Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 7770 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-04-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
SMC
Assessment Year
2011-2012
Appeal Filed On
21-08-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.1799/KOL/2018 ( / ASSESSMENT YEAR: 2011-12) ACIT, CIRCLE-2(2), KOLKATA VS. M/S NETGURU LTD. E2-4, BLOCK GP, SECTOR-V, SALT LAKE, KOLKATA-700091. ./ ./PAN/GIR NO. : AABCR 5109 B (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SANJAY PAUL, JCIT, SR. DR RESPONDENT BY : SHRI ANUP SIN HA, ACA AND RITUPARNA SINHA, ACA / DATE OF HEARING : 06/02/2019 /DATE OF PRONOUNCEMENT : 24/04/2019 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAIN ING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST THE ORDER PASSED BY TH E LD COMMISSIONER OF INCOME TAX (APPEALS)-22, KOLKATA, DATED 31.05.2018, WHICH IN TURN ARISES OUT OF A FAIR ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3)/144C OF THE INCOME TAX ACT, 1961, DATED 29.04.2015. 2.THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YE AR 2011-12, IS BARRED BY LIMITATION BY 9 DAYS. THE REVENUE HAS MOVED A PETIT ION REQUESTING THE BENCH TO CONDONE THE DELAY. WE HAVE HEARD BOTH THE PARTIES O N THIS PRELIMINARY ISSUE. HAVING REGARD TO THE REASONS GIVEN IN THE PETITION, WE CON DONE THE DELAY AND ADMIT THE APPEAL OF REVENUE FOR HEARING. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 2 22 2 3. GROUND NO.1 RAISED BY THE REVENUE RELATES TO ACT ION OF THE LD. CIT(A) IN ACCEPTING THE SEGMENT REPORTING PREPARED BY THE ASS ESSEE COMPANY WITHOUT HAVING REGARD TO THE NATURE OF BUSINESS. THE REVENUE ALLEG ED IN THE AFORESAID GROUND OF APPEAL THAT HAD THE SEGMENT REPORTING BEEN PREPARED BY THE ASSESSEE COMPANY HAVING REGARD TO THE NATURE OF ITS BUSINESS, THE SE GMENT REPORTING OUGHT TO HAVE BEEN PART OF THE AUDITED ACCOUNTS CONSIDERING THE D IFFERENCE IN THE RISK AND RETURNS OF THE TWO SEGMENTS CLAIMED BY THE ASSESSEE. 4. THE FACTS OF THE CASE WHICH CAN BE STATED QUITE SHORTLY ARE AS FOLLOWS. THE ASSESSEE COMPANY, NAMELY, NET GURU LIMITED, IS AN I NDIAN SUBSIDIARY OF NETGURULNC. USA (HEREINAFTER REFERRED TO AS 'ASSOCI ATED ENTERPRISE' OR 'AE'). DURING THE FINANCIAL YEAR ENDED 31 ST MARCH, 2011, THE ASSESSEE COMPANY GENERATED REVENU E FROM SALE OF PRODUCTS AND SERVICES AMOUNTING TO INR 3,68,83,174/-. THE ASSESSEE COMPANY ENTERED INTO AN INTERNATIONAL TRANSACTION W ITH ITS AE WHICH INVOLVED RECEIPT OF INR RS. 1,45,22,019/- FROM THE AE FOR PR OVISION OF SOFTWARE DEVELOPMENT SERVICES TO THE AE DURING THE RELEVANT FINANCIAL YEAR. THE DETAILED BREAK-UP OF REVENUE FROM OPERATION OF THE ASSESSEE COMPANY (INR 3,68,83,174/-) DURING THE RELEVANT FINANCIAL YEAR IS GIVEN BELOW: TABLE NO. 1 - BREAK-UP OF REVENUE FROM OPERATION 5. FINDINGS OF THE TRANSFER PRICING STUDY REPORT OF T HE ASSESSEE. IN THE TRANSFER PRICING STUDY REPORT (HEREINAFTER REFERRED TO AS TH E 'TPSR'), THE ASSESSEE COMPANY SELECTED THE TRANSACTIONAL NET MARGIN METHOD (HEREI NAFTER REFERRED TO AS 'TNMM') M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 3 33 3 AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ARM'S LENGTH NATURE OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION. FOR THE PURPOSE OF APPLICATION OF THE TNMM, THE ASSESSEE COMPANY PREPARED A SEGMENT REPOR TING THAT DISCLOSED TWO SEPARATE SEGMENTS VIZ., (1) 'TRANSACTIONS WITH NET GURU INC. USA' AND (2) 'TRANSACTIONS WITH INDEPENDENT CUSTOMERS'. THE FIRS T SEGMENT DISCLOSED SALES TO AE AND ASSOCIATED EXPENSES, WHILE THE SECOND SEGMENT D ISCLOSED SALES TO UNRELATED DOMESTIC CUSTOMERS AND ASSOCIATED EXPENSES. THE SAI D SEGMENT REPORT WAS DULY VERIFIED AND CERTIFIED BY THE INDEPENDENT STATUTORY AUDITOR OF THE ASSESSEE COMPANY. IN THIS CONNECTION, IT MAY BE NOTED THAT T HE SAID 'AUDITOR'S CERTIFICATE' ALONG WITH ANNEXURE CONTAINING THE SEGMENT REPORTIN G REFERRED TO HEREINABOVE WERE DULY SIGNED BY THE INDEPENDENT STATUTORY AUDITOR OF THE ASSESSEE COMPANY ON 1 ST SEPTEMBER, 2011, HAVING BEEN THE SAME DATE AS THAT AT WHICH THE 'AUDITORS' REPORT TO THE MEMBERS OF NET GURU LIMITED', 'BALANCE SHEET AS AT 31 ST MARCH, 2011 AND 'PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2011 WERE SIGNED BY THE SAME AUDITOR AS AFORESAID. THE ASSESSEE COMPANY INC ORPORATED THE FINANCIAL INFORMATION CONTAINED IN THE SEGMENT REPORTING IN I TS TPSR AND SUBMITTED THE AUDITOR'S CERTIFICATE (INCLUDING SEGMENT REPORTING AS ITS ANNEXURE) TO THE TPO DURING THE COURSE OF PROCEEDINGS UNDER SECTION 92CA (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE CO NTENT OF SEGMENT REPORTING FOR THE FINANCIAL YEAR ENDED 31 ST MARCH, 2011, DULY VERIFIED AND CERTIFIED BY THE ST ATUTORY AUDITOR IS GIVEN BELOW: TABLE NO.2 SEGMENT REPORTING (FINANCIAL YEAR 2010 -11) M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 4 44 4 THE TOTAL MANPOWER OF THE ASSESSEE FOR THE FY 2010- 11 WAS 105. OUT OF IT, MANPOWER USED FOR CONTROLLED TRANSACTIONS DURING TH E RELEVANT FINANCIAL YEAR STOOD AT 10. THE BALANCE MANPOWER I.E.95 PERSONS WERE USE D FOR UNCONTROLLED TRANSACTIONS.THE TOTAL AREA OF THE OFFICE OF THE AS SESSEE FOR FY 2010-11 WAS 42,000 SQUARE FEET. OUT OF IT, THE AREA USED FOR THE DIVIS ION ENGAGED IN CONTROLLED TRANSACTION WAS 600 SQUARE FEET.THE FOLLOWING EXPEN SES WERE ATTRIBUTABLE EXCLUSIVELY TO TRANSACTIONS WITH UNRELATED CUSTOMER S AND HENCE, WERE NOT ALLOCATED TO THE TRANSACTION WITH NETGURULNC., USA. TRAVELLING & CONVEYANCE EXPENSES ADVERTISEMENT AND SALE PROMOTION EXPENSES RECRUITMENT EXPENSES REGISTRATION FEES M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 5 55 5 SEMINAR EXPENSES TENDER FEES PERMISSION FEES THE FOLLOWING EXPENSE WERE NON-OPERATING EXPENSES A ND THEREFORE, NOT CONSIDERED FORTHE COMPUTATION OF NET PROFIT INDICATORS: FOREIGN EXCHANGE FLUCTUATION LOSS BANK CHARGES INTEREST LOSS ON SALE OF ASSETS THE PROVISION MADE FOR DEPRECIATION WAS NOT CONSIDE RED AS AN OPERATING EXPENSE FOR THE PURPOSE OF COMPUTATION OF NET PROFIT INDICA TOR UNDER THE TNMM. HENCE, THE ASSESSEE HAS CONSIDERED 'CASH PROFIT MARGIN ON COST ' AS THE APPROPRIATE NET PROFIT INDICATOR. 6. IN THE TRANSFER PRICING STUDY REPORTTPSR, TH E NET PROFIT INDICATOR OF THE ASSESSEE COMPANY (I.E. CASH PROFIT MARGIN ON COST) WAS WORKED AT 43.25%, WHEREAS THE 'ARITHMETIC MEAN' OF THE NET PROFIT INDICATORS OF THE COMPARABLE COMPANIES SELECTED FROM PUBLIC DOMAIN WAS WORKED AT 19.07%. I N VIEW OF THE ABOVE COMPUTATION, THE ASSESSEE COMPANY CONCLUDED THAT TH E INTERNATIONAL TRANSACTION UNDER CONSIDERATION WAS AT ARM'S LENGTH UNDER THE T NMM.THE TPO REJECTED THE SEGMENT REPORTING AND APPLIED THE TNMM AT THE ENTIT Y LEVEL. HE DIRECTED AN UPWARD ARM'S LENGTH PRICE ('ALP') ADJUSTMENT TO INC OME AMOUNTING TO RS.83,60,749/-. IN THE ASSESSMENT ORDER DATED 29/04 /2015, THE ASSESSING OFFICER MADE THE AFORESAID ARM'S LENGTH PRICE ADJUSTMENT FO R A SUM OF RS.83,60, 749/-. 7. AGGRIEVED BY THE ORDER OF THE TPO/AO, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A). THE LD. CIT(A), AFTER EXAMINI NG THE FACTS AND CIRCUMSTANCES OF THE CASE, DELETED THE ALP ADJUSTMENT OF INR 83,6 0,749/-. AGGRIEVED, BY THE ORDER OF THE LD CIT(A), THE REVENUE IS IN APPEAL BE FORE US. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 6 66 6 8.LD DR FOR THE REVENUE SUBMITTED BEFORE US THAT L D CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE SEGMENTAL ACCOUNTS PREPARED BY THE AS SESSEE WITHOUT HAVING REGARD TO THE NATURE OF BUSINESS, IF SO, THE SEGMENTAL ACC OUNTS OUGHT TO HAVE BEEN PART OF THE AUDITED ACCOUNTS CONSIDERING THE DIFFERENCE IN THE RISK AND RETURNS OF THE TWO SEGMENTS AS CLAIMED BY THE ASSESSEE. THE LD DR FURT HER POINTED OUT THAT THE SEGMENTAL ACCOUNTS ARE LIABLE TO BE REJECTED AS THE ASSESSEE IS ENGAGED ONLY IN ONE ACTIVITY, THAT IS, SOFTWARE DEVELOPMENT. APART FROM THIS, THE LD DR FOR THE REVENUEHAS PRIMARILY REITERATED THE STAND TAKEN BY THE TPO/ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. ON THE OTHER HAND, RITUPARNA SINHA,LD COUNSEL FO R THE ASSESSEE, BEGINS BY POINTING OUT THAT DISCLOSURE OF SEGMENT INFORMATION IN ANNUAL FINANCI AL STATEMENTS OF AN ENTERPRISE IS GOVERNED BY THE ACCOUNTING STANDARD (AS) -17 (SEGME NT REPORTING) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). THE AFORESAID ACCOUNTING STANDARD IS APPLICABLE TO AN ENTERPRISE SUBJECT TO CERTAIN CONDITIONS SPECIFIED THEREIN. IN CASE, THE DISCLOSURE OF SEGMENT INFORMA TION IS MANDATORY FOR AN ENTERPRISE, THE ENTERPRISE DISCLOSES REQUISITE INFO RMATION IN RESPECT OF BUSINESS SEGMENTS / GEOGRAPHICAL SEGMENTS IN ITS ANNUAL FINA NCIAL STATEMENTS. A BUSINESS SEGMENT IS A DISTINGUISHABLE COMPONENT OF AN ENTERP RISE THAT IS ENGAGED IN PROVIDING AN INDIVIDUAL PRODUCT OR SERVICE OR A GRO UP OF RELATED PRODUCTS OR SERVICES AND THAT IS SUBJECT TO RISKS AND RETURNS T HAT ARE DIFFERENT FROM THOSE OF OTHER BUSINESS SEGMENTS. A GEOGRAPHICAL SEGMENT IS A DIST INGUISHABLE COMPONENT OF AN ENTERPRISE, THAT IS ENGAGED IN PROVIDING PRODUCTS O R SERVICES WITHIN A PARTICULAR ECONOMIC ENVIRONMENT AND THAT IS SUBJECT TO RISKS A ND RETURNS THAT ARE DIFFERENT FROM THOSE OF COMPONENTS OPERATING IN OTHER ECONOMI C ENVIRONMENTS. 10.MS. RITUPARNA SINHA, LD COUNSEL FOR THE ASSESSEE , FURTHER POINTED OUT THAT ACCOUNTING STANDARD ( AS)-17 IS NOT MANDATORY FOR SMALL AND MEDIUM SIZED COMPANIES' AND 'SMALL AND MEDIUM SIZED NON-CORPORAT E ENTITIES'FALLING IN LEVEL II AND LEVEL III, AS DEFINED IN APPENDIX 1 TO THE COMP ENDIUM APPLICABILITY OF ACCOUNTING STANDARDS TO VARIOUS ENTITIES'. AS PER T HE NOTIFICATION DATED 7 TH M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 7 77 7 DECEMBER, 2006, ISSUED BY THE MINISTRY OF COMPANY A FFAIRS, 'SMALL AND MEDIUM SIZED COMPANY' (SMC) MEANS, A COMPANY- (I) WHOSE EQUITY OR DEBT SECURITIES ARE NOT LISTED OR ARE NOT IN THE PROCESS OF LISTING ON ANY STOCK EXCHANGE, WHETHER IN INDIA OR OUTSIDE INDIA; (II) WHICH IS NOT A BANK, FINANCIAL INSTITUTION OR AN INSURANCE COMPANY; (III) WHOSE TURNOVER (EXCLUDING OTHER INCOME) DOES NOT EXCEED RUPEES FIFTY CRORE IN THE IMMEDIATELY PRECEDING ACCOUNTING YEAR; (IV) WHICH DOES NOT HAVE BORROWINGS (INCLUDING PUBL IC DEPOSITS) IN EXCESS OF RUPEES TEN CRORE AT ANY TIME DURING THE IMMEDIATELY PRECEDING ACCOUNTING YEAR; AND (V) WHICH IS NOT A HOLDING OR SUBSIDIARY COMPANY OF A COMPANY WHICH IS NOT A SMALL AND MEDIUM-SIZED COMPANY. ON PERUSAL OF THE ANNUAL FINANCIAL STATEMENTS OF TH E COMPANY, IT MAY BE APPRECIATED THAT IN THE INSTANT CASE, THE ASSESSEE COMPANY SATISFIES ALL OF THE FIVE CONDITIONS STATED HEREINABOVE, THAT IS: (I) THE EQUITY OR DEBT SECURITIES OF THE ASSESSEE C OMPANY ARE NOT LISTED OR ARE NOT IN THE PROCESS OF LISTING ON ANY STOCK EXCHANGE , WHETHER IN INDIA OR OUTSIDE INDIA. (II) THE ASSESSEE COMPANY IS NOT A BANK, FINANCIAL INSTITUTION OR AN INSURANCE COMPANY. (III) THE ASSESSEE COMPANY'S TURNOVER (EXCLUDING OT HER INCOME) DOES NOT EXCEED RUPEES FIFTY CRORE IN THE IMMEDIATELY PRECED ING ACCOUNTING YEAR. (IV)THE ASSESSEE COMPANY DOES NOT HAVE BORROWINGS ( INCLUDING PUBLIC DEPOSITS) IN EXCESS OF RUPEES TEN CRORE AT ANY TIME DURING THE IMMEDIATELY PRECEDING ACCOUNTING YEAR. (V) THE ASSESSEE COMPANY IS NOT A HOLDING COMPANY O R SUBSIDIARY COMPANY OF A COMPANY WHICH IS NOT A SMALL AND MEDIUM-SIZED COMPANY IN LNDIA AS PER THE DEFINITION OF 'SMALL AND MEDIUM SIZED COMPANY' PROVIDED IN THE AFORESAID NOTIFICATION. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 8 88 8 IN VIEW OF THE ABOVE, THE ASSESSEE COMPANY BELONGS TO THE CATEGORY 'SMALL AND MEDIUM SIZED COMPANIES' AS STATED IN THE SAID NOTIF ICATION. AS A CONSEQUENCE, THE AS-17 IS NOT MANDATORY FOR THE ASSESSEE COMPANY. TH AT IS WHY, THE ASSESSEE COMPANY HAS NOT DISCLOSED SEGMENT REPORTING IN THE AUDITED FINANCIAL STATEMENTS FOR THE RELEVANT FINANCIAL YEAR. HOWEVER, IT IS PER TINENT TO NOTE THAT THE ASSESSEE COMPANY SUBMITTED SEGMENT REPORTING TO THE TPO SOLE LY FOR THE PURPOSE OF APPLICATION OF THE TNMM. IN THIS CONNECTION, ATTENT ION IS INVITED TO THE DECISION OF THE HON'BLE DELHI TRIBUNAL IN THE MATTER OF GSR TEC HNOLOGY (INDIA) (P.) LTD VS. AGIT REPORTED IN [2018] 90 TAXMANN.COM 85 (DELHI - TRIB.). IN THIS CASE, THE HON'BLE TRIBUNAL EXAMINED THE ISSUE AS TO WHETHER T HE TPO/DRP ERRED IN DISREGARDING THE SEGMENTAL INFORMATION PROVIDED BY THE TAXPAYER FOR THE REASON THAT THE SAME WAS NOT AN AUDITED ONE. IT WAS HELD T HAT EVEN IF SUCH SEGMENTAL RESULTS WERE NOT SHOWN IN THE AUDITED FINANCIAL ACC OUNTS, THEY HAD TO BE ACCEPTED. IN VIEW OF OUR ABOVE SUBMISSION, LD COUNSEL PRAYED THE BENCH THAT THERE WAS VALID REASON FOR NON-DISCLOSURE OF SEGMENT REPORTING IN T HE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY AND SUBMISSION OF SEGMENT REPORTIN G BEFORE THE TPO. HENCE, THE ALLEGATION MADE BY THE REVENUE IN THIS REGARD H AS NO LAWFUL BASIS AND THEREFORE, THE ORDER OF THE LD CIT(A) SHOULD BE ACC EPTED. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT IN GROUND NO.1, THE REVENUE ALLEGED TH AT THE SEGMENT REPORTING WAS PREPARED BY THE ASSESSEE COMPANY WITHOUT HAVING REG ARD TO THE NATURE OF BUSINESS. ACCORDING TO THEM, HAD THE SEGMENT REPORTING BEEN P REPARED HAVING REGARD TO THE NATURE OF BUSINESS, THE SEGMENT REPORTING OUGHT TO HAVE BEEN PART OF THE AUDITED ACCOUNTS CONSIDERING THE DIFFERENCE IN THE RISK AND RETURNS OF THE TWO SEGMENTS AS CLAIMED BY THE ASSESSEE COMPANY. SO, THE CONTENTION OF THE REVENUE WAS THAT THE LD. CIT(A) ERRED IN ACCEPTING THE SEGMENT REPORTING PREPARED BY THE ASSESSEE COMPANY. WE NOTE THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY BELONGS TO THE CATEGORY OF 'SMALL AND MEDIUM SIZED COMPANI ES'. AS A CONSEQUENCE, THE ACCOUNTING STANDARD(AS)-17 IS NOT MANDATORY FOR THE ASSESSEE COMPANY. THAT IS WHY, THE ASSESSEE COMPANY HAS NOT DISCLOSED SEGMENT REPORTING IN THE AUDITED FINANCIAL STATEMENTS FOR THE RELEVANT FINANCIAL YEA R. HOWEVER, IT IS PERTINENT TO NOTE M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 9 99 9 THAT THE ASSESSEE COMPANY SUBMITTED SEGMENT REPORTI NG TO THE LD TPO SOLELY FOR THE PURPOSE OF APPLICATION OF THE TNMM. WE NOTE THA T COORDINATE BENCH DELHI TRIBUNAL IN THE MATTER OF GSR TECHNOLOGY (INDIA) (P .) LTD VS. AGIT REPORTED IN [2018] 90 TAXMANN.COM 85 (DELHI - TRIB.), HAS EXAMI NED THE ISSUE AS TO WHETHER THE TPO/DRP ERRED IN DISREGARDING THE SEGMENTAL INF ORMATION PROVIDED BY THE TAXPAYER FOR THE REASON THAT THE SAME WAS NOT AN AU DITED ONE. LN THIS CONNECTION, THE COORDINATE BENCH ON THE DECISION OF THE COORDIN ATE BENCH CHENNAI IN THE MATTER OF HONEYWELL ELECTRICAL DEVICES & SYSTEMS IN DIA LTD. V. ASSTT. CIT REPORTED IN [2014] 42 TAXMANN.COM 223/64 SOT 118 (C HENNAI - TRIB.) WHEREIN THE CHENNAI TRIBUNAL, PLACING RELIANCE ON THE DECISION RENDERED IN THE MATTER OF 3I INFOTEC LTD. V. ITO REPORTED IN [2013] 35 TXMANN.CO M 582 (CHENNAI - TRIB), HELD THAT EVEN IF SUCH SEGMENTAL RESULTS WERE NOT SHOWN IN THE AUDITED FINANCIAL ACCOUNTS, THEY HAD TO BE ACCEPTED. THE COORDINATE B ENCH IN THE MATTER OF INFOTEC LTD. V. ITO (SUPRA) HELD THAT THERE WAS NO LEGAL RE QUIREMENT THAT THE SEGMENT WISE WORKING SUBMITTED BEFORE THE TPO SHOULD HAVE BEEN A UDITED BY THE ASSESSEE'S CHARTERED ACCOUNTANT. THE COORDINATE BENCH DELHI TR IBUNAL FURTHER PLACED RELIANCE ON THE DECISION RENDERED IN THE MATTER OF LUMMUS TECHNOLOGY HEAT TRANSFER BV V. DY. CIT REPORTED IN [2014] 42 TAXMAN N.COM 342/64 SOT 47 (URO) (DELHI - TRIB) WHEREIN IT WAS HELD THAT SEGME NTAL RESULTS COULD NOT BE REJECTED ON THE GROUND THAT THE SAME WAS NOT AUDITE D. THE TPO/DRP WAS REQUIRED TO EXAMINE THE SEGMENTAL RESULTS IF THE SAME WERE M AINTAINED IN THE ORDINARY COURSE OF BUSINESS. ON PERUSAL OF, INTER ALIA, THE AFORESAID DECISIONS, THE COORDINATE BENCH DELHI IN THE MATTER OF CSR TECHNOLOGY (INDIA ) (P.) LTD VS. ACIT (SUPRA) HELD THAT THE AO/TPO/DRP ERRED IN DISREGARDING THE SEGMENTAL RESULT OF THE TAXPAYER BY PROCEEDING TO CONSIDER THE MARGIN OF TH E TAXPAYER AT THE ENTITY LEVEL FOR THE TRANSFER PRICING ANALYSIS. IN VIEW OF ABOVE JUDGMENTS OF COORDINATE BENCHES, W E NOTE THAT THERE WAS VALID REASON FOR NON-DISCLOSURE OF SEGMENT REPORTING IN T HE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY AND SUBMISSION OF SEGMENT REPORTIN G BEFORE THE TPO. THEREFORE, THE ALLEGATION MADE BY THE REVENUE IN TH IS REGARD NEEDS TO BE REJECTED. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 12. SO FAR NATURE OF BUSINESS IS CONCERNED, WE NOTE THAT THE ASSESSEE COMPANY WAS PRIMARILY ENGAGED IN SEVEN DIFFERENT TYPES OF REVEN UE- GENERATING FUNCTIONS SUCH AS (I) PROVISION OF SOFTWARE DEVELOPMENT SERVICES TO A E, (II) PROVISION OF ENGINEERING SERVICES TO UNRELATED DOMESTIC CUSTOMERS, (III) CD SALES TO UNRELATED DOMESTIC CUSTOMERS, (IV) SALE OF SOFTWARE PRODUCTS TO UNRELA TED DOMESTIC CUSTOMERS, (V) DIGITAL MEDIA SALES TO UNRELATED DOMESTIC CUSTOMERS , (VI) WEBSITE DEVELOPMENT FOR UNRELATED DOMESTIC CUSTOMERS AND (VII) PROVISION OF GIFT ONLINE SERVICES TO UNRELATED DOMESTIC CUSTOMERS. THE SEVEN DIFFERENT T YPES OF BUSINESS ACTIVITIES HAD DIVERSE RISK AND RETURN PORTFOLIOS. IT MAY BE NOTED THAT THE MANAGEMENT OF THE ASSESSEE COMPANY PREPARED THE SEGMENT REPORTING EXC LUSIVELY FOR THE PURPOSE OF APPLICATION OF THE TNMM IN RELATION TO THE INTERNAT IONAL TRANSACTION INVOLVING CHARGES RECEIVED/RECEIVABLE BY THE ASSESSEE COMPANY FOR PROVISION OF SOFTWARE DEVELOPMENT SERVICES TO AE. IN THE SEGMENT REPORTIN G, ONE SEGMENT DISCLOSED REVENUE RECEIVED/RECEIVABLE BY THE ASSESSEE COMPANY FROM ITS AE [WHICH WOULD FALL UNDER CATEGORY (I) OF THE AFORESAID ACTIVITIES ] AND ASSOCIATED COSTS, WHILE THE OTHER SEGMENT DISCLOSED REVENUE RECEIVED/RECEIVABLE BY THE ASSESSEE COMPANY FROM UNRELATED DOMESTIC CUSTOMERS [WHICH WOULD FALL UNDER CATEGORY (II) TO CATEGORY (VII) OF THE AFORESAID ACTIVITIES] AND ASS OCIATED COSTS. BASED ON THE SEGMENT REPORTING, THE ASSESSEE COMPANY COMPUTED TH E NET PROFIT INDICATOR ARISING FROM THE INTERNATIONAL TRANSACTION UNDER CONSIDERAT ION AND THEREAFTER, COMPARED THE NET PROFIT INDICATOR OF THE COMPANY WITH THE ARITHM ETIC MEAN OF THE NET PROFIT INDICATORS OF THE COMPARABLE COMPANIES UNDER THE TN MM FOR THE PURPOSE OF DEMONSTRATING THAT THE INTERNATIONAL TRANSACTION UN DER CONSIDERATION WAS AT ARM'S LENGTH UNDER THE TNMM. WE NOTE THAT HAD THE ASSESSEE COMPANY PREPARED SEGM ENT REPORTING HAVING REGARD TO THE NATURE OF BUSINESS, THERE WOULD HAVE BEEN SE VEN BUSINESS SEGMENTS FOR SEVEN DIFFERENT TYPES OF REVENUE-GENERATING BUSINESS FUNC TIONS. HOWEVER, AS THE SOLE OBJECTIVE OF PREPARATION OF SEGMENT REPORT WAS TO C OMPUTE THE NET PROFIT INDICATOR ARISING FROM THE INTERNATIONAL TRANSACTION UNDER CO NSIDERATION.THE ASSESSEE COMPANY DISCLOSED ONLY TWO SEGMENTS VIZ., AE TRANSA CTION SEGMENT AND NON-AE TRANSACTION SEGMENT ('NON-AE' MEANS UNRELATED CUSTO MERS). WE NOTE THAT M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 COORDINATE BENCH OF ITAT CHENNAI IN THE MATTER OF 3 I-INFOTECH LTD VS. ITO (SUPRA), HELD THAT THE ASSESSEE PREPARED SEGMENT-WI SE PROFIT AND LOSS ACCOUNT IN RESPECT OF ITS TRANSACTIONS WITH AE AND TRANSACTION S WITH OTHERS AND CLAIMED THAT IT HAS EARNED PROFIT OF 34.17% OF THE COST IN RESPECT OF AE TRANSACTIONS AND INCURRED LOSS OF 60.30% OF COST IN RESPECT OF TRANSACTIONS W ITH NON-AES. THE TPO REJECTED THE ABOVE WORKING OF THE ASSESSEE. THE TRIBUNAL HE LD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN NOT EXCLUDING PROFIT OR LOSS IN RESPECT OF DOMESTIC TRANSACTIONS FOR DETERMINING THE PROFIT DECLARED BY THE ASSESSEE IN RESPECT OF AE TRANSACTIONS. THE TRIBUNAL FURTHER HELD THAT THE LOWER AUTHORITIE S WERE NOT JUSTIFIED IN ADOPTING THE PROFIT LEVEL ACHIEVED BY THE ASSESSEE IN RESPEC T OF ALL ITS TRANSACTIONS INCLUDING DOMESTIC TRANSACTIONS AS THE PROFIT LEVEL DECLARED IN RESPECT OF AE TRANSACTIONS. THE TRIBUNAL, NOTED THAT THE RATE OF PROFIT ACHIEVED IN OTHER COMPARABLE CASES WERE TO BE COMPARED WITH PROFIT LEVEL DECLARED BY THE ASSES SEE IN RESPECT OF ITS AE TRANSACTIONS AFTER EXCLUDING DOMESTIC TRANSACTIONS. THEREFORE, ON COMPARING THE SAME, THE TRIBUNAL HELD THAT THE PROFIT LEVEL DECLA RED BY THE ASSESSEE IN RESPECT OF ITS AE TRANSACTIONS WAS MORE THAN THE PROFIT LEVEL IN RESPECT OF COMPARABLE CASES FOUND BY THE TPO. IN THE ABOVE CIRCUMSTANCES, IN TH E CONSIDERED VIEW OF THE TRIBUNAL, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN MAKING ADDITION TO THE INCOME OF THE ASSESSEE. THE TRIBUNAL DELETED THE ADDITION AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 13. WE NOTE THAT THE COORDINATE BENCH OF ITAT, PUN E IN THE MATTER OF TIETO IT SERVICES INDIA (P.) LTD VS. DCIT REPORTED IN [2018] 92 TAXMANN.COM 8 (PUNE - TRIB.) OBSERVED THAT THE TPO DIRECTED TRANSFER PRIC ING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE BY DISREGARDING SEGMENTAL INF ORMATION PERTAINING TO TRANSACTIONS WITH ASSOCIATED ENTERPRISES AND THE TR ANSACTIONS WITH THIRD PARTY I.E. NON-ASSOCIATED ENTERPRISES BUSINESS. THE ASSESSEE W AS AGGRIEVED BY THE ORDER OF ASSESSING OFFICER/DISPUTE RESOLUTION PANEL (DRP) IN CONSIDERING THE OPERATING MARGINS OF THE ASSESSEE AT AN ENTITY LEVEL WHILE DE TERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS AS AGAINST THE SEGMEN TAL INFORMATION PERTAINING TO ASSOCIATED ENTERPRISES BUSINESS FILED BY THE ASSESS EE. THE TRIBUNAL HELD THAT WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS OF PROVISIO N OF SERVICES TO TIETO GROUP M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 COMPANIES BY THE ASSESSEE, THE SEGMENTAL DETAILS OF AE SEGMENT NEED TO BE APPLIED AND NOT THE RESULTS AT ENTITY LEVEL ARE TO BE APPLIED. THE TRIBUNAL REVERSED THE ORDER OF ASSESSING OFFICER/TPO IN APPLYING THE MARGINS AT ENTITY LEVEL AND DIRECTED THE ASSESSING OFFICER TO ACCEPT MARGINS SH OWN IN SEGMENTAL PROFITABILITY OF AE SEGMENT BY THE ASSESSEE. IN VIEW OF THE ABOVE , IT IS TO BE NOTED THAT THE SEGMENT REPORT PREPARED BY THE ASSESSEE COMPANY DIS CLOSING AE SEGMENT AND NON- AE SEGMENT DRAWS SUPPORT FROM THE DECISIONS OF THE COORDINATE BENCHES AND HENCE, THE ALLEGATION MADE BY THE REVENUE THAT THE ASSESSEE COMPANY PREPARED THE SEGMENT REPORTING WITHOUT HAVING REGARD TO THE NATU RE OF BUSINESS, HAS NO VALID BASIS AND THE SAME SHOULD BE REJECTED. 14. WE NOTE THAT AT THIS JUNCTURE IT IS RELEVANT TO QUOTE THE PROVISION OF CLAUSE (E) OF SUB-RULE (1) OF RULE 10B OF THE INCOME TAX RULES, 1 962 (HEREINAFTER REFERRED TO AS THE 'RULES') WHICH INTER ALIA READ AS UNDER: 10B. (1) FOR THE PURPOSE OF SUB-SECTION (2) OF SEC TION 92C, THE ARM'S LENGTH PRICE RELATION TO AN INTERNATIONAL TRANSACTION [OR A SPEC IFIED DOMESTIC TRANSACTION] SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEIN G THE MOST APPROPRIATE METHOD, IN THE FOLLOWING MANNER, NAMELY :- E) TRANSACTIONAL NET MARGIN METHOD BY WHICH - (I) THE NET PROFIT MARGIN REALIZED BY THE ENTERPRIS E FROM AN INTERNATIONAL TRANSACTION [OR A SPECIFIED DOMESTIC TRANSACTION] ENTERED INTO WITH AN ASSOCIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFF ECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD TO ANY OTHER RELEVANT BASE; (II) THE NET PROFIT MARGIN REALIZED BY THE ENTERPRI SE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUM BER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO THE SAME BASE; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAU SE (II) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION [OR THE SPECI FIED DOMESTIC TRANSACTION] AND THE COMPARABLE UNCONTROLLED TRANSACTIONS, OR BETWEE N THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT TH E AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET; (IV) THE NET PROFIT MARGIN REALIZED BY THE ENTERPRI SE AND REFERRED TO IN SUB-CLAUSE (I) IS ESTABLISHED TO BE THE SAME AS THE NET PROFIT MAR GIN REFERRED TO IN SUB-CLAUSE (III); (V) THE NET PROFIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT TO ARRIVE AT AN ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION [OR THE SPECIFIED DOMESTIC TRANSACTION. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 WE NOTE THAT THE MANDATE IN CLAUSE (E) OF SUB-RULE (1) OF RULE 10B OF THE RULES IS TO DETERMINE THE NET PROFIT MARGIN REALIZED BY THE TAX PAYER FROM AN INTERNATIONAL TRANSACTION AND THEREAFTER COMPARE THE SAME WITH NE T PROFIT MARGIN REALIZED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COM PARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS AFTER MAKING APPRO PRIATE ADJUSTMENTS, IF REQUIRED. WE NOTE THAT IN COMPLIANCE WITH THE AFORESAID PROVI SION, THE ASSESSEE COMPANY COMPUTED THE NET PROFIT INDICATOR ARISING SOLELY FR OM THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION BASED ON THE SEGMENT REPORT DUL Y VERIFIED AND CERTIFIED BY THE INDEPENDENT STATUTORY AUDITOR AND THEREAFTER COMPAR ED THE SAME WITH THE ARITHMETIC MEAN OF THE NET PROFIT INDICATORS OF COM PARABLE COMPANIES. THE TPO, HOWEVER, COMPUTED THE NET PROFIT INDICATOR OF THE A SSESSEE COMPANY ARISING AT THE ENTITY LEVEL FROM ALL THE SEVEN DIFFERENT TYPES OF REVENUE GENERATING TRANSACTIONS TAKEN TOGETHER. THE AFORESAID REVENUE-GENERATING TR ANSACTIONS INCLUDED CONTROLLED TRANSACTION AS WELL AS SIX DIFFERENT TYPES OF UNCON TROLLED TRANSACTIONS WITH VARIED RISKS AND RETURNS. ON PERUSAL OF THE PROVISION OF L AW, WE NOTE THAT THE AFORESAID ACTION OF THE TPO GOES AGAINST THE BASIC TENET OF I NDIAN TRANSFER PRICING LAWS. HENCE, THE ALP ADJUSTMENT MADE BY THE TPO/AO IS NOT JUSTIFIED. 15. WE NOTE THAT THE COORDINATE BENCH OF ITAT KOLKA TA IN THE MATTER OF DEPUTY COMMISSIONER OF INCOME-TAX V. J.J. EXPORTERS LTD. R EPORTED IN [2017] 82 TAXMANN.COM 8 (KOLKATA-TRIB.), WHEREIN THE TRIBUNAL INTER ALIA HELD AS FOLLOWS: IT IS CLEAR FROM THE STATUTORY PROVISIONS ESPECIAL LY RULE 10B(E) (I) TO (III) THAT IT IS ONLY THE INTERNATIONAL TRANSACTION THAT HAS TO BE COMPARED WITH UNCONTROLLED TRANSACTION AND NOT THE TRANSACTION UN DERTAKEN BY THE ENTITY AS A WHOLE. HON'BLE MUMBAI ITAT IN THE CASE OF UCB IND IA (P) LTD. (SUPRA) HAD HELD THAT SECTION 92C READ WITH RULE 10B(I)(E) DEALS WITH THE TRANSACTIONS NET MARGIN METHOD AND IT REFERS TO ONL Y NET PROFIT MARGIN REALIZED BY AN ENTERPRISE FROM AN INTERNATIONAL TRA NSACTION OR A CLASS OF SUCH TRANSACTIONS BUT NOT OPERATING MARGINS OF ENTERPRIS ES AS WHOLE. THIS VIEW WAS RE-ITERATED BY THE COORDINATE BENCH MUMBAI IN T HE CASE OF TEJDIAM (SUPRA) AND WHEREIN TRIBUNAL HELD THAT THE MARGIN O F THE INTERNATIONAL TRANSACTION CAN ONLY BE COMPARED WITH UNCONTROLLED TRANSACTION AND NOT OTHERWISE. M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 IN THE LIGHT OF THE AFORESAID DECISIONS, WE NOTE TH AT WHILE DETERMINING THE ARM'S LENGTH NATURE OF THE INTERNATIONAL TRANSACTION UNDE R THE TNMM, THE TPO ERRED IN ADOPTING THE ENTITY LEVEL TNMM APPROACH BECAUSE THE ASSESSEE COMPANY HAD UNDERTAKEN BROADLY SEVEN DIFFERENT TYPES OF REVENUE GENERATING TRANSACTIONS WITH VARIED RISKS AND RETURNS AND THE PROVISION OF SOFTW ARE DEVELOPMENT SERVICE TO AE WAS ONLY ONE OF THEM. THE ASSESSEE COMPANY CORRECTL Y PREPARED THE SEGMENT REPORTING FOR THE PURPOSE OF COMPUTING NET PROFIT I NDICATOR THAT AROSE SOLELY FROM THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION A ND APPLIED THE TNMM ONLY IN RESPECT THEREOF. HENCE, WE ACCEPT THE ALP ANALYSIS UNDERTAKEN BY THE ASSESSEE COMPANY UNDER THE TNMM BASED ON THE SEGMENT REPORT SUBMITTED BY THE ASSESSEE COMPANY TO THE TPO WHICH IS DULY VERIFIED AND CERTI FIED BY THE INDEPENDENT STATUTORY AUDITOR OF THE ASSESSEE COMPANY. THEREFOR E, WE ARE OF THE VIEW THAT THE ERRONEOUS BENCHMARKING APPROACH ADOPTED BY THE TPO NEEDS TO BE REJECTED, AND THEREFORE, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 16. NOW, WE SHALL TAKE GROUND NO.2 RAISED BY THE RE VENUE WHICH READS AS UNDER: WHETHER ON THE FACTS AND CIRCUMSTANCES AND LAW POI NT OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE FACT T HAT THE SEGMENTAL ACCOUNTS ARE LIABLE TO BE REJECTED AS THE ASSESSEE IS ENGAGE D ONLY IN ONE ACTIVITY - SOFTWARE DEVELOPMENT - AS CAN BE OBSERVED FROM THE WEBSITE OF THE ASSESSEE AND THERE IS NO MENTION OF ENGINEERING SERVICES PER FORMED AS CLAIMED BY THE ASSESSEE COMPANY IN THE TRANSFER PRICING STUDY REPO RT, IN WHICH IT HAS INCURRED A LOSS OF RS.1.36 CRORE. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE BRIEF FACTS OF THE ASSESSEE COMPANY HAS ALREADY BEEN NOTED BY US IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAK E OF BREVITY. THE LD COUNSEL SUBMITTED BEFORE US THAT THE ASSESSEE COMPANY, INCO RPORATED IN INDIA, AND DOES NOT MAINTAIN ITS OWN WEBSITE. THE AE MAINTAINS ITS WEBS ITE NAMELY HTTPS.//WWW.NETOURU.COM/ IN WHICH THE AE HAS DISCLO SED THE SERVICES OFFERED BY IT TO THE CUSTOMERS. THE ASSESSEE ENCLOSED WITH THE PA PER BOOK A PRINT-OUT OF THE WEBPAGE HTTPS://WWW.SULEKHA.COM/NET-GURU-LTD-SALT-L AKE-CITY-KOLKATA-CONTACT- ADDRESS, WHEREIN IT IS MENTIONED AS FOLLOWS: M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 'NETGURU IS A PROVIDER OF SOFTWARE SOLUTIONS, WEB A ND ECOMMERCE, ENGINEERING DESIGN SERVICES AND PROMOTIONAL PRODUCT S FOR BUSINESSES. SINCE 1982 NET GURU HAS GROWN ITS BUSINESS OFFERINGS BY M AINTAINING AN EXPERT EMPLOYEE BASE OF DIVERSE PROFESSIONALS. NET GURU HA S EVOLVED INTO TECHNOLOGY-BASED BUSINESS DIVISIONS WITH A FOCUS ON ADDRESSING THE NEEDS OF TODAY'S COMPLEX AND CHALLENGING BUSINESS ENVIRONMEN T......' DURING THE COURSE OF PROCEEDINGS BEFORE THE TPO, TH E ASSESSEE COMPANY SUBMITTED TO THE TPO SAMPLE COPIES OF INVOICES/WORK ORDERS IN RELATION TO SALE OF SERVICE / PRODUCT MADE BY THE ASSESSEE COMPANY TO AE AS WELL AS UNRELATED CUSTOMERS. THE ASSESSEE ENCLOSED COPIES OF SOME OF THE SAMPLE INVO ICES/WORK ORDERS WITH THE PAPER BOOK FOR THE REVIEW. THE DETAILS IN REGARD TH ERETO ARE FURNISHED BELOW. TABLE NO. 3 - DETAILS OF SERVICES / PRODUCTS M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7 IN VIEW OF OUR ABOVE SUBMISSION, IT MAY BE NOTED T HAT THE ASSESSEE COMPANY WAS ENGAGED IN SEVEN DIFFERENT TYPES OF REVENUE GENERAT ING ACTIVITIES WITH VARIED RISK AND RETURN SUCH AS: (A) SERVICES RENDERED TO AE REGULAR MAINTENANCE O F CLIENTS SOFTWARE AND TECHNICAL SUPPORT (I.E. BUG FIXING, DAILY TECHNICAL SUPPORT FOR NON-PROGRAMMING ISSUES, DATE ENTRY, UP-GRADATION OF APPLICATION ETC . (B) SALE OF SERVICES / PRODUCTS TO NON-AES (UNRELAT ED CUSTOMERS) SALE OF SOFTWARE PRODUCTS ENGINEERING SERVICES (ENGINEERING DESIGN & DRAWING) GIFT ONLINE SERVICES DIGITAL MEDIA SALES WEB DEVELOPMENT SERVICE CD SALES M/S NETGURU LTD. ITA NO.1799/KOL/2018 ASSESSMENT YEAR:2011-12 P PP PA AA AG GG GE EE E | || | 1 11 18 88 8 BASED ON THE ABOVE NOTED FACTUAL POSITION, WE NOTE THAT THE ALLEGATION OF THE REVENUE THAT THE ASSESSEE COMPANY WAS ENGAGED ONLY IN ONE ACTIVITY I.E. SOFTWARE DEVELOPMENT, IS ERRONEOUS. THEREFORE, WE ACCEPT THE SEGMENT REPORTING SUBMITTED BY THE ASSESSEE COMPANY TO THE TPO AND DISMISS THE GROUND NO.2 RAISED BY THE REVENUE. 18. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 24.04.2019. SD/- (S.S.GODARA) SD/- (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED 24/04/2019 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ACIT, CIRCLE-2(2), KOLKATA 2. M/S NETGURU LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES
