S.R.A.Systems Ltd., CHENNAI V. ACIT, CHENNAI

CO 84/CHNY/2009

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8218 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-01-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 04-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T BANUSEKAR
• Assessee Lawyers: G K DHA LL IRS
• Keywords: Transfer pricing; Business expenditure; International transaction
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NOS.528(MDS)/2009 & 938(MDS)/2008 ASSESSMENT YEARS : 2003-04 & 2004-05 AND C.O. NO.84(MDS)/2009 IN ITA NO.528(MDS)/2009 (A.Y. 2003-04) THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE VI(1), CHENNAI. VS. M/S. SRA SYSTEMS LIMITED, 100-VALLUVARKOTTAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI-600 034. PAN AAECS7014H. (APPELLANT) ( RESPONDENT/CROSS OBJECTOR) APPELLANT BY : SHRI G.K.DHA LL, IRS, CIT RESPONDENT BY : SHRI T.BANUSEKAR , FCA DATE OF HEARING : 8 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 8 TH JANUARY, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THESE TWO APPEALS ARE FILED BY THE REVENUE FOR TH E ASSESSMENT YEARS 2003-04 AND 2004-05. THE CROSS OB JECTION IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003- 04. - - ITA 528/09 & 938/08, ETC. 2 2. FIRST WE WILL CONSIDER THE APPEAL AND THE CROSS OBJECTION FILED FOR THE ASSESSMENT YEAR 2003-04. T HE APPEAL AND THE CROSS OBJECTION ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-XI AT CHENNAI, PASSED ON 7-1-2009 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3), READ WITH SECTIONS 147 AND 92CA OF THE INCOME- TAX ACT, 1961. 3. THE ASSESSEE IS A COMPANY PROVIDING COMPUTER SYSTEM CONSULTANCY SERVICES TO PRIVATE SECTOR, PUBL IC SECTOR, GOVERNMENT AND OTHER ORGANIZATIONS. THE ASSESSEE U NDERTAKES STUDY FOR ITS CLIENTS ON MATTERS RELATING TO FEASIB ILITY OF COMPUTERIZATION, EVALUATE AND SELECT APPROPRIATE HA RDWARE AND SOFTWARE, INSTALL AND ASSIST IN USING MAINFRAME, MI NI AND MICRO COMPUTERS, ETC. THE ASSESSEE-COMPANY IS PROVIDING SOFTWARE SERVICES IN THE FORM OF IT SOLUTIONS, IT SERVICES, IT PRACTICE ASSISTANCE AND SUPPORT SOFTWARE DEVELOPMENT AND MOD IFICATION. 4. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD REPORTED SALES OF SOFTWARE SERVICES TO ITS ASSOCIATED ENTERPRISE (AE) AT ` 18.49 CRORES. IN THE LIGHT OF THE ABOVE TRANSACTION ENTERED INTO WIT H THE AE, THE - - ITA 528/09 & 938/08, ETC. 3 QUESTION OF DETERMINING THE ARMS LENGTH PRICE (ALP ) WAS REFERRED TO THE TRANSFER PRICING OFFICER (TPO) UNDE R SECTION 92CA(1) OF THE ACT. 5. THE ASSESSEE HAS ADOPTED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD TO ARRIVE AT THE ALP. THE ASSESSEE HAS FILED A VERY D ETAILED TRANSFER PRICING STUDY REPORT BEFORE THE TPO. ON G OING THROUGH THE EXPLANATIONS MADE BY THE ASSESSEE-COMPANY, THE TNMM ADOPTED BY THE ASSESSEE-COMPANY WAS APPROVED BY THE TPO. THE TPO HAS RECORDED HIS FINDING THAT ON THE BASIS OF THE FUNCTIONS PERFORMED BY THE ASSESSEE-COMPANY, THE RI SK ASSUMED AND THE NATURE AND VARIETY OF INTERNATIONAL TRANSACTION, TNMM IS FOUND TO BE THE MOST APPROPRIATE METHOD FOR COMPUTING THE ALP IN THE PRESENT CASE. 6. AS FAR AS THE PROFIT LEVEL INDICATOR (PLI) IS CONCERNED, THE ASSESSEE-COMPANY HAS ADOPTED THE RAT IO OF OPERATING PROFIT (OP) ON TOTAL COST. THE TPO FOUND THAT THIS RATIO MEASURES THE OPERATING PROFIT ON TOTAL COST, WHICH IS A USEFUL INDICATOR FOR MEASURING THE PROFIT ON SOFTWARE DEVE LOPMENT TO ITS RELATIVE COSTS. THE RATIO EXCLUDES THE EFFECT OF C OMPANY - - ITA 528/09 & 938/08, ETC. 4 FINANCING AND TAXATION DECISIONS AS WELL AS ABNORMA L AND EXTRAORDINARY ITEMS. THE TPO AGREED WITH THE ASSES SEE- COMPANY AND ADOPTED THE RATIO OF OPERATING PROFIT T O TOTAL COST AS THE PLI. 7. THEREAFTER, THE TPO EXAMINED THE SELECTION OF COMPARABLES MADE BY THE ASSESSEE-COMPANY. ON THE B ASIS OF DETAILS AVAILABLE IN THE APPROVED DATA BASE, THE AS SESSEE- COMPANY HAS INITIALLY IDENTIFIED 521COMPANIES FOR T HE PURPOSE OF COMPARISON. THIS WAS MADE ON THE BASIS OF SIMILARI TY OF FUNCTIONS. FROM THE ABOVE GROSS LOT, THE COMPANIES FOR WHICH DATA ARE NOT AVAILABLE FOR THE FINANCIAL YEAR 2002- 03, WERE OMITTED. THUS 259 COMPANIES WERE ELIMINATED. THE BALANCE 262 COMPANIES WERE AGAIN CONSIDERED. AS THE THIRD CRITERION, THE ASSESSEE-COMPANY ADOPTED THE TURNOVER TEST. AS FAR AS THE ASSESSEE-COMPANY IS CONCERNED, ITS TURNOVER OF SOFT WARE IS ` 22 CRORES. ON THIS BASIS, THE ASSESSEE-COMPANY HA S CHOSEN A RANGE OF ` 5 CRORES TO ` 250 CRORES AS COMPARABLE TURNOVER. WHEN THIS CRITERION WAS BROUGHT IN, ANOTHER 116 COM PANIES WERE ELIMINATED AND THEREAFTER 146 COMPANIES REMAINED IN THE COMPARISON LIST. THEREAFTER, THE ASSESSEE EXAMINED AS TO - - ITA 528/09 & 938/08, ETC. 5 WHETHER THESE 146 COMPANIES HAD TRANSACTIONS WITH A SSOCIATED ENTERPRISES OR NOT. RELYING ON COMPANY BACKGROUND AND THE OTHER RELEVANT MATTERS, THE ASSESSEE-COMPANY ELIMIN ATED 83 COMPANIES AND ADOPTED THE BALANCE 63 COMPANIES FOR FURTHER COMPARISON. THE FIFTH CRITERION ADOPTED BY THE ASS ESSEE- COMPANY WAS THE AREA OF SOFTWARE OPERATIONS, ON WHI CH ANOTHER 56 COMPANIES WERE ELIMINATED. THE BALANCE REMAINED WAS 7 COMPANIES. THEREAFTER, THE ASSESSEE COMPANY APPLIE D THE SIXTH CRITERION, I.E. WHETHER THE COMPARABLE COMPANIES WE RE PROFIT- MAKING COMPANIES. AT THIS STAGE ONE MORE COMPANY W AS ELIMINATED AND FINALLY THE ASSESSEE-COMPANY ZEROED DOWN TO A COMPARABLE LIST OF 6 COMPANIES. 8. THE AVERAGE PLI OF THE ABOVE SIX COMPANIES WORKED OUT TO 18.04%, I.E. THE ALP DETERMINED ON TH E BASIS OF THE RATIO OF OPERATING PROFIT TO TOTAL COST OF THE ASSESSEE-COMPANY HAS BEEN WORKED OUT TO 18.04%. THIS RESULTED IN CO MPUTING THE OPERATING PROFIT AT ` 4.15 CRORES AGAINST A TOTAL COST OF ` 23 CRORES. 9. THE TPO, AFTER FOLLOWING ALL THE METHODS AND PROCEDURES ADOPTED BY THE ASSESSEE-COMPANY, GAVE A SINGULAR - - ITA 528/09 & 938/08, ETC. 6 DIFFERENT TREATMENT IN RESPECT OF THE COMPARABLES S ELECTED FOR THE STUDY. THE TPO MADE HIS LIST OF COMPARABLE COMPANI ES AND WORKED OUT THE RATIO OF OPERATING PROFIT TO TOTAL C OST AT 27.52%. THIS REVISED PLI WORKED OUT BY THE TPO BROUGHT OUT AN OPERATING PROFIT OF ` 8.73 CRORES. BUT THE OPERATING PROFIT RETURNED BY THE ASSESSEE WAS ` 4.15 CRORES. THE DIFFERENTIAL AMOUNT IS ` 4.58 CRORES. THE VALUE OF SALES, AS ADMITTED BY T HE ASSESSEE, MADE TO ITS AE IS ` 18.49 CRORES. THE TPO ADDED THE ABOVE STATED DIFFERENTIAL OF ` 4.58 CRORES AND DETERMINED THE ALP AT ` 23.07 CRORES. THE TPO HAS TRANSMITTED HIS ORDER T O THE ASSESSING OFFICER, BASED ON WHICH THE ASSESSMENT WA S COMPLETED BY THE ASSESSING OFFICER BY MAKING AN ADD ITION OF ` 4.58 CRORES TO THE INCOME OF THE ASSESSEE TOWARDS ALP ADJUSTMENT. 10. WHEN THE MATTER WAS TAKEN IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEALS) DELETED THE SAI D ALP ADDITION OF ` 4.58 CRORES. THIS IS THE MOST IMPORTANT GROUND RAISED BY THE REVENUE IN THE PRESENT APPEAL. THE G ROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS ERRED IN DELETING THE ALP ADJUSTME NT TO THE - - ITA 528/09 & 938/08, ETC. 7 TUNE OF ` 4.58 CRORES MADE BY THE ASSESSING OFFICER ON THE B ASIS OF THE COMPUTATION MADE BY THE TPO. IT IS THE CASE OF THE REVENUE THAT THE COMMISSIONER OF INCOME-TAX(APPEALS ) HAS FAILED TO APPRECIATE THAT ON THE SELECTION OF COMPA RABLES, EMPHASIS WAS PLACED ON RULE 10B(4) OF THE INCOME-TA X RULES ON DATA RELATING TO THE FINANCIAL YEAR 2002-03, IN WHI CH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. 11. WE HEARD SHRI G.K.DHALL, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E, ON THIS POINT AT LENGTH. SHRI T.BANUSEKAR, THE LEARNED CHA RTERED ACCOUNTANT, APPEARED FOR THE ASSESSEE-COMPANY. 12. AFTER HEARING BOTH SIDES IN DETAIL, WE CONSIDE RED THE ISSUE VERY CAREFULLY. THERE IS NO DISPUTE IN THE S ELECTION OF THE MOST APPROPRIATE METHOD TO ARRIVE AT THE ALP. BY A ND LARGE THERE IS NO DISPUTE ON THE CRITERIA ADOPTED BY THE ASSESSEE TO SELECT THE COMPARABLES. THE TPO HIMSELF HAS DISCUS SED IN DETAIL THE SIX CRITERIA RELIED ON BY THE ASSESSEE-C OMPANY TO FINALLY DRAW OUT THE LIST OF COMPARABLE COMPANIES. 13. BUT, THE DEVIATION TOOK PLACE IN THE FINAL LIS T OF COMPARABLES RELIED ON BY THE ASSESSING OFFICER AS A GAINST THE - - ITA 528/09 & 938/08, ETC. 8 COMPANIES SELECTED BY THE ASSESSEE-COMPANY. THE LI ST OF COMPARABLE COMPANIES RELIED UPON BY THE ASSESSEE-CO MPANY HAS BEEN REJECTED BY THE TPO WITHOUT STATING ANY RE ASON, EVEN THOUGH THE TPO HAS, BY AND LARGE, AGREED WITH THE G ENERAL PREMISES ON WHICH THE ASSESSEE HAS COMPUTED ITS ALP . THE TPO HAS NOT MADE ANY FINDING THAT THE PRICE CHARGED OR PAID IN THE TRANSACTIONS ENTERED INTO WITH AE WAS NOT IN AC CORDANCE WITH RULES. THE TPO HAS NO CASE THAT THE ASSESSEE-COMPA NY HAS NOT MAINTAINED PROPER INFORMATION AND DOCUMENTATION REL ATING TO THE INTERNATIONAL TRANSACTIONS. THERE IS ALSO NO DISPU TE FOR THE TPO ON THE INFORMATION AND DATA USED IN THE COMPUTATION OF ALP, WHICH RELATED TO THE FINANCIAL YEAR 2002-03. THERE ARE NO SUCH OTHER FAILURES ON THE PART OF THE ASSESSEE. 14. IT IS SEEN THAT THE ASSESSING OFFICER HAS REJE CTED THE CASES OF COMPARISON PROVIDED BY THE ASSESSEE-COMPAN Y WITHOUT STATING ANY REASON. IN THE CASE OF M/S. ANTARIX EA PPLICATION LTD., THE ASSESSEE-COMPANY HAS NOT RELIED UPON THE SAME F OR THE REASON THAT THE AREA OF COMPARABILITY IS NOT THE SA ME. BUT THE TPO TOOK THE OPPOSITE VIEW WITHOUT STATING ANY REAS ON. LIKEWISE, IN THE CASE OF M/S. E.STAR INFOTECH LTD., THE ASSESSEE- - - ITA 528/09 & 938/08, ETC. 9 COMPANY OPTED IT OUT FOR THE REASON THAT THE SAID F IRM WAS PROVIDING MORE OF IT SERVICES RATHER THAN SOFTWARE SERVICES. THIS IS ALSO TURNED DOWN BY THE TPO WITHOUT STATING ANY REASON. THIS IS THE CASE WITH MANY OTHER COMPARABLES LIKE M/S. F ORTUNE INFORMATICS LTD., M/S. FOUR SOFT LTD., M/S. NATIONA L INFORMATICS CENTRE SERVICES INC., M/S.ZEN TECHNOLOGIES LTD., ET C. 15. IN THESE CIRCUMSTANCES, WE FIND THAT EVEN THOU GH THE TPO HAS ADOPTED THE TNMM TO COMPUTE THE ALP, HE HAS OVERRULED THE OBJECTIONS OF THE ASSESSEE WITHOUT ST ATING ANY REASON. THE ARBITRARY SELECTION OF COMPARABLES HAS IN FACT INFLATED THE OPERATING PROFIT IN THE COMPUTATION MA DE OUT BY THE TPO. THEREFORE, WE FIND THAT THERE IS NO FACTUAL B ASIS FOR THE ADDITION OF THE DIFFERENTIAL AMOUNT OF ` 4.58 CRORES WORKED OUT BY THE TPO AND ADOPTED BY THE ASSESSING OFFICER. WHEN THE MATTER IS VIEWED IN THE ABOVE PERSPECTIVE, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN DELETING THE ALP ADDITION OF ` 4.58 CRORES. MOREOVER, WE FIND FROM THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) T HAT FOR THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 2004-05, THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS HELD IN THE - - ITA 528/09 & 938/08, ETC. 10 ASSESSEES OWN CASE THAT THE TPO SHOULD NOT HAVE RE JECTED THE ALP DISCLOSED BY THE ASSESSEE. FURTHER, IN THE SUB SEQUENT ASSESSMENT YEAR 2005-06, THE TPO HIMSELF HAS ACCEPT ED THE ALP RETURNED BY THE ASSESSEE-COMPANY. IT IS VERY R ELEVANT TO NOTE THAT FOR ALL THESE ASSESSMENT YEARS, THE FACTU AL MATRIX OF THE CASE REMAINED EXACTLY THE SAME. 16. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, WE UPHOLD THE ORDER OF THE COMMISSIONER OF IN COME- TAX(APPEALS) IN DELETING THE ALP ADDITION OF ` 4.58 CRORES. 17. THE RELEVANT GROUNDS RAISED BY THE REVENUE FAI L. 18. THE NEXT ISSUE RAISED BY THE REVENUE IN THE PR ESENT APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW E XEMPTION UNDER SECTION 10A OF THE ACT. THIS ISSUE WAS CONSIDERED BY THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH-A, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 THROUGH TH EIR ORDER DATED 7-11-2012 IN ITA NO.2150(MDS)/2010. THE TRIB UNAL HELD THAT THE ASSESSEE-COMPANY IS ENTITLED FOR THE BENEF IT OF DEDUCTION AVAILABLE UNDER SECTION10A OF THE ACT. T HE TRIBUNAL RELIED ON ITS OWN DECISION RENDERED IN THE CASE OF THE VERY SAME - - ITA 528/09 & 938/08, ETC. 11 ASSESSEE FOR THE EARLIER ASSESSMENT YEAR 2002-03 AN D THE SUBSEQUENT ASSESSMENT YEAR 2005-06, IN COMING TO TH E ABOVE CONCLUSION. IN THE PRESENT CASE, THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL ON THE SUBJECT. THEREFORE, WE FIND THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) IS JUSTIFIED IN HOLDING THAT THE ASSES SEE-COMPANY IS ENTITLED FOR THE BENEFIT OF DEDUCTION AVAILABLE UND ER SECTION 10A OF THE ACT. 19. NO OTHER GROUND IS RAISED IN THIS APPEAL FILED BY THE REVENUE. IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED. 20. NEXT WE WILL CONSIDER THE CROSS OBJECTION FILE D BY THE ASSESSEE IN C.O. NO.84(MDS)/2009. THE FIRST OBJEC TION OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE INCOME-ESCAPING A SSESSMENT ORDER IS WITHOUT JURISDICTION AND CONTRARY TO FACTS AND LAW. ON GOING THROUGH THE FACTS OF THE CASE, WE FIND THAT T HERE IS NO MUCH FORCE IN THIS ARGUMENT ADVANCED BY THE ASSESSEE. 21. THE SECOND OBJECTION RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N - - ITA 528/09 & 938/08, ETC. 12 CONFIRMING THE DISALLOWANCE OF DIVIDEND TAX DELAY C HARGES, INTEREST FOR DELAY IN REMITTING TDS, EXPENSES INCUR RED FOR DELAY IN UTI DIVIDEND PAYMENTS, ETC. IT IS TO BE SEEN THAT THE DELAY CHARGES ATTRIBUTABLE TO DIVIDEND TAX PARTAKES THE C HARACTER OF DIVIDEND TAX ITSELF. DIVIDEND TAX AS SUCH IS NOT DE DUCTIBLE. THEREFORE THE DELAY CHARGES ALSO ARE NOT DEDUCTIBLE . THIS IS THE SAME CASE IN RESPECT OF INTEREST FOR DELAY IN REMIT TING TDS. THERE CANNOT BE A DIFFERENT VIEW ON EXPENSES INCURR ED FOR DELAY IN UTI DIVIDEND PAYMENTS. THEREFORE, THESE EXPENSE S CLAIMED BY THE ASSESSEE ARE NOT DEDUCTIBLE IN COMPUTING ITS INCOME. THIS GROUND FAILS. 22. THE ASSESSEE FAILS IN ITS CROSS OBJECTION FILE D BEFORE THE TRIBUNAL. 23. NEXT WE WILL CONSIDER THE APPEAL OF THE REVENU E FILED FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.938 (MDS)/2008. THE FIRST ISSUE RAISED BY THE REVENUE FOR THE IMPUG NED ASSESSMENT YEAR 2004-05 IS THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS ERRED IN DIRECTING THE ASSESSING O FFICER TO ALLOW THE CLAIM OF EXPENSES TOWARDS DEVELOPMENT OF SOFTWA RE AS ALLOWABLE BUSINESS EXPENDITURE, THEREBY DELETING TH E ADDITION OF - - ITA 528/09 & 938/08, ETC. 13 ` 3,54,480/-. THE COMMISSIONER OF INCOME-TAX(APPEAL S) HAS DELETED THE ABOVE ADDITION, RELYING ON THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF BUSINESS INFORMATI ON PROCESSING SERVICES VS. ACIT, 73 ITD 304. IN THE S AID ORDER THE TRIBUNAL HAS HELD THAT COMPUTER SOFTWARE CONSISTS O F PROGRAMMES WHICH A COMPUTER USES TO PERFORM A TASK ON THE BASIS OF LOGIC SUPPLIED BY THE USER. SUCH SOFTWARE CAN BE EITHER CREATED OR PURCHASED AND CAN BE MODIFIED IF THERE A RE SUBSEQUENT CHANGES AS THE ASSESSEE IS REQUIRED TO C HANGE THE SOFTWARE WITHIN A VERY SHORT SPAN OF TIME AND THEY BECOME OUTDATED BECAUSE OF CHANGE OF SYSTEM AND CHANGE OF TECHNOLOGY. HARDWARE IS PURCHASED ONCE, BUT SOFTWA RE IS EQUIPMENT WHICH IS PURCHASED SEPARATELY TO DEVELOP THE VARIOUS PROGRAMMES AND TO TAKE THE HELP OF THE VARIOUS SCHE MES AS REQUIRED BY THE USERS. THE TRIBUNAL CONTINUED TO O BSERVE THAT DAY BY DAY THE SYSTEMS ARE DEVELOPED IN A NEW WAY A ND SOFTWARES ARE NEEDED LIKE A RAW MATERIAL FOR USE IN MANUFACTURING AND THEREFORE SUCH EXPENDITURE IS PUR ELY OF REVENUE IN NATURE AND SHOULD BE ALLOWED IN FULL. W E FIND THAT THE - - ITA 528/09 & 938/08, ETC. 14 COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY FOL LOWED THE ORDER OF THE TRIBUNAL AND DELETED THE ADDITION OF ` 3,54,480/-. 24. THIS GROUND OF THE REVENUE IS DISMISSED. 25. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT THE TPO OR THE ASSESSING OFFICER SHOULD NOT HAVE RE JECTED THE ALP DETERMINED BY THE ASSESSEE, THEREBY DELETING TH E ADDITION OF ` 9,65,84,000/-. IT IS THE CASE OF THE REVENUE THAT THE TPO HAS DETERMINED THE ALP BASED ON THE DETAILS OF COMP ARABLE COMPANIES GIVEN BY THE ASSESSEE-COMPANY. 26. THIS VERY SAME ISSUE HAS ALREADY BEEN CONSIDER ED BY US FOR THE EARLIER ASSESSMENT YEAR 2003-04 IN IT A NO.528(MDS)/2009, DISCUSSED IN PARAS 12 TO 16 ABOVE . THE FACTS AND THE CIRCUMSTANCES ARE EXACTLY SIMILAR. T HEREFORE, FOLLOWING THE REASONS EXPRESSED IN OUR ORDER PASSED FOR THE ASSESSMENT YEAR 2003-04, WE HOLD THAT THE COMMISSIO NER OF INCOME-TAX(APPEALS) IS JUSTIFIED IN DELETING THE AD DITION OF TP ADJUSTMENT. THIS GROUND ALSO FAILS. 27. IN RESULT, THE APPEALS FILED BY THE REVENUE FO R THE TWO ASSESSMENT YEARS 2003-04 AND 2004-05 ARE DISMIS SED. THE - - ITA 528/09 & 938/08, ETC. 15 CROSS OBJECTION FILED BY THE ASSESSEE FOR THE ASSES SMENT YEAR 2003-04 IS ALSO DISMISSED. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON TUESDAY, THE 8 TH OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 8 TH JANUARY, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.