Assessee entitled to object to inclusion or exclusion of companies at stage of appellate proceedings, no estoppel: ITAT grants partial relief to Dell [Read Order]

In a partial relief to the Dell International Services, the Income Tax Appellate Tribunal (ITAT), Bangalore Bench ruled that assessee entitled to object to inclusion or exclusion of companies at stage of appellate proceedings, there is no estoppel.

The assessee, Dell International Services is a wholly-owned subsidiary of Dell International Inc. The assessee is primarily engaged in the business of providing IT support services / SWD services and IT Enabled Services to its AEs. During the previous year relevant to the assessment year 2010-11, the international transactions that took place between the assessee and its AEs were the provision of SWD services and ITES by the assessee for which a TP adjustment was made by the TPO (vide rectified order) totaling to Rs. 1,26,90,33,692/- i.e., Rs. 46,85,29,023/- in the SWD segment and Rs. 80,05,04,669/- in the ITES segment. Incorporating the said TP adjustment, the Assessing Officer passed a draft assessment order.

Aggrieved, the assessee filed its objections before the DRP, which, vide its directions, granted partial relief to the assessee. Pursuant to the directions of the DRP, the AO passed the final assessment order in which the TP adjustment was reworked to Rs. 1,11,82,20,792/-.

It was submitted that this company is being consistently excluded from final list of comparables in cases of companies placed similarly to that of the assessee. In this regard, reliance was placed on the decisions of this Tribunal in the case of Cerner Healthcare Solutions (P.) Ltd. v. ITO ([2017] 79 taxmann.com 64 (Bengaluru – Trib.)) wherein this company was directed to be excluded and DCIT v. Electronics for Imaging India P. Ltd [(2016) 70 taxmann.com 299 (Bang – Trib.)] wherein this company was remanded to the AO/TPO for verification as to whether the company’s segmental details as regards its revenues from software development and product development were available, and to thereafter exclude it if the details were not available. The learned DR relied on the order of the TPO whereas the assessee accepted this company as a comparable company.

The two-member bench headed by Vice President N.V.Vasudevan and Accountant Member Chandra Poojari ruled that the assessee did not object to the inclusion of this company before the TPO but objected to the inclusion of this company before DRP. The DRP did not adjudicate the objection. In these circumstances, we are of the view that exclusion of this company from the list of comparable companies has to be examined by the TPO/ AO and we remand the issue to the TPO/AO. The law is well settled that the assessee is entitled to object to inclusion/exclusion of companies at the stage of appellate proceedings and there is no estoppel. The AO/TPO will afford the opportunity of being heard to the assessee in the set-aside proceedings.

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