CGI Informatiion Systems and Mangement Consultants Private Limited, Bangalore V. DCIT, Bangalore

ITA 1117/BANG/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8587 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREETI GARG
• Keywords: Transfer pricing; International transaction
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 234B; 144C; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1117 (BANG) 2011 (ASSESSMENT YEAR : 2007 08) M/S CGI INFORMATION SYSTEMS MANAGEMENT CONSULTANTS PVT. LTD., ELECTRONIC CITY, TOWER 2, 95/1 AND 95/2, ELECTRONIC CITY PHASE 1 (WEST), BANGALORE - 560100 PAN : AAACI1994C APPELLANT VS THE DCIT, CIRCLE 11 (2), BANGALORE RESPONDENT ASSESSEE BY : SHRI T. SURYANARAY ANA, ADVOCATE REVENUE BY : SMT. PREETI GARG, CIT DR DATE OF HEARING : 04-01-2017 DATE OF PRONOUNCEMENT: : -02- 2017 O R D E R PER SHRI A.K.GARODIA, AM THIS APPEAL IS FILED BY THE ASSESSEE. THIS IS DIRE CTED AGAINST THE ASSESSMENT ORDER DATED 27.09.2011 FOR A. Y. 2007 08 PASSED U /S 143 (3) R.W.S. 144C AS PER THE DIRECTIONS OF DRP. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - XXXXXXXXXXXXXXXXXXXXX 3. LEARNED AR OF THE ASSESSEE SUBMITTED A CHART IN RESPECT OF TP ISSUES RAISED BY THE ASSESSEE AS PER GROUNDS 1 TO 3 AND RE QUESTED THAT THESE ITA NOS.1117 (BANG)2011 2 ISSUES MAY BE DECIDED IN THE LIGHT OF THE CHART. RE GARDING GROUND NO. 4, HE SUBMITTED THAT THIS ISSUE REGARDING INCLUSION OF REIMBURSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE FROM ITS AE MA Y BE RESTORED BACK IN THE LIGHT OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF AXA BUSINESS SERVICES PVT. LTD. VS. DCIT IN ITA NO. 334/BANG/201 3 DATED 29.11.2016. HE SUBMITTED A COPY OF THIS TRIBUNAL OR DER AND DRAWN OUR ATTENTION TO PARA 49 TO 52 OF THIS TRIBUNAL ORDER. REGARDING GROUND NO. 5 IN RESPECT OF NON CONSIDERING OF WRITE BACK OF PR OVISION OF EXPENSES MADE IN EARLIER YEARS AS OPERATING PROFIT OF THE AS SESSEE IN THE PRESENT YEAR, HE SUBMITTED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE IN A. Y. 2008 09 IN ITA NO. 1227/BANG/2016 DATED 30.09.2016, COPY AVAILABLE ON PAGES 217 TO 238 OF CASE LAW PAPER BOOK AND OUR ATTENTION WAS DRAWN TO PARA 9 ON PAGE 233. REGARDING GROUND NO. 6, HE SUBMITTED T HAT THE BENEFIT OF PROVISO SHOULD BE ALLOWED. REGARDING GROUND NO. 7, HE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F YOKOGAWA INDIA LTD. AS REPORTED IN 341 ITR 385. REGARDING GROUND N O. 8 TO 11, HE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED I N THE CASE OF TATA ELXSI LTD. AS REPORTED IN 349 ITR 98. REGARDIN G GROUND NO. 12, HE SUBMITTED THAT HIS SUBMISSIONS ON THIS ISSUE ON PAGE 17 AND 18 OF SYNOPSYS SHOULD BE CONSIDERED. REGARDING GROUNDS 13 AND 14, HE SUBMITTED THAT THESE ISSUES ARE CONSEQUENTIAL ABOUT INTEREST U/S 234B AND 234D. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF ITA NOS.1117 (BANG)2011 3 THE LOWER AUTHORITIES. HE PLACED RELIANCE ON THE TR IBUNAL ORDER RENDERED IN THE CASE OF J. P. MORGAN SERVICES (P) L TD. VS. DCIT AS REPORTED IN 46 ITR (T) 561 (MUMBAI TRIB.) AND SUB MITTED THAT FOR USA AND CANADA, IN MAP PROCEEDINGS, RATE ADOPTED WA S 17.5 % AND AS PER THIS TRIBUNAL ORDER, SAME RATE SHOULD BE ADO PTED IN RESPECT OF OTHER COUNTRIES IF THERE IS NO DISTINCTION IN FACTS . HE SUBMITTED THAT IN VIEW OF THIS, IN THE PRESENT CASE ALSO, FOR UK AND AUSTRALIA ALSO, THE SAME RATE OF MARK UP OF 17.5 % SHOULD BE ADOPTED AS WAS ADOPTED IN MAP WITH USA & CANADA BECAUSE THERE IS NO DISTINCTI ON IN FACTS. IN THE REJOINDER, LEARNED AR OF THE ASSESSEE COULD NOT POINT OUT ANY DISTINCTION IN FACTS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE AS SESSEE COMPANY IS HAVING INTERNATIONAL TRANSACTIONS WITH ITS AE IN FO UR COUNTRIES I.E. 1) USA, 2) CANADA, 3) UK AND 4) AUSTRALIA. AS PER MAP WITH USA AND CANADA, MARK UP OF 17.5% WAS AGREED. NOW, IN THE LIGHT OF THESE FAC TS, WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER CITED BY THE LE ARNED DR OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF J. P. MORGAN SE RVICES (P) LTD. VS. DCIT (SUPRA). THIS WAS HELD BY THE TRIBUNAL IN THIS CAS E THAT IF THERE IS NO DISTINCTION IN FACTS, THEN WHATEVER MARGIN HAS BEEN DETERMINED IN MAP FOR 96% OF THE TRANSACTIONS, SAME MARGIN SHOULD BE DETE RMINED FOR THE REMAINING 4% TRANSACTIONS AS WELL. IN THE PRESENT C ASE, NO DISTINCTION IN FACTS HAS BEEN POINTED OUT BY THE AR OF THE ASSESSE E AND AS PER THE ORDER OF LOWER AUTHORITIES ALSO, NO DISTINCTION IN FACTS IS NOTICED. TOTAL TP ADJUSTMENT MADE WAS OF RS. 2211.45 LACS. THE ASSESSEE GOT RELI EF OF RS. 713.00 LACS AS PER MAP WITH USA AND GOT FURTHER RELIEF OF RS. 123. 95 LACS AS PER MAP WITH ITA NOS.1117 (BANG)2011 4 CANADA. THE AMOUNT OF TP ADJUSTMENT FOR CANADA TRAN SACTIONS WAS RS. 318.66 LACS. HENCE, THE RELIEF IS ABOUT 38.90%. IF THE PERCENTAGE OF RELIEF IN RESPECT OF USA TRANSACTION IS CONSIDERED AT SAME PE RCENTAGE I.E. 38.90%, TOTAL VALUE OF TP ADJUSTMENT FOR USA TRANSACTIONS C OMES TO RS. 1832.90 LACS. IN THIS MANNER, TOTAL ADJUSTMENT FOR USA AND CANADA COMES TO RS. 2151.56 LACS OUT OF RS. 2211.45 LACS BEING TOTAL TP ADJUSTMENT. IN PERCENTAGE TERMS, IT COMES TO ABOUT 96%. HENCE, IT IS SEEN THAT THE FACTS IN THE PRESENT CASE ARE SIMILAR IF NOT IDENTICAL AND H ENCE, WE RESPECTFULLY FOLLOW THIS TRIBUNAL ORDER AND HOLD THAT IN RESPECT OF TRA NSACTION WITH UK AND AUSTRALIA ALSO, SAME MARK UP OF 17.5% SHOULD BE ADO PTED AS WERE APPROVED IN MAP WITH USA AND CANADA. IN VIEW OF THIS, NO SEP ARATE ADJUDICATION IS CALLED FOR ON TP ISSUE IN RESPECT OF TP GROUNDS RAI SED BY THE ASSESSEE. ACCORDINGLY, THESE GROUNDS I.E. GROUND NO. 1 TO 4 A RE PARTLY ALLOWED. REGARDING GROUND NO. 5 AND 6 ALSO, THE ISSUE INVOLV ED IS IN CONNECTION WITH TP ADJUSTMENT AND HAVING DECIDED THE TP ISSUE IN LI NE WITH MAP WITH USA AND CANADA, THESE ISSUES DO NOT SURVIVE FOR A SEPAR ATE ADJUDICATION. THE ISSUE INVOLVED IN GROUND NO. 7 IS COVERED IN FA VOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDER ED IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THIS GROUND IS ALLOWED. THE ISSUE INVOLVED IN GROUND NO. 8 TO 11 IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT REN DERED IN THE CASE OF TATA ELXSI LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THESE GROUNDS ARE ALLOWED. ITA NOS.1117 (BANG)2011 5 REGARDING GROUND NO. 12, WE FIND THAT THE ISSUE INV OLVED IS DISALLOWANCE OF LOSS ON ACCOUNT OF WRITE OFF OF ADVANCES TO EMPLOYE ES MAINLY. IN OUR CONSIDERED OPINION, THIS IS ALLOWABLE AND ACCORDING LY, GROUND NO. 12 IS ALLOWED. GROUND NO. 13 AND 14 ARE CONSEQUENTIAL. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED ON THE CAPTION PAGE. (VIJAY PAL RAO) (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : .02.2017 AM * 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 ITA NOS.1117 (BANG)2011 6 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 DATE 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. D ATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT 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 RE GISTRAR 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