×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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06-06-2019, International Specialty Products, Section 144C(13), Tribunal Mumbai
1. Aforesaid appeal by assessee for Assessment Year [AY] 2012-13 contest final assessment order dated 23/12/2016 passed by Ld. Assistant Commissioner of Income Tax-15(2)(1), Mumbai [AO] u/s 143(3) read with Section 144C(13) pursuant to the directions of Ld. Dispute Resolution Panel-1, Bengaluru [DRP] u/s 144C(5) dated 10/11/2016. The assessee has raised 12 grounds. Ground Nos.1 & 12 are general in nature whereas ground nos. 2 & 7 have not been passed before us during hearing. The remaining effective grounds read as under: -
Corporate / Back Office Support Services
3. The Ld. AO / Ld. DRP are not justified in law in considering wrong comparable and consequently arriving at a high arithmetic mean of 22.90% (after working capital adjustment of 2.06%) as a ratio of OP/OC as against the margin of 11.85% of the appellant.
4. The Ld. AO / Ld. DRP are not justified in law in making an adjustment u/s 92CA of Rs.93,05,870/- to the price received by the appellan
5. The Ld. AO / Ld. DRP ought to have rejected the following companies which were objected by assessee on the grounds of functional dissimilarity and which are also rejected by Ld. DRP during AY 2011-12 i.e.,
6. The Ld. AO / Ld. DRP erred in not accepting the assessee’s contention of rejecting cross domain solutions Pvt. Ltd. on the grounds of functional dissimilarity. R & D Services
8. The Ld. AO / Ld. DRP are not justified in law in considering wrong comparable and consequently arriving at a high arithmetic mean of 19.30% as a ratio of OP/OC.
9. The Ld. AO / Ld. DRP are not justified in law in making an adjustment u/s 92CA of Rs.50,53,176/- to the price received by the appellant.
10. The Ld. AO / Ld. DRP erred in not rejecting Oxygen Bio Research Pvt. Ltd. being functional dis-similar to that of assessee company.
11. The appellant company would like to reject Syngene International Ltd. as a comparable, functionally dissimilar though selected originally in the TP study, which was not accepted by Ld. DRP.
As evident from grounds of appeal, the assessee is agitating exclusion / inclusion of certain comparable entities under the two segments viz. Corporate / Back Office Support Services [referred to as ITeS Services] and R&D Services.
2.1 Briefly stated, the assessee being resident corporate entity was stated to be engaged in trading activities, R&D & providing corporate support services during impugned AY. In trading division, it was engaged in distribution of specialty chemicals. The assessee filed its return of income for the impugned AY on 28/09/2012 at Rs.291.15 Lacs. Since the assessee entered into certain international transactions with its Associated Enterprises [AE] during impugned AY, a reference was made u/s 92CA(1) to Ld. DCIT (Transfer Pricing Officer)-2, Hyderabad [TPO] for determination of Arm’s Length Price [ALP] of these transactions. The subject matter of present appeal before us is issue of comparable in 2 segments viz. (i) Corporate / Back Office Support Services classified as Information
Technology enabled Services [ITeS]; (ii) R & D Services.
2.2 The assessee has provided these services to its various AEs during impugned AY and earned revenue of Rs.941.93 Lacs from ITeS services and revenue of Rs.758 64 Lacs from provision of R & D Services. The revenue in trading segments amounted to Rs.3473.99 Lacs. The Ld. TPO had proposed aggregate TP adjustment of Rs.193.26 Lacs which comprised-off of TP adjustment of Rs.120.93 Lacs under ITeS Segment and TP adjustment of Rs.72.32 Lacs under Contract R&D. However, the directions of Ld. DRP reduced the proposed adjustment to Rs.143.59 Lacs. Aggrieved, the assessee is in further appeal before us.