Asst.C.I.T., Bangalore V. M/s Fair Issac India Software Pvt. Ltd., Bangalore

ITA 1503/BANG/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0716 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRIYAM SINGHANIA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER IT (TP) A NO. 1503 /BANG/201 5 ASSESSMENT YEAR : 20 1 1 - 1 2 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3 (1) (1), BANGALORE. VS. M/S. FAIR ISSAC INDIA SOFTWARE PVT. LTD., TITANIUM BLDG., 135 AIRPORT ROAD, KODIHALLI, BANGALORE 560 017. PAN: AABCF7670G APPELLANT RESPONDENT APPELLANT BY : MS. NEERA MALHOTRA, CIT (DR) RESPONDENT BY : MS. PRIYAM SINGHANIA, CA DATE OF HEARING : 19 . 11 .2018 DATE OF PRONOUNCEMENT : 29 . 11 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AND THE SAME IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED BY THE AO ON 30.10.2015 U/S . 143(3) R.W.S. 144C OF IT ACT AS PER THE DIRECTIONS OF DRP FOR ASSESSME NT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. 1. THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL A RE OPPOSED TO LAW AND FACTS OF THE CASE. 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, WHETHER THE HON'BLE DISPUTE RESOLUTION PANEL IS CORRECT IN HOLD ING THAT M/S E-ZEST SOLUTIONS LTD., M/S INFOSYS TECHNOLOGIES LTD., M/S TATA ELXSI LTD., AND M/S ICRA TECHNO ANALYTICS LTD., CANNOT BE TAKEN AS A COMPARABLE BEING FUNCTIONALLY DIFFERENT WHEN IT SATISFIES ALL THE QUALITATIVE AND QUANTITATIVE FILTERS APPLIED BY THE TPO. 3. WHETHER A COMPARABLE MAY BE CONSIDERED AS ENGAGE D IN SOFTWARE PRODUCT BUSINESS MERELY BECAUSE IT HAS DEVELOPED SO FTWARE PRODUCT BY FOLLOWING SOFTWARE DEVELOPMENT PROCESS WITHOUT HAVI NG LEGAL OWNERSHIP ON SUCH SOFTWARE PRODUCT. 4. WHETHER THE HON'BLE DRP BANGALORE INSTEAD OF REL YING ON THE DECISION OF THE ITAT OUGHT TO HAVE DECIDED THE COMP ARABILITY OF THESE COMPANIES ON THE BASIS OF SPECIFIC FACTS BROUGHT ON RECORD BY THE TPO IN THE CASE OF THE ASSESSEE. 5. WHETHER THE HON'BLE DRP WAS RIGHT IN SEEKING EXA CT COMPARABILITY WHILE SEARCHING FOR COMPARABLE COMPANIES OF THE ASS ESSEE UNDER IT(TP)A NO. 1503/BANG/2015 PAGE 2 OF 3 TNMM METHOD WHEREAS REQUIREMENT OF LAW AND INTERNAT IONAL JURISPRUDENCE REQUIRE SEEKING SIMILAR COMPARABLE CO MPANIES. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE HON'BLE DRP IS RIGHT IN HOLDING THAT M/S R.S.SOFTWARE PVT L TD., M/S ACROPETAL TECHNOLOGIES LTD., M/S MINDTREE LTD., AND M/S L&T I NFOTECH LTD., M/S EVOKE TECHNOLOGIES LTD., CANNOT BE TAKEN AS A COMPA RABLE WHEN IT SATISFIES ALL THE QUALITATIVE AND QUANTITATIVE FILT ERS ADOPTED BY THE TPO. 7. WHETHER WHILE SEEKING THE EXACT COMPARABILITY AS MENTIONED ABOVE THE DRP WAS RIGHT IN FACT AND IN LAW IN IMPOSING CO NDITION BEYOND LAW WHERE THE REQUIREMENT OF LAW IS TO ACKNOWLEDGE ONLY THOSE DIFFERENCES THAT ARE LIKELY TO MATERIALLY AFFECT TH E MARGIN. 9. WHETHER THE HON'BLE DRP ERRED IN FACT AND LAW BY HOLDING THAT THE COMPANY M/S ICC INTERNATIONAL AGENCIES AS FUNCTIONA LLY DISSIMILAR WITHOUT ANALYZING THE FACTS OF THE COMPANY. 10. WHETHER THE HON'BLE DRP ERRED IN FACT AND LAW B Y CONSIDERING THE COMPARABLE AS FUNCTIONALLY DISSIMILAR BASED ON THE GROUNDS THAT THERE IS A LACK OF CLARITY IN THE SEGMENT REPORT WITHOUT ANALYSING THE FACTS IN DEPTH . 11. WHETHER THE HON'BLE DRP WAS RIGHT IN HOLDING TH AT FOREIGN EXCHANGE TRANSACTION IS TO BE CONSIDERED AS OPERATI NG IN NATURE, IGNORING PROVISIONS OF THE RULE 10B(2)(D) THAT THE NET PROFIT MARGIN REALIZED BY THE TAX PAYER IN THE INTERNATIONAL TRAN SACTION SHALL ALONE BE COMPUTED UNDER THE TNMM METHOD 12. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE DRP WAS RIGHT IN FOLLOWING THE RATIO LAID DOWN BY THE HON'B LE HIGH COURT IN THE CASE OF M/S TATA ELXSI LTD., IN 349 ITR 98. 13. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE DISPUTE RESOLUTION PANEL WAS RIGHT IN HOLDING THAT EXPENSES REDUCED FROM EXPORT TURNOVER HAS TO BE REDUCED FROM TOTAL T URNOVER ALSO, SINCE NO PROVISION U/S 10A PROVIDES FOR EXCLUSION O F SUCH EXPENSES. 14. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS OF THE DI SPUTE RESOLUTION PANEL IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED. 15. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE LD. DR OF REVENUE SUBMITTED A LETTER FROM TH E AO DATED 15.11.2018 AND HE SUBMITTED THAT THE GROUNDS PERTAINING TO TRANSFE R PRICING ISSUES ARE WITHDRAWN BECAUSE THE ASSESSEE HAS SIGNED APA ON 31 .08.2017. SHE SUBMITTED THAT IN VIEW OF THIS, THE GROUNDS RAISED BY THE REVENUE ON TP ISSUES BEING GROUND NOS. 1 TO 11 MAY BE REJECTED AS WITHDRAWN. REGARDING GROUND NOS. 12 AND 13, SHE FAIRLY CONCEDED THAT THI S ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. TATA ELX SI LTD., 349 ITR 98 AND ALSO SUBMITTED THAT THIS JUDGEMENT OF HON'BLE KARNA TAKA HIGH COURT HAS IT(TP)A NO. 1503/BANG/2015 PAGE 3 OF 3 BEEN CONFIRMED BY HONBLE APEX COURT ALSO AS PER IT S RECENT JUDGEMENT DATED 24.04.2018 IN CIT VS. HCL TECHNOLOGIES LTD. I N CIVIL APPEAL NOS. 8489-8490/2013.THE LD. AR OF ASSESSEE ALSO SUPPORTE D THE ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN VIEW OF THIS LETTER OF THE AO DATED 15.11.2018, GROUND NOS. 1 TO 11 OF THE REV ENUES APPEAL ARE REJECTED AS WITHDRAWN BECAUSE THE SAME ARE WITHDRAW N IN VIEW OF APA SIGNED BY THE ASSESSEE ON 31.08.2017. 5. REGARDING THE REMAINING GROUNDS I.E. GROUND NOS. 12 & 13, WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) IN FAVOUR OF THE AS SESSEE BY FOLLOWING THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. TATA ELXSI LTD. (SUPRA) IN WHICH IT WAS HELD THAT T OTAL TURNOVER IS SUM TOTAL OF EXPORT TURNOVER AND DOMESTIC TURNOVER AND THEREFORE , IF AN AMOUNT IS REDUCED FROM EXPORT TURNOVER THEN THE TOTAL TURNOVE R ALSO GOES DOWN BY THE SAME AMOUNT AUTOMATICALLY. THIS ISSUE IS DECIDED I N FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE APEX COURT ALSO AS PER THE SUBSEQUENT JUDGEMENT RENDERED IN THE CASE OFCIT VS. HCL TECHNO LOGIES LTD. (SUPRA). IN VIEW OF THIS, WE DECLINE TO INTERFERE IN THE ORD ER OF CIT(A) ON THIS ISSUE. GROUND NOS. 12 AND 13 ARE REJECTED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 29 TH NOVEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.