MPS Technologies Pvt Ltd., CHENNAI V. DCIT, CHENNAI

CO 82/CHNY/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4243 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-06-2016
• Court: TRIBUNAL
• Department Lawyers: S NATARAJA
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 143(1); 201; 143(2); 92

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 856/MDS/2016 / ASSESSMENT YEAR :2008 - 09 & C.O. NO. 82/MDS/2016 [IN I.T.A. NO. 856/MDS/2016 ] THE DEPUTY COMMISSIONER OF INCOME TAX, CO RPORATE CIRCLE 4(1 ), CHENNAI . VS. M/S. MPS TECHNOLOGIES PVT. LTD., NO. 27, G.N. CHETTY ROAD, T. NAGAR, CHENNAI 600 0 1 7 . [PAN: AA C C M 020 5A ] ( APPELLANT ) ( R ESPONDENT /CROSS OBJECTOR ) DEPARTMENT BY : SHRI S. NATARAJA , J CIT ASSESSEE BY : SHRI S AROJ KUMAR PARIDA , ADVOCATE / DATE OF HEARING : 2 3 . 0 8 .201 6 / DATE OF P RONOUNCEMENT : 24 .08 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH IS APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) 8, CHENNAI DATED 31 . 12 .2015 FOR THE ASSESSMENT YEAR 20 08 - 09 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF CLAIM ON DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . I.T.A. NO . 856 /M/1 6 & C.O. NO. 82/M/16 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE CONSULTATION, DEVELOPMENT AND MAINTENANCE SUPPORT, TESTING FOR CLIENTS IN PUBLISHING AND OTHER INDUSTRIE S. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF THE ASSESSEE AT . NIL. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AS THE ASSESSEE HA D ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES, WHICH EXCEEDED .15 CRORES. ACCORDINGLY NOTICES UNDER SECTION 143(2) AND 115WE(2) OF THE ACT WERE ISSUED ON 23.09.2009. SINCE THE VALUE OF INTERNATIONAL TRANSACTIONS WITH THEIR ASSOC IATE ENTERPRISES EXCEEDED .15 CRORES, THE CASE WAS REFERRED TO TRANSFER PRICING OFFICER UNDER SECTION 92CA OF THE ACT. ACCORDINGLY, THE TPO SHOW CAUSED THE ASSESSEE AND AFTER CONSIDERING VARIOUS FACTS AND CIRCUMSTANCES, THE TPO VIDE ORDER UNDER SECTION 92 CA(3) OF THE ACT DATED 13.10.2011 CONCLUDED THAT NO ADJUSTMENT IS CONSIDERED NECESSARY TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. 3. THEREAFTER, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CONSIDERING THE FACTS AN D CIRCUMSTANCES, THE ASSESSING OFF ICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE TOTAL TAX PAYABLE AT .1,18,11,183/ - AFTER REDUCING THE EXPENSES INCURRED IN FOREIGN I.T.A. NO . 856 /M/1 6 & C.O. NO. 82/M/16 3 CURRENCY OF .12,65,69,304/ - FROM THE TOTAL TURNOVER RETURNED BY THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) BY FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ITO V. SAK SOFT LIMITED [121 TTJ 865] DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE EXPENSES INCURRED IN FOREIGN EXCHANGE BOTH FROM THE EXPORT TURNOVER AND ALSO FROM THE TOTAL TURNOVER. 5. AGGRIEVED, THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AGREED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF ITAT, CHENNAI IN THE CASE OF SAK SOFT LTD. (SUPRA). 7. WE HAVE HEA RD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(APPEALS), BY FOLLOWING THE DECISION OF THE CHENNAI SPECIAL BENCH IN THE CASE OF ITO V. SAK SOFT LTD. (SUPRA), DIRECTED THE ASSESSING O FFICER TO REDUCE THE EXPENSES INCURRED IN FOREIGN EXCHANGE BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE ITAT, CHENNAI SPECIAL BENCH IN THE CASE OF M/S. SAK SOFT LTD . (SUPRA) , WHEREIN, IT WAS HELD AS UNDER: ' .... WE HOLD THAT FOR THE PURPOSE OF APPLYING THE FORMULA UNDER SUB - S (4) OF S.10B, THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR THE E XPENSES, IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA I.T.A. NO . 856 /M/1 6 & C.O. NO. 82/M/16 4 ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA. .. ' THE LD. DR HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE ABOV E DECISION OF THE TRIBUNAL HAS BEEN EITHER MODIFIED OR REVERSED BY ANY HIGHER COURT S . THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) ON THIS ISSUE AND THUS, TH E GROUND RAISED BY THE REVENUE IS DISMISSED. 8. COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, AT THE TIME OF HEARING, BY FILING COPY OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ITO V. SAK SOFT LTD. (SUPRA), THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). SINCE WE HAVE CONFIRMED THE ORDER PASSED BY THE LD. CIT(A) AND DISMISSED THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOME INFRUCTUOUS AND ACCORDINGLY DISM ISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 24 TH A UGUST , 201 6 AT CHENNAI. SD/ - SD/ - (A.MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL ME MBER CHENNAI, DATED, THE 24 .0 8 .201 6 VM/ - I.T.A. NO . 856 /M/1 6 & C.O. NO. 82/M/16 5 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.