Case Law Details
DCIT Vs AGS Customer Services India P. Ltd. (ITAT Pune)
Issue- Whether Ld. CIT(A) has erred in determining the ALP of international transaction related to Business Support Services in the light of terms and conditions of the Advance Pricing Agreement (APA) applicable to AY 2011-12 to AY 2015- 16, without appreciating that the terms and conditions set out in APA cannot be applied to the assessment year AY 2010-11 which is not a apart of APA.
CIT(A)’s admittedly appears to have gone by the assessee’s “advance pricing arrangement (APA)” dated 29.08.2016 with the CBDT adopting cost + 15% mark up to reverse the TPO’s arm’s length price computation coming to 20.75%. The Revenue’s case is that the said agreed mark up is applicable from FYs 2011-12 to 2014-15 whereas we are in AY 2010-11 only.
ITAT held that an advance pricing agreement “APA” is applicable only for the specified time span not exceeding five consecutive previous years u/s.92CC(4) r.w. sub section (9A) of the Act. We make it clear that Chapter X in the Act is in the nature of a “SPECIAL PROVISION RELATING TO AVOIDANCE OF TAX” i.e. an anti avoidance measure introduced by the legislature. Hon’ble apex court’s recent landmark decisions PCIT V/s Wipro Ltd. (2022) 140 com 223, Commissioner V/s Dilip Kumar & Co. 2018 (9) SCC 1(SC) FB & CIT V/s. GM Knitting Industries (P) Ltd.(2015) 376 ITR 456 (SC) have settled the law that the relevant provisions in the Act ought to be put to stricter interpretation only. Faced with this situation, we reverse the CIT(A)’s findings in issue going against sec. 92CC(4) r.w.s.(9A) of the Act (supra) and direct him to re-decide all of the assessee’s grounds in the lower appeal afresh as per law.
FULL TEXT OF THE ORDER OF ITAT PUNE
This Revenue’s appeal ITA No.162/PUN/2022 with assessee’s cross objection CO No. 22/PUN/2022 for assessment year 2010-11, arise against CIT(A)-13 Pune’s order dated 30.12.2021 passed in case no.PN/CIT(A)-13/DCIT, Cir-1(1), New Delhi/10012/2014-15/229, involving proceedings u/s. 143(3) r.w.s.144C of the Income Tax Act, 1961; in short “the Act”.
Heard both the parties. Case files perused.
2. The Revenue’s appeal ITA No. 162/PUN/2022 raises the following substantive grounds :-
“1) The order of the Ld. CIT(A) is contrary to law and to the facts and circumstances of the case.
2) The Ld. CIT(A) has erred in determining the ALP of international transaction related to Business Support Services in the light of terms and conditions of the Advance Pricing Agreement (APA) applicable to AY 2011-12 to AY 2015- 16, without appreciating that the terms and conditions set out in APA cannot be applied to the assessment year AY 2010-11 which is not a apart of APA.
3) The Ld. CIT(A) has erred in determining the ALP of the international transaction related to provision of Business Support Services in the light of terms and conditions of the APA without appreciating that the terms and conditions of APA which is applicable to AY 2011-12 to AY 2015-16 cannot he applied to AY 2010-11 as it would amount to violating the provisions of sub-section(9A) to section 92CC which categorically restricts the application of APA only to 4 roll back years and not beyond.
4) The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon’ble Tribunal.”
3. It is evident that the Revenue’s sole legal ground herein challenges correctness of the CIT(A)’s action reversing assessment findings making Transfer Pricing adjustment(s) of Rs.3,51,21,912/- in assessee’s back office support services segment. The CIT(A)’s admittedly appears to have gone by the assessee’s “advance pricing arrangement (APA)” dated 29.08.2016 with the CBDT adopting cost + 15% mark up to reverse the TPO’s arm’s length price computation coming to 20.75%. The Revenue’s case is that the said agreed mark up is applicable from FYs 2011-12 to 2014-15 whereas we are in AY 2010-11 only.
4. The assessee has drawn strong support from the CIT(A)’s detailed discussion in para 2.6 onwards that the forgoing agreed mark up would indeed carry persuasive value for all collateral purposes.
5. We have given our thoughtful consideration to the forgoing rival pleadings and find forced in the Revenue’s stand since an advance pricing agreement “APA” is applicable only for the specified time span not exceeding five consecutive previous years u/s.92CC(4) r.w. sub section (9A) of the Act. We make it clear that Chapter X in the Act is in the nature of a “SPECIAL PROVISION RELATING TO AVOIDANCE OF TAX” i.e. an anti avoidance measure introduced by the legislature. Hon’ble apex court’s recent landmark decisions PCIT V/s Wipro Ltd. (2022) 140 com 223, Commissioner V/s Dilip Kumar & Co. 2018 (9) SCC 1(SC) FB & CIT V/s. GM Knitting Industries (P) Ltd.(2015) 376 ITR 456 (SC) have settled the law that the relevant provisions in the Act ought to be put to stricter interpretation only. Faced with this situation, we reverse the CIT(A)’s findings in issue going against sec. 92CC(4) r.w.s.(9A) of the Act (supra) and direct him to re-decide all of the assessee’s grounds in the lower appeal afresh as per law. This Revenue’s appeal ITA No. 162/Pun/2022 is allowed for statistical purposes.
6. The assessee’s cross objection C.O. No. 22/Pun/2022 pleading therein that the CIT(A)’s ought to have decided all the relevant issues on merits; also follows the suit as the necessary corollary. Ordered accordingly.
7. To sum up, this Revenue’s appeal ITA No. 162/Pun/2022 as well as assessee’s Cross Objection C.O No. 22/Pun/2022 are allowed for statistical purposes in above terms. A copy of this common order be placed in the respective case files
Order pronounced in the Open Court on this 16th day of September, 2022.
