Mps Technologies Limited,(Since Merged With Mps Limited) v. The Assistant Commissioner Ofincome Tax,Company Circle - Iv(3)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.02.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Ms.Justice R.N.MANJULA Tax Case Appeal No.81 of 2018 MPS Technologies Limited,(Since merged with MPS Limited)27, G.N.Chetty Road, T.Nagar,Chennai - 600 017....Appellant Vs The Assistant Commissioner ofIncome Tax,Company Circle - IV(3),121, Mahatma Gandhi Road,Nungambakkam, Chennai - 600 034....Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 14.02.2017 made in ITA.No.2031/Mds/2011 on thefile of the Income Tax Appellate Tribunal, 'D' Bench, Chennaifor the assessment year 2007-08.Appeal filed against the order of the Assistant Commissionerof Income Tax, Company Circle IV (S), Chennai dated 11/10/2011and made in P.A.No.AAECM0205A and against the order of theAssistant Commissioner of Income Tax Company Circle IV(3),(i/c)Chennai -34, dated 29/12/2010, in PA No.AAECM0205A for theAssessment Year 2007-08 and against the order of the DeputyCommissioner of Income Tax, Transfer pricing Officer IV, Chennaidated 28/10/2010 and made in F.No.M.510/TPO-V/A.Y 2007-08, forthe Assessment Year 2007-2008. For Appellant : Mr.S.P.ChidambaramFor Respondent: Mr.R.Karthik Ranganathan Senior Standing Counsel JUDGMENT This appeal, filed by the assessee, is directed against theorder dated 14.02.2017 made in ITA.No.2031/Mds/2011 on the fileof the Income Tax Appellate Tribunal, 'D' Bench, Chennai ('the https://hcservices.ecourts.gov.in/hcservices/ Tribunal' for brevity) for the assessment year 2007-08. 2. The appeal was admitted on 10.12.2018 on the followingsubstantial questions of law: "i. Whether in the facts and circumstancesof the case and in law, the conclusion, drawn bythe Tribunal that the appellant is a KPOCompany, is erroneous being- a) contrary to the definition of a KPO Companyas contemplated in Rule 10TA of the Rules;b) contrary and inconsistent with the evidenceson record? ii. Whether in the facts and circumstancesof the case and in law, the Tribunal wasjustified in not appreciating that the functionsperformed by the Appellant falls under thedefinition of a BPO as laid down in Rule 10TA ofthe Rules? iii. Whether in the facts and circumstancesof the case and in law, the Tribunal was inerror in upholding the inclusion of a KPOCompany (Eclerx Services Limited) as acomparable without appreciating that Rule 10B(2)of the Rules mandates only functionally similarcompanies to be selected as comparable? iv. Whether in the facts and circumstancesof the case and in law, the Tribunal wasjustified in upholding the inclusion of EclerxServices Limited while not adjudicating on thespecific ground raised by the Appellant on theissue that Eclerx Services Limited cannot beconsidered as a comparable as per Rule 10B(2) ofthe Rules since it had abnormal growth inrevenue and extremely high profits? v. Whether, having regard to the facts andcircumstances of the case and in law, inrelation to the arm's length price of aninternational transaction, that is to bedetermined/quantified as per Rule 10B of theRules, an adjustment for start-up costs claimedby the Appellant as per Rule 10B(i)(e) and Rule10B(3) of the Rules, is legally warranted, underTNMM?" 3. We have heard Mr.S.P.Chidambaram, learned counsel for theappellant and Mr.R.Karthik Ranganathan, learned Senior StandingCounsel appearing for the respondent-Revenue. 4. The learned counsel for the appellant-assessee submitsthat theappellant-assesseehasalreadyfiledthedeclaration/undertaking under the Vivad Se Vishwas Scheme on29.01.2021 and is awaiting orders to be passed in Form No.3. v. Whether, having regard to the facts andcircumstances of the case and in law, inrelation to the arm's length price of aninternational transaction, that is to bedetermined/quantified as per Rule 10B of theRules, an adjustment for start-up costs claimedby the Appellant as per Rule 10B(i)(e) and Rule10B(3) of the Rules, is legally warranted, underTNMM?" 3. We have heard Mr.S.P.Chidambaram, learned counsel for theappellant and Mr.R.Karthik Ranganathan, learned Senior StandingCounsel appearing for the respondent-Revenue. 4. The learned counsel for the appellant-assessee submitsthat theappellant-assesseehasalreadyfiledthedeclaration/undertaking under the Vivad Se Vishwas Scheme on29.01.2021 and is awaiting orders to be passed in Form No.3. 5. In the light of the subsequent event, the CompetentAuthority shall process the application/declaration inaccordance with the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3of 2020) and pass appropriate orders as expeditiously aspossible. The assessee is given liberty to restore this appealin the event the ultimate decision to be taken on thedeclaration filed by the assessee under Section 4 of the saidAct is not in favour of the assessee. If such a prayer is made,the Registry shall entertain the prayer without insisting uponany application to be filed for condonation of delay inrestoration of the appeal and on such request made by theassessee by filing a miscellaneous petition for restoration, theRegistry shall place such petition before the appropriateDivision Bench for orders. 6. The tax case appeal stands disposed of with theaforementioned liberty and consequently, the substantialquestions of law framed are left open. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar hvkTo1. The Income Tax Appellate Tribunal, 'D' Bench, Chennai. 2. The Assistant Commissioner of Income Tax, Company Circle - IV(3), 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 3.The Deputy Commissioner of Income Tax,Transfer pricing officer IV, Chennai. AD(CO)RMP(24/03/2021) TCA.No.81 of 2018