Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 86772 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 8 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-02-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
I
Next Hearing Date
17-02-2015
Assessment Year
2003-2004
Appeal Filed On
08-06-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY , JUDICIAL MEMBER ITA NO. 2423/DEL / 2010 ASSESSMENT YEAR: 2003 - 04 MENTOR GRAPHICS (NOIDA) P. LTD., VS. DY. COMMISSIONER OF INCOME BUILDING - A, LOGIX TECHNO PARK TAX, CICCLE - 6(1), NEW DELHI PLOT NO. 5, SECTOR 127, NOIDA (PAN: AABCM5494Q ) (APPELLANT) (RESPONDENT) AND ITA NO. 2847/DEL/2010 ASSESSMENT YEAR: 2003 - 04 DY. COMMISSIONER OF INCOME VS. MENTOR GRAPHICS (NOIDA) P. LTD., TAX, CICCLE - 6(1), NEW DELHI BUILDING - A, LOGIX TECHNO PARK, PLOT NO. 5, SECTOR 127, NOIDA (PAN:AABCM5494Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SH. ROHIT TIWARI & RAVI SHARMA, CAS DEPARTMENT BY: SH. JUDY JAMES, STANDING COUNSEL FOR DR ORDER PER R.S. SYAL, AM : THESE TWO C ROSS A PPEALS, ONE BY THE ASSESSEE AND OTHER BY THE REVENUE , ARISE OUT OF THE ORDER PASSED BY THE CIT(A) ON 22.04.2010 IN RELATION TO THE ASSESSMENT YEAR 2003 - 04. 2 ITA NOS. 2423 & 2847/DEL/2010 2. T HE ONLY ISSUE PRESSED BY THE LEARNED AR FROM THE ASSESSEE S APPEAL IS AGAINST THE INCLUSION OF CERTAIN COMPANIES IN THE LIST OF COMPARABLES. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE MENTOR GRAPHICS (NOIDA) P. LTD., FORMERL Y KNOWN AS IKOS INDIA PVT. LTD., IS A WHOLLY OWNED SUBSIDIARY OF IKOS SYSTEMS INC. USA , WHICH , IN TURN , WAS ACQUIRED BY MENTOR GRAPHICS CORPORATION, USA DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE REPORTED TWO INTERNATIONAL TR ANSACTIONS, NAMELY, SOFTWARE DEVELOPMENT SERVICES R ENDERED WITH VALUE OF RS. 11,17,29,489/ - AND MARKETING SUPPORT SERVICES RENDERED WIT H VALUE OF R S. 1,33,72,483/ - . INSOFAR AS THE SEGMENT OF `S OFTWARE DEVELOPMENT SERVICES IS CONCERNED, THE ASSESSEE PROVIDED SOFTWARE DEVELOPMENT SERVICES ONLY TO ITS AES AND NOT TO THE THIRD PARTIES. SUCH SOFTWARE DEVELOPMENT SERVICES WER E UTILIZED BY ITS PARENT COMPANY , WHICH IS ENGAGED IN THE DEVELOPMENT OF S OFTWARE P RODUCTS FOR CH I P DESIGNING. APART FROM TH IS, THE ASSESSEE ALSO RENDERED ` MARKET ING SUPPORT SERVICES TO IKOS, USA BY SECURING CLIENTS IN INDIA FOR ITS FOREIGN ENTITY . THE ASSESSEE IS A CONTRACT SERVICE PROVIDER WHO WAS REMUNERATED BY ITS AES AT COST PLUS 13% IN RESPECT OF BOTH THE ABOVE TYPES OF SERVICES . THE TRANSACTIONAL NET MARGIN METHOD ( TNMM) WAS USED BY THE ASSESSEE AS A MOST APPROPRIATE METHOD WITH THE PROFIT LEVEL INDICATOR (PLI) OF O PERATING PROFIT TO S ALES. FOUR COMPANIES W ERE CHOSEN BY IT AS COMPARABLES WHICH HAVE BEEN LISTED ON PAGE 3 OF THE ORDER OF THE TRANSFER PRICING OFFICER (TPO). THE ARITHMETIC 3 ITA NOS. 2423 & 2847/DEL/2010 MEAN OF THE P ROFIT RATIO OF THESE FOUR COMPANIES WAS COMPUTED AT 5.50% AGAINST THE ASSESSEE S PLI OF 9.75%. THAT IS HOW , THE ASSESSEE DEMONSTRATED THAT ITS INTERNATIONAL TRANSACTIONS WERE AT ARM S LENGTH PRICE (ALP). THE TPO CHANGED THE PLI TO O PERATING PROFIT/ T OTAL COST (OP/TC) BY ACCEPTING THE TNMM AS THE MOST APPROPRIATE METHOD. NOT SATISFIED WITH ASSESSEE S SELECTION OF COMPARABLE S AND THE USE OF MULTIPLE YEAR DATA, THE TPO SEARCHED A NEW SET OF COMPARABLES WITH CURRENT YEAR S DATA ALONE. AFTER ENTERTAINING OBJECTIONS FROM THE SIDE OF THE ASSESSEE, THE TPO SHORTLIS TED 16 COMPANIES AS COMPARABLE WHICH HAVE BEEN TABULATED ON PAGE 9 OF HIS ORDER. THE ARITHMETIC MEAN OF THEIR OP/TC AT 22.30% WAS F OUND TO BE BREACHING + 5% MARGIN OF THE ASSESSEE S OP/TC. THIS RESULTED INTO T RANSFER P RICING A DJUSTMENT OF RS. 1,34,64,448/ - . THE ASSESSING OFFICER MADE THIS ADDITION. THE LEARNED CIT(A) ACCEPTED THE TPO S VERSION IN ENTIRELY EXCEPT TREATING GENESYS INTERNATIONAL CORPORATION LTD. AS NOT COMPARABLE. BOTH THE SIDES ARE IN APPEAL ON THEIR RESPECTIVE STANDS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ONLY DISPUTE PRESSED BEFORE US FROM TH E ASSESSEE S APPEAL IS THE INCLUSION OF FOUR COMPANIES IN THE LIST OF COMPARABLES BY THE TPO. NO OTHER ASPECT, SUCH AS THE APPLICATION OF OP/TC AS PLI OR THE EXCLUSION OF S O M E OF THE COMPANIES CHOSEN BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY REPORT OR CONSIDERATION OF CURRENT YEAR S DATA ALONE ETC. HA S BEEN CHALLENGED 4 ITA NOS. 2423 & 2847/DEL/2010 BEFORE US. AS SUCH, WE WILL C ONFINE OURSELVES ONLY TO EXAMINING THE INCLUSION OF CERTAIN COMPANIES IN THE LIST OF COMPARABLES WHICH HAVE BEEN AGITATED BEFORE US. 5. BEFORE CONSIDERING T HE COMPARABILITY OR OTHERWISE OF THE COMPANIES ASSAILED BEFORE US, IT IS PARAMOUNT TO CONSIDER THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY. WE HAVE NOTICED ABOVE THAT THE ASSESSEE RENDERED NOT ONLY S OFTWARE DEVELOPMENT SERVICES BUT ALSO M ARKETING SUPPOR T SERVICES TO ITS AES . THE TPO HAS CLUBBED BOTH THE SETS OF INTERNATIONAL TRANSACT IONS AND PROCEEDED TO DETERMINE THEIR ALP BY TREATING BOTH OF THEM AS S OFTWARE DEVELOPMENT SERVICES RENDERED IN A COMBINED MANNER. AS THE ASSESSEE HAS NOT CHALLENGED THIS ASPECT, WE WILL ALSO CONSIDER BOTH THESE SERVICES IN A COMBINED MANNER AS SOFTWARE DEVELOPMENT SERVICES , ALBEIT WE FEEL THAT THESE TWO OUGHT TO HAVE BEEN BENCHMARKED SEPARATELY. 6. THE ASSESSEE ENTERED INTO AN A GREEMENT WITH MEN TOR GRAPHICS (IRELAND) LTD EFFECTIVE FROM 08.05.200 2 UNDER WHICH IT UNDERTOOK TO RENDER `D EVELOPMENT SERVICES TO ITS AES. A COPY OF THE A GREEMENT IS AVAILABLE AT PAGES 127 ONWARDS OF THE PAPER BOOK. DEVELOPMENT SERVICES IN THIS A GREEMENT HAVE BEEN DEFIN ED TO MEAN ALL DEVELOPMENT ACTIVITIES CONCERNING ANY OF THE PRODUCTS , INCLUDING BUT NOT LIMITED TO (I) DEVELOPMENT OF NEW PRODUCTS; AND (II) CREATION OF IMPROVEMENTS, UPDATES, ADAPTATIONS, TRANSLATIONS OR OTHER MODIFICATIONS TO EXISTING PRODUCTS OR PRODUC TS UNDER DEVELOPMENT . THE EXPRESSION PRODUCTS HA S BEEN DEFINED IN THIS AGREEMENT TO MEAN AND INCLUDE ALL SOFTW ARE PRODUCTS 5 ITA NOS. 2423 & 2847/DEL/2010 WHICH ANY PARTY OR ANY AFFILIATE MARKETS OR INTENDS TO MARKET AND UPDATES, ENHANCEMENTS, NEW VERSIONS AND NEW RELEASES THEREOF, OTHER THAN SPECIFICALLY EXCLUDED PRODUCTS , IF ANY, SET FORTH IN EXHIBIT A . FROM THE ABOVE DESCRIPTION OF THE WORK TO BE CARRIED OUT BY THE ASSE SSEE , I T CLEARLY EMERGES THAT THE ASSESSEE IS PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AES AS A CAPTIVE UNIT. WITH THE ABOVE UNDERSTANDING OF THE FUNC TIONAL PROFILE OF THE ASSESSEE COMPANY, LET US EXAMINE IF THE FOUR COMPANIES UNDER CHALLENGE ARE , IN FACT , COMPARABLE. (I) A FTEX I NFOSYS L TD. 7.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES WITH PROFIT RATE OF 86.45%. THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMPANY BY CONTENDING THROUGH ITS LETTER DATED 23.01.2006, A COPY OF WHICH IS AVAILABLE ON PAGES 266 ONWARDS OF THE PAPER BOOK, THAT THIS COMPANY IS A SOFTWARE - DRIVEN AND INTERNET PRODUCT COM PANY THAT PRODUCES PERSONAL DA TA ASSISTANT (PDA) MACHINE FOR PARA - B ANKING AND SMART CARD MACHINES WHICH ARE USED IN PUBLIC TRANSPORTATION. THE ASSESSEE ALSO CONTENDED THAT THIS COMPANY DEALS IN SOFTWARE PRODUCTS HAVING ITS OWN INTELLECTUAL PROPERTY RIGHTS OF THE SOFTWARE PRODUCTS DEVEL OPED BY IT AND HENCE IS NOT COMPARABLE. THE TPO IN A GENERALIZED AND SWEEPING MANNER BRUSHED ASIDE THE ASSESEE S OBJECTIONS GIVEN FOR THIS COMPANY AND OTHERS WITHOUT SEPARATELY DISCUSSING AS TO HOW A PARTICULAR COMPANY WA S NOT IN COMPARABLE AS PER THE ASSESSEE S VERSION. THE LEARNED CIT(A) UPHELD THE ASSESSMENT ORDER. 6 ITA NOS. 2423 & 2847/DEL/2010 7.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE A NNUAL REPORT OF AFTEK INFOSYS LTD., A COPY OF WHICH IS AVAILABLE ON RECORD , THAT THIS COMPANY IS , IN FACT , ENGAGED IN THE SOFTWARE PRODUCTS BY OWNING INTELLECTUAL PROPERTY RIGHTS TO THE SOFTWARE PRODUCTS. APART FROM THAT , IT CAN BE SEEN FROM ITS A NNUAL REPORT THAT IT UNDERTOOK ACQUISITION OF 49% OF STAKE IN AREXERA FOR ITS PR ODUCTS BUSINESS. 7.3. THE MUMBAI BEN CH OF THE TRIBUNAL IN PETRO - AROL DITE (P) LTD VS. DCIT, (2013) 154 TTJ (MUM.) 176 HAS HELD THAT A COMPANY CANNOT BE CONSIDERED AS COMPARABLE BECAUSE OF EXCEPTIONAL FINANCIAL RESULTS DUE TO MERGERS/DEMERGERS ETC. SIMI LAR VIEW HAS BEEN TAKEN BY THE DELHI BENCHES OF THE TRIBUNAL IN SEVERAL CASES INCLUDING TOLUNA INDIA PVT. LTD. VS. ACIT (ITA NO. 564/D/2013). IT IS PATENT THAT THE MERGERS/DEMERGERS LARGELY INFLUENCE THE PROFITABILITY OF A COMPANY DURING THE YEAR OF HAPPENING OF SUCH EVENT, WHICH MAKE S IT INCOMPARABLE. AS THERE HAVE BEEN ACQUISITIONS BY AFTEK INFOSYS LTD. IN THE YEAR IN QUESTION AND THE FINANCIAL RESULTS OF THE ERSTWHILE COMPANY STAND INCLUDED IN THE OVERALL PROFITABILITY OF THIS COMPANY, WE HOLD THA T THE SAME CANNOT BE CONSIDERED AS A COMPARABLE. 7.4. BE THAT AS IT MAY, IT IS SEEN THAT AFTEK INFOSYS LTD. IS NOT ONLY ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES BUT IS ALSO IN THE BUSINESS OF SOFTWARE PRODUCTS BY HOLDING INTELLECTUAL PROPERTY RIGHTS IN SOME SOFTWARE PRODUCTS DEVELOPED BY IT. NO SEGMENTAL DATA OF THE `S OFTWARE DEVELOPMENT SERVICES OF 7 ITA NOS. 2423 & 2847/DEL/2010 THIS COMPANY IS AVAILABLE. THUS, IT CANNOT BE CONSIDERED AS COMPARABLE TO THE ASSESSEE ON AN ENTITY LEVEL BECAUSE THE ASSESSEE IS ENGAGED ONLY IN THE PRO VISION OF CONTRACT SOFTWARE DEVELOPMENT SERVICES. WE, THEREFORE, ORDER FOR THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. (II) B LUE S TAR I NFOTECH L TD. 8.1. THE TPO INCLUDED THIS COMPANY IN THE FINAL SET OF COMPARABLES WITH THE PROFIT RATIO OF 37.27%. THE LEARNED AR WAS FAIR ENOUGH TO CONCEDE BEFORE US ABOUT THE SIMILARITY OF THE FUNCTIONAL PROFILE OF THIS COMPANY WITH THE ASSESSEE. IT WAS, HOWEVER, CLAIMED THAT THE RELATED PARTY TRANSACTIONS OF THIS C OMPANY WERE QUITE SUBSTANTIAL. 8.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE PREDOMINANT VIEW OF THE TRIBUNAL ACROSS THE COUNTRY IN SEVERAL CASES IS THAT THE TRANSACTIONS OF A COMPANY HAVIN G MORE THAN 25% OF RELATED PARTY TRANSACTIONS (RPTS) ARE CONSIDERED AS CONTROLLED , THEREBY FAILING THE TEST OF COMPARAB I L ITY. THIS VIEW HAS BEEN TAKEN IN SEVERAL DECISION S INCLUDING BY THE DELHI BENCH IN TOLUNA INDIA PVT. LTD. (SUPRA) AND ACTIS ADVISERS PVT. LTD. VS. DCIT, (2012) 20 ITR 138 (DEL.)(TRIB.). AND MUMBAI BENCH IN STREAM INTERNATIONAL SERVICES PVT. LTD. VS. ACIT (IT) (2013) 141 ITD 492 (MUM.) . THE MECHANISM FOR CALCULATING THE PERCENTAGE OF RELATED PARTY TRANSACTIONS HAS BEEN BROADLY LAID DOWN IN NOKIA INDIA PRIVATE LTD. VS. DCIT, 2014 - TII - 224 - ITAT - DEL - TP . SINCE THE AUTHORITIES BELOW HAVE NOT EXAMINED 8 ITA NOS. 2423 & 2847/DEL/2010 THE EXTENT OF THE RPT PERCENTAGE OF THIS COMPANY, WHICH THE LEARNED AR IS CLAIMING TO BE IN EXCESS OF 25% , WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE F ILE OF AO/TPO FOR FRESH DETERMINATION OF THE PERCENTAGE OF RELATED PARTY TRANSACTIONS OF THIS COMPANY IN CONSONANCE WITH THE BROADER PRINCIPLES LAID DOWN IN THE CASE OF NOKIA INDIA PRIVATE LTD (SUPRA) , TO THE EXTENT THESE ARE APPLICABLE . IF THE RELATED PARTY TRANSACTIONS OF THIS COMPANY ARE FOUND TO BE MORE THAN 25% , THEN THIS COMPANY SHOULD BE EXCLUDED FROM THE SET O F COMPARABLES AND IN THE OTHERWISE SITUATION , IT SHOULD CONTINUE IN THE LIST OF CO MPARABLES. (III) S ARK S YSTEMS I NDIA L TD . 9.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES WITH PROFIT RATE OF 23.5 1 %. THE ASSESSEE CHALLENGED THE INCLUSION OF THIS COMPANY BEFORE THE TPO AS WELL AS THE LEARNED CIT(A), BUT WITHOUT ANY SUCCESS. 9.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THIS COMPANY IS A S OFTWARE PRODUCTS COMPANY HAVING INTELLECTUAL PROPERTY RIGHTS OF THE SOFTWARE PRODUCTS DEVELOPED BY IT . THIS FACT EMERGES FROM THE A NNUAL REPORT OF THIS COMPANY, A COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK. IT CAN BE OBSERVED FROM PAGE 486 OF THE PAPER BOOK , BEING PAGE NO. 23 OF THE A NNUAL REPORT OF THIS COMPANY , THAT IT IS ENGAGED IN THE BUSINESS OF PRODUCTION AND SALE OF SOFTWARE PRODUCTS. AS THE ASSESSEE IS ENGAGED IN RENDERING CONTRACT SOFTWARE DEVELOPMENT SERVICES, IT CANNOT BE CONSIDERED AS 9 ITA NOS. 2423 & 2847/DEL/2010 COMPARABLE WITH SARK SYSTEMS INDIA LTD. WE, THEREFORE, DIRECT TO ELIMINATE THIS COMPANY FROM THE LIST OF CO MPARABLES. (IV) Z YLOG S YSTEMS L TD . 10.1. THE TPO MADE THIS COMPANY AS A PART OF THE LIST OF COMPARABLES WITH THE PROFIT MARGIN OF 24.93%. THE ASSESSEE IS CONTESTING AGAINST THE INCLUSION OF THIS COMPANY IN THE FINAL SET OF COMPARABLES. 10.2. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD , IT IS NOTICED AS AN ADMITTED POSITION THAT THIS COMPANY IS FUNCTIONALLY COMPARABLE WITH THE ASSESSEE COMPANY. THE LEARNED AR CANDIDLY ACCEPTED THIS POSITION . HE, HOWE VER, URGED TO EXCLUDE THIS COMPANY ON THE BASIS OF FRESH A CQUISITIONS UNDERTAKEN BY IT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. WE FIND FROM ITS A NNUAL REPORT , WHICH IS AVAILABLE IN THE PAPER BOOK, THAT THE BUSINESS A CQUISITIONS OF THREE FIRMS IN USA WERE UNDERTAKEN BY THIS COMPANY GIVING A SUBSTANTIAL BOOST TO ITS OPERATIONS. WHEN WE COME TO THE S CHEDULE OF FIXED ASSETS OF THIS COMPANY , WHICH IS AVAILABLE ON PAGE 5 2 3 OF THE PAPER BOOK, IT CAN BE SEEN THAT THERE IS AN ENTRY WITH THE NARRATION B USINESS ACQUISITIONS , DURING THE YEAR WITH THE VALUE OF RS. 8,47,18,999/ - . T HESE FACTS ABUNDANTLY SHOW THAT THIS COMPANY UNDERTOOK ACQUISITIONS IN THE RELEVANT YEAR MAKING IT INCOMPARABLE IN THE LIGHT OF THE REASONING GIVEN ABOVE WHILE DEALING WITH AFTEK INFOSYS LTD. WE, THEREFORE, ORDER TO DELETE THIS COMPANY FROM THE LIST OF COMPARABLES. 10 ITA NOS. 2423 & 2847/DEL/2010 11. THE FIRST ISSUE TAKEN BY THE LD. DR FROM T HE REVENUE S APPEAL IS AGAINST THE EXCLUSION FROM THE LIST OF COMPARABLES BY THE LD. CIT(A) OF GENESYS INTERNATIONAL CORPORATION LTD. WITH A PROFIT MARGIN OF 45%. THERE IS NOT MUCH DISCUSSION IN THE TPO S ORDER ABOUT THIS COMPANY. SIMILARLY, WE FIND FROM PAGE 16 OF THE IMPUGNED ORDER THAT ALTHOUGH THERE IS SOME REFERENCE TO THE EXCLUSION OF COMPANIES WITH HIGHER PERCENTAGE OF RELATED PARTY TRANSACTIONS , BUT THERE IS NO SPECIFIC DISCUSSION ABOUT GENESYS INTERNATIONAL CORPORATION LTD. OR THE PERCENTAGE OF ITS RPTS. AS SUCH, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR CONSIDERING THE PERCENTAGE OF RELATED PARTY TRANSACTIONS OF THIS COMPANY IN CONSONANCE WITH OUR DECISION ABOVE WHILE CONSIDERING THE CASE OF BLUE STAR INFOTECH LTD. IF THE PERCENTAGE OF THE RPTS OF THIS COMPANY TURNS OUT TO BE MORE THAN 25%, T HEN THIS COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. IN THE OTHERWISE SITUATION , THE TPOS INCLUSION OF THIS COMPANY SHOULD BE UPHELD. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING IN SUCH FRESH PROCEEDINGS. 12 . 1. THE O NLY OTHER ISSUE WHICH SURVIVES IN THE APPEAL OF THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.1,33,96,258/ - MADE BY THE ASSE SSING OFFICER BY DISALLOWING DEDUCTION CLAIMED BY THE ASSESSE E UNDER SECTION 10A OF THE ACT. 11 ITA NOS. 2423 & 2847/DEL/2010 12.2. BRIEFLY STATED THE FACTS APROPOS THIS GROUN D ARE THAT THE ASSESEE CLAIMED DEDUCTION OF RS. 1.33 CRORES UNDER SECTION 10A OF THE ACT. ON BEING CALLED UPON TO EXPLAIN ABOUT THE ELIGIBILITY OF DEDUCTION, THE ASSESSEE STATED THAT IT WAS ENTITLED TO DEDUCTION I N VIEW OF FULFILLMENT OF ALL THE REQUISITE CONDITIONS AS PRESCRIBED UNDER SECTION 10A. THE ASSESSING OFFICER HELD THE ASSESSEE TO BE NOT QUALIFYING FOR DEDUCTION UNDER THIS SECTION BECAUSE THE REGISTRATION WAS GRANTED BY THE SOFTWARE TECHNOLOGY PARK OF IN DIA (STPI) AND NOT THE INTER - MINISTERIAL STANDING COMMITTEE (IMSC) . HE HELD THAT THE IMSC WAS ENTRUSTED WITH THE OBLIGATION TO EXAMINE THE PROPOSALS FOR STP UNITS AND THERE WAS NO PROVISION UNDER WHICH IT COULD DELEGATE THIS POWER TO SOFTWARE TECHNOLOGY P ARK OF INDIA . HE FURTHER HELD THAT STPI SOCIETY HAS MECHANICALLY APPROVED ALL THE UNITS WITHOUT EXAMINING ANYTHING EXCEPT EXPORT COMMITMENTS. FURTHER, THERE WAS NO EVIDENCE THAT PRESS NOTE 5 AND GREEN CARD WERE ISSUED WITH THE CONCURRENCE OF THE D EPARTMEN T OF REVENUE OR THE CBDT. THE LEARNED CIT(A) OVERTURNED THE ASSESSMENT ORDER ON THIS POINT BY RELYING ON THE ORDER DATED 06.06.2008 PASSED BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF ACIT VS. SANJAY BHALLA . 12 . 3. WE HAVE HEARD THE RIVAL SUBMISSIONS A ND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ONLY OBJECTION TAKEN BY THE ASSESSING OFFICER FOR REFUSING DEDUCTION UNDER SECTION 10A IS THAT THE REGISTRATION WAS GRANTED BY THE STPI SOCIETY AND NOT THE INTER - MINISTERIAL STANDING COM MITTEE. WE F IND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT DATED 26.2.2013 OF THE 12 ITA NOS. 2423 & 2847/DEL/2010 HON BLE DELHI HIGH COURT IN CIT VS. TECHNOVATE E SOLUTION PVT. LTD. , A COPY OF WHICH HAS BEEN PLACED ON RECORD BY THE LD. AR. IN THIS JUDGMENT, IT HAS BEEN HELD THAT THE APPROVALS GIVEN BY THE DIRECTORS OF SOFTWARE TECHNOLOGY PARKS OF INDIA ARE VALID HAVING THE AUTHORITY OF THE INTER - MINISTERIAL STANDING COMMITTEE. THIS POSITION WAS FAIRLY ACCEPTED BY THE LD. DR ALSO. IN VIEW OF THE BINDING PRECEDENT OF THE HON BLE J URISDICTIONAL HIGH COURT, THE FACTS OF WHICH ARE ON ALL FOURS WITH THOSE OF THE ASSESSEE COMPANY, WE ARE OF THE CONSIDERED OPINION THAT NO EXCEPTION CAN BE TAKEN TO THE VIEW CANVASSED BY THE LEARNED CIT(A) ON THIS SCOR E . THIS GROUND FAILS. 1 3 . IN THE RESULT, BOTH THE C ROSS A PPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION IS PRONOU NCED IN THE OPEN COURT ON 1 8 T H FEBRUARY, 2015. S D / - S D / - (A.T. VARKEY) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 8 T H FEBRUARY, 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI * *
