DCIT, CHENNAI V. Danfoss Industries P Ltd., CHENNAI

ITA 3332/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7434 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 16-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 09-12-2016
• Court: TRIBUNAL
• Department Lawyers: R DURAIPANDIAN
• Keywords: Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , ! ' ! # . $ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ITA NO.3332/MDS./2016 ASSESSMENT YEAR : 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI - 600 034. V. M/S DANFOSS INDUSTRIES PVT. LTD ., 296, OLD MAHABALIPURAM ROAD, SHOLINGANALLUR, CHENNAI - 600 119. PAN : AABCD 0321 M APPELLANT) RESPONDENT) / APPELLANT BY : SHRI R. DURAI PANDIAN, JCIT /RESPONDENT BY : MR.LALITH KUMAR C.A / DATE OF HEARING : 16.0 3.2017 / DATE OF PRONOUNCEMENT : 22 - 03 - 2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1,CHENNAI DATED 26.09.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO.3332/MDS./16 :- 2 -: 2. THE FIRST ISSUE IN REVENUES APPEAL IS WITH REG ARD TO DELETION OF ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJ USTMENT TO THE TUNE OF ` 41.94 LAKHS. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, THE SIMILAR ISS UE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEE'S OW N CASE IN I.T.A. NOS.1131,1132 & 1582/MDS./2016/ FOR ASSESSMENT YEAR S : 2004-05, 2009-10 & 2010-11 VIDE ORDER DATED 23.02.2017, THE TRIBUNAL HELD AS FOLLOWS:- 13. WE HAVE HEARD THE LD.COUNSEL FOR THE ASSESSEE ALSO. SINCE THE LD.COUNSEL FOR THE ASSESSEE HAS VERY FAIR LY ADMITTED BEFORE THIS TRIBUNAL THAT EXPENDITURE RELATING TO I MPARTING TRAINING AND MARKETING SKILLS TO THE EMPLOYEES OF THE ASSESS EEIS ENDURING BENEFIT SPREAD OVER A PERIOD OF FOUR YEARS, THE CIT (APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. A CCORDINGLY, THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE T RIBUNAL IN ASSESSEE'S OWN CASE, THE GROUND RAISED BY THE REVENUE STANDS A LLOWED. ITA NO.3332/MDS./16 :- 3 -: 4. THE SECOND ISSUE IN REVENUES APPEAL IS THAT LD .CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE SOFTWARE EXPENSES OF 2.93 CRORES AS REVENUE IN NATURE. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. IN OUR OPINION, SAME ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSES OWN CASE IN I .T.A. NOS.1131,1132 & 1582/MDS./2016/ FOR ASSESSMENT YEAR S : 2004-05, 2009-10 & 2010-11 VIDE ORDER DATED 23.02.2017 WHERE IN THE TRIBUNAL HELD AS UNDER:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECO RD. THE ASSESSEE CLAIMS `33,63,810/- TOWARDS SOFTWARE EXPEN SES. IT IS NOT IN DISPUTE THAT MATFLOW SOFTWARE WAS USED BY TH E ASSESSEE-COMPANY TO HANDLE ELECTRONIC ORDERING, MAT ERIALS MANAGEMENT, LOGISTICS, INVENTORY, ACCOUNTS RECEIVAB LES AND PAYABLES, ETC. MATFLOW SOFTWARE, IN FACT, IS ACTIN G AS A PLATFORM TO INTEGRATE INDIVIDUAL SYSTEMS INTO EDI. THE EXPENDITURE WAS FOR THE PURPOSE OF UTILISING THE AP PLICATION SERVICE AND COMPENSATION RECEIVED FROM DANFOSS A/S, DENMARK. THE CIT(APPEALS) BY PLACING HIS RELIANCE ON THE ORD ER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE, FOR THE ASSESS MENT YEARS ITA NO.3332/MDS./16 :- 4 -: 2005-06, 2007-08 AND 2008-09, ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE T RIBUNAL IN ASSESSEE'S OWN CASE, THE GROUND RAISED BY THE REVENUE STANDS D ISMISSED. 6. THE LAST ISSUE IN REVENUES APPEAL IS THAT TE LD.CIT(A) ERRED IN HOLDING THAT THE SUMS ATTRIBUTABLE TO THE DELIVE RY OF GOODS EXPORTED OUTSIDE INDIA WERE BEING EXCLUDED FROM THE EXPORT T URNOVER, THEN THE SAME SHOULD BE EXCLUDED FROM THE TOTAL TURNOVER ALS O, WHILE COMPUTING THE DEDUCTION U/S.10B OF THE ACT. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CIT(A), FOLLOWING THE DECISION OF THE CHENNAI SPECIAL BENCH IN THE CASE OF SAK SOFT LTD., 121 TTJ 865 WHE REIN HELD THAT PARITY NEEDS TO BE MAINTAINED BETWEEN EXPORT TURNO VER AND TOTAL TURNOVER, DIRECTED THE AO TO REDUCE THE EXPENSES WHICH HAVE BEEN EXCLUDED FROM EXPORT TURNOVER, THE SAME TO BE EXCLU DED FROM THE TOTAL TURNOVER ALSO FOR PURPOSE OF COMPUTING DEDUCTION U/ S.10B OF THE ACT. SINCE THE LD.CIT(A) HAS RIGHTLY FOLLOWED THE DECISI ON OF THE DECISION OF ITA NO.3332/MDS./16 :- 5 -: SAK SOFT LTD., CITED SUPRA AND HELD THE ISSUE IN FA VOUR OF THE ASSESSEE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THEREFORE WE HEREBY CONFIRM THE ORDER O F THE LD. LD. CIT (A). THIS GROUND RAISED BY THE REVENUE STANDS REJEC TED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 22 ND MARCH, 2017, AT CHENNAI. SD/ - SD/ - ! . ' #$ % ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER &' / CHENNAI ()* / DATED: 22 ND MARCH, 2017. K S SUNDARAM !)+, ,-./,0/ / COPY TO: , 1 . / APPELLANT 3. ! ,! 1,% / CIT(A) 5. /23 ,--4 / DR 2. / RESPONDENT 4. ! ,! 1 / CIT 6. 3$5,6 / GF