ITAT MUMBAI BENCH ‘K’
General Atlantic (P.)Ltd.
Versus
Deputy Commissioner of Income-tax
IT Appeal NO. 8914 (MUM.) OF 2010
[ASSESSMENT YEAR 2006-07]
JANUARY 31, 2013
ORDER
Vijay Pal Rao, Judicial Member
This appeal by the assessee is directed against the assessment order dt 13.10.2010 passed u/s 143(3) r.w.s 144C(13) of the IT Act in pursuant to the directions of the Dispute Resolution Panel (DRP) passed u/s 144(5) of the IT Act for the AY 2006-07.
2. The assessee has raised the following grounds in this appeal:
Based on the facts and circumstances of the case, the Appellant respectfully submits that the learned Deputy Commissioner of Income-tax, Circle 3 (1), Mumbai (‘DCIT’) along with the Dispute Resolution Panel (“DRP”) erred in passing an order under section 144(3) read with 144C of the Income Tax Act, 1961 (“ITA”) for Assessment Year 2006-07, on the following grounds:
1. The order passed by the learned DCIT under section 143(3) of the ITA (Impugned Order”) and the directions issued by the Dispute Resolution Panel (“the DRP”) under section 144C (5) of the ITA (“Impugned Direction”) are bad in law and on facts and against the principles of natural justice.
2. That the learned DCIT along with the DRP grossly erred in failing to appreciate the invalidity of assessment proceedings initiated against the Appellant, on account of the following grounds:
a. Passing of the Impugned Order without the issuance of a valid notice under section 143(2) of the ITA (“Impugned Notice”);
b. Failing to appreciate the need to use “reasonable effort” before service of a notice through affixture;
c. Failing to appreciate the legal provisions permitting the Appellant to raise objections questioning the validity of the Impugned Notice at any time before the completion of assessment
3. That the learned DCIT along with the DRP erred in confirming the adjustment proposed by the Transfer Pricing Officer without understanding the business of the Appellant and facts and circumstances of the case
4. That the learned DCIT grossly erred in drawing factually incorrect inferences from information! news items which appeared on the Appellant’s website and also erred in disregarding the corresponding documentary evidence presented before it. Consequentially, though argued before the DRP, the DRP has failed to consider the same in its Impugned Direction
5. That the learned DCIT along with the DRP grossly erred in failing to provide any reasons for holding! confirming that the activities of the Appellant are comparable to merchant banking! investment banking activities
6. That the DRP erred in facts in confirming that the comparability analysis conducted by the TPO, without having regard to the functions performed, assets employed and the risks assumed by the Appellant
7. That the TPO erred in not sharing the fresh comparability analysis conducted by him at the time of assessment and the DRP consequentially erred in not commenting on the same, though pointed out during the course of the hearing, in the Impugned Direction
8. That the DRP erred in first requesting and then failing to consider the revised benchmarking analysis undertaken by the Appellant in the Impugned Direction
9. That the order of the DRP is against the principles of natural justice as the DRP erred in disregarding the request of the Appellant to examine the authorized representatives of the comparable companies to understand their business model, strategy and other relevant factors to distinguish them from the Appellant’s business
10. That the order of the DRP is against the principles of natural justice as the Appellant was denied an opportunity to examine I cross-examine necessary persons
11. That DRP grossly erred, both in law and on facts of the case, in holding that the TPO could conduct a fresh comparability analysis at the time of assessment, using data which is not contemporaneous as per Rule 1 OD(4) of the Income Tax Rules, 1962
12. That the learned DCIT along with the DRP erred in arriving at a presumption that the Appellant was exposed to a risk in the form of a single customer risk
13. That the DRP erred in law in failing to grant the benefit of +1- 5 per cent variance as per proviso to section 92C(2) of the ITA
14. That the DCIT erred in granting short credit for the advance tax paid by the appellant
15. That the DCIT erred in levying interest of Rs. 7,493,198 under section 234B of the ITA
16. That the DCIT erred in levying interest of Rs. 277,298 under section 234C of the ITA as against interest of Rs. 155,079 computed by the appellant as per the return of income
3. First we take up the issue in respect of transfer pricing adjustment as raised in ground nos 3 to 13
3.1 Briefly stated facts of the case are that the assessee is a company registered in India and belongs to the General Atlantic Group (GA), which is a private equity investment firm. The assessee is providing private equity investment advisory services to its AE i.e. General Atlantic Service Corporation (GASC LLC) a Delaware limited Liability Company. GASC LLC is engaged by GA in providing management services to its affiliated limited partnership globally. The hierarchical structure chart of GA group is as under:
GA Atlantic PE investment firm – investment Committee
GASC LLC Investor Manager (AE)
General Atlantic Pvt Ltd – GAPL (Assessee)
3.1.1 GASC LLC is rendering the services to GA which includes (i) assistance in connection with the identification, investigation and analysis of potential investments and the management and disposition of investment; (ii) administration and accounting services; and (iii) such other services which GA may from time to time require in connection with the management of General Atlantic Ltd Partnerships .
3.2 The assessee is a wholly owned subsidiary of GASC LLC based in India and providing information on industries along with information in relation to potential targets located in Indian jurisdictional to its AE namely GASC LLC as per the service agreement dated 31.10.2002 entered into between the parties.
3.3 The assessee is charging cost plus 12.5% margin for the services provided to the AE. Since the assessee is having international transactions therefore, the Assessing Officer referred the same u/s 92CA(1) to the Transfer Pricing Officer(TPO) for determination of arms length price . The international transactions of the assessee are summarized as under:
