DCIT, V. M/s Vmoksha Technologies Pvt. Ltd.,

ITA 1053/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95266 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SRINIVAS BHARATH K N
• Section: 27

Judgement Text

IT(TP)A.1053/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T(TP).A NO.1053/BANG/2013 (ASSESSMENT YEAR : 2004-05) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12 (3), BANGALORE ..APPELLANT V. M/S. VMOKSHA TECHNOLOGIES P. LTD, NO.2799 & 2800, SRINIDHI SECTOR I, 27 TH MAIN, HSR LAYOUT, BANGALORE 560 102 ..RESPONDENT PAN : AABCK2021R ASSESSEE BY : SHRI. SRINIVAS BHARATH. K. N, CA REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 23.09.2015 PRONOUNCED ON : 30.09.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE DIRECTED AGAINST A N ORDER DT.25.04.2013 OF CIT (A) IV, BANGALORE, IT HAS ALTOGETHER RAISED EI GHT GROUNDS OF WHICH GROUNDS 1, 7 AND 8 ARE GENERAL NEEDING NO ADJUDICATION. 02. GROUNDS 2 AND 3 READ AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNEDCIT(A) ERRED IN DIRECTING THE AO TO COMPUTE DEDUCTION U/S 10A WITHOUT SETTING OFF OF LOSSES PER TAINING TO IT(TP)A.1053/BANG/2013 PAGE - 2 ONE UNIT AGAINST THE PROFIT OF ANOTHER BY PLACING R ELIANCE ON THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S YOKOGAWA INDIA LTD., BUT WITHOUT APPRECIATING T HE FACT THAT AS PER AMENDED PROVISIONS OF SECTION 10A, DEDUCTION U/S 10A HAS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSE SSEE, AND AS PER SECTION 2(45) OF THE IT ACT, THE TOTAL INCOME S HOULD BE COMPUTED FROM VARIOUS SOURCES AFTER SET OFF OF LOSS ES FROM ONE SOURCE AGAINST INCOME FROM OTHER SOURCES UNDER THE SAME HEAD OF INCOME IN TERMS OF SECTION 70(1). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN PLACING RELIANCE ON THE DEC ISION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S YOKOGAWA INDIA LTD., WITHOUT NOTICING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION AND FILED FURTHER APP EAL BEFORE THE HON'BLE SUPREME COURT, WHICH IS PENDING FOR DISPOSA L AS ON DATE. 03. AS IS CLEAR FROM THE GROUND, REVENUE IS CHALLEN GING THE ORDER OF CIT (A) ON THE ISSUES OF COMPUTATION OF DEDUCTION U/S.10A O F THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), WITHOUT SETTING OFF THE LOSSE S OF UNITS ON WHICH 10A HAS NOT BEEN CLAIMED. CIT (A) HAD FOLLOWED THE JURISDICTIO NAL HIGH COURT JUDGMENT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD [(2013) 341 I TR 0385]. REVENUES DECISION TO MOVE AN APPEAL BEFORE HONBLE APEX COUR T AGAINST THIS JUDGMENT WILL NOT BE A REASON NOT TO FOLLOW THIS JUDGMENT. SIMILARLY ACCEPTANCE OF A JUDGMENT OF THE HIGH COURTS OR ORDERS OF THIS TRIBU NAL ARE IRRELEVANT SINCE ALL PARTIES ARE UNDER LAW OBLIGED AND DUTY-BOUND TO FOL LOW THEM. ACCORDINGLY WE DISMISS GROUNDS 2 AND 3. 04. GROUNDS 4, 5 AND 6 ARE REPRODUCED HEREUNDER : 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO RE-COMPUTE MEAN MARGIN AND WORK OUT THE QUANTUM OF TP ADJUSTMENT, IF REQUI RED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO CONSIDER CURREN T YEAR DATA IT(TP)A.1053/BANG/2013 PAGE - 3 FOR COMPARABLE M/S NET AXIS SOFTWARE SERVICES LTD W HEN SUCH DATA HAS NEITHER BEEN FURNISHED BY THE ASSESSEE, NO R IS IT AVAILABLE IN THE PUBLIC DOMAIN. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO CONSIDER M/S. D YNACONS SOLUTIONS & SYSTEMS LTD AS COMPARABLE IN THE ABSENC E OF ANY DATA AVAILABLE FOR THE SOFTWARE SERVICES SEGMENT OF THE COMPANY IN PUBLIC DOMAIN. 05. ON A READING OF THESE GROUNDS IT IS CLEAR THAT GRIEVANCE RAISED BY THE REVENUE IS ON THE DIRECTION OF CIT (A) TO CONSIDER M/S. NET AXIS SOFTWARE SERVICES LTD AND M/S. DYNACONS SOLUTIONS & SYSTEMS LTD, AS GOOD COMPARABLES, FOR ANALYSING THE VALUE OF INTERNATION AL TRANSACTIONS OF THE ASSESSEE, WITH ITS AE. RELEVANT DIRECTIONS OF CIT (A), AS IT APPEAR AT PARA 42 IS REPRODUCED HEREUNDER : 42. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISS IONS. ITS ONLY PRAYER IS THAT M/S NET AXIS SOFTWARE SERVICES LTD. AND M/S DYNACONS SYSTEMS & SOLUTIONS LTD. MUST ALSO BE CONS IDERED FOR COMPUTATION OF THE MEAN OPERATING MARGIN, AS THEIR FINANCIAL DATA FOR THE FY ENDED 31.03.2004 WAS SINCE AVAILABLE ON THE PROWESS AND CAPITALINE DATABASES. AS THE ONLY REASON MENTIONED BY THE TPO FOR REJECTING THESE COMPANIES AS COMPARABLES WAS NON AV AILABILITY OF FINANCIAL DATA IN THE DATABASES FOR THE RELEVANT PE RIOD, IT WOULD BE IN THE INTEREST OF FAIRNESS TO INCLUDE THEM AS COMPARA BLES, NOW THAT THE RELEVANT DATA ARE CLAIMED TO BE AVAILABLE. I TH EREFORE DIRECT THE APPELLANT TO FURNISH SUCH DATA TO THE AO AND THEREU PON, DIRECT THE AO TO RE-COMPUTE MEAN MARGIN OF THE FIVE COMPARABLE S INCLUDING M/S NET AXIS AND M/S DYNACONS AND WORK OUT THE QUANTUM OF TP ADJUSTMENT, IF REQUIRED, IN ACCORDANCE WITH LAW. TH IS GROUND OF APPEAL IS TREATED AS ALLOWED. 06. LD. DR SUBMITTED THAT ASSESSEE HAD NOT DEMONSTR ATED THAT FINANCIAL DATA OF THESE TWO COMPANIES WERE AVAILABLE IN PUBLIC DOM AIN. AS PER LD. DR, CIT (A) HAD SIMPLY WENT BY THE SUBMISSIONS OF THE ASSES SEE. IT(TP)A.1053/BANG/2013 PAGE - 4 07. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. REASON GIVEN BY THE TPO FOR REJECTING M/S. NET AXIS SOFTWARE SER VICES LTD AND M/S. DYNACONS SYSTEMS & SOLUTIONS LTD APPEAR AT PARA 11 OF HIS ORDER DT.22.12.2006 AND THIS IS REPRODUCED HEREUNDER : 11 IT WAS ALSO NOTICED THAT THE ASSESSEE HAS SELECT ED CERTAIN COMPARABLES IN THE TP DOCUMENT, WHICH DO NO T QUALIFY FOR BEING CONSIDERED FOR COMPARATIVE ANALYS IS FOR THE REASONS MENTIONED AGAINST THEIR NAMES BELOW: 1. R. S. SOFTWARE INDIA LTD., - PERUSAL OF THE FINANCI AL DATA INDICATES THAT THIS COMPANY HAS INCURRED LOSSES FOR THE YEAR 2001- 02 TO 2003-04 2. NET ACCESS SOFTWARE SERVICES LTD.,-NO FINANCIAL DAT A OF THIS COMPANY IS AVAILABLE IN THE DATA BASES. 3. DYNACONS SYSTEMS & SALES LTD., - NO FINANCIAL DATA OF THIS COMPANY IS AVAILABLE IN THE DATA BASES. IN OTHER WORDS IF FINANCIAL DATA FOR RELEVANT PREVI OUS YEARS WERE AVAILABLE IN PUBLIC DOMAIN, IT COULD BE CONSIDERED AS GOOD COMPA RABLES. CIT (A)S DIRECTION WAS ONLY TO VERIFY THIS ASPECT. HE DID NOT LIMIT T HE POWER OF THE AO / TPO TO CONSIDER THEIR COMPARABILITY ON THEIR YARDSTICKS. WE ARE OF THE OPINION THAT ORDER OF CIT (A) DOES NOT SUFFER FROM ANY AMBIGUITY AND WAS FAIR AND APPROPRIATE IN THE CIRCUMSTANCES OF THE CASE. GROU NDS 4 TO 6 OF THE REVENUE ARE DISMISSED. IT(TP)A.1053/BANG/2013 PAGE - 5 08. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON ____ DAY OF S EPTEMBER, 2015. (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) 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.1053/BANG/2013 PAGE - 6