DCIT, Bangalore V. M/s Cognizant Global Services Pvt. Ltd., Bangalore

ITA 1278/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9297 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER IT(TP)A NO.1278(BANG) 2015 (ASSESSMENT YEARS : 2007-08) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1)(1), 2 ND FLOOR, BMTC BUILDING, KORAMANGALA, BANGALORE APPELLANT VS M/S COGNIZANT GLOBAL SERVICES PVT. LTD. LAKE VIEW, 5 TH FLOOR, BLOCK-A, BAGAMANE TECH. PARK-CV RAMANAGAR, BANGALORE-560 093 PAN NO.AAACD7204L RESPONDENT REVENUE BY : MISS NEERA MALHOTRA, CIT DR ASSESSEE BY : SHRI MANOJ, CA DATE OF HEARING : 20-10-2016 DATE OF PRONOUNCEMENT: : 03-11-201 6 O R D E R PER SHRI A.K.GARODIA, AM THIS APPEAL IS FILED BY THE REVENUE AND IT IS DIREC TED AGAINST THE ORDER LD.CIT(A)-II, BANGALORE DATED 23-07-2015 FOR A. Y. 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO T HE FACTS . AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAINABLE .. 2. THE LEARNED CIT(A) HAS ERRED IN RELYING ON THE D ECISION OF THE JURISDICTIONAL HONBLE HIGH COURT IN THE CASE OF M/ S TATA ELXSI LTD. VS ACIT 349 ITR 98 AND AN SLP FILED BY THE REVENUE IS STILL PENDING BEFORE THE APEX COURT. IT(TP)A NO.1278(BANG)2010 2 3. THE CIT(A) HAS ERRED IN RELYING ON THE DECISION THE CASE OF INFOSYS TECHNOLOGIES LTD. VS JCIT(109 TTJ 631) AND CANNOT BE ACCEPTED AS THE HONBLE HIGH COURT OF KARNATAKA HAS REMANDED THE MATTER BACK TO THE AO FOR FRESH CONSIDERATION I N ACCORDANCE WITH LAW. 4. FOR THESE OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE O MAY BE RESTORED. .5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. IS NOT JUSTIFIED IN PASSING THE IMPUGNED ORDER U/S. 263 OF THE ACT SINCE THE VERY NOTICE ISSUED U/S. 263 OF THE ACT WAS ILLEGAL IN AS MUCH AS THE SAME WAS ONLY FOR THE PURPOSES OF CONDU CTING FISHING AND ROVING ENQUIRES AS THERE WERE NO GROUNDS STATED BY THE LEARNED CIT FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND THE APPELLANT WAS MERELY CALLED UPON THE APPEAR BEFORE THE LEARNED CIT AND GIVE DETAILS AND THUS , THE VERY INITIATION OF THE PROCEEDINGS U/S. 263 OF THE ACT , IS ILLEGAL AND VOID AB-INITIO 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED C . I . T. FAILED TO APPRECIATE THAT THERE WAS NO ERROR MUCH LESS AN ERR OR PREJUDICIAL TO THE INTEREST OF THE REVENUE IN THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WARRANTING REVISION U/S.263 OF THE ACT AND CONSEQUENTLY, THE ORDER PASSED BY THE C . I . T . IS OPPOSED TO LAW AND FACTS OF THE APPELLANT'S CASE AND REQUIRES TO BE CA NCELLED. 4. THE LEARNED CIT, FAILED TO APPRECIATE THAT THERE WAS NO REQUIREMENT TO SET-ASIDE THE ISSUE RELATING TO THE SOURCE OF THE AMOUNTS I NVESTED BY THE APPELLANT IN BUSINESS AS THE SAME WA S EXPLAINED BY THE APPELLANT BEFORE THE LEARNED A.O. AND THUS , THE ASSESSMENT ORDER PASSED CANNOT BE CONSIDERED AS ERR ONEOUS AND IT(TP)A NO.1278(BANG)2010 3 PREJUDICIAL TO THE INTEREST OF REVENUE. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRA YS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. 3. IT WAS SUBMITTED BY THE LD. DR OF THE REVENUE T HAT GROUND NO.1 IS GENERAL IN NATURE. REGARDING GROUND NO.2, IT WAS FA IRLY CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE REVENUE BY THE JUDGMEN T OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF T ATA ELXSI LTD. VS ACIT 349 ITR 98 BUT THE SLP IS FILED BY THE REVENUE BEFORE T HE HONBLE SUPREME COURT, AND IT IS STILL PENDING. 4. REGARDING GROUND NO.3, HE SUPPORTED THE ASSESSM ENT ORDER AND RELIANCE WAS PLACED BY HIM ON THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS INFOSYS TECHNO LOGIES LTD. AS REPORTED IN 34 TAXMAN.COM 91(KAR.) WHEREIN SIMILAR ISSUE WAS RE STORED BACK BY THE HONBLE KARNATAKA HIGH COURT TO THE FILE OF AO. HE SUBMITTED THAT IN VIEW OF THIS JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT, IN THE PRESENT CASE ALSO, THE ISSUE INVOLVED IN THE REVENUES APPEAL SHOULD B E RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER EXAMINING THE FA CTUAL ASPECTS THAT WHETHER THE EXPENDITURE INCURRED IN FOREIGN CURRENCY WAS FO R PROVIDING TECHNICAL SERVICES OUTSIDE INDIA OR NOT. AS AGAINST THIS, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). IT(TP)A NO.1278(BANG)2010 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGAR DING GROUND NO.1, WE HOLD THAT THIS GROUND IS GENERAL IN NATURE AND N O SPECIFIC ADJUDICATION IS CALLED FOR. 6. GROUND NO.2 IS DISMISSED BY FOLLOWING THE JUDGME NT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S TA TA ELXSI LTD VS ACIT(SUPRA) 7. FOR GROUND NO.3, WE FIND THAT THE ISSUE IN DISP UTE HAS BEEN DECIDED BY THE LD. CIT(A) AS PER PARA-4.4 OF HIS OR DER WHICH IS RE-PRODUCED HEREIN BELOW: 4.4 THE QUESTION FOR CONSIDERATION IS WHETHER THE APPELLANT WAS ENGAGED IN RENDERING TECHNICAL SERVIC ES SO AS TO BE DEPRIVED OF THE BENEFIT OF DEDUCTION U/S 1 0A. HOWEVER, FROM THE MATERIALS PLACED BEFORE ME DURING THE APPEAL HEARINGS, IT IS NOTICED THAT THE APPELLANT I S ENGAGED ONLY IN DEVELOPING SOFTWARE. IT HAS BEEN H ELD IN THE CASE OF INFOSYS TECHNOLOGIES LTD V JCIT (109 TT J 631) THAT WHERE AN ASSESSEE IS ENGAGED IN THE DEVELOPMEN T OF COMPUTER PROGRAM IT SHOULD NOT BE REGARDED AS BEING ENGAGED IN RENDERING TECHNICAL SERVICES BUT IN THE DEVELOPMENT OF COMPUTER SOFTWARE. THE APPELLANT HAS RELIED ON THE DECISION IN ZYLOG SYSTEMS LTD (ITA NO.1138/MDS/2007) TO DRIVE HOME THE POINT THAT EXPENSES INCURRED WITH STAFF IN A FOREIGN BRANCH DO NOT RELATE TO RENDERING TECHNICAL SERVICES AS IT IS CON NECTED WITH THE OBJECT OF DEVELOPING COMPUTER SOFTWARE. I N VIEW OF THESE DECISIONS, I HOLD THAT THE AO ERRED IN RED UCING THE EXPENSES MENTIONED ABOVE FROM THE EXPORT TURNOV ER TO RESTRICT THE DEDUCTION U/S 10A OF THE ACT AND DIREC T THE AO TO ALLOW THE APPELLANTS CLAIM IN THIS REGARD. IT(TP)A NO.1278(BANG)2010 5 8. FROM THE ABOVE PARA OF THE LD. CIT(A)S ORDER, IT IS SEEN THAT HE HAS FOLLOWED THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S INFOSYS TECHNOLOGIES LTD VS JCIT(SUPRA), BUT IN THIS CASE AFTERWARDS, TH E MATTER TRAVELLED UP TO HONBLE KARNATAKA HIGH COURT AND AS PER THE JUDGMEN T REPORTED IN 34 TAXMAN.COM 91(KAR.), HONBLE KARNATAKA HIGH COURT H AS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH DECISIO N AFTER EXAMINING THIS ASPECT AS TO WHETHER THE EXPENDITURE INCURRED IN FO REIGN CURRENCY WAS FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. IN THE PRESENT CASE, THE BENCH WANTED THE LD. AR OF THE ASSESSEE TO FURNISH THE AG REEMENT/CONTRACTS WITH VARIOUS BUYERS AS PER WHICH THE ASSESSEE WAS REQUIR ED TO SEND ITS EMPLOYEES TO THE PLACE OF CUSTOMERS TO FIND OUT WHE THER THE EMPLOYEES OF THE ASSESSEE COMPANY WERE SENT TO THE PLACE OF CUST OMERS IN CONNECTION WITH SUPPLY OF SOFTWARE TO THEM OR WHETHER THE EMPL OYEES OF THE ASSESSEE COMPANY WERE SENT TO THE PLACE OF CUSTOMERS FOR REN DERING TECHNICAL SERVICES AND THEN ONLY THE ISSUE CAN BE DECIDED AS TO WHETHER SUCH EXPENSES INCURRED IN FOREIGN CURRENCY FOR DEPUTING THE EMPLOYEES OF THE ASSESSEE COMPANY TO THE PLACE OF FOREIGN COMPANIES WAS IN CONNECTION WITH SUPPLY OF COMPUTER SOFTWARE OR WERE IN CONNECTION W ITH RENDERING TECHNICAL SERVICES BUT HE REPLIED THAT NO SUCH MATERIAL IS RE ADILY AVAILABLE. THE LD.CIT(A) HAS ALSO NOT GIVEN ANY CLEAR FINDING ABOU T THIS FACTUAL ASPECT AND HE HAS PASSED A CRYPTIC ORDER ON THIS ISSUE BY SAYI NG THAT AS PER THE MATERIALS PLACED BEFORE HIM DURING THE APPELLATE PR OCEEDINGS, IT IS NOTICED BY HIM THAT THE ASSESSEE IS ENGAGED ONLY IN DEVELO PING SOFTWARE BUT THIS IS NOT COMING OUT AS TO WHAT WAS THE MATERIAL PLACED B EFORE HIM AND ON WHAT BASIS, HE CAME TO THIS CONCLUSION. UNDER THESE FA CTS AND IN VIEW OF THE IT(TP)A NO.1278(BANG)2010 6 SUBSEQUENT JUDGMENT OF THE HONBLE KARNATAKA HIGH C OURT CITED BY THE LD. DR OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF CIT VS M/S INFOSYS TECHNOLOGIES LTD.(SUPRA), WE FEEL IT PROPER THAT TH IS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR A FRESH DECISION AFTER EX AMINING THE FACTUAL ASPECT AS TO WHETHER THE EMPLOYEES OF THE ASSESSEE COMPANY WE RE DEPUTED TO THE PLACE OF FOREIGN CUSTOMERS AS A PART OF THE AGREEME NT WITH THEM FOR SUPPLYING COMPUTER SOFTWARE, BUT IF IT IS FOUND THA T AS PER THE AGREEMENT WITH FOREIGN CUSTOMER REGARDING SUPPLY OF SOFTWARE, THE ASSESSEE WAS UNDER NO OBLIGATION TO DEPUTE THEIR EMPLOYEES TO THE PLAC E OF CUSTOMER, THAN IT MAY BE A CASE OF RENDERING TECHNICAL SERVICES OUTSI DE INDIA WHICH HAS BEEN ACCOUNTED FOR BY THE ASSESSEE AS SALE OF COMPUTER S OFTWARE. HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION ON THIS ASPECT AS PER ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS ALLOWED FOR ST ATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (SMT ASHA VIJAYARAGHAVAN SD/- (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : 03.11.2016 AM * IT(TP)A NO.1278(BANG)2010 7 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 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. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE O N 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