Progress Software Development Private Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad

ITA 2271/Hyd/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5326 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 19-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DANDA SRINIVAS
• Keywords: Transfer pricing
• Section: 92B

Judgement Text

ITA NO 2271/HY D/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO.2271/HYD/2017 ASSESSMENT YEAR: 2013-14 PROGRESS SOFTWARE DEVELOPMENT PRIVATE LIMITED, 4 TH FLOOR, NO.18, I LABS CENTRE, #8, SOFTWARE UNIT LAYOUT, MADHAPUR, HYDERABAD 500 081. PAN : AADCP4833A. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI MAHAVEER JAIN - AR REVENUE BY : SRI DANDA SRINIVAS - DR DATE OF HEARING: 19/07/2021 DATE OF PRONOUNCEMENT: 23/09/2021 O R D E R PER S. S. GODARA, J.M. THIS ASSESSEES APPEAL FOR A.Y. 2013-14 ARISES AGAI NST THE DCIT, CIRCLE 16(2), HYDERABADS ASSESSMENT DATED 23.10.2017 FRAMED IN FURTHERANCE TO DISPUTE RESOLUTION PANEL DRP-1, BANGALORES DIRECTIONS DT.02.09.2017 IN F.NO.388/DR P- 1/BNG/2016-17 INVOLVING PROCEEDINGS UNDER SECTION 1 43(3) R.W.S. 144C(5) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NO 2271/HY D/2017 2 2. WE COME TO THE FORMER ISSUE OF CORRECTNESS OF AR MS LENGTH PRICE ADJUSTMENT TO THE TUNE OF RS.22,12,752 /- PERTAINING TO INTEREST PAID TO OVERSEAS ASSOCIATED ENTERPRISES ON EXTERNAL COMMERCIAL BORROWINGS ECBS AND TRADE CREDITS. RELEVANT FACTS QUA THE INSTANT FORMER ISSUE ARE IN A VERY BRIEF COMPASS. 3. THERE IS NO DISPUTE THAT ASSESSEE HAD PAID INTER EST ON THE FOREGOING LOANS TO ITS OVERSEAS AE @ 5.14% W HEREAS THE LOWER LEARNED AUTHORITIES HAVE APPLIED LIBOR + 2% THEREB Y TREATING THE REMAINING COMPONENT AS AN EXCESSIVE PAYMENT LIABLE FOR ALP ADJUSTMENT. NEEDLESS TO SAY, THE TRANSFER PRICING OFFICER (TPO) MADE HIS ADJUSTMENT TO THIS EFFECT IN SEC.92CA(3) O RDER DT.31.10.2016 FOLLOWED BY ASSESSING OFFICERS DRAFT ASSESSMENT ORDER DATED 30.12.2016 AS UPHELD IN THE DRPS DIRECTION T HEREBY CULMINATING IN THE IMPUGNED ADDITION IN ASSESSING O FFICERS ASSESSMENT ORDER. THE ASSESSEE HAS FILED A DETAILE D NOTE TO THE EFFECT THAT THE TPO HAS HIMSELF ACCEPTED THE VERY I NTEREST RATE @ 5.14% IN ASSESSMENT YEARS 2008-09, 2009-10 AND 2 012-13. LEARNED COUNSELS CASE THEREFORE IS THAT THE IMPUGN ED ASSESSMENT YEAR IS NOWHERE ANY EXCEPTION ON FACTS OR LAW. T HE REVENUES CASE ON THE OTHER HAND IS THAT ALTHOUGH THE ASSESSEES W RITTEN SUBMISSIONS HAVE EXTRACTED THE TPOS ORDERS TO THIS EFFECT ALONG WITH THE CLAIM THAT IT HAD FOLLOWED RBI APPROVED INTERES T RATE ONLY, THE SAME REQUIRES AFRESH FACTUAL VERIFICATION AT THE TP OS END SINCE THE DRP PRIMA FACIE COULD NOT VERIFY THE CORRESPONDING FACTS. ITA NO 2271/HY D/2017 3 4. FACED WITH THIS SITUATION, WE DEEM IT APPROPRIAT E TO RESTORE THE INSTANT FORMER ISSUE BACK TO THE TPO FO R HIS AFRESH EXAMINATION OF THE ASSESSEES INTEREST RATE IN LIGH T OF HIS PRECEDING ASSESSMENT AND SUCCEEDING YEARS ORDERS AND ALL OTHE R FACTS AS PER LAW WITHIN THREE EFFECTIVE OPPORTUNITIES OF HEARING . WE MAKE IT CLEAR THAT THE ASSESSEE SHALL BE AT LIBERTY TO RAISE ALL THE FACTUAL AS WELL AS LEGAL PLEAS IN CONSEQUENTIAL PROCEEDINGS. THE FORM ER SUBSTANTIVE GROUND IS ACCEPTED FOR STATISTICAL PURPOSES. 5. NEXT COMES THE LATTER ISSUE OF INTEREST ON RECEI VABLES INVOLVING ALPS ADJUSTMENT OF RS.1,94,49,839/-. TH ERE IS HARDLY ANY DISPUTE THAT SUCH AN INTEREST ON RECEIVABLES COMES UNDER SEC 92B EXPLANATION (C) (III) (C) OF THE ACT. AND THAT THE TPOS ORDER IN PARA 7.2 MORE PARTICULARLY APPEARS TO HAVE TAKEN NOTE OF THE CLINCHING FACT THAT THE ASSESSEE HAD ITSELF FILED COPIES OF I NTERCOMPANY AGREEMENTS WITH REGARD TO OUTSTANDING RECEIVABLES H AVING 30 DAYS CREDIT PERIOD. WE NEXT HOLD THAT THERE IS NO CLARI TY AS TO WHETHER THE SAID INTER-COMPANY AGREEMENTS PERTAIN TO THE ASSESS EES ASSOCIATED ENTERPRISES ONLY WHICH COULD NOT BE TAKEN AS INDEPE NDENT COMPARABLE(S) IN LIGHT OF TECHNIMONT ICB PRIVATE LI MITED VS. ADDL. CIT 138 ITD 23 (TM) (MUM) OR INDEPENDENT PARTIES H AVING COMPARABLE CONTROLLED TRANSACTIONS; AS THE CASE M AY. AND ALSO MORE PARTICULARLY, THE TPO HAS CHARGED INTEREST @ 1 4.5% THAN PROCEEDING IN LIGHT OF MARKET COMPARABLES IN THE VE RY SEGMENT FOLLOWED BY THE DRPS DIRECTIONS ADOPTING SBI DOMES TIC TERM DEPOSIT RATES NOT PERTAINING TO THE ASSESSEES LINE OF BUSI NESS. WE THUS RESTORE THE SECOND GROUND BACK TO THE TPO FOR HIS A FRESH ADJUDICATION AS PER LAW WITHIN THREE EFFECTIVE OPPO RTUNITIES OF HEARING. ORDERED ACCORDINGLY. IT IS FURTHER MADE ABUNDANTLY CLEAR THAT OF THE FOREGOING INTER-COMPANY AGREEMENTS AND FOUND ITA NO 2271/HY D/2017 4 PERTAINING TO AES ONLY, THE IMPUGNED ADJUSTMENT SHA LL STAND DELETED. 6. THIS ASSESSEES APPEAL IS ALLOWED FOR STATISTICA L PURPOSES IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2021. S SD/- SD/- (LAXMI PRASAD SAHU) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER HYDERABAD, DATED 23 RD SEPTEMBER, 2021. TYNM/SPS COPY TO: S.NO ADDRESSES 1 PROGRESS SOFTWARE DEVELOPMENT PRIVATE LIMITED, 4 TH FLOOR, NO.18, LABS CENTRE, #8, SOFTWARE UNIT LAYOUT, MADHA PUR, HYDERABAD 500 081. 2 THE DCIT, CIRCLE 16(2), HYDERABAD. 3 ITO (OSD) & SECRETARY, DRP-1, BENGALURU 4 DR, ITAT HYDERABAD BE NCHES 5 GU ARD FILE BY ORDER