M/s Jamcracker Software Technologies Private Limited, Bangalore V. DCIT, Bangalore

ITA 257/BANG/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4693 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA II
• Assessee Lawyers: G S PRASHANTH
• Keywords: Transfer pricing; Opportunity of being heard
• Section: 92D; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER IT (TP) A NO. 257/BANG/2016 ASSESSMENT YEAR : 2011 - 12 M/S. JAMCRACKER SOFTWARE TECHNOLOGIES PRIVATE LIMITED, AMR TECH PARK, 1A 23 & 24, HOSUR ROAD, BENGALURU 560 068. PAN: AABCJ 3475C VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), BENGALURU. APP ELL ANT RESPONDENT A PP EL LANT BY : SHRI G.S. PRASHANTH, CA RE SPONDENT BY : MS. NEERA MALHOTRA, CIT(DR - II )(ITAT), BENGALURU. DATE OF HEARING : 21. 0 5 .201 8 DATE OF PRONOUNCEMENT : 01.06. 201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER PASSED BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 4(1)(1) . BENGALURU DATED 31.12.2015 UNDER SECTION 144C OF THE INCOME TAX ACT . 1961 (THE ACT). 2. THE ASSESSEE IS A SUBSIDIARY OF JAMCRACKER INC, USA AND IS ENGAGED IN THE BUSINESS OF RENDERING SOFTWARE DEVEL OPMENT AND OTHER IT SERVICES, ELIGIBLE FOR CLAIMING DEDUCTION UNDER SEC TION 10A OF THE ACT. THE ASSESSEE RENDERED SOFTWARE DEVELOPMENT SERVICES AND IT SERVICES TO ITS HOLDING COMPANY AND THEREFORE INCOME FROM SUCH TRAN SACTION HAS TO BE IT(TP)A NO.257/BANG/2016 PAGE 2 OF 4 DETERMINED HAVING REGARD TO ARMS LENGTH PRICE (ALP ) AS PER THE PROVISIONS OF SECTION 92 OF THE ACT. 3. FOR THE IMPUGNED ASSESSMENT YEAR 2011-12, THE AP PELLANT FILED ITS RETURN OF INCOME ON 29.09.2011 DECLARING TOTAL INCO ME OF RS. 7,090/- AFTER CLAIMING DEDUCTION UNDER SECTION 10A OF . THE ACT AMOUNTING TO RS. 2,20,63,851/-. 4. THE LD. TRANSFER PRICING OFFICER (TPO), TO WHOM THE AO MADE A REFERENCE FOR DETERMINING THE ALP, VIDE LETTER DATE D 21.03.2014 CALLED UPON THE ASSESSEE TO SUBMIT DOCUMENTS MAINTAINED UNDER T HE PROVISIONS OF SECTION 92D OF THE ACT AND ALL THE DOCUMENTS AS SOU GHT WERE PROVIDED BY THE ASSESSEE. VIDE LETTER DATED 23.05.2014. THE TPO ISSUED NOTICE DATED 01.10.2014 UPON THE ASSESSEE TO SHOW CAUSE AS TO WH Y THE TP DOCUMENTATION SHOULD NOT BE REJECTED. ADOPTING THE COMPARABLES SELECTED BY THE TPO AND CALLING FOR OBJECTIONS. THE ASSESSEE VIDE LETTERS FILED ON 07.11.2014 AND 19.11.2014 SUBMITTED DETAILED REPLIE S DEMONSTRATING WHY THE LEARNED TPO SHOULD NOT PROCEED WITH THE PROPOSE D COMPARABLES. THE TPO, HOWEVER, PROCEEDED TO PASS THE ORDER UNDER SEC TION 92CA OF THE ACT AND DETERMINED THE AVERAGE NET OPERATING MARGIN AT 24.82%, THEREBY PROPOSING AN ADJUSTMENT OF RS. 1,53,49,413/-. 5. THE AO PASSED DRAFT ASSESSMENT ORDER PROPOSING A DDITION TO THE TOTAL INCOME OF RS.1,53,49,413 CONSEQUENT TO DETERM INATION OF ALP. THE AO ALSO RECOMPUTED THE DEDUCTION CLAIMED UNDER SECT ION 10A OF THE ACT BY EXCLUDING THE EXPENSES INCURRED IN FOREIGN CURRENCY AMOUNTING TO RS. 23.78,038/-, THEREBY MAKING ADDITIONS TO THE EXTENT OF RS. 12,48,271/- AS EXCESS CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. 6. THE APPELLANT, AGGRIEVED BY THE DRAFT ASSESSMENT ORDER PASSED BY THE AO, FILED ITS OBJECTIONS BEFORE THE DISPUTE RES OLUTION PANEL (DRP) IN IT(TP)A NO.257/BANG/2016 PAGE 3 OF 4 ACCORDANCE WITH LAW ON 13.03.2015. SUBSEQUENTLY, T HE ASSESSEE ALSO FILED PAPER BOOK AND CONCISE ARGUMENTS ON 09.09.2015. THE DRP FIXED THE HEARING ON 16.11.2015. SINCE NONE APPEARED ON BEHA LF OF THE ASSESSEE, THE DRP PASSED ITS DIRECTIONS EX PARTE . 7. THE DRP BY ITS EX PARTE DIRECTIONS DATED 19.11.2015 REJECTED ALMOST ALL THE OBJECTIONS OF THE ASSESSEE, BUT DIRECTED TH E AO TO REDUCE THE EXPENSES INCURRED IN FOREIGN CURRENCY FROM BOTH EXP ORT TURNOVER AS WELL AS TOTAL TURNOVER WHICH RESULTED IN DELETION OF THE EN TIRE ADDITIONS MADE OF RS. 12,48,271/- BY THE AO AS EXCESS CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. FURTHER WITH REGARD TO THE TP ADJUSTMENT M ADE, THE LEARNED DRP DIRECTED TO EXCLUDE COMPANIES NOT PASSING TURNOVER FILTER OF RS. 1 TO 200 CRORE WHICH RESULTED IN EXCLUSION OF 6 COMPARABLES SELECTED BY TPO AND THE TP ADJUSTMENT WAS RECOMPUTED AT RS. 1,62,42,787 . 8. THE AP PASSED FINAL ORDER OF ASSESSMENT BY CONSI DERING THE DIRECTIONS OF THE DRP VIDE ORDER U/S. 144C OF THE A CT DATED 31.12.2015. AGGRIEVED BY THE ORDER OF ASSESSMENT, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. SINCE THE DRP HAS GIVEN EX PARTE DIRECTIONS, WE ARE OF THE VIEW THAT THE ORDER OF TH E AO INCORPORATING THE DIRECTIONS OF THE DRP SHOULD BE SET ASIDE AND T HE DRP SHOULD BE DIRECTED TO CONSIDER THE OBJECTIONS OF THE ASSESSEE AFRESH, AFTER AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TO THE EXTENT THE DRP HAS G IVEN RELIEF, THE DIRECTIONS OF THE DRP SHOULD BE SUSTAINED. THE LD. DR, HOWEVER, SUBMITTED THAT THE ENTIRE DIRECTIONS OF THE DRP SHO ULD BE SET ASIDE AS THE DIRECTIONS ARE PASSED EX PARTE . WE ARE OF THE VIEW THAT THE ENTIRE DIRECTIONS OF THE DRP SHOULD BE SET ASIDE IN THE FA CTS AND CIRCUMSTANCES OF THIS CASE. THE APPLICABILITY OF ALL FILTERS CAN BE RE-EXAMINED BY THE DRP, IF IT IT(TP)A NO.257/BANG/2016 PAGE 4 OF 4 SO DESIRES. IN THIS REGARD, WE MAY ALSO MAKE IT CL EAR THAT THE DRP IS AT LIBERTY TO FOLLOW ITS EARLIER DIRECTIONS INSOFAR AS IT RELATES TO THE RELIEF ALLOWED TO THE ASSESSEE IN ITS EX PARTE DIRECTIONS. WITH THESE OBSERVATIONS, WE SET ASIDE THE ORDER IMPUGNED IN THIS APPEAL WITH DIRECT IONS TO THE DRP TO PROVIDE OPPORTUNITY OF HEARING TO THE ASSESSEE AND PASS DIRECTIONS THEREAFTER AGAINST THE DRAFT ASSESSMENT ORDER OF TH E AO. 10. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.