Akamai Technologies India Private Limited, Bangalore V. DCIT, Bangalore

ITA 1122/BANG/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7595 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; International transaction
• Section: 92C; 143(3); 234B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER IT (TP ) A NO. 1122 /BANG/201 1 ASSESSMENT YEAR : 200 7 - 0 8 M/S. AKAMAI TECHNOLOGIES INDIA PRIVATE LIMITED, SALARPURIA SOFTZONE, 2 ND & 3 RD FLOORS, A WING, SURVEY NO. 80/1, BELLANDUR VILLAGE, OUTER RING ROAD, BANGALORE 560 095. PAN: AAICS 0950J VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI DHANESH BAFNA, CA RESPONDENT BY : MS. NEERA MALHOTRA, CIT ( DR) DATE OF HEARING : 0 4 .0 9 .201 7 DATE OF PRONOUNCEMENT : 08 .09 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIRE CTED AGAINST THE ORDER DATED 20.09.2011 PASSED BY THE AO U/S. 143(3) R.W.S . 144C OF IT ACT, 1961 AS PER THE DIRECTIONS OF DRP. 2. THE REVISED GROUNDS FILED BY THE ASSESSEE ON 28.08. 2017 ARE AS UNDER. (IN CONFORMITY WITH RULE 8 OF INCOME-TAX APPELLATE TRIBUNAL RULES, 1963) BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, AKAMAI TECHNOLOGIES INDIA PRIVATE LIMITED (HEREINAF TER REFERRED TO AS 'APPELLANT') RESPECTFULLY CRAVES LEAVE TO PRE FER AN APPEAL AGAINST THE ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME- TAX CIRCLE 11(1) (`AO') DATED 20 SEPTEMBER 2011 I N PURSUANCE OF THE DIRECTIONS ISSUED BY DISPUTE RESOL UTION PANEL (`DRP'), BANGALORE DATED 24 AUGUST 2011 UNDER SECTI ON 253 OF THE INCOME-TAX ACT, 1961 (ACT') ON THE FOLLOWING GR OUNDS: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT(TP)A NO. 1122/BANG/2011 PAGE 2 OF 11 1.THE ORDER OF THE LEARNED AO, BASED ON DIRECTIONS OF THE HON'BLE DRP, ERRED IN ASSESSING THE TOTAL INCOME AT RS. 3,43,14,900 AS AGAINST RETURNED INCOME OF RS.11,94, 451 COMPUTED BY THE APPELLANT; [CORRESPONDING TO GROUND 1] GROUNDS OF APPEAL RELATING TO CORPORATE TAX MATTERS 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, BASED ON DIRECTIONS OF DRP, THE LEARNED AO HAS ERRE D IN LAW BY HOLDING THAT THE TELECOMMUNICATION EXPENSES (I.E. L EASED LINE CHARGES) ATTRIBUTABLE TO THE DELIVERY OF COMPUTER S OFTWARE OUTSIDE INDIA SHOULD BE REDUCED FROM EXPORT TURNOVE R WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T; [CORRESPONDING TO GROUND 2] 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, BASED ON DIRECTIONS OF DRP, THE LEARNED AO HAS ERRE D IN LAW AND IN FACT BY HOLDING THAT THE FOREIGN CURRENCY TR AVEL EXPENSES ARE TOWARDS TECHNICAL SERVICES RENDERED OUTSIDE IND IA AND SHOULD BE REDUCED FROM 'EXPORT TURNOVER' WHILE COMP UTING THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT; [CORRESPONDING TO GROUND 3] 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN LAW BY NOT CONSIDE RING THAT, IF THE TELECOMMUNICATION EXPENSES (I.E. LEASED LINE CHARGES) ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE O UTSIDE INDIA AND FOREIGN CURRENCY TRAVEL EXPENSES ARE REDUCED FR OM EXPORT TURNOVER, AN EQUAL AMOUNT SHOULD ALSO BE REDUCED FR OM TOTAL TURNOVER FOR COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. [CORRESPONDING TO GROUND 4] GROUNDS OF APPEAL RELATING TO TRANSFER PRICING MATT ERS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW: 5.THE LEARNED AO/TRANSFER PRICING OFFICER ('TPO') E RRED IN, MAKING AN ADDITION OF RS. 3,01,13,630 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LEN GTH PRICE OF THE BACK OFFICE SUPPORT SERVICES TRANSACTION ENTERE D BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISE; [CORRESPONDING TO GROUND 5] 6.THE LEARNED AO/TPO ERRED IN DISREGARDING THE ECON OMIC ANALYSIS UNDERTAKEN BY THE APPELLANT AND CONDUCTING A FRESH ECONOMIC ANALYSIS FOR THE DETERMINATION OF THE ARM' S LENGTH PRICE IN CONNECTION WITH THE IMPUGNED INTERNATIONAL TRANSACTION; [CORRESPONDING TO GROUND 6] 7.THE LEARNED AO/TPO HAVE ERRED IN IGNORING THE FAC T THAT SINCE THAT APPELLANT IS AVAILING TAX HOLIDAY U/S 10A OF T HE ACT, THERE IS NO INTENTION TO SHIFT THE PROFIT BASE OUT OF INDIA, WHICH IS ONE OF IT(TP)A NO. 1122/BANG/2011 PAGE 3 OF 11 THE BASIC INTENTION OF THE INTRODUCTION OF TRANSFER PRICING PROVISIONS; [CORRESPONDING TO GROUND 7] 8.THE LEARNED AO/TPO ERRED IN DETERMINING THE ARM'S LENGTH MARGIN/ PRICE USING ONLY FINANCIAL YEAR 2006-07 DAT A, WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPL YING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; [CORRESPONDING TO GROUND 8] 9.THE LEARNED AO/TPO ERRED IN REJECTING CERTAIN COM PARABLES CONSIDERED BY THE APPELLANT IN THE COMPARABILITY AN ALYSIS BY APPLYING DIFFERENT QUANTITATIVE AND QUALITATIVE FIL TERS; (A) THE LEARNED AO/TPO HAS ERRED BY REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT US ING TURNOVER