Dell International Services India Pvt. Ltd. Vs JCIT (LTU) (ITAT Bangalore)
The assessee did not object to inclusion of this company before the TPO but objected to inclusion of this company before DRP. The DRP did not adjudicate the objection. In these circumstances, we are of the view that exclusion of this company from the list of comparable companies has to be examined by the TPO/ AO and we remand the issue to the TPO/AO. The law is well settled that the assessee is entitled to object to inclusion / exclusion of companies at the stage of appellate proceedings and there is no estoppel. The AO/TPO will afford opportunity of being heard to the assessee in the set aside proceedings.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
IT(TP)A No.637/Bang/2016 is an appeal by the assessee while IT(TP)A No.639/Bang/2016 is an appeal by the Revenue. Both the appeals are directed against the final assessment order dated 29.01.2016 of JCIT, LTU Unit, Bengaluru, under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter called the ‘Act’) in relation to Assessment Year 2010-11.
2. The issues that arises for consideration in the above cross-appeals pertains to the aggregate Transfer pricing adjustment (“TP adjustment”) of Rs. 1,26,90,33,692/- made by the Transfer Pricing Officer (‘the TPO’ for short) towards the international transactions of provision of Software Development services (‘SWD services’ for short) and Information Technology Enabled services (‘ITES’ for short) by the Assessee to its Associated Enterprises (‘AE’ for short), which was subsequently reduced to Rs. 1,11,82,20,792/- on giving effect to the directions of the Dispute Resolution Panel (‘the DRP’).
3. The assessee is a wholly owned subsidiary of Dell International Inc. The assessee is primarily engaged in the business of providing IT support services / SWD services and IT Enabled services to its AEs. During the previous year relevant to the assessment year 2010-11, the international transactions that took place between the assessee and its AEs were the provision of SWD services and ITES by the assessee for which a TP adjustment was made by the TPO (vide rectified order dated 03.03.2015) totaling to Rs. 1,26,90,33,692/- i.e., Rs. 46,85,29,023/- in the SWD segment and Rs. 80,05,04,669/- in the ITES segment. Incorporating the said TP adjustment, the Assessing Officer (“AO”) passed a draft assessment order dated 30.03.2015. Aggrieved, the assessee filed its objections before the DRP, which, vide its directions dated 15.12.2015 granted partial relief to the assessee. Pursuant to the directions of the DRP, the AO passed the final assessment order dated 29.01.2016 in which the TP adjustment was reworked to Rs. 1,11,82,20,792/-. Aggrieved by the final assessment order to the extent it did not grant relief to the assessee, the assessee has preferred the appeal before this Hon’ble Tribunal. To the extent that the DRP’s directions granted relief to the assessee, the Revenue has filed the above appeal before this Hon’ble Tribunal.
4. During the pendency of the present appeals, the Assessee filed an application under Article 27 of the India-US Double Taxation Avoidance Agreement (‘DTAA’ for short) for initiation of Mutual Agreement Procedure (‘MAP’ for short) before the Indian and the US Competent Authorities with respect to ITES provided to the AEs based in the United States of America (‘US’ for short). As the Assessee has accepted the terms of MAP, the grounds pertaining to the TP adjustment with respect to ITES transactions with the AEs based in the US are withdrawn by the Assessee vide letter dated 26.08.2020. Pursuant to the acceptance of MAP, as regards the ITE services rendered by the Assessee to its AEs situated other than in the USA, the adjustment stands at Rs. 18,44,80,061/-.
5. We shall first take up for consideration the dispute with regard to determination of Arm’s Length Price (ALP) in respect of the International Transaction of providing SWD services by the assessee to its AE.
6. SOFTWARE DEVELOPMENT SEGMENT
Net mark-up on cost earned by the assessee as reflected in the TP Order:
