Marvell India Private Limited, Bangalore V. ACIT, Bangalore

ITA 1033/BANG/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0335 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; Rectification of order; Opportunity of being heard; Principle of natural justice; International transaction; Services rendered outside India
• Section: 92C; 143(3); 234B; 27; 154

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER IT(TP)A NO.1033(BANG)/2011 (ASSESSMENT YEAR : 2007-08) & IT(TP)A NO.536(BANG)/2015 (ASSESSMENT YEAR 2010-11) M/S MARVEL INDIA PVT.LTD., NO.23, AIRPORT ROAD, II FLOOR, LEELA GALLERIA, BANGALORE-560 008 PAN NO.AAECM5559R APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRLE-12(1), BANGALORE RESPONDENT AND IT(TP)A NO.431(BANG)/2015 (ASSESSMENT YEAR 2010-11) (BY REVENUE) ASSESSEE BY : SHRI AJITH KUMAR JAIN, CA REVENUE BY : SHRI MUZAFFAR HUSAIN, CIT(LTU) DATE OF HEARING : 26-05-2016 DATE OF PRONOUNCEMENT : 17 -06-2016 O R D E R PER SHRI A. K. GARODIA, AM: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WHICH ARE DIRECTED AGAINST THE DIRECTIONS OF THE LEARNED DRP, BANGALOR E DATED 21-08-2011 AND 10-12- 2014 FOR THE ASSESSMENT YEARS : 2007-08 AND 2010-11 RESPECTIVELY. 3. FIRST WE TAKE UP ASSESSEES APPEAL FOR THE ASSE SSMENT YEAR 2007-08 IN IT(TP)A NO.1033(B)/2011. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER; BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, MARVELL INDIA PRIVATE LIMITED (HEREINAFTER REFERRED TO AS 'THE APPELLANT'), RESPE CTFULLY SUBMITS IN RESPECT OF THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER ('AO'), ASSISTANT COMMISSIONER OF INCOME -TAX, CIRCLE 12(1), BANGALORE UNDER SECTION 143(3) READ WITH SECTION 14 4C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') ON THE FOLLO WING GROUNDS: TRANSFER PRICING 1. THE LEARNED AO BASED ON THE DIRECTIONS RECEIVED FRO M HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED IN LAW AND ON FACTS, IN UPHOLDING THE ADJUSTMENT TO THE TRANSFER PRICE PROPOSED BY THE LEARNED TRANSFER PRICING OFFICER ('TPO'). 2. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY MAKING AN ADDITION OF RS 10,624,431 TO THE TAXABLE INCOME OF THE APPELLANT AND IN HOLDI NG THAT THE TRANSACTIONS BETWEEN THE APPELLANT AND ITS ASSOCIATED ENTERPRISE WITH RESPEC T TO SOFTWARE RESEARCH AND DEVELOPMENT SERVICES WERE NOT AT ARM'S LENGTH. 3. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY FAILING TO APPRECIATE THE FACT THAT ASSOCIATED ENTERPRISE OF THE APPELLANT INCURRED LOS SES DURING THE YEAR UNDER CONTENTION. THIS FURTHER SUBSTANTIATES THE FACT THAT THE APPELLANT H AS NOT SHIFTED PROFITS OUTSIDE INDIA. 4. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY FAILING TO APPRECIATE THE APPELLANT'S COMMERCIAL JUDGMENT ABOUT THE APPLICATION IF ARM'S LENGTH PRINCIPLE WHICH IS TIED TO THE BUSINESS REALITIES. 5. THE LEARNED AO/DRPITPO ERRED IN LAW AND ON FACTS BY FAILING TO APPRECIATE THAT TRANSFER PRICING IS AN ANTI AVOIDANCE MECHANISM. IN THE INST ANT CASE, THE APPELLANT IS REGISTERED UNDER THE SOFTWARE TECHNOLOGY PARKS OF INDIA ('STPI') SCH EME AND HAS AVAILED TAX BENEFITS UNDER SECTION 1 OA OF THE ACT 6. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY FAILING TO APPRECIATE THAT THE APPELLANT HAS NO INCENTIVE TO SHIFT PROFITS OUTSIDE INDIA. 7. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY NOT AP PRECIATING THAT THE APPELLANT IS A CAPTIVE SERVICE PROVIDER, CARRYING OUT LIMITED FUN CTIONS AND ASSUMING LIMITED RISKS. 8. THE LEARNED AOIDRPITPO ERRED IN LAW AND ON FACTS BY REJECTIN G THE TRANSFER PRICING DOCUMENTATION PREPARED BY THE APPELLANT IN THE MANNER AS REQU IRED UNDER THE PROVISIONS OF THE ACT AND INCOME-TAX RULES, 1962 ('THE RULES') . 9. THE LEARNED AO/DRPITPO ERRED IN LAW BY CONDUCTING A FRESH SEAR CH FOR COMPARABLE COMPANIES AND BY REJECTING THE SEARCH PROCESS CARRIED OUT BY THE A PPELLANT, WITHOUT GIVING ADEQUATE REASONS FOR THE REJECTION. 10. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY REJECTI NG THE FILTERS ADOPTED BY THE ASSESSEE WITH NEW FILTERS BASED ON TPOS OWN JUDGMENT AND PERCEPTION. 11. THE LEARNED AOIDRPITPO ERRED IN LAW AND ON FACTS BY R EJECTING CERTAIN COMPARABLES CONSIDERED BY THE APPELLANT, ON GROUNDS OF FUNCTIO NAL DISSIMILARITY AND BY APPLYING FILTERS SUCH AS ONSITE REVENUE, EMPLOYEE COST, EXPORT REVENUE, DIFFERENT YEAR ENDING, DECLINING REVENUE, TURNOVER, REVENUE FROM RELEVANT SEG MENT LESS THAN 75 PERCENT OF TOTAL REVENUE. 12. THE LEARNED AOIDRPITPO ERRED IN LAW AND ON FACTS BY R EJECTING CERTAIN COMPARABLES CONSIDERED BY THE APPELLANT, ON GROUNDS OF FUNCTIO NAL DISSIMILARITY AND BY APPLYING FILTERS SUCH AS ONSITE REVENUE, EMPLOYEE COST, EXPORT REVENUE, DIFFERENT YEAR ENDING, DECLINING REVENUE, TURNOVER, REVENUE FROM RELEVANT SEG MENT LESS THAN 75 PERCENT OF TOTAL REVENUE. 12. THE LEARNED AO/DRPITPO ERRED IN LAW AND ON FACTS BY NO T FOLLOWING A CONSISTENT APPROACH WHILE APPLYING SAID FILTERS AND ADDING CERTAIN CO MPANIES AS COMPARABLES, WHICH FAIL QUALITATIVE AND I OR QUANTITATIVE FILTERS, ADOPTED BY TPO HIMSELF. 13. THE LEARNED AO/DRPITPO ERRED IN LAW AND ON FACTS IN NO T ACCEPTING CONSOLIDATED FINANCIAL STATEMENTS FOR POTENTIALLY COMPARABLE COMPANIES. 14. THE LEARNED AO/DRP/TPO ERRED IN LAW AND ON FACTS BY IN CLUDING LARGE COMPANIES SUCH AS INFOSYS TECHNOLOGIES LIMITED AND WIPRO LIMITED AS COMP ARABLES. IT PO ER RE D I N LAW A ND ON F A 15. THE LEARNED AO/DRPITPO ERRED BY CONCLUDIN G THAT THE DATA USED BY THE APPELLANT FOR THE TRANSFER PRICING STUDY WAS NOT CONTEMPORANEOUS. 16 THE LEARNED AO/DRPITPO ERRED IN LAW AND ON FACTS BY REJECTING USAGE OF MULTIPLE YEAR DATA BY THE APPELLANT AND USING ONLY THE CURRENT YEAR (I.E. FINANCIAL YEAR 2006-07) DATA FOR COMPUTATION OF ARM'S LENGTH PRICE. 17. THE LEARNED AO/DRPITPO ERRED BY IGNORING THE PROVISIONS OF RULE 10 OF THE RULES, INTERNATIONAL COMMENTARIES AND JUDICIAL PRO NOUNCEMENTS, WHICH ADVOCATE USAGE OF MULTIPLE YEAR DATA OF COMPARABLE COMPANIES FOR THE PURPOSE OF DETERMINATION OF THE ARM'S LENGTH PRICE. 18. THE LEARNED AO / DRP I TPO ERRED IN L AW A N D O N F AC T S BY N O T TA KIN G INT O CO N S I DE R AT I O N F ORE I G N EXCHANGE F LU CTUAT I ON GA I N /L OSS AND P R OV I S I ON F O R DOUBTFU L DEB T S WHIL E COMPUT I NG THE OPE R AT I NG MA R G I N OF THE COMPA R AB L E COMPAN I ES AND THE APPE LL AN T . 19 THE LEARNED AO / DRP I TPO ERRED I N L AW AND ON FACTS BY NOT PRO VI D I NG A R E LI E F ON ACCO UN T OF D I FFE R ENCES I N R I SK PROFILE OF THE APPELLANT AND THE POTENT I A L COMPARABLES . 20. THE LEARNED AO/DRP/TPO ERRED I N LAW AND ON FACTS BY I NCLUDING CERTA IN COMPAN I ES AS COMPARABLE AND I N REJECTING CERTAIN COMPARABLES CONSIDERED BY APPEL LANT , BASED ON T HE I NFORMATION GATHERED UNDE R SECTION 1 33(6) OF THE AC T , THOUGH SUCH I NFORMATION WAS NOT AVAILABLE IN PUBLIC DOMAIN TO THE APPELLANT AT THE TIME OF CONDUCTING ITS OWN TRANSFER PRICING STUDY . 21. THE L EARNED AO / DRP I TPO ERRED IN L AW AND ON FACTS , IN MAKING SEVE R AL OBSE R VAT I ONS AND F I NDINGS WH I CH ARE BASED ON . INCORRECT I NTERPRETAT I ON OF L AW AND CONTRA R Y T O FACTS O F TH E CASE . 22. THE L EARNED AO / DRP I TPO ERRED , IN L AW AND O N F ACTS , B Y N OT P R O VI D I NG T H E BE N EF IT O F 5 PE R CENT R ANGE TO THE APPELLANT AS ENV I SAGED UNDE R PROV I SO TO SECT I O N 92C ( 2 ) O F T HE ACT . 23. THE LEARNED COL L EGIUM OF COMM I SS I ONE R S COMP RI S I NG T H E DRP ER R ED I N L AW AND ON F ACTS , BY NOT ADHER IN G TO T HE PROCEDURE LA I D DOWN I N SECTION 144C ( 5 ) , 1 44C ( 6 ) AND 1 44C ( 7 ) O F T HE ACT . 24 . THE LEARNED AO ERRED I N I NITIATING PENALTY PROCEEDINGS U N DER SECT I ON 27 1 ( 1 )( C ) OF THE ACT . CORPORATE TAX 25. THE LEARNED AO/DRP ERRED I N RE-COMPUTING THE RELIEF UNDER SEC T ION 1 0A AT RS 2 , 057 , 394 AS AGA I NST RS 2 , 124 , 078 C L AIMED BY APPE L LANT I N I TS RETURN OF I NCOME FO R ITS STP I UN I T I N PUNE , THEREB Y MAK I NG AN ADD I T I ON OF RS 66 , 684 TO THE RETURNED I NCOME . 26. THE L EARNED AO/DRP ERRED I N L AW I N REDUCING AN AMOUNT OF INR 357 , 922 PERTA I N I NG TO IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 5 TELECOMMUNICAT I ON EXPENSES FROM THE EXPORT TU R NOVER FOR THE PURPOSES OF COMPUT I NG SECT I ON 10A REL I EF ON THE BAS I S T HAT APPELLANT HAD I NCLUDED THE SAME IN TH E ' E X PORT TURNOVER ' AND THAT THE SAME REPRESENTS EXPENSES A T TR I BUTABLE TO DE LI VER Y OF COMPUTER SOFTWARE OUTS I DE I ND I A AS ENVISAGED I N THE PROV I SO T O EXPLANAT I ON 2 (I V ) O F SECT I ON 10A OF THE ACT . 