IBM Daksh Business Process Services Private Ltd., New Delhi v. DCIT, New Delhi

ITA 5834/DEL/2011 | 2007-2008
Pronouncement Date: 20-11-2019 | Result: Allowed

Appeal Details

RSA Number 583420114 RSA 2011
Assessee PAN AABCD4187D
Bench Delhi
Appeal Number ITA 5834/DEL/2011
Duration Of Justice 7 year(s) 10 month(s) 22 day(s)
Appellant IBM Daksh Business Process Services Private Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 20-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I1
Tribunal Order Date 20-11-2019
Date Of Final Hearing 24-05-2017
Next Hearing Date 24-05-2017
First Hearing Date 24-05-2017
Assessment Year 2007-2008
Appeal Filed On 28-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SH. N. K. BILLAIYA ACCOUNTANT MEMBER AND SH. KULDIP SINGH JUDICIAL MEMBER ITA NO.5719/DEL/2010 & 5834/DEL/2011 ASSESSMENT YEAR: 2006-07 & 2007-08 IBM DAKSH BUSINESS PROCESS SERVICES PVT. LTD. BIRLA TOWER 1 ST FLOOR 25 BARAKHAMBA ROAD CONNAUGHT PLACE NEW DELHI-110001 PAN NO. AABCD4187D VS DCIT CIRCLE -11 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI G. C. SRIVASTAVA ADVOCATE MR. PARICHAY SOLANKI CA MR. MAYANK PATAWARI CA RESPONDENT BY SH. SANJAY I. BARA CIT DR DATE OF HEARING: 18/11/2019 DATE OF PRONOUNCEMENT: 20/11/2019 ORDER PER N. K. BILLAIYA AM: ITA NO.5719/DEL/2010 AND 5834/DEL/2011 ARE TWO SEPARATE APPEALS BY THE ASSESSEE PREFERRED AGAINST TWO SEPARATE ASSESSMENT ORDERS FOR A. Y.2006-07 AND 2007-08 FRAM ED U/S. 143 (3) R.W.S. 144 C OF THE ACT. 2 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE A PPEALS THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THI S COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. ASSESSEE IS JOINTLY OWNED BY IBM INDIA AND IBM S AH LIMITED MAURITIUS. FURTHER ASSESSEE IS THE OWNER OF IBM DA KSH BUSINESS PROCESS INC LOCATED IN THE PHILIPPINES. 4. ASSESSEE IS LEADING PROVIDER OF BPO SERVICES TO FORTUNE 500 COMPANIES IN THE TRANSACTION PROCESSING AND CUSTOME R CARE SERVICES SEGMENTS. ASSESSEE ALSO OFFERS A HOST OF INTEGRATED REMOTE SUPPORT SERVICES WHICH INCLUDED CUSTOMER CAR E AND TECHNICAL SUPPORT THROUGH MULTIPLE COMMUNICATION CH ANNELS TELEMARKETING WEB BASED SERVICES INCLUDING REAL TI ME CHAT. 5. THE INTERNATIONAL TRANSACTIONS WHICH ARE UNDER D ISPUTE ARE (1) PROVISION OF BPO SERVICES (2) PROVISION OF LOAN TO SUBSIDIARY COMPANY. 6. AT THE VERY OUTSET THE COUNSEL FOR THE ASSESSEE STATED THAT FOR THE ASSESSMENT YEAR A. Y. 2007-08 TO 2011-12 TH E APPELLANT ENTERED A MAP AND RECEIVED RESOLUTION UNDER MAP WIT H ITS ASSOCIATED ENTERPRISES NAMELY IBM WORLD TRADE CORPO RATION US WITH REGARD INTERNATIONAL TRANSACTION PERTAINING TO PROVISION OF BPO SERVICES AND PAYMENT OF ROYALTY. IT IS THE SAY OF THE COUNSEL THAT THIS DISPUTE IS NOW SETTLED BY THE MAP AND FUR NISHED THE COPY OF MAP RESOLUTION. THE COUNSEL CONTENDED THAT SINCE THE 3 BUSINESS PROFILE OF THE ASSESSEE IS THE SAME NATURE OF TRANSACTIONS ARE ALSO THE SAME AND THE TESTED PARTY IS ALSO THE SAME THEREFORE THE MARGIN ADOPTED UNDER MAP SHOUL D ALSO BE TAKEN INTO CONSIDERATION IN A. Y. 2006-07 THOUGH A. Y. 2006-07 IS NOT COVERED BY THE MAP RESOLUTION. 7. PER CONTRA THE DR STATED THAT THE MAP RESOLUTION IS ONLY IN RESPECT OF THE TRANSACTIONS WITH AE IN USA AND UK A ND THERE ARE OTHER COUNTRIES ALSO INVOLVED IN THE IMPUGNED INTER NATIONAL TRANSACTION THEREFORE MAP RESOLUTION SHOULD NOT B E APPLIED TO THE TRANSACTIONS WITH OTHER COUNTRIES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IT IS TRUE THAT MAP RESOLUTION IS FOR THE TRANSACTIONS WITH AE FROM USA AND UK. IT IS EQUALLY TRUE THAT THE NATURE OF TRANSACT IONS IS SIMILAR WITH OTHER COUNTRIES. IT IS ALSO TRUE THAT THE BUS INESS PROFILES AND TESTED PARTY ARE THE SAME. WE ARE OF THE CONSIDERE D VIEW THAT ONCE THE QUARREL HAS BEEN SETTLED WITH THE MAP RESO LUTION A DIFFERENT VIEW FOR THE TRANSACTIONS WITH OTHER COUN TRIES SHOULD NOT BE TAKEN AS THE BUSINESS PROFILE AND THE NATURE OF THE TRANSACTIONS ARE THE SAME. 9. WE HAVE CAREFULLY PERUSED THE MAP RESOLUTION WHI CH IS PLACED AS ANNEXURE-1 IN THE PAPER BOOK. WE ACCORDI NGLY DIRECT THE AO/ TPO TO RECOMPUTE THE MARGINS AS SETTLED BY THE MAP RESOLUTION DATED 06.04.2018. WE FURTHER DIRECT THE AO/ TPO TO 4 ADOPT THE SAME MARGIN FOR THE IMPUGNED INTERNATIONA L TRANSACTIONS FOR A.Y.2006-07. 10. IN ITA NO.5834/DEL/2011 FOR A. Y. 2007-08 GROUN D NO.4 RELATE TO THE TRANSFER PRICING ADJUSTMENT WITH RESP ECT TO RECEIPT OF INTEREST ON LOAN EXTENDED BY THE ASSESSEE TO ITS AE . 11. FACTS ON RECORD SHOW THAT THE ASSESSEE HAS PROV IDED A LOAN OF RS. 15.93 CRORES TO ITS AE IBM PHILIPPINES. THE APPELLANT HAD CHARGED THE INTEREST @ 8% PER ANNUM ON THIS LOAN SI NCE THE INTEREST CHARGED @ 8%WAS HIGHER THAN THE FIXED DEPO SIT RATE APPLYING THE CUP METHOD THE APPELLANT TREATED THE SAME TO BE AT ARMS LENGTH. 12. DURING THE TRANSFER PRICING ADJUSTMENT PROCEEDI NGS THE TPO ADOPTED THE COUPON RATE OF CORPORATE BOND PREVAILIN G IN INDIA FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF RECEI PT OF INTEREST AND MADE ADJUSTMENT OF RS.43.55 CRORES WHICH WAS UP HELD BY THE DRP. 13. BEFORE US THE COUNSEL FOR THE ASSESSEE STATED THAT SINCE THE LOAN WAS GIVEN TO AE IBM PHILIPPINES ADOPTION OF CO UPON RATES OF CORPORATE BONDS PREVAILING IN INDIA IS NOT CORRECT. THE DR STATED THAT THE ASSESSEE HAS ALSO BENCHMARK BY COMPARING T HE INTEREST RATE WITH THE PREVAILING FIXED DEPOSIT INTEREST RAT E IN INDIA WHICH IS ALSO NOT CORRECT. 5 14. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS. WE ARE OF THE CONSIDERED VIEW THAT IN SUCH INTERNATIONAL TRANSACTION LIBOR + IS THE BEST RATE FOR BENCHMARKING. IN OUR HUMBLE OPINION LIBOR + 150 BA SIS POINTS SHOULD BE TAKEN AS THE RATE. WE ACCORDINGLY DIRECT THE AO /TPO TO RECOMPUTE THE INTEREST AT LIBOR + 150 BASIS POIN TS AND DECIDE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 15. GROUND NO.4 IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSE. 16. GROUND NO.8 RELATE TO THE DISALLOWANCE OF PRIOR PERIOD EXPENSES. 17. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND ON PERUSAL OF THE AUDIT REPORT THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENSES OF RS.14499220/-IN TH E P & L ACCOUNT. THE AO FURTHER FOUND THAT THE ASSESSEE HA S NOT ADDED BACK PRIOR PERIOD EXPENSES WHILE COMPUTING ITS INCO ME. THE ASSESSEE WAS ASKED TO JUSTIFY THE SAME. IN ITS REP LY THE ASSESSEE EXPLAINED NATURE OF EXPENDITURE AND CONTENDED THAT IT HAS BEEN CRYSTALLIZED DURING THE YEAR A.Y.2007-08 ONLY THER EFORE THE SAME SHOULD BE ALLOWED. 18. THIS CONTENTION OF THE ASSESSEE DID NOT FIND AN Y FAVOUR WITH THE AO WHO WAS OF THE OPINION THAT PRIOR PERIOD EXP ENSES CANNOT BE ALLOWED. THE ACTION OF THE AO WAS UPHELD BY THE DRP. 6 19. BEFORE US THE COUNSEL FOR THE ASSESSEE ONCE AGA IN STATED THAT LIABILITIES CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE NO DISALLOWANCE SHOULD BE MADE ON A CCOUNT OF THIS. 20. PER CONTRA THE DR STATED THAT NO DOCUMENTARY EV IDENCES WERE FURNISHED AND AT THE MOST THE MATTER MAY BE RE STORED TO THE FILES OF THE AO. 21. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE AR E OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE WAS NOT GIV EN PROPER OPPORTUNITY TO DEMONSTRATE THAT THE LIABILITY CRYST ALLIZED DURING A.Y.2007-08 IN THE INTEREST OF JUSTICE AND FAIR PL AY WE RESTORE THIS ISSUE TO THE FILES OF THE AO. THE ASSESSEE IS DIRECTED TO FURNISH NECESSARY DOCUMENTARY EVIDENCES TO DEMONSTR ATE THAT THE LIABILITY ACTUALLY CRYSTALLIZED IN A.Y.2007-08 AND THE AO IS DIRECTED TO EXAMINE THE SAME AND DECIDE THE ISSUE A S PER THE PROVISIONS OF THE LAW. THIS GROUND IS TREATED AS AL LOWED FOR STATISTICAL PURPOSE. 22. THE OTHER GROUND RELATE TO THE CHARGING OF INTE REST AND SHORT CREDIT OF TDS. 23. THE AO IS DIRECTED TO CHARGE INTEREST AS PER TH E PROVISIONS OF THE LAW AND GIVE CREDIT FOR TDS/ OTHER TAXES PAID A CCORDINGLY. 7 24. IN THE RESULT THE APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.11.2019 . SD/- SD/- [KULDIP SINGH] [N.K. B ILLAIYA] JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: 20 NOVEMBER 2019 *NEHA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CITI 4. CIT(A) 5. DR ASST. REGISTRAR ITAT NEW DELHI DATE OF DICTATION 19.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 20.11.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 20.11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 20.11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 20.11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 20.11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.1 1.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER