ITA No. 7576/Mum/2012, (Assessment Year: 2008-2009). Case: Tecnimont ICB Pvt. Ltd. Vs Additional CIT. ITAT (Income Tax Appellate Tribunal)
| Case Number | ITA No. 7576/Mum/2012, (Assessment Year: 2008-2009) |
| Counsel | For Appellant: M.P. Lohia and For Respondents: S.D. Srivastava |
| Judges | R.C. Sharma, Member (A) and Vijay Pal Rao, Member (J) |
| Issue | Income Tax Act, 1961 - Sections 10A, 132, 133, 133A, 143(3), 144C(13), 144C(5), 92C(3), 92CA(1), 92CA(3), 92CA(7), 92D(3), 92F(ii) |
| Judgement Date | June 27, 2014 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
Vijay Pal Rao, Member (J), (ITAT Mumbai 'K' Bench)
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This appeal by the assessee is directed against the assessment order dated 15.11.2012 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act in pursuance to directions of Dispute Resolution Panel (herein after referred as DRP) dated 28.09.2012 u/s. 144C(5) of the Income Tax Act for the A.Y. 2008-09. The assessee has filed the concise grounds as under:-
Based on the facts and circumstances of the case, Tecnimont 1GB Private Limited (successors to Engineering Design Tecnimont 1GB Private Limited) (hereinafter referred to as the Appellant) respectfully craves leave to prefer an appeal against the final order passed by the learned Additional Commissioner of Income-tax-9(1) ('AO'), in pursuance of the directions issued by Dispute Resolution Panel-I ('DRP'), Mumbai under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act) on the following grounds which are independent and without prejudice to each other.
On the facts and circumstances of the case and in law, the AO/Transfer Pricing Officer ('TPO') based on directions of DRP:
General
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erred in making a transfer pricing adjustment of Rs. 29,08,51,336/-;
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erred in adopting an approach based on unsubstantiated presumptions, surmises, conjectures and allegations for the purpose of making an adjustment to the international transactions, thereby violating the provisions of section 92C(3) read with 92GA(3) of the Act;
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erred in ignoring the fact that since the Appellant is availing tax holiday u/s. 10A of the Act, there is no motive or reason to shift profits out of India, curbing which is the basic intention of introducing the transfer pricing provisions;
Rejection of economic and comparability analysis
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erred in not accepting the economic analysis undertaken by the 4 Appellant in accordance with the provisions of the Act read with the Rules, conducting a fresh search for the determination of the ALP in connection with the impugned international transaction and holding that the Appellant's international transaction is not at arm's length;
Order based on incorrect presumptions
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erred in making incorrect presumptions like;
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The Appellant operates on a cost plus 15% basis;
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Appellant's Global Analytical Center renders credit analytical and re search services, which are also in the nature of KPO services;
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The Appellant is providing services exclusively to its AE, Thomson US;
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The Appellant is engaged in equity and credit research services.
Rejection of Business Activity profile
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erred in holding that the Appellant's business activity is similar to KPO without assigning any valid reasons and without analyzing business activity of the Appellant in the right perspective;
Comparables selected by Assessing Officer/TPO
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erred in selecting following com parables though they are functionally different compared to the business activities of the Appellant:
• Acropetal Technologies
• Crossdomain Solutions Limited
• Exclerx Services Limited
• Mold-Tek Technologies Limited
• Triton Corp Limited
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erred in selecting Mold-Tek Technologies though not comparable in view of the fact that there was a demerger as well as acquisition during the year and without appreciating that TPO itself rejected Allsec Technologies as a comparable on similar grounds during his search process;
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Without prejudice to the above, if Mold Tek Technologies is accepted as a comparable, then Allsec Technologies should also be considered as a comparable;
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Without prejudice to the above, erred in applying incorrect margin of 96.66% for Mold Tek Technologies as against the correct margin of 15.05% as worked out by the Appellant;
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erred in continuing "M/s. Coral Hubs Ltd." as a part of comparable set, even though the DRP specifically directed to exclude it from the comparable set;
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Without prejudice to the above, while treating the Appellant's business activity similar to KPO, erred in rejecting following 5 companies out of 11 comparables mentioned in the show cause notice without assigning any valid reasons even though they fulfilled all the quantitative filters adopted by the TPO:
• Aditya Birla Minacs Worldwide Ltd.
• R Systems International Ltd.
• Spanco Ltd.
• Accentia Technologies Ltd.
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WITHOUT PREJUDICE TO THE ABOVE, WHILE TREATING THE APPELLANT'S BUSINESS ACTIVITY SIMILAR TO KPO, ERRED IN NOT SELECTING THE FOLLOWING 7 COMPARABLES IN THE COMPARABILITY STUDY UNDERTAKEN BY THE TPO EVEN THOUGH THEY FULFILLED ALL THE QUANTITATIVE FILTERS ADOPTED BY THE TPO:
• Infosys BPO Limited
• Asit C Mehta Financial Services Ltd.
• E4e healthcare Business Services Pvt. Ltd.
Adjustment on account of cost of new hires/trainees
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While computing margin for the appellant's comparables, erred in not granting adjustment on account of cost of new hires/trainees who remained unproductive during the year being under training;
Risk Adjustment
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erred by not making suitable adjustments to account for differences in the risk profile of the Appellant vis-a-vis the co parables.
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At the time of hearing the Ld. Authorized Representative of the assessee has submitted that subsequent to the directions of DRP dated 28.09.2012, the assessee has filed a rectification petition under Rule 13 of the Income Tax (Dispute Resolution Panel Rules 2009) on 27.12.2012. The DRP disposed of the rectification petition vide order dated 10.03.2014, thereby directed the Assessing Officer/TPO to recompute the margin of Mold-Tek Technologies Ltd. after considering the loss on derivatives as an operating item. He has filed a copy of the DRP order dated 10.03.2014 whereby the directions are modified. The Ld. Authorized Representative has then submitted that in...
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