M/s. Multitech Software Systems India Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1336/BANG/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95249 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R REDDY
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO , JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T. (T.P) A. NO. 1336 /BANG/201 0 (ASSESSMENT YEAR : 200 6 - 07 ) M/S. MULTITECH SOFTWARE SYSTEMS INDIA PVT. LTD. , NO.170, 8 TH CROSS, 10 TH MAIN, INDIRANAGAR II STAGE, BANGALORE - 560 038 PAN AAACM 9615 Q VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 12(1), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE. RESPONDENT BY : SHRI G.R. REDDY , CIT (D.R) DATE OF H EARING : 10.9.2015. DATE OF P RONOUNCEMENT : 18.9. 201 5 . O R D E R PER SHRI JASON P. BOAZ, A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 PASSED UNDER SECTION 143(3) RWS 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DT.29.10.2010 IN PURSUANCE TO THE DIR ECTIONS OF THE DISPUTE RESOLUTION PANEL ( DRP ), BANGALORE ISSUED UNDER SECTION 144C OF THE ACT DT.29.9.2010. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2 ITA NO. 1336 /BANG/ 2010 2.1 THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE DEVELOPMENT SE RVICES, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 ON 29.11.2006 DECLARING TOTAL INCOME OF RS.35,92,600 AFTER CLAIMING DEDUCTION OF RS.1,80,35,296 UNDER SECTION 10A OF THE ACT. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE C ASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. SINCE THE ASSESSEE HAD REPORTEDLY ENTERED INTO THE FOLLOWING INTERNATIONAL TRANSACTIONS, THE ASSESSING OFFICER MADE A REFERENCE TO THE TRANSFER PRICING OFFICER ( TPO ) FOR DETERMINATION OF THE ARM S LENGTH PRICE ( ALP ) THEREOF. INTERNATIONAL TRANSACTIONS AMOUNT (RS.) PROVISION OF SOFTWARE DEVELOPMENT SERVICES 4,83,84,000 REIMBURSEMENT OF EXPENSES RECEIVED 1,55,274. THE TPO AFTER EXAMINATION OF THE MATTER, PASSED AN ORDER UNDER SECTION 92CA OF THE ACT DT.30.10.2009 WHEREIN HE PROPOSED A T.P. ADJUSTMENT OF RS.32,56,440 TO THE SOFTWARE DEVELOPMENT SERVICES SEGMENT OF THE ASSESSEE. 2.2 IN CONSEQUENCE THEREOF, THE ASSESSING OFFICER PASSED A DRAFT ASSESSMENT ORDER DT.23.12.2009, INTER ALIA, INCLUDING T HE PROPOSED T.P. ADJUSTMENT AND RESTRICTED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 10A OF THE ACT. THE ASSESSEE FILED ITS OBJECTIONS THERETO BEFORE THE DRP. THE DRP DISPOSED OFF THE ASSESSEE'S OBJECTIONS VIDE ITS DIRECTIONS UNDER SECTION 144C OF THE ACT DT.29.9.2010 ALLOWING THE ASSESSEE PARTIAL RELIEF. IN PURSUANCE THEREOF, THE ASSESSING OFFICER PASSED THE FINAL ORDER OF ASSESSMENT UNDER SECTION 143(3) RWS 144C(13) OF THE ACT VIDE ORDER DT.29.10.2010 WHEREIN THE INCOME 3 ITA NO. 1336 /BANG/ 2010 OF THE ASSESSEE WAS CO MPUTED AT RS.38,10,260 IN VIEW OF THE RESTRICTION OF THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT TO RS.1,78,17,937. 3. AGGRIEVED BY THE FINAL ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07, DT.29.10.2010, THE ASSESSEE IN APPEAL B EFORE THIS TRIBUNAL RAISING THE FOLLOWING GROUNDS : - 1. THE ASSESSING OFFICER TAKING THE NATURAL MEANING OF THE WORD TOTAL TURNOVER FOR COMPUTING THE DEDUCTION UNDER SECTION 10A IS AGAINST EQUITY AND LAW. 2. THE ASSESSING OFFICER ERRED IN NOT CONSIDERIN G THE HON'BLE ITAT ORDER IN THE APPELLANT S CASE PERTAINS TO THE ASSESSMENT YEAR 2003 - 04 EVEN THOGH THE SAME HAS BEEN HIGHLIGHTED. 3. THE DISPUTE RESOLUTION PANEL ALSO ENDORSING THE ASSESSING OFFICER S VIEW IN ADOPTING THE NATURAL MEANING FOR THE TOTAL TU RNOVER EVEN THOUGH THE HON'BLE ITAT HAVE EXPLICITLY PASSED AN ORDER IN THE APPELLANT S OWN CASE IS AGAINST EQUITY AND LAW. 4. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUND/ARGUMENTS AT THE TIME OF HEARING. 4. GROUND NOS.1 TO 4 : DEDUCTION UNDER SECTION 10A OF THE ACT. 4.1 IN THESE GROUNDS, THE SOLE ISSUE OF DISPUTE IN THIS APPEAL, THE ASSESSEE CHALLENGE THE ACTION OF THE AUTHORITIES BELOW (I.E. THE ASSESSING OFFICER AND THE DRP) IN EXCLUDING EXPENSES INCURRED IN FOREIGN CURRENCY TOWA RDS TELECOMMUNICATION AND TRAVEL EXPENSES TOWARDS DELIVERY OF SOFTWARE FROM EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION UNDER 4 ITA NO. 1336 /BANG/ 2010 SECTION 10A OF THE ACT. IT WAS CONTENDED THAT ADMITTEDLY, THE ASSESSEE HAD COMPUTED ITS CLAIM FOR DEDUCTION UNDER SECTION 10A O F THE ACT BY EXCLUDING THE AFORESAID EXPENSES FROM BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHICH WAS NOT ACCE PTED BY THE ASSESSING OFFICER WHO PROCEEDED TO RECOMPUTE THE DEDUCTION UNDER SECTION 10A OF THE ACT BY REDUCING THE AFORESAID EXPENSES INC URRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER ONLY. THE ASSESSEE SUBMITS THAT THE AFORESAID EXPENSES THAT ARE REDU C ED FROM EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER AND PLACED RELIANCE ON THE DECISION OF THE HON'BLE KARNATAKA HIGH CO URT IN THE CASE OF CIT V TATA ELXSI LTD. (2012) 349 ITR 98 (KAR), WHICH DECISION HAS BEEN FOLLOWED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2005 - 06 IN IT(TP)A NO.175/BANG/2012 DT.30.4.2015. 4.2 WE HAV E HEARD BOTH THE LEARNED AUTHORISED REPRESENTATIVE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE MATTER. TAKING INTO CONSIDERATION THE DECISION RENDERED BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD. (SUPRA) AND OF THE CO - ORDI NATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2005 - 06 (SUPRA), ARE OF THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO DIRECT THE ASSESSING OFFICER THAT TELECOMMUNICATION CHARGES AND TRAVEL EXPENSES INCURRED IN FOREIGN CURREN CY ARE TO BE EXCLUDED FROM BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE 5 ITA NO. 1336 /BANG/ 2010 COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT, AS HAS BEEN PRAYED BY THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 5. IN THE RESULT, ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2006 - 07 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPT., 2 01 5 . SD/ - ( VIJAYPAL RAO ) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE