Principal Commissioner Of Income Tax-10 v. J.p. Morgan Services India Pvt. Ltd

1 / 9 11-ITXA-4-_-170-17.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.4 OF 2017WITHINCOME TAX APPEAL NO.170 OF 2017 Principal Commissioner of Income Tax-10 .... Appellant versus J.P. Morgan Services India Pvt. Ltd.... Respondent….... Mr.Arvind Pinto, Advocate for Appellant.Mr.Arvind Pinto, Advocate for Appellant. Mr.Porus Kaka, Senior Counsel a/w Mr.Divesh Chawla i/b. Atul Jasani, Advocate for Respondent.Mr.Porus Kaka, Senior Counsel a/w Mr.Divesh Chawla i/b. Atul Jasani, Advocate for Respondent. CORAM : AKIL KURESHI & SARANG V. KOTWAL, JJ.DATE: 25[th] MARCH, 2019. P.C. : 1. These Appeals are filed by the Revenue to challengethe Judgment of Income Tax Appellate Tribunal. Followingquestion was presented for our consideration: “Whether the Tribunal was right in holding that broughtforward losses and depreciation is not to be set off 2. For convenience, we may record facts from Income TaxAppeal No.4/2017. The Respondent-Assessee is a private limited company.In the return of income-tax filed by the assessee for theassessment year 2007-2008, the question of determination ofArm's Length Price of the transaction entered into by theassessee with its international Associated Enterprises came upfor consideration. The Assessee has 96% of its such transactionswith its US based associated enterprise. The rest of thetransactions are non-US based transactions. In relation to the USbased transactions, the Government of India and that of UnitedStates of America entered into a Mutually Agreed Procedure fordetermining the tax to be levied in the two countries in relationto such transactions. This Mutually Agreed Procedureculminated into an order being formally passed in this regard.When it came to the question of determining the Arm's LengthPrice of assessee's similar transactions, which were non-US 3 / 9 11-ITXA-4-_-170-17.odtbased, the tribunal by the impugned judgment, applied the sameparameters and determined the Arm's Length Price on the basisof determination contained in MAP in relation to US basedtransactions. This approach of the tribunal has given rise to thepresent Appeals. 3. The main contention of the Department is that theMAP is a non-adjudicatory process and therefore theculmination of such process cannot be automatically projectedfor determination of Arm's Length Price in terms of section 92Cof the Act, where no such agreement has been arrived at. Thecase of the assessee on the other hand is that in the present casethe tribunal has not automatically lifted parameters laid down inthe MAP. Firstly, the MAP itself has been drawn after detailconsideration of the Arm's Length Price. In absence of anymaterial difference between the US based transactions andassessee's non-US based transactions, the revenue cannot raiseany such objection to approach adopted by the tribunal. 4 / 9 11-ITXA-4-_-170-17.odt 4. Previously we had heard the learned Counsel for theparties for some time. We were then prima facie of the opinion,which we still continue to hold, that in absence of any othermaterial on record, it would be doubtful whether the finalculmination of the MAP can be projected in the determination ofthe Arm's Length Price in the mechanism envisaged under theIncome Tax Act, 1961, that too, without any other adjustment orconsideration. This larger question, however, we are notrequired to examine in the present Appeal for the followingreasons. 4 / 9 11-ITXA-4-_-170-17.odt 4. Previously we had heard the learned Counsel for theparties for some time. We were then prima facie of the opinion,which we still continue to hold, that in absence of any othermaterial on record, it would be doubtful whether the finalculmination of the MAP can be projected in the determination ofthe Arm's Length Price in the mechanism envisaged under theIncome Tax Act, 1961, that too, without any other adjustment orconsideration. This larger question, however, we are notrequired to examine in the present Appeal for the followingreasons. 5. The tribunal in the impugned judgment, whileadopting the same parameters as laid down in relation to USbased transaction in the MAP for the purpose of determiningArm's Length Price in relation to the assessee's non-US basedtransactions, observed that there is no distinction between USand non-US based transactions. Even orders by the authoritieshad made no such distinction. Even then, an argument may stillbe open for the revenue to raise, that this would not be 5 / 9 11-ITXA-4-_-170-17.odtsufficient for the tribunal to mechanically accept the conclusionsof the MAP in relation to the transactions which were notsubject to such procedure. However, on the previous occasion,Counsel for the assessee had made a statement that the CBDTitself in case of the assessee for the later assessment year hadaccepted that the consideration in the MAP would also apply tothe non-US based transactions. In our order dated 05/03/2019therefore we had recorded the statement and requested thelearned Counsel for the revenue to take instructions with respectto the same. 6. Counsel for the assessee had produced a copy of anAdvance Pricing Agreement between the assessee and the CBDTfor the later assessment year, in which following observationswere made; “AND WHEREAS the outcome agreed under the MutualAgreement with US for Applicant's international transactionswith US AEs would also be applied to its transactions with Non-US AEs and the Applicant has conveyed its acceptance of thesame.” 6 / 9 11-ITXA-4-_-170-17.odt 7. To this, learned Counsel for the revenue stated that theposition projected by the learned Counsel for the assessee iscorrect, however, this was the situation for the later assessmentyear and cannot be accepted for the present assessment year. Inour opinion, two significant features therefore arise in thepresent Appeal; firstly, the MAP has been drawn after theconsideration of relevant aspects giving rise to transfer pricingadjustment and secondly, the CBDT in the later year agreed thatsuch transfer pricing consideration in relation to US basedtransactions can be safely adopted for the purpose of theassessee's non-US based transactions. In the present year,therefore it would be wholly inappropriate to allow the revenueto argue to the contrary. 8. We notice that the revenue has presented two morequestions which read as under; “(a)Whether in law and on the facts of the instantcases, was the Tribunal justified in holding thatcases, was the Tribunal justified in holding that 7 / 9 11-ITXA-4-_-170-17.odt exemption u/s 10A is allowable prior to the settingoff, of brought forward losses and unabsorbeddepreciation? (b)Whether in law and on the facts of the instantcase, was the Tribunal justified in holding thatinterest income is business income ignoring thefact that this income was derived from fixeddeposits and not from the business of theundertaking?”case, was the Tribunal justified in holding thatinterest income is business income ignoring thefact that this income was derived from fixeddeposits and not from the business of theundertaking?” 9. It is agreed position that both these issues came up for consideration in case of this assessee in revenue's appealNo.2188/13. The Appeal was dismissed in following terms; 4.Regarding Question no.(b) exemption u/s 10A is allowable prior to the settingoff, of brought forward losses and unabsorbeddepreciation? (b)Whether in law and on the facts of the instantcase, was the Tribunal justified in holding thatinterest income is business income ignoring thefact that this income was derived from fixeddeposits and not from the business of theundertaking?”case, was the Tribunal justified in holding thatinterest income is business income ignoring thefact that this income was derived from fixeddeposits and not from the business of theundertaking?” 9. It is agreed position that both these issues came up for consideration in case of this assessee in revenue's appealNo.2188/13. The Appeal was dismissed in following terms; 4.Regarding Question no.(b) (i)So far as question no.(b) is concerned, the issuerelates to interest on deposit which the impugnedorder of the Tribunal holds is chargeable to taxunder the head 'Profits & Gains of Business orProfession' and consequently eligible for deductionrelates to interest on deposit which the impugnedorder of the Tribunal holds is chargeable to taxunder the head 'Profits & Gains of Business orProfession' and consequently eligible for deduction 8 / 9 11-ITXA-4-_-170-17.odt under Section 10A of the Act. However, Mr.Pintosubmits that in any view the interest on delayed taxrefund would not be covered under the head 'Profitsand Gains of Business'. When asked, Mr.Pinto fairlystates that the issue of classification of interest ontax refund was not agitated before the Tribunal.We are of the view that the above issue of intereston tax refund not to be treated as interest ondeposits was not agitated by the Revenue before theTribunal. Thus this issue not arising from the orderof the Tribunal, does not arise for ourconsideration. (ii)In any case we find that the impugned order of theTribunal has followed its decision rendered in theRespondent-Assessee's case reported in 33-SOT page327 for A.Y. 2004-05. Mr.Pinto is unable to pointout any distinguishable features in the presentAppeal which would warrant out taking a differentview from that having been taken in the orderpassed by the Tribunal for the A.Y. 2004-05.Moreover, nothing has been shown to us whichwould indicate that the Tribunal's order for theA.Y. 2004-05 has not been accepted by theRevenue. (iii) In these circumstances, question no.(b) as framed also does not give rise to any substantial questionof law. Thus not entertained. Regarding Question no.(c) 3.So far as question no.(c) is concerned. Mr.Pintolearned Counsel for the Revenue very fairly statesthat the issue stands covered against the Revenueby the decision of this Court in CIT Vs. Black &Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72. Inthe above view, the question as framed does notgive rise to any substantial question of law. Thusnot entertained.learned Counsel for the Revenue very fairly statesthat the issue stands covered against the Revenueby the decision of this Court in CIT Vs. Black &Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72. Inthe above view, the question as framed does notgive rise to any substantial question of law. Thusnot entertained. 10. In the circumstances, we do not find any reason tointerfere with the decision of the tribunal. Income Tax Appealsare dismissed. (SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)