M/s. Infrasoft Technologies Limited, New Delhi V. DCIT, New Delhi

ITA 1987/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2790 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 28-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHAKANT SAHU
• Assessee Lawyers: VIKAS SHAH
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.1987/DEL/2014 ASSESSMENT YEAR : 2008-09 INFRASOFT TECHNOLOGIES LIMITED, C/O RAVINDER GUPTA, CHARTERED ACCOUNTANTS, 20, VAKIL LANE, KG MARG, NEW DELHI. PAN: AAACB2817R VS. DCIT, CIRCLE-11(1), NEW DELHI. ITA NO.2236/DEL/2014 ASSESSMENT YEAR : 2008-09 DCIT, CIRCLE-11(1), NEW DELHI. VS. INFRASOFT TECHNOLOGIES LIMITED, C/O RAVINDER GUPTA, CHARTERED ACCOUNTANTS, 20, VAKIL LANE, KG MARG, NEW DELHI. PAN: AAACB2817R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA, CA, SHRI ANUJ KISNADWALA, ADVOCATE & SHRI VIKAS SHAH, AR DEPARTMENT BY : SHRI SUBHA KANT SAHU, SR. DR ITA NOS.1987 & 2236/DEL/2014 2 DATE OF HEARING : 28.08.2018 DATE OF PRONOUNCEMENT : 29.08.2018 ORDER PER R.S. SYAL, VP: THESE TWO CROSS APPEALS ONE FILED BY THE ASSESSE E AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CI T(A) ON 23.01.2014 IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. GROUND NOS.1 AND 3 DEAL WITH THE DENIAL OF DEDUC TION CLAIMED BY THE ASSESSEE U/S 10A OF THE INCOME-TAX ACT, 1961 (HEREI NAFTER ALSO CALLED THE ACT) IN RESPECT OF ITS ELIGIBLE UNIT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CONTINUED TO DERIVE INCOME FROM THE BUSINESS OF DEVELOPMENT AND SALE OF SOFTWARE PRODUCTS. IT WAS GRANTED STPI REGISTRATION INITIAL LY ON 28.03.2000, WHICH WAS EXTENDED ON 19.03.2005 FOR FURTHER FIVE YEARS. THE ASSESSEE CLAIMED DEDUCTION OF RS.57,79,603/- U/S 10A OF THE ACT IN T HE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER, FOLLOWING HI S ORDERS FOR THE ASSESSMENT YEARS 2001-02 ONWARDS, REJECTED SUCH A C LAIM OF DEDUCTION. ITA NOS.1987 & 2236/DEL/2014 3 THE LD. CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS SCORE, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBU NAL. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS SEEN THAT THE ORDERS PASSED BY THE LD . CIT(A) IN RELATION TO ASSESSMENT YEARS 2001-02 AND 2007-08, DEALING WITH THE DENIAL OF DEDUCTION U/S 10A, CAME UP FOR CONSIDERATION BEFO RE THE TRIBUNAL. VIDE ORDER DATED 03.05.2016, THE TRIBUNAL, IN ITA NO.638 6 AND 6387/DEL/2012, HAS ACCEPTED THE ASSESSEES CLAIM OF DEDUCTION IN R ESPECT OF ASSESSMENT YEAR 2001-02. THE ASSESSEE FILED ADDITIONAL EVIDENC E BEFORE THE TRIBUNAL IN SUPPORT OF THE ELIGIBILITY OF DEDUCTION FOR THE ASS ESSMENT YEAR 2007-08. CONSIDERING SUCH ADDITIONAL EVIDENCE, THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF ASSESSING OFFICER FOR A FRESH DECISION. IN VIEW OF THE FACT THAT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFOR E THE TRIBUNAL IN THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08 HAS BEA RING ON THE ALLOWABILITY OF DEDUCTION U/S 10A FOR THE YEAR UNDE R CONSIDERATION AS WELL, IT WAS PRAYED ON BEHALF OF THE ASSESSEE THAT THE EX TANT ISSUE MAY ALSO BE SENT BACK TO THE ASSESSING OFFICER FOR A DECISION I N ACCORDANCE WITH THE VIEW CANVASSED FOR THE ASSESSMENT YEAR 2007-08 AFTE R CONSIDERATION OF THE ITA NOS.1987 & 2236/DEL/2014 4 ADDITIONAL EVIDENCE. NO OBJECTION WAS TAKEN BY THE LD. DR TO THIS SUBMISSION MADE ON BEHALF OF THE ASSESSEE. CONCURRI NG WITH THE RIVAL BUT COMMON SUBMISSIONS AND RESPECTFULLY FOLLOWING THE O RDER PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08, WE SET AS IDE THE IMPUGNED ORDER ON THIS SCORE AND REMIT THE MATTER TO THE FILE OF A SSESSING OFFICER FOR DECIDING IT AFRESH IN THE LIGHT OF THE DECISION TAK EN IN FRESH PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08. 5. GROUND NOS. 2 AND 6 WERE NOT PRESSED. THE SAME, THEREFORE, STAND DISMISSED. 6. THE ONLY EFFECTIVE GROUND WHICH SURVIVES IN THE APPEAL OF THE ASSESSEE AND THE SOLITARY GROUND RAISED IN THE REVENUES APP EAL RELATE TO THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. THE FAC TS APROPOS THIS ISSUE ARE THAT THE ASSESSEE IS A SOFTWARE DEVELOPMENT COMPANY WHICH SPECIALIZES IN DEVELOPMENT OF I.T. SOLUTIONS AND SOFTWARE PRODUCTS . IT EARNED CERTAIN REVENUE FROM RENDERING SOFTWARE DEVELOPMENT SERVICE S TO ITS ASSOCIATED ENTERPRISE. THE ASSESSEE EMPLOYED TRANSACTIONAL NE T MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD WITH PROFIT L EVEL INDICATOR (PLI) ITA NOS.1987 & 2236/DEL/2014 5 OF OPERATING PROFIT/TOTAL COST (OP/TC). CERTAIN CO MPARABLES WERE CHOSEN TO DEMONSTRATE THAT THE INTERNATIONAL TRANSACTION W AS AT ARMS LENGTH PRICE (ALP). THE TRANSFER PRICING OFFICER (TPO) MADE CERT AIN INCLUSIONS/EXCLUSIONS IN/FROM THE LIST OF COMPARABL ES DRAWN BY THE ASSESSEE AND EVENTUALLY RECOMMENDED TRANSFER PRICING ADJUSTM ENT AMOUNTING TO RS.3,01,93,572/-, FOR WHICH ADDITION WAS MADE BY TH E ASSESSING OFFICER. THE ASSESSEE ASSAILED THE CORRECTNESS OF THE ASSESS MENT ORDER BEFORE THE LD. CIT(A) WHO GAVE CERTAIN DIRECTIONS BOTH FOR AND A GAINST THE ASSESSEE, AGAINST WHICH BOTH THE ASSESSEE AS WELL AS THE REVE NUE HAVE RESPECTIVELY COME UP IN APPEAL BEFORE THE TRIBUNAL. 7. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSEE RAISED A C LAIM THAT WITHIN THE OVERALL SEGMENT OF SOFTWARE DEVELOPMENT, THERE ARE TWO COMP ONENTS, VIZ., SOFTWARE DEVELOPMENT AND SOFTWARE PRODUCTS. THE ASSESSEE HA S FILED ADDITIONAL EVIDENCE IN THE SHAPE OF AUDITED ACCOUNTS IN RESPEC T OF THESE TWO SEGMENTS. SINCE SUCH SEGMENT-WISE AUDITED ACCOUNTS WERE NOT B EFORE THE AUTHORITIES BELOW, IT WAS PRAYED THAT THE TPO BE DIRECTED TO BE NCHMARK THE INTERNATIONAL TRANSACTION AFRESH IN THE LIGHT OF TH E ADDITIONAL EVIDENCE. NO ITA NOS.1987 & 2236/DEL/2014 6 SERIOUS OBJECTION WAS TAKEN BY THE LD. DR. IN VIEW OF THE FOREGOING FACTS, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND R EMIT THE MATTER TO THE FILE OF ASSESSING OFFICER/TPO FOR DETERMINING THE A LP OF THE INTERNATIONAL TRANSACTION AFRESH, AS PER LAW, AFTER ALLOWING A RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE WILL BE AT LIBERTY TO FILE ANY FRESH EVIDENCE/MATERIAL BEFORE THE TPO/ A.O IN SUCH FRESH PROCEEDINGS. GRIEVANCE OF THE REVENUE TO THE EXCLU SION OF CERTAIN COMPANIES BY THE LD. CIT(A) WILL BE AUTOMATICALLY A DDRESSED WHEN THE FRESH EXERCISE WILL BE UNDERTAKEN BY THE AUTHORITIE S BELOW. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.08.201 8. SD/- SD/- [K. NARASIMHA CHARY] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 29 TH AUGUST, 2018. DK ITA NOS.1987 & 2236/DEL/2014 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.