Deputy Commissioner of Income tax, Bangalore V. M/s Independent Technology systems India Pvt Ltd, Bangalore

ITA 1234/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90005 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Wholly owned subsidiary
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI VIJAYPAL RAO , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T. (T.P) A. NO. 1234 /BANG/201 4 (ASSESSMENT YEAR : 200 9 - 10 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. VS. M/S. INDEPENDENT TECHNOLOGY SYSTEMS INDIA PVT. LTD., DIVYASREE TOWERS, 4 TH FLOOR, NO.55, GURUPPANNA PALYA, MADIVALA RANGE, BANGALORE - 560 029 PAN AABCI 2954B APPELLANT RESPONDENT. APPELLANT BY : DR. SHANKAR PRASAD K (D.R) RESPONDENT B Y : SHRI MANOJ M SHENOY,C.A. DATE OF H EARING : 30.6.2015. DATE OF P RONOUNCEMENT : 10.07 . 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M. : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - V , BANGALORE DT. 19.08.2014 FOR ASSESSMENT YEAR 2009 - 10. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESS EE COMPANY, A WHOLLY OWNED SUBSIDIARY OF INDEPENDENT TECHNOLOGY SYSTEMS, U.K. ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS ASSOCIATED ENTERPRISES (AE), FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10 ON 2 IT (T.P) A NO. 1234 /BANG/ 2014 30.9.2009 DECLARI NG TOTAL INCOME OF RS.80,40,384. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) RWS 144C OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DT.28.5.2013, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINE D AT RS.3,78,51,906 AS AGAINST THE RETURNED INCOME OF RS.80,40,384 IN VIEW OF THE FOLLOWING : - I. T.P. ADJUSTMENT : RS.2,82,46,287. II. RESTRICTION OF THE DEDUCTION U/S. 10A OF THE ACT TO RS.9,03,01,118 AS AGAINST THE ASSESSEE'S CLAIM OF - RS.9,18, 66,353. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT.28.5.2013 FOR ASSESSMENT YEAR 2009 - 10, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS) IV, BANGALORE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE APPEAL VIDE ORDER DT.19.8.2014 ALLOWING T HE ASSESSEE PARTIAL RELIEF. 3. REVENUE BEING AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) IV, BANGALORE DT.19.8.2014 FOR ASSESSMENT YEAR 2009 - 10 HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRE4D IN DIRECTING THE ASSESSING OFFICER TO FOLLOW THE RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OFTATA ELXSI LIMITED 349 ITR 98 AND EXCLUDE THE TELECOMM UNICATION CHARGES / FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY FORM THE TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE I.T. ACT AS THE DECISION OF THE HIGH COURT IS BINDING, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROVI SION IN SECTION 10A THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO, AS CLAUSE (IV) OF THE EXPLANATION TO 3 IT (T.P) A NO. 1234 /BANG/ 2014 SECTION 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TURNOVER. 3. THE CIT (APPEALS) ERRED IN NOT APPRECIA TING THE FACT THAT THE JURISDICTIONAL HIGH COURT S DECISION IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY B E URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE 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 TH A T MAY BE URGED AT T HE TIME OF HEARING OF THE APPEAL. 4. THE GROUNDS AT S.NOS. 1, 4 AND 5 ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 5. GROUNDS AT S.NOS. 2 AND 3 DEDUCTION U/S.10A OF THE ACT. 5.1 IN THESE GROUNDS, REV ENUE ASSAILS THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE TELECOMMUNICATION CHARGES AND FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY FROM BOTH EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER FOR THE PURPOSES OF COMPUTATION OF THE DEDUCTION UNDER SECTION 10A OF THE ACT BY RELYING ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V TATA ELXSI LTD. (2012) 349 ITR 98 (KAR). 5.2 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) ON THIS ISSUE. 5.3 WE HAVE HEARD BOTH THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE AND THE LEARNED DEPARTMEN T AL REPRESENTATIVE IN THE MATTER. WE FIND THAT THE ISSUE BEFORE US I S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE HIGH COURT OF 4 IT (T.P) A NO. 1234 /BANG/ 2014 KARNATAKA IN THE CASE OF TATA ELXSI LTD. (SUPRA). RESPECTFULLY FOLLOWI N G BINDING DECISION RENDERED BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD. (SUPRA ), WE ARE OF THE VIEW THAT ACTION OF THE LEARNED CIT (APPEALS), DIRECTING THE ASSESSING OFFICER THAT TELECOMMUNICATION CHARGES AND FREIGHT CHARGES INCURRED IN FOREIGN CURRENCY ARE TO BE EXCLUDED FROM BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COM PUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT , IS IN ORDER . CONSEQUENTLY, REVENUE S GROUNDS AT S.NOS.2 AND 3 ARE DISMISSED. 6. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 2009 - 10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 201 5 . SD/ - ( VIJAYPAL RAO ) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPO NDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE