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29-11-2019, Omniglobe Information Technologies, Section 254, 144C,Tribunal Delhi

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2 weeks 1 day ago #11604 by amit
Section - 254, 144C, 92CA(3), 10A, 234B, 92F(iv), 10D(4)
Order Date - 29-11-2019
Favouring - Assessee Partly
Court - Tribunal Delhi
Appellant - Omniglobe Information Technologies (India) Pvt. Ltd.
Respondent - ITO
Justice - SUSHMA CHOWLA JM & DR.B.R.R.KUMAR AM
Citation - 1119Taxpundit296
Appeal No. - ITA No.4343/Del/2014
Asstt. Year - 2006-07

Order

PER : SUSHMA CHOWLA, JM

The appeal filed by assessee is against order of Assessing Officer, New Delhi, dated 29.05.2014 relating to assessment year 2006-07 passed under section 254 r.w.s. 143(3) of the Income-tax Act, 1961 (in short “Act”).

2. The assessee has raised following grounds of appeal:-

1. “That the assessing officer erred on facts and in law in completing assessment under section 143(3)/ 144C read with section 254 of the Income-tax Act (the Act) at an income of Rs. 1,15,57,890 as against the returned income of Rs. 3,417.

2. That the assessing officer / TPO erred on facts and in law in making an addition of Rs. 1,15,57,886 allegedly on account of difference in the arm’s length price of the ‘international transactions' of provision of BPO / ITES services to the associated enterprise on the basis of the order passed under section 92CA(3) of the Act by the TPO.

2.1 That the DRP/TPO erred on facts and in law in adopting additional filter of export sales less than 75% of total income without appreciating that selection of comparable company shall be on FAR analysis and application of such quantitative filters selectively defies the purpose of the benchmarking analysis.

2.2 That the DRP/TPO erred on facts and in law in rejecting the following companies on the basis of export filter and not appreciating that they werefunctionally comparable to the appellant:

a) Surevin internet Services Ltd.
b) E-Nxt Financial Ltd.
c) Cosmic Global Ltd.
d) AOK In-House BPO Services Ltd.
e) Cameo Corporate Services Ltd.

2.3 That the DRP/TPO erred on facts and in law in rejecting Eureka Outsourcing Solutions Pvt. Ltd. on the ground that it was a persistent loss making company and not appreciating that the company is functionally comparable to the appellant.

2.4 That the DRP/TPO erred on facts and in law in not appreciating that the company has earned a profit margin of 0.25% over operating cost in the relevant year and accordingly is not a persistent loss making company.

3. That on facts and circumstances of the case and in law, the AO/TPO erred in not holding that since the associated enterprise (“the AE”) has incurred a loss, in relation to ITES services rendered by the appellant to the AE, which, in turn, were rendered by the AE to ultimate third party customer(s), no Transfer Pricing adjustment was warranted.

3.1 That on facts and circumstances of the case and in law, the AO/TPO erred in not holding that the Transfer Pricing adjustment, at best, could not exceed the total profit earned by the group, as the same would result in taxation of notional income.

3.2 That the AO/TPO erred on facts and in law in not appreciating that the appellant is engaged in the business of rendering low end data processing services resulting in low combined profitability and, therefore, there could not be an allegation as to transfer pricing.

4. That the assessing officer erred on facts and in law in not undertaking comparability adjustment to account for difference in working capital employed by the appellant vis-a-vis comparable companies considered in the order passed under section 92CA(3)/144C of the Act.

5. That the assessing officer erred on facts and in law in not allowing appropriate risk adjustment to establish comparability on account of the appellant being a low-risk-bearing captive service provider as opposed to the comparable companies who were independent ITES service provider, even while holding that “the assessee cannot be compared to a risk free entity”.

6. Without prejudice that the assessing officer erred on facts and in law in not appreciating that the income of the appellant being exempt under section 10A of the Income-tax Act, 1961 ("the Act”), there could be no motive to divert any part of its profit to the foreign enterprise

7. That the assessing officer erred on facts and in law in levying interest under Section 234B of the Act.

8. That the assessing officer erred on facts and in law in initiating penalty proceedings under Section 271(1)(c) of the Act. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal before or at the time of hearing.”

3. Briefly in the facts of the case, the assessee had furnished the return of income declaring income of Rs. 3417/-. The case of the assessee was taken up for scrutiny and draft assessment order was passed on 17.12.2009 proposing an adjustment of Rs. 3.26 Crores. The assessee filed objections before the DRP which rejected the same and confirmed the proposed addition. The assessment was completed under section 143(3)/ 144C (13) of the Act at Rs. 3.26 Crores. The assessee filed an appeal against the final assessment order before the Tribunal, which in ITA No. 5265/Del/2010, vide order dated 18.02.2011 restored the issue of transfer pricing adjustment to the file of DRP observing that it had not passed

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