Siftbrabds India Private Limited, Bangalore V. ACIT, Bangalore

ITA 234/BANG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0159 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER IT(TP)A NO.234/BANG/2012 ASSESSMENT YEAR : 2005-06 INFOR (BANGALORE) PVT. LTD., [EARLIER SOFTBRANDS INDIA PVT. LTD.], PRESTIGE OBELISK, LEVEL 9, KASTURBA ROAD, BANGALORE 560 001. PAN: AAFCS 9041K VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI CHERIAN K. BABY, CA RESPONDENT BY : SHRI A.R. V. SREENIVASAN, JT. CIT(DR) DATE OF HEARING : 05.07.2016 DATE OF PRONOUNCEMENT : 29.07.2016 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE AGAINST THE ORDER OF THE CIT(APPEALS)-IV, BANGALORE DATED 20.12.2011 FOR THE ASSESSMENT YEAR 2005-06 INTER ALIA ON THE FOLLOWING CONCISE GROUNDS:- YOUR APPELLANT IS ENGAGED IN THE BUSINESS OF SOFTW ARE DEVELOPMENT, SOFTWARE CONSULTANCY AND INFORMATION T ECHNOLOGY ENABLED SERVICES FROM SOFTWARE TECHNOLOGY PARKS UNI TS SET UP IN IT(TP)A NO.234/BANG/2012 PAGE 2 OF 4 BANGALORE AND NOIDA. THE PRESENT APPEAL IS PREFERRE D AGAINST THE ORDER OF THE ASSESSING OFFICER TO THE EXTENT UPHELD BY THE LEARNED CIT(A)-IV, BANGALORE. THE FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. GROUND I - TRANSFER PRICING ADJUSTMENT OF RS. 79,53 ,501/ - 1. THE AO AND TPO HAS GRIEVOUSLY ERRED IN MAKING, AND THE CIT(A) IN UPHOLDING, THE TRANSFER PRICING ADJUSTMEN T OF RS. 79,53,501/- TO THE PRICES CHARGED BY YOUR APPELLANT . 2. THE TP PROCEEDINGS WERE CONDUCTED AND ORDER PASSED BY THE ADDL. DIRECTOR OF INCOME TAX, WHO IS NOT AN AUTHORI ZED PERSON TO CONDUCT SUCH PROCEEDINGS AND PASS NECESSA RY ORDER AS PER THE EXPLANATION TO SEC.92CA OF THE INCOME TA X ACT, 1961, WHICH CONTEMPLATES A JOINT / DEPUTY / ASSISTA NT COMMISSIONER AS TPO. 3. THE TPO HAS ERRED IN REJECTING THE COST PLUS METHOD AS THE MOST APPROPRIATE METHOD FOR DETERMINING ARM'S LENGT H PRICE ('ALP') AND WRONGLY ADOPTING TRANSACTION NET MARGIN METHOD INSTEAD. 4. THE TPO HAS ERRED IN THE APPLICATION OF CERTAIN FIL TERS, VIZ. TURNOVER FILTER, AND HAVE SELECTED AS COMPARABLE, C OMPANIES WHOSE BUSINESS AND OPERATIONS HAVE NOTHING IN COMMO N TO THAT OF YOUR APPELLANT. 5. THE TPO HAS ERRED IN NOT MAKING ANY ADJUSTMENTS FOR THE DIFFERENCES IN THE FUNCTIONS AND RISKS WHICH ARE NO T UNDERTAKEN BY YOUR APPELLANT BUT UNDERTAKEN BY THE COMPARABLE COMPANIES, CONSIDERING THE FACT THAT YOU R APPELLANT DOES NOT UNDERTAKE ANY MARKETING OR RESEA RCH AND DEVELOPMENT ACTIVITIES IN RESPECT OF TRANSACTIONS W ITH AES. 6. THE TPO HAS ERRED IN NOT CONSIDERING THE RETURN ON INVESTMENT OF YOUR APPELLANT WHICH, BEING 43.23%, I S SUFFICIENT TO ENTHUSE ANY PRUDENT BUSINESSMAN TO CA RRY ON BUSINESS AND THEREFORE JUSTIFIES THE PRICE RECEIVED . 7. THE TPO HAS ERRED IN NOT CONSIDERING AND ALLOWING T HE RANGE OF +/- 5% OF THE ALP COMPUTED. IT(TP)A NO.234/BANG/2012 PAGE 3 OF 4 8. THE TPO HAS ERRED IN NOT CONSIDERING THE FACT THAT THE MARGINS EARNED BY THE ASSOCIATED ENTERPRISES (AES') ARE LOW ER THAN THE MARGINS EARNED BY YOUR APPELLANT WHICH CLEARLY INDI CATES THAT THE AES ARE CHARGED AT ALP. GROUND II - MISCELLANEOUS 1. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, V ARY AND/ OR WITHDRAW ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT MAY BE DIRECTED THAT THE ORDER OF TH E AO AS UPHELD BY THE LEARNED CIT(A) BE MODIFIED TO THE EXT ENT APPEALED AGAINST. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE CIT(APPEALS) HAS DEC IDED THE APPEAL WITHOUT SERVICE OF NOTICE OF HEARING UPON THE ASSESSEE. T HE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, CONTENDED THAT THE IMPUGNED ISSU ES ARE COVERED BY THE ORDERS OF THE TRIBUNAL. 3. PER CONTRA , THE LD .DR HAS CONTENDED THAT THE CIT(APPEALS) HA S AFFORDED VARIOUS OPPORTUNITIES TO THE ASSESSEE, BUT NONE APPEARED ON BEHALF OF THE ASSESSEE. 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE CIT(A PPEALS), WE FIND THAT THE CIT(APPEALS) HAS NOT GIVEN A SPECIFIC FIND ING WITH REGARD TO SERVICE OF NOTICE OF HEARING UPON THE ASSESSEE. HE HAS DIS POSED OF THE APPEAL EX PARTE . IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THOUGH THE ISSUES MAY BE COVERED BY THE ORDERS OF THE TRIBUNAL, BUT T HERE SHOULD BE SOME FINDING OF THE CIT(APPEALS) ON THE CONTROVERSY RAIS ED. WE ACCORDINGLY SET IT(TP)A NO.234/BANG/2012 PAGE 4 OF 4 ASIDE THE ORDER OF THE CIT(APPEALS) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO ADJUDICATE THE ISSUES AFRESH IN THE LI GHT OF THE ORDERS OF THE TRIBUNAL, AFTER AFFORDING OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JULY, 2016. SD/- SD/- ( A.K. GARODIA ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE, DATED, THE 29 TH JULY, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.