BT Global Communications India Pvt. Ltd. Vs. Addl. CIT (Delhi ITAT)
The only issue to be decided in the present appeal relates to protective adjustment on account of business restructuring that has taken place in assessment year 2010-11. We find that TPO/DRP have made adjustment on substantive basis in assessment year 2010-11. However, since the proceedings in assessment year 2010-11 were subjudice, protective adjustment was made in the impugned assessment order making an addition of Rs. 100,69,37,657/- which is in line with similar addition for assessment year 2011-12, 2012-13 and 2014-15.
We find the MAP resolution was passed on 29th January, 2018 which is much after the order passed by the AO/TPO/DRP. Under these circumstances we deem it appropriate to restore the issue to the file of the AO/TPO for deciding the issue afresh in the light of the MAP resolution dated 29th January, 2018 and the order passed by the DRP in assessee’s own case for assessment year 2014-15 vide order dated 7th August, 2018. The AO/TPO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
PER R.K. PANDA, AM
This appeal filed by the assessee is directed against the order passed u/s 143(3) r.w.s 144C of the Income Tax Act 1961 for the assessment year 2013-14.
2. The grounds raised by the assessee are as under :-
“Based upon the facts and circumstances of the case and in law, the learned Assessing Officer (‘AO’) has erred, in passing the assessment order under section 143(3) read with section 144C of the Income-tax Act, 1961 (‘the Act’) after considering the adjustments proposed by the learned Transfer Pricing Officer (‘TPO’) in his order passed under section 92CA(3) of the Act and subsequently confirmed by the Hon’ble Dispute Resolution Panel (‘DRP’).
Each of the ground is referred to separately, which may kindly be considered independent of each other and without prejudice to each other.
That on the facts and circumstances of the case and in law,
1. The TPO/AO/DRP have erred, in law and on facts and circumstances of the case in making an adjustment of INR 1,00,69,37,657 to the total income of the appellant, without the existence of an international transaction under section 92B of the Act requiring determination of arm’s length price (“ALP”) thereof.
2. The TPO/AO/DRP have erred, in law and on facts and circumstances of the case, in making an upward adjustment on ‘protective basis’, without appreciating
2.1 that the substantive adjustment (including adjustment for all future years) alleging business restructuring has already been made in AY 2010-11; and
2.2 that a similar protective adjustment has been deleted by the Hon’ble DRP in AY 2011-12
3. The TPO/AO/DRP have erred by not adopting a consistent approach as adopted by their office in AY 2011-12, since a similar protective adjustment has been deleted by the Hon’ble DRP in AY 2011-12
4. The TPO/AO/DRP have erred, in law, by not prescribing any method for the purpose of redetermination of ALP, thereby rendering the order under section 92CA(3) of the Act passed by the TPO as illegal, null and void.
5. The TPO/ AO/ DRP have erred in computing the ALP by applying a hypothetical price that would have been charged between related enterprises in controlled circumstances, as the ALP and thereby proposing an adjustment to the appellant’s income.
6. The TPO/AO/DRP have erred in holding in rejecting the functions, assets and risks analysis (“FAR”) for the year under consideration by the appellant in accordance with provisions of the Act read with the Income-tax Rules, 1962 (“the Rules”) and modifying the same for determination of ALP of the alleged inter-company transaction, to hold that the same is not at arm’s length
7. The TPO/AO/DRP have erred in proposing the adjustment to the income of the appellant for AY 2013-14, by arbitrarily
7.1 rejecting the economic analysis undertaken by the appellant as part of its Transfer Pricing documentation;
7.2 not appreciating the fact that appellant’s economic analysis and determination of ALP of its international transactions is consistent with its FAR profile; and
7.3 Not appreciating the fact that the applicant, even after allegedly being characterized as a risk bearing entity, is earning a higher operating margin in comparison with the comparable companies bearing routine risks, as demonstrated in the economic analysis.
8. The TPO/AO/DRP have erred, in law and on facts and circumstances of the case, by relying on the contentions and approach adopted by his predecessor in AY 2010-11, without undertaking any analysis on his own account, thereby ignoring the fact that principles of res judicata do not apply to tax assessment proceedings.
9. The TPO/AO/DRP have erred, in law and facts and circumstances of the case, by erroneously making a protective assessment in the case of the appellant without appreciating that there is no ambiguity as regards the ownership of the income.
10. The TPO/AO/DRP have erred, in law and facts and circumstances of the case, by violating of the principle of double jeopardy and proposing an addition on the transaction of business restructuring on which the taxpayer has already been penalized in AY 2010-11.
11. The TPO/AO/DRP have made certain arithmetical errors while computing the impugned adjustment to the total income of the appellant.
12. The AO/DRP has erred on facts and in law, in initiating penalty proceedings under section 271(1) (c) of the Act.
3. Facts of the case, in brief, are that the assessee is a company engaged in the business of providing telecom services under ILD,ISP and Voice Mail/Audiotex Services license and earns service revenues from provision of such services. It filed its return of income on 29th November 2013 declaring total income of Rs. 42,98,91,290/-. Since the assessee had entered into certain international transactions, the AO referred the matter to the TPO for determination of ALP of the international transactions. The TPO during the TP assessment proceedings noted that the assessee has entered into the following international transactions:-
