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11-03-2019, Comverse Kenan India, Section 154, 263, Tribunal Delhi

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2 months 6 days ago #8785 by amit
Section - 154, 263, 92CA(3)
Order Date - 11-03-2019
Favouring - Revenue
Court - Tribunal Delhi
Appellant - ACIT
Respondent - Comverse Kenan India Pvt. Ltd.
Citation - 319Taxpundit233
Appeal No. - ITA No. 2461/DEL/2011
Asstt. Year - 2005-06



This appeal by the Revenue and Cross Objection by the assessee are preferred against the order of the Commissioner of Income Tax [Appeals], Panchkula dated 28/02/2011 pertaining to A.Y. 2005-06. The appeal and the cross objection were heard together and are being disposed of by this common order for the sake of convenience and brevity.

2. The substantive grounds of appeal raised by the Revenue are as under:

1. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in deleting the addition of Rs. 1,27,01,985/- made by AO on account of transfer pricing adjustment when the TPO has rightly determined the arm’s length price u/s 92CA(3) in respect of international transaction entered into by the assessee during the Financial Year 2004-05. The reliance is placed on the decision of the Ld. ITAT in the case of Serdia Pharmaceuticals (I) Pvt. Ltd. vs ACIT (ITAT - Mumbai).

2. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in directing the TPO to exclude the two companies, namely (i) L&T Infotech (ii) M/s Thirdware Solution Ltd from the final set of comparables, when TPO has rightly drawn the conclusion that in view of the peculiarity of this case and also keeping in view of the unique nature of transactions involved, the comparables selected are justified and appropriate.

3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in holding that working capital adjustment should be allowed on the same lines as given in the Assessment Year 2007-08, when the TPO has rightly drawn the conclusion that the biggest problem about this adjustment is the inability to find out the position of the payables and receivables at the beginning and end of the year. Moreover, the credit terms offered by the comparables are not known. The debtors and creditors shown in the balance sheet of the comparables contain both trade and non-trade creditors. In the absence of a break up, such adjustment cannot be reliable and justified. Similarly, the assumption of prime lending rate as the interest rate applicable for making the working capital adjustment suffers from risks of inaccuracy. There is no scientific way making risk adjustments which is much more difficult and involves more approximation than working capital adjustment”

3. The Revenue has also raised one additional ground and the same reads as under:

“On the facts and circumstances of the case, the Ld. CIT(A) erred in not including M/s Infosys as one of the comparable, which was left out by the TPO due to inadvertence, as the above comparable was selected by the assessee itself in the TP Study Report and the assessee never objected to inclusion of the above comparable on ground of functional dissimilarity”.

4. The appellant company is a subsidiary of CSG, Netherlands BV and is engaged in the business of providing liaison, technical support and maintenance services to it Associated Enterprises, namely, CSG International Ltd, UK. The international transactions reported by the assessee company are given below:

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