27. WITHOUT PREJUDICE TO THE ABOVE GROUND , THAT THE TELECOMMUN I CAT I ON EXPENSES OUGH T NO T TO BE EXCLUDED FROM THE EXPORT TURNOVER , THE LEARNED AO ERRED I N FACT AND IN L AW IN REDUCING THE ENTIRE TELECOMMUNICATION EXPENSES, WHEN SAID EXPENS ES WERE INCURRED BY APPELLANT FOR ITS ENTIRE OPERATIONS INCLUDING FOR DOWNLOADING DATA, UPLOADING DATA. 28. THE LEARNED AO/DRP ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE DOES NOT PROVIDE ANY TECHNICAL SERVICES OUTSIDE IND IA AND INSTEAD HOLDING THAT DELIVERY OF COMPUTER SOFTWARE IS IN THE NATURE OF RENDERING 'TE CHNICAL SERVICES' AS DEFINED IN EXPLANATION 2 TO SECTION 9(1 )(VII) OF THE ACT, THE REBY DISREGARDING VARIOUS JURISDICTIONAL TRIBUNAL DECISIONS ON THE ISSUE. 29. WITHOUT PREJUDICE, THE LEARNED AOIDRP ERRED IN LAW AND ON FACTS IN REDUCING THE ABOVEMENTIONED EXPENSES OF RS 357,922 ONLY FROM THE EXPORT TURNOVER AND NOT FROM THE TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING SECTIO N 10A RELIEF, THEREBY DISREGARDING VARIOUS JURISDICTIONAL TRIBUNAL AND OTHER DECISIONS ON THE ISSUE. 30. THE LEARNED AO/DRP ALSO ERRED IN NOT RELYING ON THE DECISION OF THE SPECIAL BENCH OF THE CHENNAI TRIBUNAL IN THE CASE OF SAK SOFT LIMITED V. ITO (ITA NO. 691 & 1953/MDS/2007) WHEREIN IT HAS BEEN HELD THAT IF THE TELECOMMUNICAT ION, FREIGHT AND INSURANCE EXPENSES ARE REDUCED FROM THE EXPORT TURNOVER THEN THE SAME WOULD ALSO HAVE TO BE REDUCED FROM THE TOTAL TURNOVER IN ORDER TO COMPUTE THE DEDUCTIO N UNDER SECTION 10A. 31. THE LEARNED AO HAS ERRED, IN LAW AND ON FACTS, IN CHARGING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. FOR THE ABOVE AND ANY OTHER GROUNDS, WHICH MAY BE A DVANCED AT THE TIME OF HEARING, YOUR APPELLANT PRAYS THAT THE ORDER OF THE LEARNED AO M AY BE PLEASE SET ASIDE . THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, AMEND AND / OR MODIFY ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 4. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT ON TP ISSUE, THE ASSESSEE HAS RAISED 24 GROUNDS, BUT THE ASSESSEE IS PRESSING ONLY GROUND IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 6 NOS.9,12,14 AND 22 AND THE REMAINING GROUNDS ARE NO T PRESSED. ACCORDINGLY, THE REMAINING GROUNDS ARE REJECTED, AS NOT PRESSED. 5. REGARDING THESE FOUR GROUNDS WHICH ARE BEING PR ESSED BY THE LD. AR OF THE ASSESSEE, IT WAS SUBMITTED THAT THAT OUT OF 28 COMPARABLES WHICH ARE CONSIDERED BY THE TPO AS CAN BE SEEN ON PAGES 1 57 TO 158 OF THE PAPER BOOK, I.E. PAGE NO.2 & 3 OF THE TPOS ORDER, IT WAS POINTED OUT THAT THE INTERNATIONAL TRANSACTION IN DISPUTE IS MAINLY REGA RDING SOFTWARE DEVELOPMENT SERVICES OF RS.15,03,62,370/-AND THE PE RCENTAGE OF OPERATING PROFIT ON OPERATING COST OF THE ASSESSEE IS NOTED B Y THE TPO AT 14.64% AND THE MEAN MARGIN OF 26 COMPARABLES IS NOTED BY THE T PO AT 25.14% BEFORE WORKING CAPITAL ADJUSTMENT AND 22.74% AFTER WORKING CAPITAL ADJUSTMENT. THEREAFTER, HE SUBMITTED THAT IN CASE OF HEWLETT PA CKARD (IND.) SOFTWARE OPERATION LTD., IN ITA NO.130(BANG)/2011 DATED 09-0 3-2016 FOR THE SAME ASSESSMENT YEAR, COPY AVAILABLE IN COMPILATION OF C ASE LAWS PAPER BOOK ALSO, THE SAME 26 COMPARABLES WERE ADOPTED BY THE T PO AND AS PER PARA 14 OF THE TRIBUNALS ORDER RENDERED IN THE CASE OF M/S HEWLET PACKARD (IND.) SOFTWARE OPERATION LTD., (SUPRA), THE TRIBUN AL HAS DIRECTED TO EXCLUDE 12 COMPARABLES I.E. 1) M/S AVANI CIMCON TEC H.LTD., 2) M/S CELESTIAL LABS LTD., 3)E-ZEST SOLUTIONS LTD., 4)FLE XTRONICS SOFTWARE SYSTEMS LTD (SEG.) 5)M/S HELIOS & MATHESAON INF.TECH.LTD.,6 ) M/S INFOSYS TECH.LTD., 7) M/S ISHIR INFOTECH LTD., 8) M/S KALS INFORMATION SYSTEMS LTD (SEG.) 9) LUCID SOFTWARE LTD.,10) M/S MEGASOFT LTD. , 11) M/S PERSISTENT SYSTEMS LTD., AND 12) M/S WIPRO LTD.,(SEG.) HE FUR THER SUBMITTED THAT AS PER THE TRIBUNALS ORDER RENDERED IN THE CASE OF M/ S MERITOR LVS INDIA (P) IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 7 LTD., IN IT(TP)A NO.1231(BANG)/2011 FOR THE SAME A SSESSMENT YEAR, COPY AVAILABLE IN COMPILATION OF CASE LAWS ALSO, THE SAM E 26 COMPARABLES WERE CONSIDERED BY THE TPO AND IN ADDITION TO THESE 12 C OMPARABLES WHICH ARE EXCLUDED AS PER THE TRIBUNALS ORDER IN THE CASE OF M/S HEWLET PACKARD (IND.) SOFTWARE OPERATION LTD., (SUPRA), THREE MORE COMPARABLES WERE DIRECTED TO BE EXCLUDED IN THIS CASE, I.E. 1) M/S A CEL TRANSMATICS LTD (SEG.) 2) M/S TATA ELXSI LTD.,(SEG.) AND 3) THIRDWARE SOL UTIONS LTD. HE SUBMITTED THAT IN THESE TWO CASES ALSO, THE ASSESSEE COMPANY WAS ENGAGED IN THE SOFTWARE DEVELOPMENT SERVICES AS IN THE PRESENT CAS E AND THEREFORE, THESE TWO TRIBUNAL ORDERS ARE SQUARELY APPLICABLE TO THE PRESENT CASE AND HENCE, THESE 15 COMPARABLES, AS PER THESE TWO TRIBUNAL ORD ERS SHOULD BE EXCLUDED IN THE PRESENT CASE. 6. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IN THE PRESENT CASE, IT IS NOTED BY THE TPO ON PAGE NO.2 & 3 OF HIS ORDER THAT THE ASSESSEE COMPANY IS ENGAGED IN RENDERING SERVICES T O THE AE RELATING TO DESIGNING OF INTEGRATED CIRCUITS AND THE TESTING OF INTEGRATED CIRCUITS ALONG WITH CUSTOMER SUPPORT. IT IS ALSO NOTED BY THE TPO THAT THE INTERNATIONAL TRANSACTIONS ARE MAINLY OF RS.15,03,62,370/-FOR SOF TWARE SERVICES APART FROM RE-IMBURSEMENT OF EXPENSES OF RS.21.45 LACS AN D 22.61 LACS. IN THE CASE OF M/S HEWLET PACKARD (IND.) SOFTWARE OPERATIO N LTD.(SUPRA) ALSO, THE INTERNATIONAL TRANSACTION INCLUDED MAINLY THE SERVI CES RENDERED AS SOFTWARE IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 8 DEVELOPMENT SERVICES OF RS.5854.51 LACKS. SIMILARL Y, IN THE CASE OF M/S MERITOR LVS INDIA (P) LTD., (SUPRA) ALSO, IT WAS NO TED BY THE TRIBUNAL IN PARA-5 OF THE TRIBUNALS ORDER THAT FINAL TP ADJUST MENT RECOMMENDED BY THE TPO WAS ONLY ON THE SOFTWARE DEVELOPMENT SERVIC ES(SEG.). HENCE, IN OUR CONSIDERED OPINION, THESE TWO TRIBUNAL ORDERS A RE SQUARELY APPLICABLE IN THE PRESENT CASE BECAUSE LD. DR OF THE REVENUE F AILED TO POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT CASE AND IN THES E TWO CASES. AS PER PARA-14 OF THE TRIBUNAL ORDER IN THE CASE OF M/S HE WLET PACKARD (IND.) SOFTWARE OPERATION LTD. (SUPRA), THE TRIBUNAL HELD THAT 11 COMPARABLES I.E. M/S AVANI CIMCON TECHNOLOGIES LTD., 2) M/S CELESTIA L LABS LTD., 3) M/S E- ZEST SOLUTIONS LTD., 4) M/S FLEXTRONICS SOFTWARE SY STEMS LTD.,(SEG.) 5)M/S HELIOS & MATHESON INFORMATION TECHNOLOGY LTD.,6) M/ S INFOSYS TECHNOLOGIES LTD., 7) M/S ISHIR INFOTECH LTD., 8) M /S KALS INFORMATION SYSTEMS LTD., 9) M/S LUCID SOFTWARE LTD;, 10) PERSI STENT SYSTEMS LTD., AND 11)M/S WIPRO LTD., (SEG.) ARE TO BE EXCLUDED. REGA RDING M/S MEGASOFT LTD., IT WAS HELD BY THE TRIBUNAL THAT M/S MEGASOFT LTD CAN BE CONSIDERED FOR INCLUSION ONLY AFTER SEGMENTATION OF ITS RESULT S. FOR THE SAKE OF READY REFERENCE, WE REPRODUCE PARA-14 OF THIS TRIBUNAL OR DER IS REPRODUCED. IN THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S MERI TOR LVS INDIA (P) LTD., (SUPRA) ALSO, PARA-14 OF THE TRIBUNAL ORDER IS RELE VANT WHICH IS ALSO RE- PRODUCED HEREUNDER; 14. ACCORDINGLY, FOLLOWING THE ABOVE ORDER, WE DI RECT EXCLUSION OF CELESTIAL LABS LTD., E ZEST SOLUTIONS LTD., INFOSYS TECHNOLOGIES LTD., KALS INFORMATION SYSTEMS LTD. (S EG.) LUCID IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 9 SOFTWARE LTD., WIPRO LTD (SEG.) ACCEL TRANSMATIC LT D.,(SEG.), HELIOS & MATH4ESON INFORMATION TECHNOLOGY LTD., ISHIR INF OTECHLTD., PERSISTENT SYSTEMS LTD., SASKEN COMMUNICATION TECHN OLOGIES LTD (SEG.), TATA ELXSI LTD., (SEG.) AND THIRDWARE SOLUT IONS LTD. IN SOFAR AS MEGASOFT SOLUTIONS LTD., IS CONCERNED, WE DIRECT THE AO/TPO TO REWORK ITS SEGMENTAL RESULTS AND CONSIDER ITS COMPA RABILITY ONLY WITH REGARD TO THE SOFTWARE DEVELOPMENT SERVICES SE GMENT. ORDERED ACCORDINGLY. IT CAN BE SEEN THAT AS PER THIS TRIBUNAL ORDER ALS O, IT WAS HELD BY THE TRIBUNAL THAT IN RESPECT OF M/S MEGASOFT LTD.,, THE AO/TPO WERE DIRECTED TO RE-WORK ITS SEGMENTAL RESULTS AND CONSIDER ITS C OMPARABILITY ONLY WITH REGARD TO SOFTWARE DEVELOPMENT SERVICES (SEG.). IT WAS DIRECTED THAT M/S ACCEL TRANSMATIC LTD., (SEG.) M./S TATA ELXSI LTD., AND M/S THIRDWARE SOLUTIONS LTD., SHOULD BE EXCLUDED IN ADDITION TO O THER 11 COMPARABLES, WHICH WERE DIRECTED TO BE EXCLUDED AS PER TRIBUNAL ORDER IN THE CASE OF M/S HEWLET PACKARD (IND.) SOFTWARE OPERATION LTD., (SUP RA). WE THEREFORE, DIRECT THE AO/TPO TO EXCLUDE 14 COMPARABLES INCLUDING 11 C OMPARABLES AS PER TRIBUNAL ORDER IN THE CASE OF M/S HEWLET PACKARD (I ND.) SOFTWARE OPERATION LTD., (SUPRA) AND THREE COMPARABLES AS PER TRIBUNAL ORDER IN THE CASE OF M/S MERITOR LVS INDIA (P) LTD., (SUPRA), AS NOTED A BOVE. ONE COMPARABLE M/S MEGASOFT LTD., SHOULD BE CONSIDERED FOR INCLUSI ON AS PER ITS SEGMENTAL RESULTS ONLY. THE AO/TPO SHOULD PASS NECESSARY ORD ER AS PER LAW AND AS PER ABOVE DISCUSSION AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THESE FOUR GROUNDS ARE DISPOSED OF IN T HIS MANNER. IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 10 8. REGARDING CORPORATE TAX ISSUE RAISED BY THE ASS ESSEE AS PER GROUND NO.25 TO 30, IT WAS SUBMITTED THAT THIS ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT RENDERED IN THE CASE OF M/S TATA ELXSI LTD., (349 ITR 98). 9. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW ON THIS ISSUE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THIS GROUND OF APPEAL, THE ISSUE INVOLVED IS REGARDING R EDUCTION OF RS.3,57,922/- PERTAINING TO TELEPHONE EXPENSES FROM THE TOTAL TURNOVER. THE AO/TPO HAD REDUCED THE SAME FROM THE EXPORT TUR NOVER BUT NOT FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DED UCTION ALLOWABLE TO THE ASSESSEE U/S 10A OF THE IT ACT, 1961. IT WAS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S TATA E LXSI LTD. (SUPRA) THAT TOTAL TURNOVER IS SUM TOTAL OF DOMESTIC TURNOVER AN D EXPORT TURNOVER AND THEREFORE, IF AN AMOUNT IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME GETS AUTOMATICALLY REDUCED FROM THE TOTAL TURNOVER. RESP ECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE AO/TPO TO REDUCE THIS AMOUNT WHICH WAS REDUCED FROM THE EXPOR T TURNOVER FROM THE TOTAL TURNOVER ALSO FOR THE PURPOSE OF COMPUTING DE DUCTION ALLOWABLE TO THE ASSESSEE U/S 10A OF THE IT ACT, 1961. ACCORDINGLY , GROUND NO.25 TO 30 OF THE ASSESSEES APPEAL ARE ALLOWED. 11. GROUND NO.31 IS CONSEQUENTIAL WHICH IS IN RESP ECT OF INTEREST CHARGED U/S 234B AND 2345C OF THE IT ACT, 1961 IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 11 12. NOW WE TAKE UP CROSS APPEALS FOR THE ASSESSMENT YEAR 2010-11 IN IT(TP)A NO.536(B)/2015 , ASSESSEES APPEAL AND IT(TP)A NO.431()B)/2015 BEING REVENUES APPEAL. GROUNDS RAISED IN THESE TW O APPEALS ARE AS UNDER; IT(TP)A NO.536(BANG)/2015 ( ASSESSMENT YEAR :2010-1 1) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN ASSESSING THE TOTAL INCOME OF THE A PPELLANT FOR THE RELEVANT AY: AT INR 7,61,21,130/- AS AGAINST REVISE D RETURNED INCOME OF INR 3,31,46,375/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE AO BEING NOT IN CONFORMITY WITH THE DIRECTIONS ISSUED BY THE DRP ISSUED UNDER SEC.144C(5) OF THE A CT, IS BAD IN LAW. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO HAVE ERRED IN NOT COMPLETING THE ASSESSMENT FOR THE SUBJECT ASSESSMENT YEAR IN CONFORMITY WITH THE DIRECTIONS I SSUED BY THE DRP, WHEREBY THE DRP DIRECTED FOR EXCLUSION/INCLUSION OF CERTAIN COMPARABLE COMPANIES FOR COMPUTING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION RELATED TO PROVISION OF S OFTWARE DEVELOPMENT SERVICES TO THE ASSOCIATED ENTERPRISES (AE). 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO HAVE ERRED IN NOT PROVIDING WORKING CAPITAL ADJUSTMENT AND HAVE FURTHER ERRED IN NOT ADOPTING THE CORRECT OPER ATING MARGIN OF THE FINAL COMPARABLE COMPANIES PURSUANT TO THE DIRECTIO NS ISSUED BY THE DRP TO VERIFY AND CARRY OUT NECESSARY RECTIFICATION IN RELATION TO THE ABOVE. 5.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE AO/TPO HAVE ERRED IN ARBITRARILY REJECTING CERTAIN COMPARABLE COMPANIES CONSIDERED BY THE APPELLANT FOR BENCHMAR KING ITS IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 12 INTERNATIONAL TRANSACTION RELATING TO SOFTWARE DEVE LOPMENT SERVICES AND HAVE FURTHER ERRED IN NOT INCLUDING THE SAID C OMPARABLE COMPANIES IN CONFORMITY WITH THE DIRECTIONS ISSUED BY THE DRP. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO HAVE ERRED IN ARBITRARILY INCLUDING CERTAIN COMPARABLE COMPANIES FOR COMPUTING THE ARMS LENGTH PRICE IN R ELATION TO THE SOFTWARE DEVELOPMENT SERVICES AND HAVE FURTHER ERRE D IN NOT EXCLUDING THE SAID COMPARABLE COMPANIES IN CONFORMI TY WITH THE DIRECTIONS ISSUED BY THE DRP. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN HOLDING THAT THE BROADBAND CHARGES ARE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA AND SHOULD BE REDUCED FROM THE EXPORT TURNOVER WHILE COMPUTING TH E DEDUCTION UNDER SEC.10A OF THE ACT. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN HOLDING THAT THE FOREIGN CURRENCY TRAV EL EXPENSES ARE TOWARDS TECHNICAL SERVICES RENDERED OUTSIDE INDIA A ND SHOULD BE REDUCED FROM THE EXPORT TURNOVER WHILE COMPUTING T HE DEDUCTION UNDER SEC.10A OF THE ACT. 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 23 4C OF THE ACT. 10. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER S ECTION 271(1)(C ) OF THE ACT. EACH OF THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE ASSESSEE. THE ASSESSEE PRAYS FOR LEAVE TO ADD, ALTER, VARY, O MIT, SUBSTITUTE OR AMEND THE ABOVE ROUNDS OF APPEAL, AT ANY TIME BEFOR E OR AT THE TIME OF HEARING OF THE APPEAL. IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 13 IT(TPA NO.431(B)/2015 ( ASSESSMENT YEAR: 2010-11) 1. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL; 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DRP ERRED IN HOLDING THAT THE SIZE AND TURNOVER OF THE COMPANY A RE DECIDING FACTORS FOR TREATING THE COMPANY AS A COMPARABLE AND ACCORD INGLY, ERRED IN EXCLUDING M/S KALS INFORMATION SYSTEMS LTD., M/S PE RSISTENT SYSTEMS & SOLUTIONS LTD. M/S TATA ELXSI LTD., M/S EVOKE TE CHNOLOGIES LTD AND M/S INFOSYS LTD AS COMPARABLES. 2. THE LD. DRP MEMBER HAS ERRED IN EXCLUDING THE C OMPARABLES ON THE BASIS OF DIFFERENT FUNCTION WHILE THE COMPAR ABLE IS QUALIFYING ALL THE QUALITATIVE AND QUANTITATIVE FILTERS APPLIED B Y THE TPO. 3. THE LD. DRP MEMBER HAS ERRED IN HOLDING THAT PER SISTENT LOSSES OF THE COMPANIES I.E. M/S QUINTEGRA SOLUTIONS LTD M/S TVS INFOTECH LTD., M/S HELIOS & MATHESON INFORMATION TECH.LTD., AND M/ S SIP TECHNOLOGIES & EXPORTS LTD DOES NOT QUALIFY FOR BEI NG TREATED AS A COMPARABLE IGNORING THE FUNDAMENTAL PRINCIPLE APPLI ED BY THE TPO THAT THE SAME IS DESIGNED TO ELIMINATE COMPANIES WH ICH ARE NOT IN LINE WITH THE REND OF GROWTH WITNESSED IN THE SOFTWARE I NDUSTRY. 4. THE LD. DRP MEMBER HAS FAILED TO APPRECIATE THAT THERE IS DECLINE IN THE RATE OF GROWTH OF EXPORT REVENUE BECAUSE IND USTRIES WERE FACING RECESSION. 5. THE LD. DRP MEMBER HAS FAILED TO APPRECIATE THAT THERE ARE SO MANY COMPANIES HAVING THE SAME FINANCIAL YEAR ENDIN G WHICH ARE AVAILABLE FOR COMPARISON PURPOSE. 6. THE LD.DRP MEMBER ERRED IN NOT CONSIDERING THE C OMPANIES WHOSE SALES IS LESS THAN 1 CRORE BY STATING THAT THEY MAY NOT LEAD TO A PROPER COMPARABILITY AS THESE COMPANIES MAY NOT BE REPRESENTING THE INDUSTRY TREND. IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 14 7. THE HONBLE DRP HAS ERRED TO APPRECIATE THAT MO RE THE COMPARABLE LOW COST/SALES BASE MAKES THEIR RESULTS UNRELIABLE. 8. THE HONBLE DRP HAS ERRED IN RELYING ON THE DECI SION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS M/S T ATA ELXSI LTD., WHEREIN THE LEGISLATURE INTENTIONALLY INCLUDED THE DEFINITION OF EXPORT TURN OVER AND DID NOT INCLUDE DEFINITION OF TOTAL T URN OVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A. MOREO VER, THE DECISION OF THE HONBLE HIGH COURT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL BEFORE HONBLE SUPREME COURT HAS BEEN FILED, WHICH IS PENDING FOR DECISION. 9. THE HONBLE DRP ERRED IN DIRECTING THE AO TO EXC LUDE THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS TELECO M LEASE LINE EXPENDITURE AND TRAVEL EXPENSES FROM BOTH EXPORT TU RNOVER AND TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N U/S 10A OF THE IT ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 13. AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT IN ASSESSEES APPEAL, GROUND NO.1S IS GENERAL AND GROUND NO.4,5& 6 ARE NOT PRESSED AND THE ISSUE INVOLVED IN GROUND NO.7 & 8 IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE KARNATA KA HIGH COURT RENDERED IN THE CASE OF CIT VS TATA ELXSI LTD. (349 ITR 98)( KAR.)(SUPRA) AND GROUND NO.9 & 10 ARE CONSEQUENTIAL. ACCORDINGLY, GROUND NO .4,5& 6 ARE REJECTED AS NOT PRESSED AND GROUND NO.7 & 8 ARE ALLOWED IN LINE WITH OUR DECISION FOR ASSESSMENT YEAR 2007-08. 14. AT THE VERY OUTSET, THE LEARNED AR SUBMITTED THAT THE TPOS ORDER IS DATED 30-01-2014 AND THE DRAFT ASSESSMENT ORDER (DA O) PASSED BY THE AO IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 15 IS DATED 25-03-2014, WHEREIN THE DAO PASSED BY THE AO. AS PER THE TPOS ORDER, THE TPO MADE AN ADDITION OF RS.4,29,74,755/- . THEREAFTER, HE POINTED OUT THAT ORDER OF DRP IS DATED 10-12-2014 AND AS PE R PARA NO.3.9 OF DRP ORDER, IT WAS HELD THAT FIVE COMPARABLES I.E. 1) M/ S KALS INFORMATION SYSTEMS LTD., 2) PERSISTENT SYSTEMS & SOLUTIONS LTD., 3) M/ S TATA ELXSI LTD., 4) M/S EVOKE TECHNOLOGIES LTD., AND 5) M/S INFOSYS LIMITED ., SHOULD BE EXCLUDED. HE ALSO DREW OUR ATTENTION TO PARA-3.1 OF THE DRP O RDER, AS PER WHICH THE TPO WAS DIRECTED TO INCLUDE 8 CASES AS COMPARABLES AND THEREAFTER, TO RECALCULATE THE CORRECT TRANSFER PRICING ADJUSTMENT TO BE MADE. FURTHER, HE POINTED OUT THAT AS PER THE FINAL ASSESSMENT ORDER PASSED BY THE AO ON 30- 01-2015, THE AO HAS MADE ADDITION OF RS.4,29,74,705 /- WITHOUT INCLUDING OR EXCLUDING ANY COMPARABLE AS DIRECTED BY THE DRP. THEREAFTER, HE SUBMITTED THAT AS PER THE PROVISIONS OF SEC.144C(8) , THE DRP MAY CONFIRM REDUCE OR ENHANCE THE VARIATION PROPOSED IN THE DRA FT ORDER. HE REFERRED TO SUB SECTION13 OF SEC.144C AND SUBMITTED THAT AS PER THIS SUB-SECTION, THE AO HAS TO PASS ASSESSMENT ORDER IN CONFORMITY WITH THE DIRECTIONS OF DRP, WITHIN ONE MONTH FROM THE END OF THE MONTH SUCH DIR ECTION IS RECEIVED. HE SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A O IS NOT IN CONFORMITY WITH THE DIRECTIONS OF DRP AND THEREFORE, THIS ASSE SSMENT ORDER IS NOT VALID AND HENCE, IT SHOULD BE QUASHED. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON A JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT RENDERED IN THE CASE OF M/S VODAONE INDIA SERVICE PVT.LTD., VS UNIO N OF INDIA AND OTHERS IN W.P.NO.488 OF 2012 OF WHICH COPY OF RELEVANT PORTIO N IS MADE AVAILABLE BEFORE US. HE ALSO PLACED RELIANCE ON THE JUDGMEN T OF THE HONBLE DELHI IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 16 HIGH COURT RENDERED IN THE CASE OF M/S ESPN STAR SP ORTS MAURITIUS S.N.C. ET COMPAGNIE (NOW KNOWN AS ESS ADVENTURING (MAURITI US) S.N.C. ET COMPAGNIE IN W.P 2384/2015 & CM NO.4277/2015 DATE D 23-03-2016 AND SUBMITTED A COPY OF THIS JUDGMENT. HE ALSO PLA CED RELIANCE ON THE TRIBUNALS ORDER RENDERED IN THE CASE OF M/S LIONBR IDGE TECHNOLOGIES LTD., VS DCIT IN ITA NO.1041/MUM/2015 DATED 29-05-2015. 15. LEARNED DR OF THE REVENUE SUBMITTED IN RE PLY THAT THIS IS NOT A FACT THAT THE A.O. IN HIS FINAL ORDER HAS DISREGARDED TH E DIRECTIONS OF DRP. HE POINTED OUT THAT AS PER THE FINAL ASSESSMENT ORDER, THE A.O. SAYS IN PARA 4.4 THAT DRP HAS CONFIRMED THE DRAFT ASSESSMENT ORDER. HE SUBMITTED THAT UNDER THESE FACTS, IT SHOULD BE HELD THAT THERE IS AN APPARENT MISTAKE IN THE FINAL ASSESSMENT ORDER AND THE SAME IS RECTIFIABLE U/S 154 AND THEREFORE, THE MATTER SHOULD BE RESTORED TO THE A.O. FOR PASSING T HE RECTIFICATION ORDER. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, MATERIAL AVAILABLE ON RECORD AND VARIOUS JUDGMENTS CITED BY THE LEARNED A R OF THE ASSESSEE. THERE IS NO DISPUTE THAT AS PER THE DIRECTIONS OF DRP, SO ME COMPARABLES WERE TO BE EXCLUDED AND SOME WERE TO BE INCLUDED BUT AS PER TH E FINAL ASSESSMENT ORDER, THE A.O. HAS NEITHER INCLUDED ANY COMPARABLE NOR EXCLUDED ANY COMPARABLE AS HAD BEEN DIRECTED BY DRP AND THEREFOR E, HIS ORDER IS IN VIOLATION OF SUB SECTION13 OF SEC.144C. BUT THIS IS ALSO TRUE THAT THERE IS WRONG OBSERVATION IN THIS FINAL ASSESSMENT ORDER TH AT DRP HAS CONFIRMED THE PROPOSED ASSESSMENT ORDER. UNDER THESE FACTS, W E FIND FORCE IN THE IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 17 SUBMISSIONS OF THE LEARNED DR OF THE REVENUE THAT T HIS IS AN APPARENT MISTAKE IN THE ASSESSMENT ORDER RECTIFIABLE U/S 154 OF THE I T ACT. 17. NOW WE EXAMINE THE APPLICABILITY OF VARIOUS JUD GMENTS CITED BY THE LEARNED AR OF THE ASSESSEE. FIRST JUDGMENT CITED BY HIM IS JUDGMENT OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF M /S VODAONE INDIA SERVICE PVT.LTD., VS UNION OF INDIA AND OTHERS (SUP RA). LEARNED AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION TO THAT PARA OF TH IS JUDGMENT WHERE IT IS OBSERVED BY THE HONBLE BOMBAY HIGH COURT THAT CONF ORMITY IS SYNONYMOUS TO THE WORD COMPLIANCE. THERE IS NO DISPUTE ON TH IS ASPECT. FINALLY IN PARA 106 OF THIS JUDGMENT, IT WAS HELD THAT DRP WOULD HA VE THE JURISDICTION TO RECTIFY THE ERROR AND ISSUE NECESSARY DIRECTION TO THE AO TO COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW. IN PARA 107, IT WAS HELD THAT THERE IS NO WARRANT FOR EXERCISE OF WRIT JURISDICTION BECAUSE T HE REMEDY LIES IN FILING OBJECTION BEFORE DRP. IN OUR CONSIDERED OPINION, AS PER THIS JUDGMENT, IT CANNOT BE SAID THAT THE PRESENT ASSESSMENT ORDER SH OULD BE QUASHED. 18. SECOND JUDGMENT CITED BY HIM IS JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF M/S ESPN STAR SPORTS MAURITIUS S.N.C. ET COMPAGNIE (NOW KNOWN AS ESS ADVENTURING (MAURITIUS) S.N.C. ET COMPAGNIE (SUPRA). IN THAT CASE, IN PARA 31, IT IS NOTED BY HONBLE DELHI HIGH COURT THAT THE AO HAS CHOSEN TO LABEL THE ORDE R OF DRP TO BE INVALID AND THAT IS THE JUSTIFICATION FOR NOT COMPLYING WIT H THE SAID ORDER. THEREAFTER IN PARA 41, IT IS OBSERVED THAT THE AO STATED IN PA RA 4.2 OF THE ASSESSMENT ORDER THAT THE DRP HAS NOT ACTED IN ACCORDANCE WIT H THE PROVISIONS OF THE IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 18 ACT WHILE PASSING HIS ORDER WHICH IS GROSSLY ILLEGA L, AGAINST THE INTENT OF LEGISLATURE, WITHOUT FOLLOWING THE BASIC PRINCIPLE OF NATURAL JUSTICE AND ADOPTING VERY NARROW INTERPRETATION OF THE PROVISIO NS OF THE ACT. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT BECAUSE IN TH E PRESENT CASE, IT APPEARS TO BE AN APPARENT MISTAKE COMMITTED BY THE A.O. IN UNDERSTANDING THE DIRECTIONS OF DRP AND FOR THAT REASON WITH THE MIST AKEN UNDERSTANDING THAT DRP HAS APPROVED THE DRAFT ASSESSMENT ORDER, THE A. O. HAS NOT GIVEN EFFECT TO VARIOUS DIRECTIONS OF DRP TO INCLUDE SOME COMPAR ABLES AND TO EXCLUDE SOME COMPARABLES. UNDER THESE FACTS, IN OUR CONSIDE RED OPINION, BY FOLLOWING THIS JUDGMENT ALSO, IT CANNOT BE HELD THA T THE PRESENT ASSESSMENT ORDER SHOULD BE QUASHED BUT IN THE FACTS OF THE PRE SENT CASE, PROPER COURSE IS TO RESTORE THE MATTER TO THE A.O. TO PASS FRESH ASSESSMENT ORDER AS PER DIRECTIONS OF DRP. 19. THIRD JUDGMENT CITED BY HIM IS ORDER OF THE TRIBUNAL RENDERED IN THE CASE OF M/S LIONBRIDGE TECHNOLOGIES LTD., VS DCIT ( SUPRA). IN THIS CASE, DRAFT ASSESSMENT ORDER WAS NOT FORWARDED BY THE AO TO THE ASSESSEE WITHIN THE TIME LIMIT PRESCRIBED UNDER THE THIRD PROVISO T O SECTION 153 (2A). IN PARA 17 OF THE TRIBUNAL ORDER, IT WAS NOTED THAT AT THE TIME OF ISSUE OF CORRIGENDUM ALSO ON 16.04.2015, THE DEMAND RAISED I N THE ASSESSMENT ORDER DATED 12.03.2014 WAS NOT WITHDRAWN. IN THE PR ESENT CASE, DRAFT ASSESSMENT ORDER WAS ISSUED IN TIME AND THEREFORE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER IS NOT RELEVANT IN THE PRESENT CASE. IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 19 AS PER ABOVE DISCUSSION, WE FIND THAT NONE OF THE JUDGMENTS CITED BY THE LEARNED AR OF THE ASSESSEE IS SUPPORTING HIS CO NTENTION THAT THE PRESENT ASSESSMENT ORDER BE QUASHED. IN THE FACTS O F THE PRESENT CASE, WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED DR OF THE REVENUE THAT THERE IS APPARENT MISTAKE IN THIS FINAL ASSESSMENT ORDER AND SINCE THE TIME LIMIT OF 4 YEARS PRESCRIBED IN SECTION 154 HAS NOT ELAPSED, WE FEEL IT PROPER TO RESTORE THE ENTIRE MATTER IN THIS YEAR TO THE AO TO PASS FRESH ASSESSMENT ORDER AS PER THE DIRECTIONS OF DRP AND THEREAFTER, BOTH SIDES ARE AT LIBERTY TO FILE APPEAL BEFORE THE TRIBUNAL IF NOT SATISFIED WITH THAT ORDER. 20. IN VIEW OF THIS DECISION, NONE OF THE GROUNDS RAISED BY BOTH SIDES REQUIRE ANY ADJUDICATION. 21. IN THE RESULT, BOTH APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE COMBINED RESULT, APPEAL OF THE ASS ESSEE IN ASSESSMENT YEAR : 2007-08 IS PARTLY ALLOWED AND CROSS APPEALS IN A.Y. 2010 11 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (VIJAY PAL RAO) SD/- (A K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 17.06.2016 AM* IT(TP)A NOS.1033(B)/11, 536(B)2015 AND 431(B)/15 20 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DA TE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NO T UPLOADED, FURNISH THE REASON FOR DOING SO. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER