IDP Education India P. Ltd. (Earlier known as IDP Education Exam Services P. Ltd.) vs Assistant Commissioner Of Income Tax

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the assessment order dated 27.06.2022 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act,1961(hereinafter referred to as 'the Act'), for Assessment Year 2018-19.

Shri Vishal Kalra, appearing on behalf of the assessee at the outset submitted that the assessee is not pressing ground no. 2 of appeal. The Id. Counsel submits that the solitary issue in this appeal is Transfer Pricing Adjustment of Rs.16,99,524/- made by the Transfer Pricing Officer (TPO) in respect of reimbursement of expenses. He submitted that the assessee is engaged in providing local administrative support for organizing administer and conduct of examination on behalf of BC, UK at its centers in India. During the period relevant to assessment year under appeal, the assessee inter alia reported international transactions in Form 3CEB in respect of provision of exams support services and reimbursement of expenses for conducting of exams. For provision of exam support services, the assessee charged Rs.227,61,44,912/-. The assessee applied Transactional Net Margin Method (TNMM) to bench mark the transaction. The TPO accepted the transaction at Arm’s Length Price (ALP), hence, no adjustment was proposed on the said transaction. As regards reimbursement of expenses, the ld. Counsel submitted that these expanses are in nature of courier charges, broadband configuration charges, staff accommodation, conference charges, etc. There was no value addition to said services, hence, the reimbursement was sought on cost to cost basis. The TPO has erred in understanding the nature of claim made by the assessee for reimbursement of expenses and has raised doubt over the actual rendering of such services. The ld. Counsel submits that the assessee has furnished all relevant documents viz. the invoices for making arrangement for stay of staff of BC, UK in India, charges paid for telecommunication, the details of couriers etc. to substantiate that the expenditure was indeed incurred by the assessee. The ld. Counsel submits that similar charges were incurred in the preceding assessment years and the same were claimed from BC, UK on cost to cost basis. The Assessing Officer (AO) never made any addition/adjustment in respect of such reimbursement of expenditure in the past. There is no change in the nature of expenditure incurred during the relevant period. He thus, prayed for deleting the TP adjustment with regard to reimbursement of expenses.

Shri S K Jadhav, representing the department vehemently defended the assessment order. He placed reliance on findings of the AO in respect of Transfer Pricing issue relating to reimbursement of expenses and prayed for dismissing appeal of the assessee.

Both sides heard, orders of the authorities below examined. The ground no. 1 of appeal is general in nature, hence, requires no adjudication. As regards ground no. 2 of appeal, the ld. Counsel for the assessee made statement at Bar that he is not pressing the same. In light of the statement made by ld. Counsel for the assessee, ground no. 2 of appeal is dismissed as not pressed. In ground no. 4 and 5 of appeal, the assessee has assailed additions on corporate tax issues. The ld. Counsel for the assessee submitted that relief has been allowed by the AO in rectification petition u/s. 154 of the Act vide order dated 21.04.2023, hence, ground no. 4 and 5 of appeal have become infructuous. Accordingly, the said grounds are dismissed as having become infructuous.

The solitary issue in present appeal for adjudicaiton is with regard to Transfer Pricing adjustment of Rs.16,99,524/-made by TPO qua reimbursement of expenditure. The assessee is providing local administrative support to organize and conduct examination on behalf of British Council, UK at its centers in India. The assessee inter alia claimed reimbursement of certain expenditure on cost to cost basis. The detail of the expenditure claimed by the assessee during the relevant assessment year is as under:-

We find that the TPO has misdirected himself while analyzing the issue of reimbursement of expenses. The TPO has accepted the amount charged by the assessee for provision of exam support services amounting to Rs.227,61,44,912/-. The expenditure for which reimbursement has been sought is only in connection with organizing and conducting of examination. There was no value addition, hence, the assessee only sought reimbursement of expenses on cost to cost basis. To substantiate payment of expenditure, the assessee has placed on record invoices. The expenses are purely third party expenses and were incurred in relation to business activities carried out by the assessee. The TPO has erred in questioning need of such ancillary services and further erred in holding that there was no cost benefit analysis taken by the assessee for receipt of such services. The TPO without understanding the issue in right perspective has made TP adjustment of Rs.16,99,524/-. Thus, the adjustment of Rs. 16,99,524/- made by the TPO in respect of reimbursement of expenditure is directed to be deleted. The assessee succeeds on ground no. 3 of appeal.

The assessee in ground no. 6 of appeal, has assailed levy of interest u/s.234B, 234C and 234D of the Act. Charging of interest under aforesaid sections is mandatory and consequential, hence, ground no. 6 of appeal is dismissed.

In the result, appeal of the assessee is partly allowed.