Vestas Technology R&D Chennai Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1143/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6875 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR D KUMUDHA
• Keywords: Related party transaction; Transfer pricing
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.1143/CHNY/2017 / ASSESSMENT YEAR: 2009-10 M/S. VESTAS TECHNOLOGY R & D CHENNAI PRIVATE LIMITED, BLOCK A, 8 TH FLOOR, TECCI PARK, 173, RAJIV GANDHI SALAI (OMR), SHOLLINGANALLUR, CHENNAI 600 119. [PAN: AACCV4768P] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(4), CHENNAI 34. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / RESPONDENT BY : DR. D. KUMUDHA, JCIT / DATE OF HEARING : 03.01.2019 /DATE OF PRONOUNCEMENT : 07.01.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 13, CHENNAI PASSED UNDER SECTION 143(3) R.W.S. 92CA OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] DATED 27.02.2017 RELEVANT TO THE ASSESSMENT YEAR 2009-10. 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED FOLLOWING TRANSFER PRICING ISSUES FOR ADJUDICATION: GROUND NO. 1: THE ORDER OF THE LEARNED (LD.) COMMISSIONER OF INCOME TAX (APPEALS 13[CIT(A)] CONFIRMING THE ACTION OF LD. TRANSFER PRICING OFFICER I.T.A. NO. 1143/CHNY/17 2 (TPO) OF MAKING AN ADJUSTMENT TO THE TRANSFER PRICE OF THE APPELLANT BY INR 3,01,52,714 IN RESPECT OF PROVISION OF SOFTWARE DEVELOPMENT SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISE (AE), IS ERRONEOUS IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO. 2: THE ORDER OF THE LD. CIT(A) UPHOLDING THE ORDER OF THE LD. TPO, IN DETERMINING THE ARMS LENGTH PRICE IS ERRONEOUS IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE FOR ITS APPROACH TO IDENTIFY COMPARABLE COMPANIES ON FOLLOWING KEY POINTS AND MORE: 2.1 FAILING TO CONSIDER THE FUNCTIONAL DISSIMILARITIES AND SIGNIFICANT RELATED PARTY TRANSACTIONS THAT WERE HIGHLIGHTED BY THE APPELLANT. 2.2 FAILING TO TAKE COGNIZANCE OF THE CORRECT MARK-UP COMPUTATION OF COMPARABLE COMPANIES. 2.3 UPHOLDING INAPPROPRIATE QUANTITATIVE FILTERS ADOPTED BY THE LD. TPO WHILE ARRIVING AT THE FINAL SET OF COMPARABLE COMPANIES. 2.4 FAILING TO TAKE COGNIZANCE OF THE SUBMISSIONS FILED BY THE APPELLANT FOR REJECTION OF APPELLANTS OWN COMPARABLES. 2.5 UPHOLDING THE ORDER OF THE LD. TPO THAT REJECTED CERTAIN COMPARABLES AS PURPORTED PERSISTENT LOSS MAKING COMPANIES ETC. 3. BY REFERRING TO THE LETTER DATED 04.10.2018 OF THE ASSESSEE, THE LD. COUNSEL FOR THE ASSESSEE HAS SOUGHT FOR PERMISSION TO WITHDRAW GROUND NO. 1 AND GROUND NO. 2 AS REPRODUCED HEREINABOVE, FOR WHICH, THE REVENUE HAS NOT RAISED ANY OBJECTION. CONSEQUENTLY, GROUND NO. 1 AND GROUND NO. 2 OF THE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE DISMISSED AS WITHDRAWN. 4. GROUND NO. 3 RELATES TO DISALLOWANCE OF DEDUCTION UNDER SECTION 10A OF THE ACT AMOUNTING TO .44,69,274/-. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS ERRONEOUSLY EXCLUDED THE FOREIGN TRAVEL EXPENDITURE FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHEREAS, IT WAS NOT EXCLUDED FROM THE TOTAL TURNOVER IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL I.T.A. NO. 1143/CHNY/17 3 IN THE CASE OF ITO V. SAK SOFT LTD. 313 ITR 353 (SB). FURTHER, IT WAS THE SUBMISSION THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 AND PRAYED THAT THE SAME SHOULD BE FOLLOWED. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 IN I.T.A. NO. 1540/MDS/2017 DATED 01.09.2017. BY FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ITO V. SAK SOFT LTD. (SUPRA), IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11, THE TRIBUNAL HAS HELD THAT THE FOREIGN TRAVEL EXPENDITURE, WHICH HAS BEEN REDUCED FROM THE EXPORT TURNOVER IS ALSO TO BE REDUCED FROM THE TOTAL TURNOVER AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, IN VIEW OF THE ABOVE DECISIONS, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE FOREIGN TRAVEL EXPENDITURE BOTH FROM EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. THUS, THE GROUND RAISED BY THE ASSESSEE STANDS ALLOWED. 6. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED A SPECIFIC ISSUE IN GROUND 3.2 THAT THE ASSESSING OFFICER AND THE LD. CIT(A) ERRED IN FACTS AND IN LAW BY INCLUDING FOREIGN EXCHANGE FLUCTUATION GAIN AMOUNTING TO INR I.T.A. NO. 1143/CHNY/17 4 1,33,67,283/- IN TOTAL TURNOVER WITHOUT INCLUDING THE SAME IN EXPORT TURNOVER, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT. HOWEVER, DURING THE COURSE OF APPEAL HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PUT FORTH ANY OF HIS ARGUMENT ON THIS ISSUE. MOREOVER, ON PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT THE GROUND RAISED IS NOT AN ISSUE IN THE ASSESSMENT ORDER, WHICH CANNOT BE ADMITTED AND THEREFORE, THE LD. CIT(A) DISMISSED THE GROUND. BEING SO, THE SPECIFIC ISSUE RAISED IN THE GROUNDS OF APPEAL STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 07 TH JANUARY, 2019 IN CHENNAI. SD/ - SD/ - (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 07.01.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.