Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 7817 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 9 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-09-2021
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
06-07-2021
Assessment Year
2008-2009
Appeal Filed On
18-11-2013
Judgement Text
IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.1565/BANG/2013 ASSESSMENT YEAR: 2008-09 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD. NO.123, INDUSTRIAL LAYOUT KORAMANGALA HOSUR ROAD BANGALORE 560 095. PAN NO : AAACR7108R VS. DEPUTY COMMISSIONER OF INCOME-TAX (LTU) BANGALORE APPELLANT RESPONDENT IT(TP)A NO.1575/BANG/2013 ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX (LTU) BANGALORE VS. M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD. NO.123, INDUSTRIAL LAYOUT KORAMANGALA HOSUR ROAD BANGALORE 560 095. APPELLANT RESPONDENT A PPELLANT BY : SHRI PERCY PARDIWALA, SR. A.R. RESPONDENT BY : MS. NEERA MALHOTRA, D.R. DATE OF HEARING : 06.07.2021 DATE OF PRONOUNCEMENT : 01.09.2021 IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 2 OF 23 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 23- 08-2013 PASSED BY LD CIT(A), LARGE TAXPAYERS UNIT, BANGALORE AND THEY RELATE TO THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS ENGAGED IN BUSINESS OF DEVELOPME NT OF SOFTWARE, DEALING IN AUTOMOTIVE COMPONENTS, MECHANI CAL AND ELECTRONIC DESIGNS, TRANSLATIONS ETC. REVENUES APPEAL 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY T HE REVENUE. THE GROUNDS OF APPEAL URGED BY THE REVENUE READ AS UNDE R:- 1. THE CIT(A) ERRED IN DISALLOWING THE AOS ACTION OF EXCLUDING IN FOREIGN CURRENCY OF RS.111,35,86,587/- FROM THE EXP ORT TURNOVER. 2. THE CIT(A) ERRED IN ALLOWING THE ASSESSEES CLAIM O F DEDUCTION OF TELECOM CHARGES OF RS.6,24,40,116/- AND EXPENDITURE INCURRED IN FOREIGN CURRENCY OF RS.111,35,86,587/- FROM THE TOT AL TURNOVER. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) ERRED IN HOLDING THAT M/S. KALS INFORMATION SYSTEMS LTD CANN OT BE TAKEN AS COMPARABLE AS THE COMPANY CARRIES INVENTORIES. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) ERRED IN HOLDING THAT M/S. BODHTREE CONSULTING LTD. BEING FU NCTIONALLY DIFFERENT, CANNOT BE TAKEN AS COMPARABLES IGNORING THE FACT TH AT IT CONTRACTING HIS OWN FINDING THAT THE SERVICES OFFERED ARE IN THE NA TURE OF THE ITES SERVICES AND RELYING ON THE WEBSITE INFORMATION WIT HOUT GIVING ANY FINDING FROM THE ANNUAL REPORT. 5. SOFTWARE SEGMENT: THE LEARNED CIT(A) ERRED IN HOLDI NG THAT THE SIZE AND TURNOVER & RPT OF THE COMPANY ARE DECIDING FACT ORS FOR TREATING A COMPANY AS A COMPARABLE AND ACCORDINGLY ERRED IN EX CLUDING THE COMPARABLES, M/S. FLEXTRONICS LTD., IGATE GLOBAL SO LUTIONS LTD., IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 3 OF 23 SASKENCOMMUNICATION TECHNOLOGIES LTD., TATA ELXSI L IMITED AND WIPRO LIMITED IN SOFTWARE DEVELOPMENT SEGMENT ON SI MILAR ISSUE THE DEPARTMENT IS IN FURTHER APPEAL HENCE FURTHER APPEA L IS HEREBY SUGGESTED. ITES SEGMENT: THE LEARNED CIT(A) ERRED IN HOLDING T HAT THE SIZE AND TURNOVER OF THE COMPANY ARE DECIDING FACTORS FOR TR EATING A COMPANY AS A COMPARABLE AND ALSO RPT (% OF SALES) FILTER AND A CCORDINGLY ERRED IN EXCLUDING THE FOLLOWING COMPARABLES. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT M/S. ACCENTIA TECHNOLOGIES LTD. HAD EX TRAORDINARY CIRCUMSTANCES, CANNOT BE TAKEN AS COMPARABLE. 7. IN THE FACTS AND CIRCUMSTANCE OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT M/S. GENESYS INTERNATIONAL CORPORATION LTD. BEING FUNCTIONALLY DIFFERENT, CANNOT BE TAKEN AS COMPARAB LE. 8. ITES SEGMENT: THE LEARNED CIT(A) ERRED IN HOLD ING THAT THE TURNOVER AND RPT OF THE COMPANY ARE DECIDING FACTORS FOR TRE ATING A COMPANY AS A COMPARABLE AND ACCORDINGLY ERRED IN EXCLUDING THE COMPARABLES, ADITYA BIRLA MINACS WORLDWIDE LTD., ASIT C MEHTA FI NANCIAL SERVICES LTD. (SEG), CALIBER POINT BUSINESS SOLUTIONS LTD., DATAMATICS FINANCIAL SERVICES LTD. (SEG), E4E HEALTHCARE SOLUTIONS LTD. (EARLIER KNOWN NITANNY), ECLERX SERVICES LTD., INFOSYS BPO LTD., I -SERVICE INDIA PVT. LTD., JINDAL INTELLICOM PVT. LTD., MOLD TEK TECHNOL OGIES LTD., SPANCO LTD. (SEG), WIPRO LTD. (SEG), IN ITES SEGMENT ON SI MILAR ISSUE THE DEPARTMENT IS IN FURTHER APPEAL HENCE FURTHER APPEA L IS HEREBY SUGGESTED. 4. THE FIRST AND SECOND GROUND RELATE TO DEDUCTI ON CLAIMED U/S 10A OF THE ACT. IN THE FIRST GROUND, THE REVENUE I S ASSAILING THE DECISION OF LD CIT(A) IN DIRECTING AO NOT TO EXCLUD E EXPENDITURE INCURRED IN FOREIGN CURRENCY OF RS.111,35,86,857/- FROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE A CT. THE SECOND GROUND RELATE TO THE DIRECTION OF LD CIT(A) TO THE AO TO REDUCE EXPENSES INCURRED TOWARDS TELECOM CHARGES AN D EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM BOTH EXPORT TURNO VER AND TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE A CT. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 4 OF 23 4.1 SO FAR AS THE FIRST GROUND IS CONCERNED, TH E FACTS ARE THAT THE ASSESSEE INCURRED EXPENDITURE IN FOREIGN CURRENCY A GGREGATING TO RS.111,35,86,857/- AND THE SAME WAS EXCLUDED BY THE AO FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S 10A O F THE ACT. THE ASSESSEE CHALLENGED THE SAME BEFORE LD CIT(A) SUBMI TTING THAT THE EXCLUSION OF EXPENDITURE IN FOREIGN CURRENCY FROM E XPORT TURNOVER CONTEMPLATED IN CLAUSE (IV) OF EXPLANATION 2 TO SEC .10A IS APPLICABLE ONLY TO EXPORT TURNOVER FROM PROVIDING TECHNICAL SE RVICES OUTSIDE INDIA AND DOES NOT APPLY TO EXPORT OF COMPUTER SOFT WARE BY THE ASSESSEE. THE LD CIT(A) NOTICED THAT AN IDENTICAL ISSUE IS PENDING BEFORE THE TRIBUNAL AS WELL AS IN HIGH COURT IN THE ASSESSEES OWN CASE. HE ALSO NOTICED THAT HIS PREDECESSOR HAS DECI DED THIS ISSUE AGAINST THE ASSESSEE IN ASST. YEAR 2007-08. HOWEVE R, HE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THE REASONI NG THAT THE DECISION OF ITAT AS ON DATE IS IN FAVOUR OF THE ASS ESSEE. THE REVENUE IS AGGRIEVED BY THIS DECISION. 4.2 WE NOTICE THAT AN IDENTICAL ISSUE HAS BEEN RE STORED TO THE FILE OF LD CIT(A) BY THE CO-ORDINATE BENCH IN THE ASSESS EES OWN CASE IN AY 2009-10 IN ITA NO.1688/BANG/2017 ORDER DATED 28- 06-2021. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE D ISCUSSIONS MADE BY THE CO-ORDINATE BENCH IN ASSESSMENT YEAR 2009-10 :- 10. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE ISSUE WHETHER THE EXPENDITURE INCUR RED IN FOREIGN CURRENCY IS REQUIRED TO BE EXCLUDED FROM THE EXPORT TURNOVER OR NOT WHEN THE ASSESSEE IS EXPORTING ONLY SOFTWARE, WAS EXAMINED B Y THE COORDINATE BENCH IN THE ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007- 08 AND THE MATTER WAS RESTORED TO THE FILE OF THE LD. CIT(A) WITH THE FOL LOWING OBSERVATIONS: 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S CLEAR FROM THE DECISION OF THE HYDERABAD BENCH OF THE ITAT THA T TO EXCLUDE EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE EXPO RT TURNOVER, THE ASSESSEE SHOULD HAVE OBTAINED THE BENEFIT OF SECTION 10A ON INCOME FROM RENDERING TECHNICAL SERVICES OUTSIDE IN DIA. THE ADMITTED FACTUAL POSITION IN THE PRESENT CASE IS TH AT THE ASSESSEE IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 5 OF 23 IS IN THE BUSINESS OF EXPORTING COMPUTER SOFTWARE A ND THEREFORE THE EXPENSES INCURRED IN FOREIGN EXCHANGE CANNOT BE SAID TO BE ONE INCURRED BY THE ASSESSEE IN CONNECTION WITH PRO VIDING TECHNICAL SERVICES OUTSIDE INDIA. THE ASSESSEE DOES NOT CLAIM EXCLUSION OF TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE IN DIA. THE CLAIM FOR EXCLUSION FROM THE EXPORT TURNOVER IS MADE BY T HE ASSESSEE ONLY IN RESPECT OF EXPENSES INCURRED IN FOREIGN CUR RENCY IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. WE HOWE VER DO NOT HAVE THE BREAK-UP OF THE ITEM OF EXPENDITURE INCURR ED IN FOREIGN CURRENCY OUTSIDE INDIA. A COPY OF THE AGREEMENT BET WEEN THE ASSESSEE AND ROBERT BOSCH, GERMANY TITLED SOFTWARE PROJECT AGREEMENT (SPA) HAS BEEN FILED BEFORE US. WE DO NOT KNOW AS TO WHETHER THE ENTIRE EXPORT TURNOVER IS IN RELATION T O THIS CLIENT ALONE OR THERE WERE OTHER CLIENTS FOR WHOM THE ASSE SSEE RENDERED COMPUTER SOFTWARE DEVELOPMENT SERVICES. A PERUSAL O F THE SPA FILED BEFORE US SHOWS THAT THE ASSESSEE AGREED TO C ARRY OUT SOFTWARE DEVELOPMENT WORK FOR ROBERT BOSCH GERMANY AT GERMANY ALSO. THE TERMS OF THE AGREEMENT FOR RENDER ING SERVICES ON-SITE AT CLAUSES-5.2 TO 5.2.6 OF THE AGREEMENT DO ES NOT INVOLVE RENDERING OF ANY TECHNICAL SERVICES. THE QUESTION A S TO WHETHER THE ENTIRE EXPENDITURE INCURRED IN FOREIGN EXCHANGE OUTSIDE INDIA RELATES TO PROVIDING TECHNICAL SERVICES OUTSIDE IND IA CANNOT BE DECIDED IN THE ABSENCE OF THE REQUIRED INFORMATION AS STATED ABOVE. IF THE CLAIM OF THE ASSESSEE THAT THE ENTIRE EXPENDITURE INCURRED IN FOREIGN EXCHANGE OUTSIDE INDIA DOES NOT RELATE TO PROVIDING TECHNICAL SERVICES OUTSIDE INDIA, THEN TH E SAME CANNOT BE EXCLUDED FROM THE EXPORT TURNOVER. SINCE THE FAC TUAL VERIFICATION IS REQUIRED FOR ADJUDICATING THE AFORE SAID ISSUE, WE DEEM IT APPROPRIATE TO SET ASIDE THE ORDER OF THE C IT(A) AND REMAND THE ISSUE TO HIM WITH A DIRECTION TO DECIDE THE ISSUE WITH REGARD TO GR.NO.2 AND 3 RAISED BY THE ASSESSEE BEFO RE HIM. WE ACCORDINGLY ALLOW THE APPEAL OF THE ASSESSEE FOR ST ATISTICAL PURPOSE. 11. IN ASSESSMENT YEAR 2004-05 ALSO, THE COORDINATE BENCH RESTORED THE ISSUE TO THE FILE OF THE LD. CIT(A) FOR EXAMINING T HIS ISSUE IN THE LIGHT OF DECISION RENDERED BY HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF INFOSYS LTD. (SUPRA). CONSISTENT WITH THE VIEW TAK EN IN THE ABOVE SAID TWO YEARS IN THE ASSESSEES OWN CASE, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO HIS FI LE FOR EXAMINING IT AFRESH ON SIMILAR LINES. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 6 OF 23 4.3 CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNA L IN ASST. YEAR 2007-08 AND 2009-10, WE RESTORE THIS ISSUE TO THE F ILE OF LD CIT(A) FOR EXAMINING IT AFRESH. 4.4 THE SECOND GROUND RELATE TO EXCLUSION OF TEL ECOMMUNICATION CHARGES FROM EXPORT TURNOVER AND TOTAL TURNOVER WHI LE COMPUTING DEDUCTION U/S 10A OF THE ACT. THE LD CIT(A), AFTER DECIDING THE ISSUE RELATING TO EXPENDITURE INCURRED IN FOREIGN CURRENCY IN FAVOUR OF THE ASSESSEE, HAS HELD THAT THE TELECOMMU NICATION CHARGES AND EXPENDITURE INCURRED IN FOREIGN CURRENC Y SHOULD BE DEDUCTED BOTH FROM EXPORT TURNOVER AND TOTAL TURNOV ER. IN ANY CASE, IT IS NOW SETTLED THAT THE AMOUNT REDUCED FRO M THE EXPORT TURNOVER HAS TO BE REDUCED FROM THE TOTAL TURNOVER ALSO AS HELD BY HONBLE SUPREME COURT IN THE CASE OF HCL TECHNOLOGI ES LTD, (404 ITR 179)(SC). ACCORDINGLY, THE DECISION RENDERED B Y LD CIT(A) ON THIS ISSUE DOES NOT REQUIRE INTERFERENCE. SOFTWARE DEVELOPMENT SEGMENT:- 5. GROUND NOS. 3 TO 5 URGED BY THE REVENUE RELAT ES TO THE TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF SOFTWARE DEVE LOPMENT SERVICES (IT SERVICES). THE FACTS RELATING THERETO ARE DISCUSSED IN BRIEF. AS PER SEGMENTAL DETAILS, THE TURNOVER OF T HE ASSESSEE FOR SOFTWARE DEVELOPMENT SEGMENT WAS RS.626.85 CRORES ( HOWEVER IN THE LIST OF INTERNATIONAL TRANSACTIONS, THE TURNOVE R IS MENTIONED AS RS.606.03 CRORES). THE ASSESSEE ADOPTED TNM METHOD AS MOST APPROPRIATE METHOD. THE PROFIT LEVEL INDICATOR WAS TAKEN AS OPERATING PROFIT/OPERATING COST. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 7 OF 23 5.1 THE TPO REJECTED THE TRANSFER PRICING STUDY OF THE ASSESSEE AND SELECTED FOLLOWING 20 COMPARABLE COMPANIES, WHO SE AVERAGE MARGIN WORKED OUT TO 23.65%:- SI.NO. NAME OF THE COMPANY OP/TC % 1 AVANICINCOM 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 13.99 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 SOLUTION LTD 21.74 13 R SYSTEMS INTERNATIONAL(SEG) 15.30 14 R S SOFTWARE (INDIA) LTD 7.41 15 SASKEN COMMUNICATION TECHNOLOGIES LTD(SEG) 7.58 16 TATA ELXSI(SEG) 18.97 17 THIRDWARE SOLUTION LTD 19.35 18 WIPRO LTD(SEG) 28.45 19 SOFTSOL INDIA LTD 17.89 20 LUCID SOFTWARE LTD 16.50 AVERAGE 23.65 AFTER MAKING WORKING CAPITAL ADJUSTMENT, THE TPO MA DE TRANSFER PRICING ADJUSTMENT OF RS.48.69 CRORES. 5.2 BEFORE LD CIT(A), THE ASSESSEE INSISTED FO R APPLICATION OF TURNOVER FILTER. IN THIS REGARD, THE ASSESSEE PLAC ED ITS RELIANCE ON THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE O F GENISYS INTEGRATED SYSTEM (INDIA) P LTD VS. DCIT (ITA NO.12 31/BANG/2010). THE LD CIT(A) ACCEPTED THIS CONTENTION OF THE ASSES SEE. SINCE THE TURNOVER OF THE ASSESSEE IN SOFTWARE DEVELOPMENT SE GMENT WAS IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 8 OF 23 RS.606.03 CRORES, FOLLOWING THE STUDY OF DUN & BRAD S STREET, HE HELD THAT THE COMPANIES HAVING TURNOVER IN THE RANG E OF 200 CRORES TO 2000 CRORES ALONE CAN BE CONSIDERED AS COMPARABL E WITH THE ASSESSEE. 5.3 THE TPO HAD APPLIED THE RELATED PARTY TRANS ACTION FILTER (RPT FILTER) OF 25% AND ABOVE AND ACCORDINGLY THE TPO HA D REJECTED THE COMPANIES WITH RPT IN EXCESS OF 25% OF OPERATING RE VENUES. THE ASSESSEE CONTENDED BEFORE THE LD CIT(A) THAT THE RP T FILTER MAY BE FIXED AT 10%. IN THIS REGARD, THE ASSESSEE HAD PLA CED ITS RELIANCE ON THE DECISION RENDERED BY DELHI BENCH OF TRIBUNAL IN THE CASE OF SONY INDIA PVT LTD VS. DCIT (ITA NO.1189/DEL/2005 A ND 819 & 820/DEL/2007), WHEREIN RPT WAS RANGE WAS FIXED BETW EEN 10% TO 15%. HOWEVER, THE LD CIT(A) FIXED RPT FILTER @ 1% OF SALES. 5.4 ACCORDINGLY, APPLYING BOTH TURNOVER FILTER AND RPT FILTER, THE LD CIT(A) DIRECTED EXCLUSION OF FOLLOWING COMPANIES :- TURNOVER (RS IN CR) RPT (% OF SALES) ITS SEGMENT FLEXTRONICS SOFTWARE 954.42 5.24% (FAILED) I-GATE GLOBAL SOLUTIONS LTD. 781.56 4.44% (-DO-) INFOSYS TECHNOLOGIES LTD. 15,672.00 (FAILED) 5.31% ( -DO-) KALS INFORMATION SYSTEMS LTD 2.05 (-DO-) - PERSISTENT SYSTEM 383.41 . 8.95% (-DO-) SASKEN COMMUNICATION TECH LTD.(SEG) 335.80 1.14% (-DO-) IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 9 OF 23 WIPRO LTD .(SEG.,) 11,955.60 (FAILED) 0.02% (-DO-) LGS GLOBAL LTD. 136.52 ( - DO - ) 4.91% (-DO-) R SYSTEMS INTERNATIONAL (SEG) 144.56 ( - DO - ) 13.01% ( - DO - ) THIRD WARE SOLUTIONS LTD. 52.28 ( - DO - ) 15.32% (-DO-) SOFTSOL INDIA LTD. 18.99 (-DO-) 18.38% (-DO-) LUCID SOFTWARE LTD. 2.35 (-DO-) -- 5.5 THE LD CIT(A) HAS OBSERVED IN PARAGRAPH 6 O F HIS ORDER THAT TWO COMPANIES, VIZ., MINDTREE LTD AND TATA ELXSI LT D SHALL REMAIN OUT OF TPOS LIST, I.E., HE HAS UPHELD THE VIEW OF THE TPO IN RESPECT OF ABOVE SAID TWO COMPANIES. 5.6 IN GROUND NO.3 TO 5 (FIRST PART), THE REVENU E IS ASSAILING THE DECISION OF LD CIT(A) IN RESPECT OF FOLLOWING COMPA RABLE COMPANIES:- (I) KALS INFORMATION SYSTEMS LTD (II) BODHTREE CONSULTING LTD (III) FLEXTRONICS SOFTWARE (IV) IGATE GLOBAL SOLUTIONS LTD (V) INFOSYS TECHNOLOGIES LTD (VI) MINDTREE CONSULTING LTD (VII) PERSISTENT SYSTEMS LTD (VIII) SASKEN COMMUNICATION TECHNOLOGIES LTD (IX) TATA ELXSI LTD (X) WIPRO LTD IN TOTAL, THE REVENUE IS CONTESTING EXCLUSION OF TE N COMPANIES CITED ABOVE. 5.7 (A) OUT OF THE ABOVE SAID TEN COMPANIES CONT ESTED BY THE REVENUE, M/S MINDTREE LTD AND M/S TATA ELXSI LTD HA VE BEEN RETAINED BY LD CIT(A), I.E., HE HAS NOT DIRECTED EX CLUSION OF THESE TWO COMPANIES. HENCE THE GROUND OF THE REVENUE IN RESPECT OF THESE TWO COMPANIES IS LIABLE TO BE REJECTED. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 10 OF 23 (B) THE LD CIT(A) HAS NOT RENDERED ANY DECISION ON M/S BODHTREE CONSULTING LTD. HENCE THE GROUND OF THE R EVENUE IN RESPECT OF THIS COMPANY IS LIABLE TO BE REJECTED (C) IN RESPECT OF APPLICATION OF TURNOVER FILTE R, WE NOTICE THAT THE CO-ORDINATE BENCH HAS FOLLOWED THE CLASSIFICATI ON OF COMPANIES ON THE BASIS OF TURNOVER CRITERIA BY THE STUDY OF D UN & BRADS STREET, IN ITS DECISION RENDERED IN THE CASE OF GEN ISYS INTEGRATED SYSTEM (INDIA) P LTD (SUPRA). FOLLOWING THE SAME, WE HOLD THAT THE LD CIT(A) WAS JUSTIFIED IN APPLYING TURNOVER FILTER . ACCORDINGLY, THE COMPANIES HAVING TURNOVER OF BELOW 200 CRORES AND A BOVE 2000 CRORES ARE LIABLE TO BE EXCLUDED. ACCORDINGLY, EXC LUSION OF FOLLOWING THREE COMPANIES BY LD CIT(A) IS UPHELD:- (I) KALS INFORMATION SYSTEMS LTD - 2.05 CROR ES (I) INFOSYS TECHNOLOGIES LTD - 15,672 CROR ES (II) WIPRO LTD (SEG) - 11,955.60 CRORES HENCE THE GROUND OF THE REVENUE IN RESPECT OF THESE THREE COMPANIES IS LIABLE TO BE REJECTED. (D) THE ASSESSEE IS OBJECTING TO THE DECISION OF LD CIT(A) IN ADOPTING RPT FILTER OF 1%. WE HAVE NOTICED EARLIER THAT THE TPO HAD ADOPTED RPT FILTER OF 25% AND THE ASSESSEE HAD PLEA DED BEFORE THE LD CIT(A) TO ADOPT 10%. HOWEVER, THE LD CIT(A) HAS ADOPTED RPT FILTER OF 1% OF SALES, WHICH WAS NOT THE PRAYER OF ANYONE. IN ANY CASE, CO-ORDINATE BENCHES HAVE DETERMINED THE RPT F ILTER @ 15% IN MANY CASES. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) AND DETERMINE THE RPT FILTER @ 15% OF SALES. IN THAT C ASE, FOLLOWING COMPANIES ARE LIABLE TO BE INCLUDED AS COMPARABLE C OMPANIES:- (I) FLEXTRONICS SOFTWARE (II) IGATE GLOBAL SOLUTIONS LTD (III) PERSISTENT SYSTEMS LTD (IV) SASKEN COMMUNICATION TECHNOLOGIES LTD HENCE THE DECISION RENDERED BY LD CIT(A) IN RESPECT OF THESE FOUR COMPANIES IS LIABLE TO BE REVERSED. THE LD A.R, HO WEVER, SUBMITTED THAT THE LD CIT(A) HAS EXCLUDED THESE FOUR COMPANIE S ONLY IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 11 OF 23 APPLICATION OF RPT FILTER OF 1%. HOWEVER, SOME OF THE ABOVE SAID COMPANIES HAVE BEEN HELD TO BE NOT A GOOD COMPARABL E ON THE BASIS OF FUNCTIONS PERFORMED, EXTRA ORDINARY EVENTS. IN THIS REGARD, HE PLACED HIS RELIANCE ON THE FOLLOWING DECISIONS REND ERED BY THE TRIBUNAL:- (A) M/S 3DPLM SOFTWARE SOLUTIONS LTD (IT (TP) A NO.1303/BANG/2012) (B) M/S MPHASIS LTD (ITA NO.325/BANG/2014 AND ITA NO.313/BANG/2014) (C) DCIT VBS. M/S VERISIGN SERVICES INDIA P LTD (I T(TP)A NO.1230/BANG/2013) (D) M/S HEWLETT PACKARD (INDIA) SOFTWARE OPERATION P LTD (IT(TP)A NO.1682/BANG/2012) WE HAVE GONE THROUGH THESE DECISIONS AND WE NOTICE THAT M/S PERSISTENT SYSTEMS LTD HAS BEEN HELD TO BE A NOT GO OD COMPARABLE. WE DO NOT FIND ANY ORDER IN RESPECT OF REMAINING TH REE COMPANIES. ACCORDINGLY, WE DIRECT EXCLUSION OF M/S PERSISTENT SYSTEMS LTD FROM THE LIST OF COMPARABLE COMPANIES. ACCORDINGLY THE REMAINING THREE COMPANIES ARE LIABLE TO BE INCLUDED AS COMPARABLE C OMPANIES. WE ORDER ACCORDINGLY. ITES SEGMENT:- 6. AS PER SEGMENTAL DETAILS, THE TURNOVER OF T HE ASSESSEE IN ITES SEGMENT WAS RS.54.39 CRORES (HOWEVER IN THE LIST OF INTERNATIONAL TRANSACTIONS, THE TURNOVER IS MENTIONED AS RS.53.59 CRORES). THE ASSESSEE ADOPTED TNM METHOD AS MOST APPROPRIATE MET HOD. THE PROFIT LEVEL INDICATOR WAS TAKEN AS OPERATING PROFI T/OPERATING COST. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 12 OF 23 6.1 THE TPO REJECTED THE TRANSFER PRICING STUDY OF THE ASSESSEE IN RESPECT OF ITES SERVICES ALSO AND SELECTED FOLLOWIN G 20 COMPARABLE COMPANIES, WHOSE AVERAGE MARGIN WORKED OUT TO 24.75 %:- SI.NO. NAME OF THE COMPANY OP/TC% 1 ACCENTIA TECHNOLOGIES LTD (SEG. 41.77 2 ACROPETAL TECHNOLOGIES LTD (SEG.) 35.30 3 ADITYA BIRLA MINACS WORLDWIDE LIMITED (EARLIER KNOWN AS TRANSWORKS INFORMATION SERVICES LTD.) -4.00 4 ASIT C MEHTA FINANCIAL SERVICES LTD (SEG.) 9.42 5 CALIBER POINT BUSINESS SOLUTIONS LTD 10.97 6 CORAL HUBS LTD (EARLIER KNOWN AS VISHAL INFORMATION TECHNOLOGIES LTD 50.68 7 COSMIC GLOBAL LTD 23.30 8 CROSSDOMAIN SOLUTIONS LTD 27.03 9 DATAMATICS FINANCIAL SERVICES LTD (SEG.) 29.11 10 E4E HEALTHCARE SOLUTIONS LTD (FORMERLY KNOWN AS NIT TANY OUTSOURCING SERVICES PVT LID) 18.54 11 ECLERX SERVICES LTD 58.80 12 GENESYS INTERNATIONAL CORPORATION LTD 47.40 13 INFOSYS BPO LTD 19.66 14 ISERVICES INDIA PVT LTD 10.77 15 JINDAL INTELLICOM PVT LTD - 10.29 16 MOLD - TEK TECHNOLOGIES LTD 96.66 17 R SYSTEMS INTERNATIONAL LTD (SEG.) 4.30 18 SPANCO LTD. (SEG) (EARLIER KNOWN AS SPANCOTELESYSTE MS& SOLUTIONS LTD.) 8.81 19 WIPRO LTD. (SEG) 30.05 20 ALLSEC TECHNOLOGIES LIMITED - 13.29 AVERAGE 24.75 AFTER MAKING WORKING CAPITAL ADJUSTMENT, THE TPO MA DE TRANSFER PRICING ADJUSTMENT OF RS.7.28 CRORES IN ITES SEGMEN T. 6.2 BEFORE LD CIT(A), THE ASSESSEE INSISTED FO R APPLICATION OF TURNOVER FILTER. IN THIS REGARD, THE ASSESSEE PLAC ED ITS RELIANCE ON THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE O F GENISYS INTEGRATED SYSTEM (INDIA) P LTD VS. DCIT (ITA NO.12 31/BANG/2010). IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 13 OF 23 THE LD CIT(A) ACCEPTED THIS CONTENTION OF THE ASSES SEE. SINCE THE TURNOVER OF THE ASSESSEE IN SOFTWARE DEVELOPMENT SE GMENT WAS RS.53.59 CRORES, FOLLOWING THE STUDY OF DUN & BRADS STREET, HE HELD THAT THE COMPANIES HAVING TURNOVER IN THE RANGE OF 1 CRORE TO 200 CRORES ALONE CAN BE CONSIDERED AS COMPARABLE WITH T HE ASSESSEE. 6.3 THE TPO HAD APPLIED THE RELATED PARTY TRANS ACTION FILTER (RPT FILTER) OF 25% AND ABOVE AND ACCORDINGLY THE TPO HA D REJECTED THE COMPANIES WITH RPT IN EXCESS OF 25% OF OPERATING RE VENUES. THE ASSESSEE CONTENDED BEFORE THE LD CIT(A) THAT THE RP T FILTER MAY BE FIXED AT 10%. IN THIS REGARD, THE ASSESSEE HAD PLA CED ITS RELIANCE ON THE DECISION RENDERED BY DELHI BENCH OF TRIBUNAL IN THE CASE OF SONY INDIA PVT LTD VS. DCIT (ITA NO.1189/DEL/2005 A ND 819 &820/DEL/2007), WHEREIN RPT WAS RANGE WAS FIXED BET WEEN 10% TO 15%. HOWEVER, THE LD CIT(A) FIXED RPT FILTER @ 1% OF SALES. 6.4 ACCORDINGLY, APPLYING BOTH TURNOVER FILTER AND RPT FILTER OF 1%, THE LD CIT(A) DIRECTED EXCLUSION OF FOLLOWING C OMPANIES:- ITES SEGMENT COMPANY TURNOVER (RS IN CR) RPT (% OF SALES) INFOSYS BPO LTD. 825.09 (-DO-) 7.36%(-DO-) WIPRO LTD. (SEG) 1,157.20 (-DO-) - ADITYA BIRLA MINACS WORLD WIDE LTD. 176.72 11.16% (-DO-) ASIT C MEHTA FINANCIAL SERVICES LTD. (SEG) 4.24 19.69% (-DO-) CALIBRE POINT BUSINESS SOLUTIONS LTD. 53.14 19.69% (-DO-) IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 14 OF 23 CORAL HUBS LTD. (VISHAL INFO) 38.08 0.29% ( - DO - ) DATAMATICS FINANCIAL SERVICES LTD. (SEG) 6.06 1.30% (-DO-) E4E HEALTH CARE SOLUTIONS LTD. 25.82 2.23% (-DO-) ECLERX SERVICES LTD. 116.98 11.54% ( - DO - ) JINDAL INTELECOM PVT. LTD. 19.55 29.94% ( - DO - ) MOLD TEK TECHNOLOGIES LTD. 17.85 20.45% ( - DO - ) R SYSTEMS INTERNATIONAL LTD.(SEG) 21.33 7.05% (-DO-) SPANCO LTD.(SEG) 41.70 4.39% (-DO-) 6.5 IN GROUND NO.5 (SECOND PART) TO 8, THE REVE NUE IS ASSAILING EXCLUSION OF FOLLOWING COMPANIES BY LD CIT(A):- (I) ACCENTIA TECHNOLOGIES LTD (II) GENESYS INTERNATIONAL CORPORATION LTD (III) ADITYA BIRLA MINACS WORLDWIDE LTD (IV) ASIT C MEHTA FINANCIAL SERVICES LTD (SEG.) (V) CALIBRE POINT BUSINESS SOLUTIONS LTD (VI) DATAMATICS FINANCIAL SERVICES LTD (SEG) (VII) E4E HEALTHCARE SOLUTIONS LTD (EARLIER KNOWN NITANNY) (VIII) ECLERX SERVICES LTD (IX) INFOSYS BPO LTD (X) I-SERVICE INDIA P LTD (XI) JINDAL INTELLICOM P LTD (XII) MOLD TEK TECHNOLOGIES LTD (XIII) SPANCO LTD (SEG) (XIV) WIPRO LTD IN TOTAL, THE REVENUE IS CONTESTING EXCLUSION OF 14 COMPANIES. 6.6 WHILE ADJUDICATING ISSUE IN RESPECT OF SOFTW ARE DEVELOPMENT SEGMENT, WE HAVE UPHELD THE ADOPTION OF TURNOVER FI LTER AND FURTHER WE HAVE HELD THAT THE RPT FILTER SHOULD BE TAKEN AS 15%. WE DIRECT TO FOLLOW THE SAME FOR ITES SEGMENT ALSO. 6.7 (A) OUT OF THE FOURTEEN COMPANIES, M/S A CCENTIA TECHNOLOGIES LTD AND M/S GENESYS INTERNATIONAL CORP ORATION LTD IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 15 OF 23 HAVE BEEN RETAINED BY LD CIT(A). HENCE THE GROUND OF THE REVENUE ON THESE TWO COMPARABLE COMPANIES IS LIABLE TO BE D ELETED. (B) ON APPLYING TURNOVER CRITERIA, COMPANIES HAV ING TURNOVER EXCEEDING RS.200 CRORES IS LIABLE TO REJECTED. THE TURNOVER OF M/S INFOSYS BPO LTD AND M/S WIPRO LTD EXCEEDS RS.200 CR ORES. ACCORDINGLY THE DECISION OF LD CIT(A) IN DIRECTING EXCLUSION OF THESE TWO COMPANIES IS UPHELD. (C) IN RESPECT OF M/S I SERVICE INDIA P LTD, THE LD CIT(A) HAS NOT RENDERED ANY DECISION. ACCORDINGLY, THE GROUND OF THE REVENUE IN RESPECT OF THIS COMPANY IS LIABLE TO BE REJECTED . (D) THE PERCENTAGE OF RPT ON SALES EXCEEDS THE LI MIT OF 15% IN RESPECT OF FOLLOWING COMPANIES:- (I) ASIT C MEHTA FINANCIAL SERVICES LTD (19.69%) (II) CALIBRE POINT BUSINESS SOLUTIONS LTD (19.69 %) (III) JINDAL INTELECOM P LTD (29.94%) (IV) MOLD TEK TECHNOLOGIES LTD (20.45%) (E) THE LD CIT(A) HAS EXCLUDED THE FOLLOWING FIV E COMPANIES APPLYING RPT FILTER OF 1%. SINCE WE HAVE DETERMINE D THE RPT FILTER AT 15%, THE DECISION OF LD CIT(A) IN RESPECT OF FOL LOWING FIVE COMPANIES IS LIABLE TO BE REVERSED:- (I) ADITYA BIRLA MINACS WORLD WIDE LTD (II) DATAMATICS FINANCIAL SERVICES LTD (SEG.) (III) E4E HEALTH CARE SOLUTIONS LTD (IV) E CLERX SERVICES LTD (V) SPANCO LTD (SEG.) THE LD A.R, BY PLACING RELIANCE ON THE FOLLOWING CA SE LAWS, SUBMITTED THAT SOME OF THE ABOVE SAID COMPANIES HAV E BEEN HELD TO BE NOT A GOOD COMPARABLE:- (A) M/S MPHASIS LTD (ITA NO.325/BANG/2014 AND ITA NO.313/BANG/2014) (B) FLEXTRONICS TECHNOLOGIES (INDIA) P LTD (IT(TP)A NO.1559/BANG/2012) IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 16 OF 23 (C) SYMPHONY MARKETING SOLUTIONS (IT(TP)A NO.1316/BANG/2012) (D) KODIAK NETWORKS (INDIA) P LTD (IT(TP)A NO.1540/BANG/2012) (E) MAERSK GLOBAL CENTRES (INDIA) P LTD (ITA NO.7466/MUM/2012)(SB) WE NOTICE THAT THE CO-ORDINATE BENCH, IN THE CASE O F SYMPHONY MARKETING SOLUTIONS (SUPRA) AND THE SPECIAL BENCH O F MUMBAI TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDI A) P LTD (SUPRA) HAVE EXCLUDED M/S E-CLERX SERVICES LTD (PARAGRAPH 20 TO 21) HOLDING IT AS NOT A GOOD COMPARABLE FOR A CAPTIVE S ERVICE PROVIDER. ACCORDINGLY, WE DIRECT EXCLUSION OF M/S E-CLERX SER VICES LTD FROM THE LIST OF COMPARABLE COMPANIES. WE DO NOT FIND A NY ORDER IN RESPECT OF REMAINING FOUR COMPARABLE COMPANIES. AC CORDINGLY, THE REMAINING FOUR COMPANIES SHALL BE INCLUDED IN THE L IST OF COMPARABLE COMPANIES. ASSESSEES APPEAL:- 7. THE GROUNDS OF APPEAL URGED BY THE ASSESSEE REA DS AS UNDER:- THE GROUNDS HEREINAFTER TAKEN BY THE APPELLANT ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) LTU, BANGALORE UCIT (A) - LTU'], TO THE EXTENT PR EJUDICIAL TO THE APPELLANT, IS BAD IN LAW AND LIABLE TO BE QUASHED. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 17 OF 23 CORPORATE TAX RELATED MATTERS (OTHER THAN TRANSFER PRICING) A) THAT THE LEARNED CIT (A) - LTU ERRED IN HOLDING THA T THE SALE PROCEEDS OUGHT TO HAVE BEEN RECEIVED WITHIN 6 MONTHS BY THE SOFTWARE TECHNOLOGY PARK (STP) UNIT IN TERMS OF PROVISIONS OF SEC 1OA(3 ), ALTHOUGH RBI BEING THE COMPETENT AUTHORITY IN TERMS OF PROVISIONS OF S AID SECTION HAD VIDE ITS MASTER CIRCULAR NO/O9/2007-08 DATED JULY 2, 2007, APPLICABLE FOR THE PERIOD AY 2008-09, PERMITTED STP UNITS TO REALISE AND REPATRIATE THE F ULL VALUE OF EXPORT PROCEEDS WITHIN A PERIOD OF 12 MONTHS FROM THE DATE OF EXPORT. B) THE LEARNED CIT (A) - LTU ERRED IN CONFIRMING THE O RDER OF THE AO IN REDUCING FROM THE EXPORT TURNOVER THE SUM OF RS 7,15,89,738 AND RS 2,14,69,416 AS UNREALISED EXPORT TURNOVER. C) THE LEARNED CIT (A) - LTU ERRED IN CONFIRMING THE O RDER OF THE AO IN MAKING A DISALLOWANCE OF AN AMOUNT OF RS 29,04,760 U/S 14A AS EXPENDITURE ATTRIBUTABLE TO EARNING EXEMPT INCOME. D) THE LEARNED CIT (A) - LTU ERRED IN HOLDING THAT A S UM OF RS 10,992 INCURRED TOWARDS LANGUAGE TRAINING COST OF SPOUSES OF EMPLOYEES OF THE APPELLANT AS NOT A BUSINESS EXPENDITURE AND HENCE N OT ALLOWING THE SAID AMOUNT'' E) THE LEARNED CIT (A) - LTU OUGHT TO HAVE DIRECTED TH E AO TO GRANT TDS CREDIT OF A SUM OF RS 1,98,67,264 AS CLAIMED BY THE APPELLANT AS AGAINST A SUM OF RS 1,97,61,981 AS GRANTED BY THE AO. TRANSFER PRICING RELATED 1. THAT THE LEARNED CIT (A) - LTU ERRED IN UPHOLDING T HE REJECTION OF TRANSFER PRICING ('TP') DOCUMENTATION BY THE LEARNE D TRANSFER PRICING OFFICER (`TP0')/ ASSESSING OFFICER (`A0') AND IN UP HOLDING THE ADJUSTMENT TO THE TRANSFER PRICE OF THE APPELLANT I N RESPECT OF ITS INFORMATION TECHNOLOGY ENABLED SERVICES (`ITES'). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT (A) - LTU ERRED IN; (A) UPHOLDING THE REJECTION OF COMPARABILITY ANALYSIS O F THE APPELLANT IN THE TP DOCUMENTATION AND ACCEPTING THE COMPARABILITY ANALYSIS PERFORMED BY THE LEARNED TPO IN THE TP ORDER. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 18 OF 23 (B) NOT ADDRESSING THE APPELLANTS GRIEVANCES IN FULL WI TH RESPECT TO THE APPLICATION OF ADDITIONAL FILTERS BY THE TPO (C) DISREGARDING APPLICATION OF MULTIPLE YEAR/ PRIOR YE AR DATA AS USED BY THE APPELLANT IN THE TP DOCUMENTATION AND H OLDING THAT CURRENT YEAR (I.E. FINANCIAL YEAR 2007-08) DATA FOR COMPANIES SHOULD BE USED FOR COMPARABILITY. (D) UPHOLDING THE LEARNED TPO'S APPROACH OF USING DATA AS AT THE TIME OF ASSESSMENT PROCEEDINGS, INSTEAD OF THAT AVA ILABLE AS ON THE DATE OF PREPARING THE TP DOCUMENTATION FOR COMP ARABLE COMPANIES WHILE DETERMINING THE ARM'S LENGTH PRICE. (E) UPHOLDING THE APPROACH ADOPTED BY THE LEARNED TPO O F COLLECTING SELECTIVE INFORMATION OF THE COMPANIES B Y EXERCISING POWER GRANTED TO HIM UNDER SECTION 133(6) OF THE IN COME TAX ACT, 1961 (ACT') THAT WAS NOT AVAILABLE TO THE APPE LLANT IN THE PUBLIC DOMAIN. (F) ARBITRARILY ARRIVING AT A SET OF COMPANIES AS COMPA RABLE FOR THE SERVICES RENDERED BY THE APPELLANT, ON REJECTING CO MPANIES THAT ARE OTHERWISE FUNCTIONALLY COMPARABLE TO THE APPELL ANT AND ON INCLUSION OF COMPANIES THAT OTHERWISE FAIL THE TEST OF COMPARABILITY. (G) NOT APPRECIATING THE BUSINESS AND COMMERCIAL REALIT IES OF THE APPELLANT INCLUDING THE FACT THAT IT OPERATES ON A TIME AND MATERIAL BASED BILLING MODEL (MAN-MONTH RATES). (H) NOT PROVIDING ANY ADJUSTMENT TOWARDS THE DIFFERENCE IN THE RISK PROFILE BETWEEN THE APPELLANT AND THE ENTREPRENEURI AL COMPANIES SELECTED AS COMPARABLES WHILE DETERMINING THE ARMS LENGTH PRICE. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE C HARGING OF INTEREST UNDER SECTIONS 234B OF THE ACT. IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 19 OF 23 THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 8. GROUND (A) AND (B) URGED UNDER THE HEADING CO RPORATE TAX MATTERS RELATE TO REJECTION OF DEDUCTION U/S 10A I N RESPECT OF SALE PROCEEDS WHICH HAVE NOT BEEN REALISED WITHIN A PERI OD OF SIX MONTHS. 8.1 THE AO NOTICED THAT THE ASSESSEE HAS NOT REA LISED EXPORT PROCEEDS WITHIN SIX MONTHS TO THE EXTENT OF RS.7.15 CRORES AND RS.2.14 CRORES IN RESPECT OF BANGALORE AND COIMBATO RE UNITS RESPECTIVELY. SINCE THE ASSESSEE DID NOT FURNISH A NY CERTIFICATE FROM RBI FOR EXTENSION OF PERIOD FOR REALISATION OF EXPO RT PROCEEDS, THE AO REDUCED THE ABOVE SAID AMOUNTS WHILE COMPUTING DEDU CTION U/S 10A OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE S AME. 8.2 IN THIS REGARD, THE LD. A.R. INVITED OUR ATT ENTION TO MASTER CIRCULAR NO.9/2007-08 DATED 2ND JULY, 2007 ISSUED B Y RBI. THE LD. A.R. SUBMITTED THAT THE RBI HAS GRANTED GENERA L PERMISSION TO REALIZE THE EXPORT PROCEEDS WITHIN A PERIOD OF 12 M ONTHS FROM THE DATE OF EXPORT ON OR AFTER 1 ST SEPTEMBER, 2004. ACCORDINGLY, HE SUBMITTED THAT THE PERIOD OF REALISATION SHOULD BE TAKEN AS 12 MONTHS AND NOT SIX MONTHS. THE LD D.R, ON THE CONT RARY, SUBMITTED THAT THE EXTENSION HAS TO BE GIVEN BY THE COMPETENT AUTHORITY, WHICH IS RBI. 8.3 WE FIND MERIT IN THE SUBMISSIONS OF LD A.R. WE NOTICE THAT THE CIRCULAR ISSUED BY RBI ALLOWED A PERIOD OF 12 M ONTHS FOR REALISATION OF EXPORT PROCEEDS. ACCORDINGLY, WE DIR ECT THE AO TO IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 20 OF 23 RECOMPUTE THE DEDUCTION U/S 10A OF THE ACT BY CONSI DERING THE PERMITTED PERIOD OF REALISATION OF EXPORT PROCEEDS AS 12 MONTHS. 9. THE GROUND (C) URGED BY THE ASSESSEE RELATES T O THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE AO NOTICED THAT THE A SSESSEE HAS EARNED EXEMPT DIVIDEND INCOME FROM MUTUAL FUNDS TO THE TUNE OF RS.2,51,41,451/-. THE ASSESSEE DID NOT MAKE ANY DI SALLOWANCE U/S 14A OF THE ACT. THE AO COMPUTED DISALLOWANCE UNDER RULE 8D(2)(III) @ 0.50% OF AVERAGE VALUE OF INVESTMENTS AT RS.29,04,760/- AND DISALLOWED THE SAME. THE LD CIT(A) ALSO CONFIR MED THE SAME. 9.1 WE HEARD THE PARTIES ON THIS ISSUE. THE L D A.R INVITED OUR ATTENTION TO PAGE 521 OF THE PAPER BOOK, WHEREIN TH E DETAILS OF INVESTMENTS ARE GIVEN. HE SUBMITTED THAT THE ASSESS EE HAS MADE INVESTMENTS ONLY IN UNITS OF VARIOUS MUTUAL FUNDS. THE AGGREGATE AMOUNT OF INVESTMENTS MADE DURING THIS YEAR WAS RS. 90.59 CRORES. HE FURTHER SUBMITTED THE ASSESSEE HAS ALSO INVESTED A SUM OF RS.15.00 CRORES IN GROWTH SCHEME AND A SUM OF RS.20 .26 CRORES IN DIVIDEND REINVESTMENT SCHEME. THE ASSESSEE HAS MADE INVESTMENTS IN SIX SCHEMES ONLY DURING THE YEAR UNDER CONSIDERA TION AND IT HAS ENCASHED INVESTMENTS MADE IN THE EARLIER YEARS IN F OUR SCHEMES. HE SUBMITTED THAT THE ASSESSEE HAS NOT REALLY INCUR RED ANY EXPENDITURE IN EARNING THE DIVIDEND INCOME. ON THE CONTRARY, THE LD D.R SUPPORTED THE ORDER PASSED BY LD CIT(A). 9.2 WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE THAT OPENING BALANCE OF INVESTMENTS STOOD AT RS.25.59 CRORES IN FOUR SCHEMES OF MUTUAL FUNDS. DURING THE YEAR UNDER CONSIDERATION, THE ABOVE INVESTMENTS HAVE BEEN REAL ISED. THE ASSESSEE HAS MADE FRESH INVESTMENTS IN SIX SCHEMES OF MUTUAL FUNDS DURING THIS YEAR, OUT OF WHICH THREE SCHEMES FALL UNDER IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 21 OF 23 GROWTH/REINVESTMENT SCHEMES. CONSIDERING THE LESS NUMBER OF SCHEMES, IN OUR VIEW, IT MAY NOT BE PROPER TO APPLY RULE 8D MECHANICALLY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE DISALLOWANCE MAY BE ESTIMATED TO MEET THE REQUIREMENTS OF SEC.14 A OF THE ACT. ACCORDINGLY, WE ESTIMATE THE DISALLOWANCE U/S 14A A T RS.2.00 LAKHS AND IN OUR VIEW, THE SAME WOULD MEET THE REQUIREMEN TS OF THE PROVISIONS OF SEC.14A OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A TO RS.2.00 LAKHS. 10. THE GROUND (D) RELATES TO DISALLOWANCE OF RS .10,992/- INCURRED TOWARDS FOREIGN LANGUAGE TRAINING OF SPOUSES OF EMP LOYEES. THE AO DISALLOWED THE ABOVE SAID CLAIM HOLDING THAT THE EX PENSES INCURRED ON SPOUSES OF EMPLOYEES FOR IMPARTING TRAINING IN F OREIGN LANGUAGE IS NOT FOR THE PURPOSES OF BUSINESS. THE LD CIT(A) ALSO CONFIRMED THE SAME. 10.1 WE HEARD THE PARTIES ON THIS ISSUE. THE L D A.R SUBMITTED THAT THE ABOVE SAID EXPENDITURE ON SPOUSES OF EMPLO YEES IS ONLY A MEASURE OF STAFF WELFARE. ACCORDINGLY, HE SUBMITTE D THE SAME HAS BEEN INCURRED FOR THE PURPOSES OF BUSINESS ONLY. O N THE CONTRARY, THE LD D.R SUPPORTED THE ORDER OF LD CIT(A). 10.2 WE NOTICE FROM THE ORDER PASSED BY LD CIT( A) THAT THE AO HAS ALLOWED EXPENDITURE OF RS.7,20,076/- INCURRED O N EMPLOYEES TOWARDS FOREIGN LANGUAGE TRAINING. ACCORDINGLY, TH E LD CIT(A) HAS HELD THAT THE PAYMENT FOR LANGUAGE SKILL ENHANCEMEN T OF SPOUSES OF EMPLOYEES HAS GOT NO LINK WITH THE BUSINESS OF THE ASSESSEE. IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN HOLDING SO, SI NCE WE ALSO DO NOT FIND ANY CONNECTION BETWEEN THE EXPENDITURE AND THE BUSINESS OF IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 22 OF 23 THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE DISALLOW ANCE MADE BY THE AO. 11.0 THE GROUND (E) RELATES TO SHORT CREDIT OF TD S AMOUNT. IT IS THE PLEA OF THE ASSESSEE THAT THE AO SHOULD HAVE GR ANTED TDS CREDIT OF RS.1,98,67,264/- INSTEAD OF RS.1,97,61,981/-. S INCE THIS ISSUE REQUIRES VERIFICATION OF FACTUAL ASPECTS, WE RESTOR E THIS ISSUE TO THE FILE OF THE AO. 12. THE ASSESSEE HAS RAISED GROUNDS NUMBERED AS 1 AND 2(A) TO 2(H) IN RESPECT OF TRANSFER PRICING ISSUE. THESE AR E GENERAL IN NATURE AND NO SPECIFIC REFERENCE HAS BEEN MADE TO ANY OF T HE COMPARABLE COMPANIES. IN ANY CASE, WE HAVE ALREADY FOLLOWED T HE PRECEDENTS TO EXCLUDE SOME OF THE COMPANIES, WHILE ADJUDICATING T HE GROUNDS URGED BY THE REVENUE. HENCE THESE GROUNDS OF THE A SSESSEE DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 13. OTHER GROUNDS OF EITHER GENERAL IN NATURE OR CONSEQUENTIAL. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE A S WELL AS THE APPEAL OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPT, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 1 ST SEPT, 2021. VG/SPS IT(TP)A NOS.1565 & 1575/BANG/2013 M/S. ROBERT BOSCH ENGINEERING & BUSINESS SOLUTION LTD., BANGALORE PAGE 23 OF 23 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.
