Deputy Commissioner Of Income Tax, Circle- 1(1)(1), Bangalore V. M/s. Acusis Software India Private Limited, Bangalore

ITA 111/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5162 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: CHAVALI NARAYANC A
• Keywords: Transfer pricing; International transaction; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT (TP) A NO. 111 /BANG/20 20 (ASSESSMENT YEAR: 20 10 - 11 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1)( 1), BENGALURU. .APPELLANT . VS. M/S. ACUSIS SOFTWARE INDIA PVT. LTD. , NO.17/2, DOLLARS CHAMBERS, LALBAGH ROAD, BANGALORE. RESPONDENT. PAN AADCA 2415P C.O. NO.8/BANG/2020 (IN IT (TP) A NO. 111 /BANG/20 20) (ASSESSMENT YEAR: 20 10 - 11 ) ASSESSEE BY: SHRI CHAVALI NARAYAN,C.A. REVENUE BY: SHRI MUZAFFAR HUSSAIN, CIT (D.R.) DATE OF HEARING : 03.02. 20 2 1 . DATE OF PRONOUNCEMENT : 08 .02. 20 2 1 . O R D E R PER SHRI CHANDRA POOJARI, A.M. : THE APPEAL BY REVENUE AND CROSS OBJECTION BY THE ASSESSEE FILED AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS) - 1 , BANGALORE - 6 DT.14.08.2019 FOR THE ASSESSMENT YEAR 2010 - 11. 2 IT (TP) A NO. 111/B ANG/2020 & C.O. NO.8/BANG/2020 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) ERRED IN TREATING THE FOREX GAIN EARNED FORM SOFTWARE DEVELOPMENT SERVICES AS OPERATING IN NATURE. 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (APPEALS) IS RIGHT IN ACCEPTING THE ADDITIONAL EVIDE NCES SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDING WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE FRESH EVIDENCES AS REQUIRED UNDER RULE 46A. 4. FOR THEE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS H UMBLY PRAYED THAT THE ORDER OF THE LEARNED CIT (APPEALS) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 3. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAS NOT PRESSED THE GROUNDS TAKEN IN C.O. FILED BY THE ASSESSEE WHICH IS IN SUPPORT OF CIT (APPEALS) ORDER , THE SAME IS DISMISSED AS WITHDRAWN. 4. THE ISSUE IN REVENUES APPEAL IS WI TH REGARD TO THE FOREX GAIN EARNED FROM SOFTWARE DEVELOPMENT SERVICES IS OPERATI NG IN NATURE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BY THE CO - ORDINATE B ENCH 3 IT (TP) A NO. 111/B ANG/2020 & C.O. NO.8/BANG/2020 OF THIS TRIBUNAL IN THE CASE OF M/S. FIDELITY BUSINESS SERVICES INDIA PVT. LTD. VS. ACIT IN IT(TP)A NO.308/BANG/2017 DT.17.12.2020 WHEREIN I N PARA 15 HELD AS UNDER : 15. AS FAR AS GROUND NO.15 RAISED BY THE ASSESSEE IS CONCERNED, IT IS A CONSISTE NT VIEW OF THE BANGALORE BENCHES OF ITAT THAT FOREIGN EXCHANGE GAIN HAS TO BE TAKEN AS PART OF THE OPERATING PROFITS TO THE EXTENT THAT IT HAS NEXUS WITH THE INTERNATIONAL TRANSACTION IN RESPECT OF WHICH THE ALP IS BEING DETERMINED. AS FAR AS THE ISSUE WIT H REGARD TO TREATMENT OF FOREIGN EXCHANGE GAIN AS PART OF OPERATING PROFIT IS CONCERNED,, THIS ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN SETTLED BY THE DECISION OF THE BANGALORE BENCH OF ITAT IN THE CASE OF E4E BUSINESS SOLUTIONS P. LTD. V. DCIT [2016] 6 7 TAXMANN.COM 68 [BANG. TRIB.]. IT HAS BEEN HELD THEREIN THAT THE GAINS ARISING FROM FLUCTUATION OF FOREIGN EXCHANGE HAVING NEXUS WITH INTERNATIONAL TRANSACTION SHOULD BE TREATED AS OPERATING INCOME AND TAKEN INTO CONSIDERATION WHILE COMPUTING THE OPERATIN G PROFIT OF THE ASSESSEE. FOLLOWING THE AFORESAID DECISION, WE DIRECT THE COMPUTATION OF PLI BY TREATING THE GAINS ARISING FROM FLUCTUATION OF FOREIGN EXCHANGE HAVING NEXUS WITH INTERNATIONAL TRANSACTION AS PART OF OPERATING INCOME. TAKING A CONSISTENT VIEW, WE ARE OF THE OPINION THAT FOREIGN EXCHANGE GAIN ARISING FROM THE FLUCTUATION OF FOREIGN EXCHANGE HAS TO BE CONSIDERED AS OPERATIVE IN NATURE WHILE COMPUTING THE PLI. THE CIT (APPEALS) HAS TAKEN A CO RRECT VIEW HOLDING THAT THE FOREIGN EXCHANGE GAIN EARNED HAVING NEXUS WITH INTERNATIONAL TRANSACTION AS PART OF OPERATING INCOME. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 6. GROUND NO.3 IS WITH REGARD TO ADMITTING OF ADDITIONAL EVIDENCE BY CIT (APPEALS) FOLLOWING RULE 46A OF INCOME TAX RULES, 1 962. THE LEARNED DEPARTMENTAL REPRESENTATIVE IS NOT ABLE TO PIN POINT BEFORE US WITH REGARD TO WHAT 4 IT (TP) A NO. 111/B ANG/2020 & C.O. NO.8/BANG/2020 THE ADDITIONAL EVIDENCE ADMITTED BY CIT (APPEALS) BEFORE US. HENCE THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE REVENUES APPEA L AND C.O. BY ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD./ - SD/ - ( SMT. BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 . 02 . 20 2 1 . *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE