Robert Bosch Engineering and Business Solutrions Limited, Bangalore V. DCIT, Bangalore

ITA 1519/BANG/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7618 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PERCY PARDIWALA SENIOR SMT
• Keywords: Transfer pricing

Judgement Text

IT(TP)A.1519 & 1687/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T(TP).A NO.1519/BANG/2013 (ASSESSMENT YEARS : 2005-06) ROBERT BOSCH ENGINEERING AND BUSINESS SOLUTIONS LTD , (FORMERLY ROBERT BOSCH INDIA LTD, HOSUR ROAD, KORAMANGALA, BENGALURU .. APPELLANT PAN : AAACR7108R V. DEPUTY COMMISSIONER OF INCOME-TAX, LTU, BENGALURU .. RESPONDENT I.T(TP).A NO.1687/BANG/2013 (ASSESSMENT YEARS : 2005-06) (BY THE REVENUE) ASSESSEE BY : SHRI. PERCY PARDIWALA, SENIOR COUNSEL REVENUE BY : SMT. NEERA MALHOTRA, CIT - DR HEARD ON : 02.08.2017 PRONOUNCED ON :13 .09.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT (A) LTU, BENGALURU, DT.29.08.2013, FOR THE ASSESSMENT YEAR 2005-06. IT(TP)A.1519 & 1687/BANG/2013 PAGE - 2 02. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER : IT(TP)A.1519 & 1687/BANG/2013 PAGE - 3 03. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS AND THE FACTS LEADING TO FILING OF THE ADDITIONAL GROUNDS, WHICH IS REPRODUCED HEREUNDER : IT(TP)A.1519 & 1687/BANG/2013 PAGE - 4 04. IN ITS CROSS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US : 05. THE ASSESSEE COMPANY IS IN THE BUSINESS OF DEVE LOPMENT OF SOFTWARE FOR EXPORTS AND DOMESTIC SALES, DEALING IN COMPONENTS INCLUDING FUEL INJECTION SYSTEMS. THE ASSESSEE FIL ED ITS ORIGINAL RETURN OF INCOME DECLARING TOTAL INCOME OF RS.14,98,05,810 /-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. THE AO REF ERRED THE CASE TO THE TPO FOR COMPUTATION OF ALP. AFTER ELABORATE DISCU SSIONS IN HIS ORDER U/S.92CA, THE TPO DETERMINED THE ALP AT RS.35 ,86,13,736/-. AGGRIEVED BY THE ORDER OF THE TPO, THE ASSESSEE WEN T IN APPEAL BEFORE THE CIT (A). THE CIT (A) HAD PARTLY GRANTED THE RE LIEF TO ASSESSEE, THEREFORE BOTH THE PARTIES ARE BEFORE US. IT(TP)A.1519 & 1687/BANG/2013 PAGE - 5 07. NOW THE ASSESSEE IS IN APPEAL BEFORE US AGGRIEV ED BY THE ORDER PASSED BY THE AO IN PURSUANCE TO THE ORDER OF THE C IT (A), BY MAKING THE FOLLOWING ADDITIONS : I) COMPUTATION OF DEDUCTION U/S.10A .. RS.11,18,97, 312 II) TRANSFER PRICING .. RS.35,86,13,736 TP GROUNDS OF THE REVENUE AS WELL AS THE ASSESSEE : 08. AT THE OUT SET, THE BENCH HAS POINTED OUT THAT THE TRIBUNAL IS RESTORING THE MATTER BACK TO THE FILE TO THE AO / T PO FOR FRESH ADJUDICATION IN THOSE CASES WHERE THE CLAIM OF THE ASSESSEE OR OF THE REVENUE PERTAINS TO APPLICATION OF TURNOVER FILTER, HIGH PROFIT FILTER OR ABNORMAL MARGINS IN THE LIGHT OF THE JUDGMENT OF TH E HONBLE DELHI HIGH COURT RENDERED IN THE MATTER OF CHRYSCAPITAL I NVESTMENT ADVISORS INDIA P. LTD V. DCIT [82 TAXMANN.COM 167] . IN THE SAID JUDGMENT, HUGE TURNOVER / ABNORMAL MARGIN, ETC., IP SO FACTO DOES NOT LEAD TO THE CONCLUSION THAT A COMPANY WHICH IS OTHE RWISE COMPARABLE ON FAR ANALYSIS CAN BE EXCLUDED. IT WAS OBSERVED B Y THE HONBLE HIGH COURT THAT THE TPO TRIED TO IRON-OUT THE EFFEC T OF SUCH EVENTS ON IT(TP)A.1519 & 1687/BANG/2013 PAGE - 6 THE PROFITABILITY MARGIN AND PRICE OF THE COMPARABL E WHICH ARE OTHERWISE FUNCTIONALLY SIMILAR TO THE ASSESSEE. FU RTHER THE BENCH ALSO POINTED OUT THAT THE TRIBUNAL IS NOW ADOPTING THE 2 5% RPT FILTER AND 15% RPT FILTER DEPENDING UPON THE AVAILABILITY OF C OMPARABLES, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE MATTE R OF DCIT V. ACI WORLDWIDE SOLUTIONS P. LTD [IT(TP)A.262/BANG/2015, DT.26.07.2017]. ON ACCOUNT OF APPLICATION OF 25% RPT FILTER, SEVERA L COMPARABLES WILL BE AVAILABLE WHICH WERE EARLIER DELETED ON ACCOUNT OF 0% RPT FILTER. THESE COMPARABLES ARE REQUIRED TO BE EXAMINED ON TH E FAR ANALYSIS AND THEREFORE, IN OUR VIEW, THE ENTIRE TP ISSUE IS REQUIRED TO BE REMITTED BACK TO THE FILE OF THE TPO. ON THIS, THE LD. AR HAD AGREED. HOWEVER, THE LD. DR HAS SUBMITTED THAT THE OTHER IS SUE OF INCLUSION / EXCLUSION OF FLEXTRONICS SOFTWARE SYSTEMS LTD, IS A LSO REQUIRED TO BE CONSIDERED. 09. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. IN OUR VIEW, THE ISSUE OF TP IS REQUIRED TO BE REST ORED BACK TO THE CIT (A) WITH A DIRECTION THAT HE SHOULD DECIDE THE ISSU E AFRESH BY APPLYING THE RPT FILTER OF 25% OR 15% AS THE CASE MAY BE AND EXAMINE THE ASPECT OF HIGH-PROFIT MARGIN AND HIGH TURNOVER IN T HE LIGHT OF THE IT(TP)A.1519 & 1687/BANG/2013 PAGE - 7 JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED I N THE CASE OF CHRYSCAPITAL INVESTMENT ADVISERS INDIA P. LTD (SUPR A). 10. IN THE RESULT, GROUNDS OF ASSESSEE AS WELL AS T HE REVENUE WITH RESPECT OF TRANSFER PRICING ARE ALLOWED FOR STATIST ICAL PURPOSE. 11. WITH RESPECT TO GROUND NOS.14 AND 15, THE MATTE R IS SENT BACK TO THE FILE OF THE CIT (A), IN VIEW OF THE DIRECTION I SSUED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE, IN ITA NOS.344 & 336/B ANG/2014, DT.21.04.2017, FOR AY 2004-05, WHEREIN AT PARA 28, IT WAS HELD AS UNDER : 28. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED IN THIS REGARD THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE AND THE AO HAS ALSO MADE AN OBSER VATION IN THIS REGARD. SOFTWARE DEVELOPMENT AGREEMENT WITH A PPELLANTS CUSTOMER, ROBERT BOSCH GMBH IS FILED. THE LD. COUN SEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF INFOSYS VIDE ITA NO,2972, 2973 , 2974 AND 3015/2015, DATED 13.02.2013 HAS HELD THAT EXPENDITU RE IN FOREIGN CURRENCY NEED NOT BE EXCLUDED FROM THE EXPORT PROCE EDS FROM THE EXPORT OF COMPUTER SOFTWARE. THEREFORE, IN THE LIG HT OF THIS JUDGMENT, THE FOREIGN CURRENCY EXPENSES SHOULD NOT BE EXCLUDED FROM THE EXPORT PROCEEDS. 12. THE ASSESSEE HAS NOT PRESSED GROUND NO.16. HEN CE THE SAME IS DISMISSED AS NOT PRESSED. IT(TP)A.1519 & 1687/BANG/2013 PAGE - 8 REVENUES APPEAL IT(TP)A.1687/BANG/2013 : GROUND NO.1 IS GENERAL IN NATURE. 13. GROUND NOS.2 AND 3 PERTAIN TO EXCLUSION OF INSU RANCE CHARGES INCURRED IN FOREIGN CURRENCY, FROM EXPORT TURNOVER FOR PROVIDING SERVICES OUTSIDE INDIA. IN THIS REGARD, THE LD. AR HAS DRAWN OUR ATTENTION TO PAGE 352 OF THE PAPER BOOK, WHEREIN TH E AMOUNT FOR INSURANCE COVERAGE FOR GROUP INSURANCE IS RS.12,52, 830/- WHEREAS IN THE ORDER OF THE CIT (A), INSURANCE AMOUNT HAS BEEN MENTIONED AS RS.11,40,000/-. 14. IN VIEW OF SECTION 10A, FREIGHT CHARGES, TELECO MMUNICATION CHARGES AND INSURANCE CHARGES WHICH ARE ATTRIBUTABL E TO EXPORT OF COMPUTER SOFTWARE ARE NOT REQUIRED TO BE TAKEN INTO ACCOUNT FOR EXPORT TURNOVER. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THAT THE ENTIRE INSURANCE COVER IS RELATABLE TO EXPORT TURNO VER FOR COMPUTER SOFTWARE, THEREFORE, WE DEEM IT APPROPRIATE TO REMA ND THIS ISSUE BACK TO THE FILE OF THE CIT (A) FOR FRESH EXAMINATION ON THIS ASPECT OF INSURANCE CHARGES I.E HOW MUCH OF INSURANCE CHARGES WERE ATTRIBUTABLE TO EXPORT OF COMPUTER SOFTWARE. THE CIT (A) IS DIR ECTED TO ADJUDICATE IT(TP)A.1519 & 1687/BANG/2013 PAGE - 9 THIS ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF HE ARING TO THE ASSESSEE AS WELL AS THE AO. THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 15. GROUND NO.4 OF THE REVENUE PERTAINS TO CIT (A) S DIRECTION TO EXCLUDE FLEXTRONICS SOFTWARE SYSTEMS LTD. THE TRIB UNAL VIDE ITS ORDER FOR A. Y. 2003-04 (SUPRA), HAS RESTORED BACK THE ENTIRE TP ISSUE TO THE FILE OF THE CIT (A). FURTHER, THE ISSUE OF INCLUSION / EXCLUSION OF FLEXTRONICS SOFTWARE SYSTEMS LTD, IS ALSO A SUBJECT MATTER OF TP ISSUE. THEREFORE, GROUND NO.4 OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSE, BEING A PART AND PARCEL OF TP ISSUE. 16. APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STA TISTICAL PURPOSE. 17. TO SUMMARISE THE RESULT, ASSESSEE AND REVENUES APPEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 13.09.2017 MCN* IT(TP)A.1519 & 1687/BANG/2013 PAGE - 10 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 SENIOR PRIVATE SECRETARY