Athena Semi Conductors Ltd., Bangalore V. CIT,

ITA 1630/BANG/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5403 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 26-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Keywords: Related party transaction; Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI A RUN KUMAR GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T. (T.P) A. NO. 1630 /BANG/201 3 (ASSESSMENT YEAR : 20 05 - 06 ) ATHENA SEMICONDUCTORS PVT. LT D. (MERGED WITH BROADCOM INDIA PVT. LTD.) 4 TH FLOOR, CAMPUS 3A, RMZ ECOSPACE, BELLANDUR VILLAGE, VARTHUR HOBLI, BANGALORE - 560 103 PAN AADCA 3846J VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI SHARATH RAO, C.A. RESPONDENT BY : SMT. SWAPNA DAS, JCIT (DR) (ITAT) - 2, BENGALURU. DATE OF H EARING : 09.03.2017. DATE OF P RONOUNCEMENT : 05 .05. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT. 26.09.2013 OF COMMISSIONER OF INCOME TAX (APPEALS) - IV , BANGALORE FOR THE ASSESSMENT YEAR 20 05 - 06. 2. THE ASSES SEE HAS RAISED THE FOLLOWING GROUNDS : 2 IT (TP) A NO. 1630 /BANG/ 201 3 3 IT (TP) A NO. 1630 /BANG/ 201 3 3. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE ASSESSEE IS REGARDING FUNCTIONAL COMPARABILITY OF THE COMPANIES SELECTED BY THE TPO AS WELL AS VARIOUS FILTERS APPLIED BY THE TPO AND CIT (APPEALS) IN SELECTI ON OF THE COMPANIES AND CONSEQUENTIAL TRANSFER PRICING ADJUSTMENT. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND CAPTIVE SERVICE PROVIDER TO ITS ASSOCIATED ENTERPRISE I.E. ATHENA SEMICONDUCTORS INC. USA IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES. THE T PO SELECTED 17 COMPARABLE COMPANIES FOR DETERMINATION OF ARM S LENGTH PRICE 4 IT (TP) A NO. 1630 /BANG/ 201 3 (ALP) IN RESPECT OF INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE TPO BEFORE THE CIT (APPEALS) AND RAISED OBJECTIONS AGAINST THE FUNCTIONA L COMPARABILITY AS WELL AS THE FILTERS APPLIED BY THE TPO REGARDING RELATED PARTY TRANSACTION (RPT) TURNOVER AND FOREIGN EXCHANGE GAIN / LOSS AS WELL AS BAD DEBT BEING TREATED AS OPERATING COST. THE CIT (APPEALS) THOUGH CONFIRMED THE ACTION OF THE TPO REG ARDING THE FILTERS IN RESPECT OF RPT AND TURNOVER HOWEVER , IT HAS NOT GIVEN A CONCLUDING FINDING REGARDING FUNCTIONAL COMPARABILITY OR DISSIMILARITY. 3 . WE HAVE HEARD THE LEARNED A.R. AS WELL AS LEARNED D.R. AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE CIT (APPEALS) WHILE DEALING WITH THE ISSUE OF FUNCTIONAL COMPARABILITY HAS DECIDED THE SAME IN PARA 5.2 AS UNDER : 5 IT (TP) A NO. 1630 /BANG/ 201 3 OPERATING IN THAT VERY SECTOR IN DIFFERENT LINE. ON DUE CONSIDERATION OF THE FINDINGS RECORDE D BY THE LD. TPO, WE DO NOT FIND ANY FORCE IN THE CONTENTIONS OF LD. COUNSEL FOR THE ASSESSEE. 6 IT (TP) A NO. 1630 /BANG/ 201 3 7 IT (TP) A NO. 1630 /BANG/ 201 3 8 IT (TP) A NO. 1630 /BANG/ 201 3 9 IT (TP) A NO. 1630 /BANG/ 201 3 10 IT (TP) A NO. 1630 /BANG/ 201 3 11 IT (TP) A NO. 1630 /BANG/ 201 3 12 IT (TP) A NO. 1630 /BANG/ 201 3 THUS IT IS CLEAR THAT IN SUBSTANCE THE CIT (APPEALS) HAS NOT ADJUDICATED THIS ISSUE CONCLUSIVELY BUT REMANDED THE SAME TO THE RECORD OF T HE TPO / A.O. FOR RECONSIDERATION AND ADJUDICATION IN THE LIGHT OF THE DECISION OF THE DELHI BENCH OF ITAT IN THE CASE OF ACTIS ADVISERS P. LTD. VS. DCIT 20 ITR (TRIB) 138. IT IS 13 IT (TP) A NO. 1630 /BANG/ 201 3 PERTINENT TO NOTE THAT THE FINDINGS REPRODUCED BY THE CIT (APPEALS) IS ONLY A BROAD GUIDELINE BUT NOT THE FACTUAL FINDING ON THE COMPARABILITY OF EACH AND EVERY COMPANY SELECTED BY THE TPO. THUS WE FIND THAT THE CIT (APPEALS) HAS NOT ADJUDICATED THE ISSUE OF FUNCTIONAL COMPARABILITY OF EACH AND EVERY COMPANY SELECTED BY THE TPO AND OBJECTED BY THE ASSESSEE. EVEN OTHERWISE THE CIT (APPEALS) HAS NO JURISDICTION TO REMAND THE MATTER TO THE TPO OR A.O. BUT IN CASE THE NEED ARISES FOR FURTHER VERIFICATION OF FACT THE REMAND REPORT OUGHT TO HAVE BEEN SOUGHT. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN CIT (APPEALS) HAS NOT ADJUDICATED THE ISSUE, WE SET ASIDE THIS ISSUE OF FUNCTIONAL COMPARABILITY AS WELL AS THE OTHER FILTERS APPLIED BY THE TPO TO THE RCORD OF THE CIT (APPEALS) FOR FRESH CONSIDERATION AND ADJUDICATION I N THE LIGHT OF VARIOUS DECISIONS OF THIS TRIBUNAL ON THESE POINTS . NEEDLESS TO SAY THE ASSESSEE BE GIVEN APPROPRIATE OPPORTUNITY OF HEARING. THE ENTIRE ISSUE OF TP ADJUSTMENT AND COMPARABILITY HAS BEEN SET ASIDE TO THE RECORD OF THE CIT (APPEALS) IN TH E ABOVE TERMS. 14 IT (TP) A NO. 1630 /BANG/ 201 3 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 201 7 . SD/ - (A RUN KUMAR GARODIA ) ACCOUNTANT MEMBER SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 05 .05. 2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FIL E. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.