M/s Yahoo Software Development India Private Limited, Bangalore V. DCIT, Bangalore

ITA 1046/BANG/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0163 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHARATH RAO CA REVENU
• Keywords: Competent authority

Judgement Text

IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER I.T(TP).A NO.1046/BANG/2011 (ASSESSMENT YEAR : 2007-08) M/S. YAHOO SOFTWARE DEVELOPMENT INDIA P. LTD, TORRY PINES, EMBASSY GOLF LINKS BUSINESS PARK, OFF INDIRANAGAR, KORAMANGALA INTERMEDIATE RING ROAD , BEMGA;IRI 560 071B .. APPELLANT PAN : AAACY1876D V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12(5), BENGALURU .. RESPONDENT I.T(TP).A NO.1685/BANG/2013 (ASSESSMENT YEAR : 2008-09) (BY THE ASSESSEE) I.T(TP).A NO.1651/BANG/2013 (ASSESSMENT YEAR : 2008-09) (BY THE REVENUE) ASSESSEE BY : SHRI. SHARATH RAO, CA REVENUE BY : SHRI. G. R REDDY, CIT DR-I HEARD ON : 05.07.2016 PRONOUNCED ON : 29 .07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : OF THE ABOVE APPEALS, IT(TP)A.1046/BANG/2011 IS TH AT OF THE ASSESSEE DIRECTED AGAINST AN ASSESSMENT ORDER DT.29 .08.2011 PASSED BY THE AO PURSUANT TO DIRECTIONS ISSUED BY THE DRP U/S.144 C OF THE INCOME-TAX IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 2 ACT, 1961 (THE ACT IN SHORT), FOR A. Y. 2007-08. APPEAL NOS.1685/BANG/2013 AND 1651/BANG/2013 ARE CROSS APP EALS OF THE ASSESSEE AND REVENUE RESPECTIVELY DIRECTED AGAINST AN ORDER DT.30.9.2013 OF CIT (A)-IV, BENGALURU, FOR A. Y. 2008-09. 02. WHEN THE APPEALS WERE TAKEN UP FOR HEARING LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN SO FAR AS ITS APPEAL FOR A. Y. 2007-08 WAS CONCERNED, FEW OF THE GROUNDS WERE ON TRANSFER PRIC ING. AS PER THE LD. AR. ASSESSEE HAD FILED AN APPLICATION WITH COMPETENT AU THORITY INVOKING MUTUAL AGREEMENT PROCEDURE (MAP) UNDER ARTICLE 27 OF THE D TAA BETWEEN INDIA AND USA. FURTHER AS PER THE LD. AR THE TP ISSUES F OR A. Y. 2006-07 TO A. Y. 2009-10 STOOD RESOLVED BY ORDER DT.19.10.2015 OF THE DEPARTMENT OF TREASURY, INTERNAL DEPARTMENT OF WASHINGTON, DC 202 24. HOWEVER ACCORDING TO THE LD. AR IN ASSESSEES APPEAL FOR A. Y. 2007-08, APART FROM THE ISSUES RELATING TO TP, ASSESSEE HAD ALSO RAISED GROUNDS ON CORPORATE TAX ISSUES APPEARING AS GROUNDS 7 TO 13. IN SO FAR AS APPEAL FOR A. Y. 2008-09 IS CONCERNED, LD. AR SUBMITTED THAT GROUNDS FILED B Y THE ASSESSEE WERE ENTIRELY ON TP MATTERS,AND ONLY OTHER GROUND WAS ON CHARGE OF INTEREST U/S.234B AND 234D OF THE ACT. IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 3 03. LD. DR FAIRLY AGREED TO THE ABOVE AVERMENTS OF THE LD. AR. HOWEVER ACCORDING TO HIM, DEPARTMENT IN ITS APPEAL FOR A. Y. 2008-09 HAD APART FROM THE TP ISSUES WHICH STOOD CONCLUDED BY T HE MAP, ALSO RAISED A GROUND REGARDING EXCLUSION OF TELECOMMUNICATION EXP ENDITURE BOTH FROM EXPORT AND TOTAL TURNOVER. AS PER THE LD. DR DEPAR TMENT HAD NOT ACCEPTED THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD [349 ITR 98]. 04. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. GROUNDS RAISED BY ASSESSEE APART FROM THOSE RELATIN G TO TP ISSUES IN ITS APPEAL FOR A. Y. 2007-08 APPEAR AS GROUNDS 7 TO 13. THESE ARE REPRODUCED HEREUNDER : IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 4 05. A READING OF THE ABOVE GROUND SHOW THAT GROUNDS 12, IS ON LEVY OF INTEREST U/S.234B AND 234D OF THE ACT, WHICH IS CON SEQUENTIAL IN NATURE NEEDING NO SPECIFIC ADJUDICATION AND GROUND 13 IS GENERAL IN NATURE. 06. IN RELATION TO GROUND 7, WE FIND THAT AO WHILE COMPUTING THE DEDUCTION AVAILABLE U/S.10A OF THE ACT, HAD SET OFF LOSS OF RS.15,955/- FROM A NON-STPI UNIT. WE FIND THAT BY VIRTUE OF THE JUD GMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT (LTU) V. YOKOGAWA INDIA LTD [(2013) 341 ITR 0385], PROFITS OF THE UNIT IN WHICH A CLAIM U/S.10A IS PREFERRED BY AN ASSESSEE HAS TO BE WORKED OUT ON A STAND ALONE BASIS WITHOUT SETTING OF LOSS FROM NON-10A UNITS. ACCORD INGLY WE ARE OF THE OPINION THAT LOSS FROM NON-STPI UNIT CANNOT BE SET OFF FROM THE PROFITS OF 10A UNIT WHILE COMPUTING THE DEDUCTION UNDER THAT S ECTION. ORDERED ACCORDINGLY. GROUND.7 STANDS ALLOWED. 07. VIDE ITS GROUNDS 8 AND 9 GRIEVANCE RAISED BY AS SESSEE IS ON EXCLUSION OF DATA LINK CHARGES OF RS.12,540,884/- AND FOREIGN TRAVEL EXPENSES OF RS.3,83,94,157/- FROM EXPORT TURNOVER WHILE COMPUTI NG DEDUCTION U/S.10A OF THE ACT. ALTERNATIVELY IN ITS GROUND 10 ASSESSE E STATES THAT SUCH REDUCTION IF MADE FROM EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S.10A OF T HE ACT. IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 5 08. BY VIRTUE OF DEFINITION OF EXPORT TURNOVER GI VEN IN EXPLANATION (IV) TO SECTION 10A OF THE ACT, WE ARE OF THE OPINION TH AT ASSESSEE CANNOT CLAIM INCLUSION OF DATA LINK CHARGES, FOREIGN TRAVEL EXPE NSES ATTRIBUTED TO DELIVERY OF SOFTWARE PRODUCTS OUTSIDE INDIA FROM EXPORT TURN OVER. HOWEVER, WITH REGARD TO ITS ALTERNATIVE PLEADING THAT SUCH AMOUNT S WHICH ARE REDUCED FROM EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM TOTAL T URNOVER, WE ARE INCLINED TO AGREE, IN VIEW OF JUDGMENT OF HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD (SUPRA). ACCORDINGLY WE DIR ECT THE AO TO WORK OUT THE DEDUCTION ALLOWABLE BY REDUCING SUCH AMOUNTS FR OM BOTH EXPORT TURNOVER AND TOTAL TURNOVER. GROUNDS 8 AND 9 ARE D ISMISSED, WHILE GROUND.10 IS ALLOWED. 09. IN ITS GROUND 11, ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO RATE OF EDUCATION CESS LEVIED AT 3%. THIS MATTER CAN BE VE RIFIED BY THE AO IF THE CESS CHARGED ON THE ASSESSEE IS NOT CORRECT, IT NEE DS TO BE RECTIFIED. ORDERED ACCORDINGLY. GROUND.11 IS ALLOWED FOR STATISTICAL PURPOSE. 10. COMING TO THE APPEAL OF THE ASSESSEE FOR A. Y. 2008-09, THERE ARE NO CORPORATE TAX ISSUES EXCEPT FOR A GENERAL GROUND RE GARDING CHARGE OF INTEREST U/SS.234B AND 234C OF THE ACT WHICH BEING CONSEQUENTIAL IN NATURE NEEDS NO SPECIFIC ADJUDICATION. IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 6 11. COMING TO THE CROSS APPEAL OF THE REVENUE FOR A . Y. 2008-09, GROUNDS 1, 6 AND 7 ARE GENERAL NEEDING NO SPECIFIC ADJUDICATION. 12. VIDE ITS GROUNDS 2 AND 3, REVENUE IS AGGRIEVED ON THE DIRECTION OF CIT (A) TO EXCLUDE TELECOMMUNICATION EXPENDITURE FR OM TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION AVAILABLE TO THE ASSE SSEE U/S.10A OF THE ACT. SINCE CIT (A) HAS FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT (A). GROUNDS 2 AND 3 STAND DISMISSED. 13. GROUNDS 4 AND 5 ARE TP ISSUES WHICH STAND RESOL VED BY VIRTUE OF MAP. VIDE MAP CLOSING LETTER DT.19.10.2015 OF DEPA RTMENT OF TREASURE INTERNAL REVENUE SERVICE, WASHINGTON DC (SUPRA), IT IS CLEAR THAT MUTUAL AGREEMENT HAS BEEN REACHED BY THE SAID AUTHORITY WI TH THE INDIAN COMPETENT AUTHORITY WITH REGARD TO THE TP ISSUES, F OR A. YS. 2006-07, 2007- 08, 2008-09 AND A. Y. 2009-10. SINCE THE TP ISSUES INVOLVED IN ALL THE APPEALS ARE RESOLVED, THE GROUNDS RAISED BY BOTH TH E PARTIES ON SUCH ISSUES BECOME INFRUCTUOUS. IN THE RESULT, THESE GROUNDS A RE DISMISSED AS INFRUCTUOUS. IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 7 14. TO SUMMARISE THE RESULTS, APPEAL OF ASSESSEE FO R A. Y. 2007-08 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THAT FOR A. Y. 2008-09 IS DISMISSED. DEPARTMENTAL APPEAL FOR A. Y. 2008-09 I S ALSO DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH DAY OF JULY, 2016. SD/- SD/- (VIJAY PAL RAO) (ABRA HAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR IT(TP)A.1046/B/2011, IT(TP)A.1651 & 1685/B/2013 PAGE - 8