Case Number: ITA 851/DEL/2021
Appellant: Orange Business Services India Solutions Pvt. Ltd., Gurgaon
Respondent: DCIT Circle- 3, Gurgaon
Assessment Year: 2016-17
Result: Appeal Allowed for Statistical Purposes
Case Filed on: 2021-07-15
Order Type: Final Tribunal Order
Date of Order: 2021-11-18
Pronounced on: 2021-11-18
Orange Business Services India Solutions Pvt. Ltd., a subsidiary of EGN BV, Netherlands, filed an appeal against the final assessment order dated 31/03/2021 passed by the Additional/Joint/Deputy/Assistant Commissioner of Income-tax, National E-assessment Centre, New Delhi, for the assessment year 2016-17. The appeal challenged transfer pricing adjustments and interest on receivables.
The case was heard by the Delhi Bench ‘I-2’ of the Income Tax Appellate Tribunal (ITAT) through video conferencing, with Shri O.P. Kant, Accountant Member, and Shri K.N. Chary, Judicial Member, presiding over the matter. The hearing took place on 23.09.2021, and the order was pronounced on 18.11.2021.
The primary issues in the appeal were the enhancement of income by Rs. 29,20,68,757/- due to transfer pricing adjustments and the addition of Rs. 10,73,91,387/- as interest on receivables outstanding beyond 60 days.
The appellant, represented by Shri Ravi Sharma, Advocate, argued that the transfer pricing adjustments were based on erroneous assumptions and failed to consider the factual positions and submissions. The appellant also contended that the receivables should not be treated as a deemed loan and charged notional interest.
The Revenue, represented by Shri Sukesh Kumar Jain, CIT(DR), supported the lower authorities’ decisions and argued that the adjustments were justified based on the facts and circumstances of the case.
The Tribunal reviewed the facts and the legal precedents, noting that in the appellant’s own case for assessment year 2013-14, the Tribunal had accepted that the segments of Contract Software Development (CSD) and Information Technology enabled services (ITeS) should be benchmarked separately. As there was no change in the functional profile of the appellant, the Tribunal directed the Assessing Officer/Transfer Pricing Officer (AO/TPO) to benchmark the segments separately, following the direction of the Tribunal for assessment year 2013-14.
Regarding the interest on receivables, the Tribunal found that the issue was covered by its own decisions in the appellant’s case for assessment years 2014-15 and 2015-16, which followed the Delhi High Court’s decision in PCIT vs Kusum Healthcare Private Limited. The Tribunal directed that no adjustment is required if working capital adjustment has been allowed to the appellant while determining the arm’s-length price of the main transactions. The issue was remanded back to the AO/TPO for compliance.
The Tribunal allowed the appeal for statistical purposes, remanding the issues of transfer pricing adjustments and interest on receivables back to the AO/TPO for reconsideration, with the direction to follow the relevant legal precedents and ensure that the appellant is provided with adequate opportunity of being heard.
In conclusion, ITA No. 851/DEL/2021 was allowed for statistical purposes, and the order pronounced on 18th November 2021 provided relief to Orange Business Services India Solutions Pvt. Ltd. by remanding the issues for further examination.
Order pronounced in the open court on 18th November 2021.
Sd/- (K.N. CHARY)
JUDICIAL MEMBER
Sd/- (O.P. KANT)
ACCOUNTANT MEMBER
Date: 18th November 2021
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR: ITAT
Assistant Registrar, ITAT, New Delhi
Orange Business Services India vs DCIT: Transfer Pricing Dispute and Interest on Receivables
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