Assistant Commissioner of Income-tax, V. M/s. Nihilent Technologies Pvt. Ltd., Pune

ITA 1307/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7478 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Keywords: Transfer pricing; International transaction
• Section: 92C; 143(3); 142(1); 115JB

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1307/PUN/2015 / ASSESSMENT YEAR : 2010-11 ASST. COMMISSIONER OF INCOME TAX , CIRCLE-2, PUNE, 1 ST FLOOR, B WING, PMT BUILDING, SHANKARSHETH ROAD, PUNE 37. . APPELLANT V/S M/S. NIHILENT TECHNOLOGIES PVT. LTD., 4 TH FLOOR, WEIKFIELD I.T. CITI INFOPARK NAGAR ROAD, PUNE 411 014. PAN : AABCN0867G. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK. REVENUE BY : SHRI NARENDRA KUMAR / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF ASST.COMMISSIONER OF INCOME TAX, CIRCLE-2, PUNE DT.31.07.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF RENDERING OF SOFTWARE DEVELOPMENT AND MIGRATION SERVICES , MANAGED SERVICES AND OTHER INFORMATION TECHNOLOGY SUPPOR T / DATE OF HEARING : 10.07.2017 / DATE OF PRONOUNCEMENT: 18.09.2017 2 SERVICES. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2010-1 1 ON 09.10.2010 DECLARING TOTAL INCOME OF RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 143(2) A ND 142(1) OF THE ACT WERE ISSUED AND SERVED ON ASSESSEE ASKING IT TO FURNISH THE DETAILS SPECIFIED THEREIN. ON SCRUTINY OF THE DETAILS IT W AS NOTICED THAT THE TOTAL QUANTUM OF INTERNATIONAL TRANSACTIO NS OF THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES (AES) WERE MORE THAN RS.15 CRORES. ACCORDINGLY REFERENCE WAS MADE TO TRANSFE R PRICING OFFICER (TPO) FOR DETERMINING ARMS LENGTH PRICE (ALP) OF INTERNATIONAL TRANSACTIONS. TPO VIDE ORDER PASSED U/S 92C A(3) DT.29.01.2014 PROPOSED UPWARD ADJUSTMENT OF INCOME OF RS.6,07,34,382/-. THEREAFTER A DRAFT ASSESSMENT ORDER WAS PASSED ON 12.03.2014 U/S 143(3) R.W.S 144C(1) OF THE ACT WHEREIN A N ADJUSTMENT OF INCOME OF RS.6,07,34,382/- WAS PROPOSED. THE ASSESSEE FILED OBJECTIONS AGAINST THE ADJUSTMENTS PROPOS ED IN THE DRAFT ASSESSMENT ORDER BEFORE D.R.P. DRP VIDE ORDER DT.26.12.2014 INTER-ALIA DIRECTED THE AO TO EXCLUDE INFOSYS TECH. LTD., AS A COMPARABLE AND FURTHER DIRECTED THE AO TO EXA MINE THE COMPUTATION OF PLI AND RE-COMPUTE ITS OPERATING MARGIN A ND ALSO TO FOLLOW THE SAFE HARBOUR RULES ISSUED BY CBDT. DRP THER EAFTER NOTED THAT AFTER THE DIRECTIONS AS GIVEN THEREIN IN THE O RDER ARE FOLLOWED, THE RESULTANT ADJUSTMENT WOULD FALL WITHIN THE MARG IN OF (+/-5%) OF THE TRANSFER PRICE DECLARED BY THE ASSESSEE A ND ACCORDINGLY DENIED TO PROCEED TO ADJUDICATE THE OTHER GROUNDS OF OBJECTIONS RAISED BY THE ASSESSEE. CONSEQUENT TO THE DIRECTIONS OF DRP, AO PASSED ORDER ON 31.07.2015 U/S 143(3) R.W.S. 144C(1 3) OF THE ACT AND WHEREIN THE REVISED PLI OF COMPARABLES AFTER EXCLUDING 3 INFOSYS WAS WORKED OUT AT 20.67% AS AGAINST 15.89 % DISC LOSED BY THE ASSESSEE AND THE ALP OF THE INTERNATIONAL TRANSACTIO NS BY APPLYING THE REVISED PLI WAS WORKED OUT AT RS.102,13,47,0 19/-. SINCE THE ADJUSTMENTS WORKED OUT BY APPLYING THE REVIS ED PLI OF COMPARABLES FELL WITHIN THE RANGE OF (+/- 5%) OF THE PRICE DIS CLOSED BY THE ASSESSEE, NO ADJUSTMENT TO THE VALUE OF INTERNA TIONAL TRANSACTIONS WAS CONSIDERED NECESSARY AND ACCORDINGLY THE TOTAL INCOME WAS DETERMINED AT RS.NIL AND BOOK PROFIT U/S 115JB WAS DETERMINED AT RS.13,73,97,120/-. AGGRIEVED BY THE ORDER OF DRP, REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLO WING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE DISPUTE RESOLUTION PANEL (DRP) ERRED IN DIRECTING T O EXCLUDE COMPARABLE ON TURNOVER BASIS, IGNORING THE FACT THA T NO CAP WAS PROPOSED BY THE ASSESSEE IN ITS OWN TRANSFER PRICIN G STUDY REPORT. 2. THE APPELLANT PRAYS THAT THE DIRECTIONS OF THE D RP BE HELD TO BE BAD IN LAW AND QUASHED AND THE ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER / ASSESSING OFFICER BE UPH ELD. 3. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF TPO AND FURTH ER SUBMITTED THAT THE ASSESSEE NEVER OBJECTED TO TURNOV ER FILTERS ADOPTED BY TPO AND WITH RESPECT TO EXCLUDING INFOSYS T ECH LTD., AS COMPARABLE, ASSESSEE HAD NO OBJECTION REGARDING FUNCTIONA L COMPARABILITY OF THE COMPANY AND THE ONLY OBJECTION WITH RESPECT TO COMPUTATION OF ITS PLI. HE SUBMITTED THAT THE OBJECT IONS WERE THEREFORE RIGHTLY CONSIDERED BY TPO. ON THE OTHER HAND , LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE TPO AND DRP AND SUPPORTED THE ORDER OF DRP. 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ON THE ISSUE OF EXCLUDING INFOSYS TECH. LIMITED AS COMPARABLE, DRP HAS GIVEN A FINDING THAT AS AGAINST THE ASSESSEES TURNOVER OF RS.103.25 CRORES, THE TURNOVER OF INFOSYS TECH. LTD WAS RS.21,140 CRORE AND THAT BIGGER SIZ ED COMPANIES ARE IN A POSITION TO UNDERTAKE MORE RISKS IN BU SINESS AS COMPARED TO SMALLER SIZED COMPANIES AND THEREFORE INFOSYS TECH. LTD., CANNOT BE CONSIDERED AS COMPARABLE. DRP HAD FURTH ER NOTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES PRIVATE LTD (ITA NO.1204 OF 2011 ORDER DT.10.07.2013) AFTER CONSIDERING SEVERAL ASPECTS OF THE GIAN T COMPANIES LIKE INFOSYS LIMITED AND WIPRO LIMITED HAS HELD THA T BIG COMPANIES CANNOT BE COMPARED WITH SMALLER COMPANIES. BEFO RE US, REVENUE HAS NOT POINTED OUT ANY FALLACY IN THE FINDINGS OF DRP NOR POINTED TO ANY CONTRARY BINDING DECISION IN ITS SUPPOR T. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF DRP AND THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 18 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ' / JUDICIAL MEMBER #' / ACCOUNTANT MEMBER PUNE; DATED : 18 TH SEPTEMBER, 2017. YAMINI 5 $%&'()(& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. 4. 5. 6. CIT(A), PUNE-10. CIT(EXEMPTIONS), PUNE RANGE. '#$!% %&',)! !&' , / DR, ITAT, A PUNE; $,-./ GUARD FILE. / BY ORDER , ! // / TRUE COPY / / // TRUE COPY // /T///// TRUE COPY // //T///// TRUE COPY // / 01%2&3 / SR. PRIVATE SECRETARY )! !&' , / ITAT, PUNE.