. No. Date Particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication would be issued, it would be necessarily required to specify reason of issuing such a communication without DIN along with the date of obtaining written approval of the Chief Commissioner/Director General of Income Tax in a particular format, which shall be mentioned in the body of the communication itself. d) Para-4 of the Circular states that any communication which is "not in conformity" with para-2 and para-3 of the Circular, shall be treated as invalid and shall be deemed to have never been issued. 8. The ld. AR submitted that from the CBDT Circular as explained above, in cases where there is neither DIN on the body of the communication nor does the communication state the reasons for manual issuance along with details regarding approval obtained from CCIT/DGIT, the communication shall straight away become a nullity in the eyes of the law, being treated as invalid and shall be deemed to have never been issued. It is submitted that the seriousness with which the DIN system has been implemented is evident from the fact that any communication issued without a DIN is to be held as invalid and deemed to have never been issued, that is, a nullity in the eyes of law as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 263 of the Act was passed without quoting DIN and on the same day, DIN was generated vide a separate intimation. The Tribunal held that the same was not in accordance with the Circular and therefore, the order under section 263 of the Act was quashed, even though the DIN was generated on the same day separately, since neither the DIN, nor the specified para of exceptions was quoted in the body of the order. He submitted it was held similarly in H.K. Suresh v. PCIT: ITA No. 625/Bang/2021. The ld. AR also placed reliance on the following decisions where the orders of the revenue authorities were quashed on the basis that the said orders were not in conformity with the CBDT's Circular No. 19 of 2019:- a) CIT v. Brandix Mauritius Holdings Ltd.: ITA 163/2023 (Delhi HC) b) Dilip Kothari v. PCIT, ITA Nos. 403 to 405/Bang/2022. c) Intrado EC India Private Ltd. v. DCIT: IT(TP)A No.239/Bang/2021 (Bangalore ITAT) d) Tata Medical Centre Trust v. CIT: ITA No.238/Kol/2021 (Kolkata ITAT) e) Gerah Enterprises P. ltd. v. PCIT: ITA No. 740/Mum/2021 (Mumbai ITAT) f) Mahesh Kumar Sureka v. PCIT: ITA. No. 106/Kol/2021 (Kolkata ITAT) g) RCC Institute of Technology v. CIT: ITA. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given below:- [THIS SPACE KEPT BLANK INTENTIONALLY ] 17. From the above, it is clear that there was no mention of DIN in the DRP order dated 30.12.2021. 18. Later on, the assessee received Intimation letter dated 31.12.2021 for order u/s. 144C(5) allotting DIN ITBA/DRP/M/144C(5)/2021-22/1038293314(1) as follows:- 19. Along with above intimation letter, the DRP Order bearing handwritten DIN ITBA/DRP/M/144C(5)/2021-22/1038293314(1) was received by the assessee, wherein DRP order dated 30.12.2021 bears the DIN of the intimation letter i.e., DIN ITBA/DRP/S/91/2021- 22/1038293464(1) and not the allotted DIN bearing ITBA/DRP/144C(5)/2021-22/1038293314(1) to the DRP order. Copy of DRP order dated 30.12.2021 with handwritten DIN is produced below:- 20. From the above facts, it is clear at the time of passing the DRP order dated 30.12.2021 DIN was not quoted in the order, which is mandatory as per the CBDT Circular No.19 noted supra. Similar issue has been decided by the coordinate Bench of the Tribunal in the case of Intrado EC India Private Ltd. v. DCIT: IT(TP)A No.239/Bang/2021 [2023] 147 taxmann.com 380 (Bangalore - Trib.)[09-11-2022] where it was held as under:- "7. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is lying with non-jurisdictional Assessing Officer; or (iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner/Director General of income tax. In cases where manual communication is required to be issued due to delay in PAN migration, the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner/Director General of Income-tax for issue of manual communication in the following format- " .. This communication issues manually without a DIN on account of reason/reasons given in para 3(i)/3(ii)/3(iii)/3(iv)/3(v) of the CBDT Circular No ...dated (strike off th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been issued manually which does not bear the signature of the authority passing the order. Further, from the perusal of the entire order, in its body, there is no reference to the fact of this order issued manually without a DIN for which the written approval of Chief Commissioner/Director General of Income-tax was required to be obtained in the prescribed format in terms of the CBDT circular. We also note that in terms of para 4 of the CBDT circular, such a lapse renders this impugned order as invalid and deemed to have never been issued. 13.1 It is also important to note about the binding nature of CBDT circular on the Income-tax Authorities for which gainful guidance is taken from the decision of Hon'ble Supreme Court in the case of CIT v. Hero Cycles (P.) Ltd. [1997] 94 Taxman 271/228 ITR 463 wherein it was held that circulars bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee. 13.2 In the case of UCO Bank v. CIT [1999] 104 Taxman 547/237 ITR 889 (SC), Hon'ble Supreme Court while dealing with the legal status of such circulars, observed thus (page 896): "Such instructions may be by way of relaxation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [2014] 45 taxmann.com 482/225 Taxman 229 (Mag.)/361 ITR 458 dealt with the issue relating to CBDT circular which according to the Department cannot defeat the provisions of law. While giving its observations and finding on the issue, the Hon'ble Court referred to the decision of Hon'ble Chhattisgarh High Court in the case of Sunita Finlease Ltd. (supra), which are as under: 7. We have considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with the procedure as contained in Para 3. On perusal of the order u/s. 92CA, it is noted that the order neither contains the DIN in the body of the order, nor contains the fact in the specific format as stated in Para 3 that the communication is issued manually without a DIN after obtaining the necessary approvals. Therefore we are of considered view that the order dated 31-10-2019 is not in conformity with Para 2 and Para 3 of the CBDT circular. In view of these discussions and respectfully following the decision of the Kolkata and Delhi Benches of the Tribunal, we hold that the orders passed u/s. 92CA dated 31-10-2019 is invalid and shall be deemed to have never been issued as per Para 4 of the CBDT circular as the order is not conformity with Para 2 and Para 3. Accordingly the TP adjustment made through an invalid order is also rendered invalid and deleted. 12. We notice that the DRP has held that the order dated 31-10- 2019 which was issued without DIN is made good by the order dated 1-11-2019 which is issued without DIN since the contents of both the orders are same. We are unable to appreciate this decision of the DRP, since there is no provision in the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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