M/s. Impelsys India Private Limited, Bangalore V. Assistant Commissioner of Income tax, Circle - 3(1)(1), Bangalore

ITA 1156/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3211 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-10-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 23-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT RAJ SINGH
• Assessee Lawyers: C SANDEEP
• Keywords: Transfer pricing; Set aside

Judgement Text

ITA NO.1156/BANG/2019 M/S. IMPELSYS INDIA PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1156/BANG/2019 ASSESSMENT YEAR: 2013-14 M/S. IMPELSYS INDIA PVT. LTD. SURYODAI COMPLEX NO.7, OLD AIRPORT ROAD KODIHALLI BANGALORE PAN NO :AACCM3490K VS. ACIT CIRCLE-3(1)(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI C. SANDEEP, A.R. RESPONDENT BY : SHRI AMRIT RAJ SINGH, D.R. DATE OF HEARING : 21.10.2021 DATE OF PRONOUNCEMENT : 21.10.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 22.2.2019 PASSED BY LD. CIT(A)-3, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2013-14. ALL THE GROUNDS URGED BY THE ASSESSEE RELATE TO TRANSFER PRICING ADJUSTMENT MADE BY THE A .O/TPO AND CONFIRMED BY LD. CIT(A). 2. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF E-PUBLISHING & E-LEARNING. HOWEVER , IN THE TRANSFER PRICING STUDY, THE ASSESSEE CATEGORIZED ITSELF AS S OFTWARE DEVELOPER ITA NO.1156/BANG/2019 M/S. IMPELSYS INDIA PVT. LTD., BANGALORE PAGE 2 OF 4 AND ACCORDINGLY COMPUTED ALP OF INTERNATIONAL TRANS ACTIONS. THE TPO ALSO ACCORDINGLY DETERMINED THE ALP OF INTERNAT IONAL TRANSACTIONS CATEGORIZING THE ASSESSEE AS SOFTWARE DEVELOPER. 3. THE LD. A.R. SUBMITTED THAT THE ASSESSEE DOES NO T CARRY OUT ANY SOFTWARE DEVELOPMENT ACTIVITY. HE SUBMITTED TH AT THE ASSESSEE IS CARRYING ON E-PUBLISHING AND E-LEARNING ACTIVITI ES ONLY. IN THIS REGARD, HE INVITED OUR ATTENTION TO LIST OF EMPLOYE ES ALONG WITH THEIR QUALIFICATION PLACED AT PAGE NOS.51 TO 57 OF THE PA PER BOOK. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS EMPLOYED MOSTL Y ARTS & SCIENCE GRADUATES, SINCE THE WORK OF E-PUBLISHING & E-LEARNING INVOLVE IN-DEPTH RESEARCH AND STUDY OF VARIOUS BOOK S AND JOURNALS. HE SUBMITTED THAT THE ASSESSEE DOES NOT CARRY ON AN Y CODING ACTIVITY, WHICH IS THE CORE ACTIVITY OF A SOFTWARE DEVELOPER. NONE OF THE ACTIVITIES PRESCRIBED FOR A SOFTWARE CYCLE IS C ARRIED ON BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS IN CA TEGORIZING ITSELF AS SOFTWARE DEVELOPERS WHILE PREPARING THE TRANSF ER PRICING STUDY OF THIS YEAR. THE LD A.R SUBMITTED THAT THE CATEGOR IZATION OF THE ASSESSEES ACTIVITIES AS SOFTWARE DEVELOPMENT IS NO T APPROPRIATE VIS- A-VIS THE ACTIVITIES CARRIED ON BY THE ASSESSEE. A CCORDINGLY, THE LD. A.R. SUBMITTED THAT THE ENTIRE ISSUE REQUIRES FRESH STUDY AND EXAMINATION. ACCORDINGLY, HE PRAYED THAT THE ENTIR E TP MATTERS MAY BE RESTORED TO THE FILE OF TPO, SO THAT A PROPE R TRANSFER PRICING STUDY RELATING TO THE ACTIVITIES OF THE ASSESSEE CO ULD BE FURNISHED BY THE ASSESSEE. 4. THE LD. D.R. SUBMITTED THAT THE ASSESSEE ITSELF HAS CATEGORIZED ITSELF AS SOFTWARE DEVELOPER IN ITS TRA NSFER PRICING STUDY AND NOT IT IS CHANGING ITS STAND. 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. IF THE ACTIVITIES OF THE ASSESSEE ARE NOT IN THE NATURE OF SOFTWARE DEVELOPMENT, ITA NO.1156/BANG/2019 M/S. IMPELSYS INDIA PVT. LTD., BANGALORE PAGE 3 OF 4 THEN IT IS NOT CORRECT TO DETERMINE ALP OF INTERNAT IONAL TRANSACTIONS BY COMPARING WITH SOFTWARE DEVELOPMENT COMPANIES. IT IS THE FIRM SUBMISSION OF LD AR THAT THE ASSESSEE IS NOT CARRYI NG ON ANY SOFTWARE DEVELOPMENT ACTIVITY AND THE MISTAKE HAS H APPENED IN THE ASSESSEES SIDE. IN VIEW OF THE SUBMISSIONS MADE BY LD. A.R., WE ARE OF THE VIEW THAT THE CLAIM OF THE LD. A.R. THAT THE ASSESSEE IS NOT A SOFTWARE DEVELOPMENT COMPANY ITSELF REQUIRES EXAMIN ATION BY AO/TPO. IF THE CLAIM OF THE LD. A.R. THAT THE ACTI VITY OF THE ASSESSEE CONSISTED OF E-PUBLISHING & E-LEARNING ONL Y AND NOT SOFTWARE DEVELOPMENT IS FOUND TO BE CORRECT, THEN T P STUDY ALREADY CONDUCTED AND TP ORDER ALREADY PASSED ARE NOT APPRO PRIATE. IN THAT CASE, IN THE INTEREST OF BOTH SIDES AND NATURAL JUS TICE, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE PROVIDED WITH AN O PPORTUNITY TO FILE FRESH TP STUDY AND THE TPO IS REQUIRED TO PASS A FRESH ORDER AFTER CONSIDERING THE TP STUDY OF THE ASSESSEE. ON THE CONTRARY, IF THE AO/TPO ARRIVES AT THE CONCLUSION THAT THE ASSES SEE IS A SOFTWARE DEVELOPMENT COMPANY, THEN HE MAY TAKE APPR OPRIATE DECISION IN ACCORDANCE WITH LAW. 6. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPI NION THAT THE ENTIRE TP ISSUE REQUIRES FRESH EXAMINATION AT THE END OF A O/TPO. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. C IT(A) ON TP ISSUE AND RESTORE ALL THE MATTERS TO THE FILE OF THE AO/T PO. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCT, 2021 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 21 ST OCT, 2021. VG/SPS ITA NO.1156/BANG/2019 M/S. IMPELSYS INDIA PVT. LTD., BANGALORE PAGE 4 OF 4 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.