Moog Controls India Private Limited, Bangalore V. ACIT, Bangalore

ITA 1519/BANG/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5260 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Transfer pricing
• Section: 143(3)

Judgement Text

IT(TP)A.1519/BANG/2012 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T(TP).A NO.1519/BANG/2012 (ASSESSMENT YEAR : 2008-09) MOOG CONTROLS INDIA P. LTD, NO.99P/100, KIADB INDUSTRIAL AREA, ELECTRONIC CITY, PHASE -II, BENGALURU 560 100 .. APPELLANT PAN : AABCM3226G V. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -12(1), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. K. R. VASUDEVAN, ADVOCATE REVENUE BY : SHRI. G. R. REDDY, CIT-DR-I HEARD ON : 12.04.2017 PRONOUNCED ON : 09.06.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORD ER OF THE ACIT, CIRCLE-12(1), BENGALURU, DT.21.09.2012, PASSED U/S. 143(3) R.W.S.144C(13) OF THE IT ACT, 1961, IN PURSUANCE TO THE DIRECTIONS OF THE DRP. IT(TP)A.1519/BANG/2012 PAGE - 2 02. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 DECLARING TO TAL INCOME OF RS.1,15,54,520/- AND THEREAFTER FILED A REVISED RET URN ON 02.07.2009 DECLARING INCOME OF RS.1,60,79,170/-. THE CASE WAS SELECTED FOR SCRUTINY AND WAS REFERRED TO THE TPO FOR BENCH MARKING THE I NTERNATIONAL TRANSACTIONS U/S.92 OF THE IT ACT. 03. THE ASSESSEE FILED THE TP STUDY BEFORE THE TPO WHEREIN THE FOLLOWING 18 COMPARABLES WERE SELECTED : SL. NAME OF THE COMPANY 1 AARMAN SOFTWARE P. LTD 2. AKSHAY SOFTWARE TECHNOLOGIES LTD 3. APPLABS TECHNOLOGIES P. LTD 4. COMPUTECH INTERNATIONAL LTD 5. CORE PROJECTS & TECHNOLOGIES LTD 6. IGATE GLOBAL SOLUTIONS LTD 7. MINDTREE LTD 8. NIHAR INFO GLOBAL LTD 9. ORIENT INFORMATION TECHNOLOGY LTD 10 PRITHVI INFORMATION SOLUTIONS LTD 11. R. S. SOFTWARE (INDIA) LTD 12. R SYSTEMS INTERNATIONAL LTD 13. S I P TECHNOLOGIES & EXPORTS LTD 14. SILVERLINE TECHNOLOGIES LTD 15. SONATA SOFTWARE 16. V J I L CONSULTING LTD 17 VMF SOFT TECH 18. ZYLOG SYSTEMS LTD IT(TP)A.1519/BANG/2012 PAGE - 3 THE TPO REJECTED THE TP STUDY FILED BY THE ASSESSEE AND THEREAFTER THE TPO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. BASED ON THE OBJECTIONS RAISED BY THE ASSESSEE, FOLLOWING SIX COMPARABLES WERE REJ ECTED BY THE TPO : SL. NO. COMPARABLE 1. ACROPETAL TECHNOLOGIES LTD (SEG) 2. ADITYA BIRLA MINACS IT SERVICES LTD (FORMERLY KNOWN AS PSI DATA SYSTEM) 3. ADITYA BIRLA MINACS TECH LTD 4. CYBERMATE INFOTECH 5. ZENITH INFOTECH LTD 6. J. K. TECHNOLOGIES LTD BASED ON THE TP STUDY, AFTER GIVING A SHOW-CAUSE NO TICE TO THE ASSESSEE, THE TPO DETAINED 15 COMPARABLES. AS UNDER : SL NO. NAME OF THE COMPANY OP/TC % 1. AVANI CINCOM TECHNOLOGIES 25.62 2. CELESTIAL BIOLABS 87.94 3. E-ZEST SOLUTIONS LTD 29.81 4. FLEXTRONICS (ARICENT) 7.86 5. IGATE GLOBAL SOLUTION LTD 13.09 6. INFOSYS 40.37 7. KALS INFORMATION SYSTEMS LTD (SEG 41.94 8. PERSISTENT SYSTEMS LTD 20.31 9. QUINTEGRA SOLUTIONS LTD 21.74 10. R SYSTEMS INTERNATIONAL (SEG) 15.30 11. SASKEN COMMUNICATION TECHNOLOGIES LTD (SEG) 18.97 12. TATA ELXSI (SEG) 18.97 13. THIRDWARE SOLUTIONS LTD 19.35 IT(TP)A.1519/BANG/2012 PAGE - 4 14. WIPRO LTD (SEG) 28.45 15. SOFTSOL INDIA LTD 17.89 AVERAGE 23.65 AFTER RETAINING THE 15 COMPARABLES AS ABOVE, THE TO TAL COMPARABLES RETAINED BY THE TPO WERE 20 COMPANIES. THESE ARE AS UNDER : SL NO. NAME OF THE COMPANY OP/TC % 1. AVANI CINCOM TECHNOLOGIES 25.62 2. BODHTREE CONSULTING LTD 18.72 3. CELESTIAL BIOLABS 87.94 4. E-ZEST SOLUTIONS LTD 29.81 5. FLEXTRONICS (ARICENT) 7.86 6. IGATE GLOBAL SOLUTION LTD 13.09 7. INFOSYS 40.37 8. KALS INFORMATION SYSTEMS LTD (SEG 41.94 9. LGS GLOBAL LTD 27.52 10. MINDTREE LTD (SEG) 16.41 11. PERSISTENT SYSTEMS LTD 20.31 12. QUINTEGRA SOLUTIONS LTD 21.74 13. R SYSTEMS INTERNATIONAL (SEG) 15.30 14. R. S. SOFTWARE (INDIA) LTD 7.41 15. SASKEN COMMUNICATION TECHNOLOGIES LTD (SEG) 18.97 16. TATA ELXSI (SEG) 18.97 17. THIRDWARE SOLUTIONS LTD 19.35 18. WIPRO LTD (SEG) 28.45 19. SOFTSOL INDIA LTD 17.89 20. LUCID SOFTWARE LTD 16.50 AVERAGE 23.65 THE ALP OF THE ABOVE 20 COMPANIES WAS COMPUTED AT 2 3.65%. IT(TP)A.1519/BANG/2012 PAGE - 5 04. FEELING AGGRIEVED, ASSESSEE FILED AN APPEAL BEF ORE THE DRP. HOWEVER, THE ASSESSEE WAS NOT SUCCESSFUL IN GETTING THE RELIEF BEFORE THE DRP. FEELING AGGRIEVED, ASSESSEE IS IN APPEAL BEFO RE THIS TRIBUNAL. THE GROUNDS OF APPEAL UNDER THE BROAD HEADS ARE FOLLOWI NG : I. TRANSFER PRICING ISSUE UNDER WHICH SUB-GROUNDS 1 TO 9, AS ALSO 6.1 TO 6.17 ARE RAISED, WHICH ARE DESCRIPTIVE AND ARGUMEN TATIVE IN NATURE AND HENCE NOT REPRODUCED. II. INTEREST ON ECB LOAN UNDER THIS HEAD, SUB-GROUNDS 10 TO 10.3 ARE RAISED, WHICH ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE AND HENCE NOT REPRODUCED. III. CORPORATE TAX UNDER THIS HEAD, SUB-GROUNDS 1 TO 3 ARE TAKEN. IV. SHORT CREDIT OF TAXES PAID AS SELF-ASSESSMENT TAX : THE LEARNED AO ERRED IN NOT GRANTING FULL CREDIT F OR SELF-ASSESSMENT TAX PAID BY THE APPELLANT COMPANY AND HAS RESTRICTE D THE CREDIT OF SELF- ASSESSMENT TAX TO RS.40,00,000 INSTEAD OF RS.45,22, 357 AS ELIGIBLE. V. LEVY OF INTEREST U/S.234B OF THE ACT OF RS.1,462,92 3/-. AT THE THRESHOLD, THE LD. AR HAS PRESSED FOR ALLOWI NG THE ADDITIONAL GROUND BEARING NOS.11 AND 12, WHICH ARE AS UNDER : IT(TP)A.1519/BANG/2012 PAGE - 6 GROUND NO.11 : LUCID SOFTWARE LIMITED (LUCID) SHO ULD BE REJECTED AS A COMPARABLE THE APPELLANT SUBMITS THAT THE LD. TPO HAS ERRED IN INCLUDING LUCID AS A FUNCTIONALLY COMPARABLE COMPANY TO THE APPELLANT WH ILE DOING THE COMPARABILITY ANALYSIS. GROUND NO.12 : BODHTREE CONSULTING LIMITED (BODHTR EE) SHOULD BE REJECTED AS A COMPARABLE THE APPELLANT SUBMITS THAT THE LD. TPO HAS ERRED IN INCLUDING LUCID AS A FUNCTIONALLY COMPARABLE COMPANY TO THE APPELLANT WH ILE DOING THE COMPARABILITY ANALYSIS. 05. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THESE TWO COMPARABLES THOUGH WERE SELECTED BY THE TPO, THE AS SESSEE HAS NOT RAISED OBJECTION AGAINST THE INCLUSION OF THESE TWO COMPAR ABLES AS THE SPECIFIC DETAILS OF THE FINANCIALS WERE NOT AVAILABLE IN THE PUBLIC DOMAIN. AFTER FILING OF THE APPEAL BEFORE THE TRIBUNAL, THE ASSES SEE NOTICED THAT THE DETAILS OF THESE TWO COMPARABLES ARE AVAILABLE IN THE PUBLI C DOMAIN AND ON THE BASIS OF SAID DETAILS AND ALSO IN ACCORDANCE OF TH E TRIBUNAL DECISIONS , IT WAS HELD THAT THESE TWO COMPARABLES ARE NOT FUNCTIO NALLY SIMILAR TO THAT OF THE ASSESSEE AS THESE COMPARABLES ARE ALSO INVOLVED INTO PRODUCT DEVELOPMENT WHEREAS THE ASSESSEE IS INTO SOFT-WARE DEVELOPMENT. MOREOVER SEGMENTAL DETAILS OF THESE TWO COMPANIES A RE ALSO NOT AVAILABLE. IT(TP)A.1519/BANG/2012 PAGE - 7 THEREFORE, IT WAS SUBMITTED THAT THE ADDITIONAL GRO UNDS AS URGED IN GROUNDS 11 AND 12 BE ALLOWED TO BE TAKEN IN THE PRESENT PRO CEEDINGS. 06. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THIS TRIBUNAL SHOULD NOT PERMIT TO RAISE THESE GROUNDS AS THE ASS ESSEE IS NOW ESTOPPED FROM RAISING THESE OBJECTIONS BEFORE THE TRIBUNAL, ONCE THE ASSESSEE HAS ACCEPTED THE INCLUSION OF THESE TWO COMPARABLES BEF ORE THE LOWER AUTHORITIES. 07. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS THE INCLUSION AND EXCLUSION OF THESE TW O COMPARABLES ARE REQUIRED TO BE EXAMINED BY APPLYING THE TEST OF FUN CTIONAL DISSIMILARITY WITH THAT OF THE ASSESSEE. IN OUR VIEW, THE MATERIAL IN THE FORM OF FINANCIAL S AND THE DECISIONS PASSED BY THE TRIBUNAL IS NOW AVAILABLE IN THE PUBLIC DOMA IN. THEREFORE, IF THE ASSESSEE IS PERMITTED TO TAKE THE OBJECTION OF TAKI NG THESE TWO COMPARABLES, IT WILL NOT PROLONG THE PROCEEDINGS BEFORE THE TPO / OTHER AUTHORITIES. IT WILL BE IN THE INTEREST OF JUSTICE IF THE ASSESSEE IS PERMITTED TO TAKE THESE OBJECTIONS BEFORE US. ACCORDINGLY, WE ALLOW THESE TWO ADDITIONAL GROUNDS. IT(TP)A.1519/BANG/2012 PAGE - 8 08. AS WE HAVE ALLOWED THE RAISING OF THE ADDITIONA L GROUND NOS.11 AND 12 FOR EXCLUSION OF LUCID SOFTWARE LTD AND BODHTREE CONSULTING LTD, WE DEEM IT APPROPRIATE TO REMAND THE MATTER BACK TO TH E FILE OF THE TPO WITH A DIRECTION TO EXAMINE AFRESH ON THE BASIS OF THE OBJ ECTIONS NOW RAISED BY THE ASSESSEE. ACCORDINGLY, THE TWO ADDITIONAL GROUNDS 11-12 ARE ALLOWED FOR STATISTICAL PURPOSE. 09. THE ASSESSEE HAS RAISED GROUNDS 1 TO 9 WHICH PE RTAIN TO TP ADJUSTMENT. IT HAS BEEN SUBMITTED THAT THE OTHER 1 1 COMPANIES, ARE REQUIRED TO BE EXCLUDED AS THOSE COMPANIES ARE NOT SIMILAR F UNCTIONALLY TO THAT OF THE ASSESSEE. IT WAS ALSO POINTED OUT THAT THE TRIBUNA L IN THE CASE OF INFINEON TECHNOLOGY INDIA P. LTD (SUPRA), HAD EXAMINED THE F UNCTIONAL SIMILARITY OF THESE COMPARABLES AND THEREAFTER HAD EXCLUDED THESE COMPARABLES FROM THE LIST OF COMPARABLES. 10. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T AS THIS TRIBUNAL IS REMANDING THE MATTER BACK IN RESPECT OF TWO COMPARA BLES, NAMELY, LUCID SOFTWARE LTD AND BODHTREE CONSULTING LTD, IN THE IN TEREST OF JUSTICE THE IT(TP)A.1519/BANG/2012 PAGE - 9 OTHER ASPECTS OF THE TP STUDY MAY ALSO BE REMANDED BACK TO THE FILE OF THE TPO. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. ACCEPTING THE CONTENTION OF THE LD. DR, WE HEREBY DIRECT THE TPO TO EXAMINE AFRESH THE ENTIRE TP ISSUE BY APPLYING T HE CORRECT FILTERS AND FOLLOWING THE JUDGMENTS LAID DOWN BY THE HONBLE HI GH COURTS AND THE DECISIONS OF THE TRIBUNAL ON THIS ASPECT. 12. THE NEXT GROUND NO.II, IS IN RESPECT OF INTERES T ON ECB LOAN. NO ARGUMENTS WERE ADDRESSED ON THIS ISSUE BY THE LD. AR FOR THE ASSESSEE DURING THE COURSE OF HEARING. THEREFORE, IT IS PRE SUMED THAT THE LD. AR IS NOT INTERESTED IN PRESSING THIS GROUND. ACCORDINGL Y THIS GROUND IS REJECTED AS NOT PRESSED. 13. GROUND NO.III PERTAINS TO CORPORATE TAX ISSUE. GRIEVANCE RAISED BY ASSESSEE IS THAT THE DRP ERRED IN UPHOLDING THE ACT ION OF THE AO IN RESTRICTING THE QUANTUM OF DEDUCTION U/S.10B IN RES PECT OF COMMUNICATION CHARGES AND TRAVELLING EXPENSES, IN VIOLATION OF TH E JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TAT A ELXSI LTD (349 ITR 98). AS HELD BY THE HONBLE HIGH COURT IN TATA ELXSI LTD (SUPRA), EXPENSES IT(TP)A.1519/BANG/2012 PAGE - 10 EXCLUDED FROM EXPORT TURNOVER HAD TO BE EXCLUDED FR OM THE TOTAL TURNOVER ALSO WHILE WORKING OUT THE ELIGIBLE DEDUCTION. WE DIRECT THE AO/TPO TO FOLLOW THE JUDGMENT OF THE HONBLE JURISDICTIONAL H IGH COURT IN TATA ELXSI LTD (SUPRA) AND EXCLUDE THE EXPENSES INCURRED IN FO REIGN CURRENCY BOTH FROM THE TOTAL TURNOVER AS WELL AS THE EXPORT TURNO VER WHILE COMPUTING THE DEDUCTION U/S.10B. GROUND NO.III OF THE ASSESSEE IS ALLOWED. 14. THE NEXT GROUND NO.IV IS WITH RESPECT TO SHORT CREDIT OF TAXES PAID AS SELF-ASSESSMENT TAX. THE LD. AR HAS SUBMITTED THAT THE AO HAS NOT GRANTED FULL CREDIT FOR SELF-ASSESSMENT TAX PAID BY THE ASS ESSEE AND HAS RESTRICTED IT TO THE CREDIT OF SELF-ASSESSMENT TAX TO RS.40 LAKHS INSTEAD OF RS.45,22,357/-. IN OUR VIEW, THE AO IS DUTY BOUND TO GIVE THE ADJU STMENT OF THE CREDIT OF THE SELF-ASSESSMENT TAX PAID BY THE ASSESSEE. ACCO RDINGLY, WE DIRECT THE AO TO GIVE CREDIT FOR THE FULL AMOUNT DEPOSITED BY THE ASSESSEE UNDER THE SELF-ASSESSMENT TAX. IF THE AO IS NOT AGREEABLE TO GRANT THE CREDIT FOR AN AMOUNT OF RS.45,22,357/-, THEN THE AO IS DIRECTED T O GIVE COGENT REASON FOR NOT GIVING CREDIT FOR THE SAME. THIS GROUND IS ALL OWED. 15. GROUND NO.V IS IN RESPECT OF LEVY OF INTEREST U /S.234B OF THE ACT, WHICH IS ONLY CONSEQUENTIAL IN NATURE AND HENCE NOT BEING ADJUDICATED. IT(TP)A.1519/BANG/2012 PAGE - 11 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9TH DAY O F JUNE, 2017. SD/- SD/- (A. K. GARODIA) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR