Open Text Corporation India Private Limited(formerly known as Cordys Software India Private Limited), Hyderabad, Hyderabad V. ITO, Ward-16(3), Hyderabad, Hyderabad

ITA 152/HYD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4776 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 26-04-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R DIPAK
• Keywords: Transfer pricing; International transaction; Retrospective amendment
• Section: 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 152/HYD/2017 ASSESSMENT YEAR: 2012-13 OPEN TEXT CORPORATION INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS CORDYS SOFTWARE INDIA PRIVATE LIMITED), HYDERABAD [PAN: AAACB8264E] VS INCOME TAX OFFICER, WARD-16(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI PRASHANT MEHARCHANDANI, AR FOR REVENUE : SHRI R.DIPAK, DR DATE OF HEARING : 26-04-2021 DATE OF PRONOUNCEMENT : 19-05-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2012-13 ARISES AGAINS T THE ITO, WARD-16(3), HYDERABADS ASSESSMENT DATED 20-12-2 016 FRAMED IN FURTHERANCE TO THE DISPUTE RESOLUTION PANEL (DRP)- 1, BENGALURUS DIRECTIONS DT.25-10-2016 IN F.NO.148/D RP-1/ BNG/2016-17, INVOLVING PROCEEDINGS U/S.143(3) R.W.S . 144C(13) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE AC T]; RESPECTIVELY. HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NO.152/HYD/2017 :- 2 -: 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE PLEADS THAT THE LEARNED LOWER AUTHORITIES HAVE ERRED IN LAW AND ON F ACTS IN MAKING ARMS LENGTH PRICE (ALP) ADJUSTMENTS OF RS.7,32,48,576/- PERTAINING TO INTEREST ON RECEIVABLES QUA ITS INTERNATIONAL TRANSACTIONS WITH THE OVERSEAS ASSOCIATED ENTERPRISE (AE). SUFFICE TO SAY, IT TRANSPIRES AT THE O UTSET THAT WE NEED NOT DWELL DEEPER QUA THE RELEVANT FACTS PERTAINING TO THE INSTANT ISSUE. WE FIND THAT ASSUMING BUT NOT ACCEPTING THE LEARNED LOWER AUTHORITIES HAVE RIGHTLY FOUND THE ASSE SSEES INTEREST RECEIVABLES AS BEYOND THE PERIOD INVOLVING UN- CONTROLLED TRANSACTIONS, THE IMPUGNED ADJUSTMENT IS NOT L IABLE TO BE SUSTAINED FOR THE SOLE REASON THAT THE SAME HAS BEE N MADE NOT AS PER LIBOR RATE APPLICABLE IN CASE OF INTER NATIONAL LOANS BUT AFTER TAKING STATE BANK OF INDIAS PRIME LENDI NG RATE @14.75% IN THE TRANSFER PRICING OFFICERS (TPO) ORDE R AND UPHELD TO THAT @ 4% TO 9.25% AS APPLICABLE IN CASE OF TH E VERY BANKS DOMESTIC SHORT TERM DEPOSITS INVOLVING 7 554 DAYS; AS THE CASE MAY BE. 2.1. LEARNED CIT-DRS VEHEMENT CONTENTION IS THAT THE TP O AS WELL AS THE DRP HAVE RIGHTLY TAKEN THE FOREGOING SB I RATES BENCHMARK INVOLVING THE SHORT TERM DEPOSITS. 2.2. WE FIND NO MERIT IN THE INSTANT ARGUMENT AS SUCH A SHORT TERM DEPOSIT CANNOT BE TAKEN AT PAR WITH AN INTERNATIONAL TRANSACTION U/S.92B OF THE ACT SINCE THE LATTER INVOLVES F OREIGN CURRENCY AND OVERSEAS MARKET CONDITIONS. IN ADDITION TO THIS, LEARNED LOWER AUTHORITIES HAVE ALSO NOT ADOPTED ANY UN - CONTROLLED PARTY/COMPARABLE IN THE VERY SEGMENT AS WEL L SO AS TO COME TO THE CONCLUSION THAT THE ASSESSEES RECEIVABLES IN ITA NO.152/HYD/2017 :- 3 -: CASE OF OVERSEAS AES INVOLVED MORE THAN THE MARKET PRA CTICE OF REASONABLE TIME PERIOD. WE KEEP IN MIND ALL THESE CL INCHING ASPECTS AND DIRECT THE TPO TO DELETE THE IMPUGNED ALP ADJUSTMENT IN ISSUE. THE ASSESSEES FORMER SUBSTANTIVE GROUND STANDS ACCEPTED IN THE ABOVE TERMS. 3. THE ASSESSEES NEXT ARGUMENT IS THAT SUCH INTEREST ON RECEIVABLES OUGHT NOT TO HAVE BEEN TREATED AS AN INTERNA TIONAL TRANSACTION COVERED UNDER EXPLANATION(C) TO SECTION 92B OF THE ACT, INSERTED IN THE ACT VIDE FINANCE ACT, 2012 W.E.F.01 -04- 2001 IS REJECTED AS PER THE HON'BLE MADRAS HIGH COUR TS DECISION IN REDINGTON INDIA PVT. LTD., VS. DCIT, IN TA X APPEAL NO.590 AND 591 OF 2019 DT.10-12-2020 HOLDING THAT A CORPORATE GUARANTEE INDEED FORMS AN INTERNATIONAL TRANS ACTION AND COVERED BY THE EXPLANATION TO SECTION 92B WITH RETROSPECTIVE EFFECT. 3.1. THERE IS HARDLY ANY ISSUE THAT THE DEPARTMENTAL AUTHORITIES HAVE APPLIED THE FOREGOING EXPLANATION WITH RETROSPECTIVE EFFECT QUA ISSUE OF A CORPORATE GUARANTEE WHICH ALSO INCLUDED THE IMPUGNED INTEREST ON RECEIVABLES. TH E ASSESSEES LEGAL ARGUMENT IS DECLINED THEREFORE. NECE SSARY COMPUTATION TO FOLLOW AS PER LAW. NO OTHER GROUND HAS BEEN PRESSED BEFORE US. 4. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER [ HYDERABAD, DATED: 19-05-2021 TNMM ITA NO.152/HYD/2017 :- 4 -: COPY TO : 1.OPEN TEXT CORPORATION INDIA PRIVATE LIMITED (FORM ERLY KNOWN AS CORDYS SOFTWARE INDIA PRIVATE LIMITED), BU ILDING D, PLOT NO.17, SOFTWARE UNITS LAYOUT, MADHAPUR, HYDERABAD. 2.THE INCOME TAX OFFICER, WARD-16(3), HYDERABAD. 3.DISPUTE RESOLUTION PANEL (DRP), BENGALURU. 4.DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5.ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICIN G), HYDERABAD. 6.D.R. ITAT, HYDERABAD. 7.GUARD FILE.