Commissionerof Incometax-Ivappellantthroughmr. Kamal Sawhney,Sr. Standingcounsel v. M/S Globalvantedgepvt. Ltdrespondentthrough

$-01*IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision:27^''November,2013 +INCOME TAX APPEAL 527/2013 COMMISSIONEROF INCOMETAX-IVAppellantThroughMr. Kamal Sawhney,Sr. StandingCounsel. versus M/S GLOBALVANTEDGEPVT. LTDRespondentThrough CORAM:HON'BLE MR. JUSTICE SANJIV KHANNAHON'BLE MR. JUSTICE SANJEEV SACHDEVA % ORDER27.11.2013 We have heard counselfor the appellant,who submitsthatthe presentappeal has been filed because the Revenue has notacceptedthe decisiondated 14^ March, 2013, of this Court inITA 1828/2010 and other connected appeals and SLP has beenpreferred. He also submitsthat a fresh issue has been raised inview of the findings of the tribunal in paragraph 4.8.2.The facts of the presentcase reveal that the Revenue,andthe DisputeResolutionPanel (DRP) intheirorderunder Section144C did not reflect the factualand the additionupon positionmade was exorbitant and spacious. 3.Therespondent-assessee isanIndiancompanyincorporatedunderthe CompaniesAct, 1956 and asubsidiaryofGlobal Vantedge(Mauritius)Limited. The respondent-assesseeoperated through their centre at Gurgaon, Haiyana andundertook back office operations. 4.Global Vantedge Inc. an associated enterprise wasengaged in marketing and business developmentof the backoffice processing services in USA.Global Vantedge Inc.Procuredbusiness,raised invoices on foreign clients, collectedmoney and subsequently had remitted 90.60% of the saidcollectionsto the respondent-assessee,retaining their share of 9.40%. 5.Total revenue or orders received by Global Vantedge Inc.during the assessmentyear in question i.e. 2006-07 was USD1,37,59,885/-, which when converted into Indian rupee @44.2872 i.e. the average exchangerate during the financialyear,comes to Rs.60,93,86,735/-.The respondent-assessee hadactually received and was paid Rs.53,57,68,717/- and thebalance amount of about Rs.7,36,18,018/- was retained by theAmerican company Global Vantedge Inc. 6.As per the directions of the DRP, the respondent-assessee'sincomeinviewofthearmslength r price was determinedat Rs.10,94,86,650/-,thoughthe operatingprofit asdeclared by the assessee was Rs.22,06,355/-.Accordingly,an additionof Rs.10,72,80,295/-was made in theassessment order. Thus, the addition made, if accepted, is morethan the total amount received by Global Vantedge Inc. fromthirdpartyi.e. the clients. In otherwords,GlobalVantedgeInc.would or should have paid from their own pocket or resourcesan amount of Rs.3,58,68,632/- because they had transferredor on back officeto theassessee inpassed operations respondentIndia.Thus, the addition suggested by the Transfer PricingOfficer, directed by DRP and in the assessment order is per seunsustainable and cannot be accepted. The addition made ofRs.10,72,80,295/-does not take notice of the fact that the totalamount retain by Global VantedgeInc. was only 9.40% of thetotal receipts i.e. Rs.7,36,18,018/-,a position which is notdisputed and denied. 7.We find that the tribunal has passed an order of remandafterrejectingseveralcontentionsof the respondent-assessee.Ithas been also noticed that in the assessment years 2003-04 to2005-06, the tribunal had held that the maximum arms' lengthprice shouldbe restrictedto 98.60%i.e. the adjustmentin arms'lengthpricecannotexceed98.60%)and,therefore. y- 1.40% of the amountreceivedshouldbe allowedto be retained by GlobalVantedgeInc. and shouldnot be taxed in India. Thefact that Global VantedgeInc. had performedservicesand hadto be paid commensuratewith the functions performed,assetsutilised,risk undertakenetc. is not disputedand challengedby the Revenue. 8.With regardto paragraph4.8, the tribunalhas recordedas under 7.We find that the tribunal has passed an order of remandafterrejectingseveralcontentionsof the respondent-assessee.Ithas been also noticed that in the assessment years 2003-04 to2005-06, the tribunal had held that the maximum arms' lengthprice shouldbe restrictedto 98.60%i.e. the adjustmentin arms'lengthpricecannotexceed98.60%)and,therefore. y- 1.40% of the amountreceivedshouldbe allowedto be retained by GlobalVantedgeInc. and shouldnot be taxed in India. Thefact that Global VantedgeInc. had performedservicesand hadto be paid commensuratewith the functions performed,assetsutilised,risk undertakenetc. is not disputedand challengedby the Revenue. 8.With regardto paragraph4.8, the tribunalhas recordedas under "4.8The issue that comparable should not berejected only on the ground of persistent losses,raised in ground no.11, the Id. Counsel submittedthat this issue was not in earlier years and is freshground.Assessee's five comparable have been on the that in those there wererejected groundpersistentlosses. Ld. Counsel submittedthat thisissue has been dealt by the ITAT Delhi Bench 'H'vide order dated 23-9-2008 in the case of M/s SonyIndia (P) Ltd. for A.Y. 2001-02to 2003-04 (2008-TIOL-439-ITAT-Del).The TPO and the DRP havenot adverted to this issue. Therefore, this issue maybe accordingly decided." 9.We do not think that the tribunal has decided any materialissue in the aforesaidparagraph. The tribunal has referredtotheir earlier decision in the case of Sony India (P) Ltd. and haveobserved that TPO and DRP had not adverted to the said aspect.The claim of the assessee was that there were five othercomparable, which had suffered losses, though they werein the same business. The claim of the Revenue wasengaged V• r that the said comparableswere sufferingpersistentlosses. Wedo not think that directionhas been the tribunal any given byexceptreferenceto theirorderin the caseofSonyIndia(P) Ltd.10.Having gone throughthe decisionin Sony India (P) Ltd.Vs. Deputy CommissionerofIncome Tax, reportedin (2009)315 ITR 150117 to we (A.T.) (ITAT, Del.) (Paragraphs 119),do not think that observation made therein or any requiresmandates issue of notice. 11.We are not inclined to interfere with the order of thetribunal and the appeal is dismissed. SANJIVKHANNA,J. SANJEEV SACHDEVA, J. NOVEMBER 27, 2013NA