Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 96019 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-09-2015
Appeal Filed By
Assessee
Bench Allotted
D
Next Hearing Date
26-08-2015
Assessment Year
2010-2011
Appeal Filed On
16-02-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , ! ' , # $% BEFORE SHRI N.R.S.GANESAN, JUDICIAL MMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ ITA NO. 363/MDS/2015 / ASSESSMENT YEAR : 2010-11 M/S. SHIPNET SOFTWARE SOLUTIONS INDIA PVT. LTD., NO.2/4, MOUNT TOWERS, MOUNT POONAMALLEE ROAD, MANAPAKKAM, CHENNAI-89. PAN AALCS8600A ( /APPELLANT) VS THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-VI(1), CHENNAI 600 034. ( /RESPONDENT) / APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, CIT / DATE OF HEARING : 26.08.2015 ! / DATE OF PRONOUNCEMENT: 11.09.2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE DRP DATED 24.11.2014. - - ITA 363/15 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. CURSORY, NON-SPEAKING ORDER OF LEARNED DRP 1.1 THE LEARNED DRP GROSSLY ERRED IN PASSING A CURSORY, NON-SPEAKING ORDER MERELY UPHOLDING ORDER OF THE TPO/ AO WITHOUT GOING INTO THE MERITS OR SUBSTANCE OF TH E CASE. 2. ADJUSTMENTS NOT PROVIDED BY LEARNED DRP/TPO 2.1 DEPRECIATION ADJUSTMENT: THE LEARNED DRP /TPO ERRED IN NOT PROVIDING THE ADJUSTMENTS SOUGHT BY AP PELLANT TO THE PLI FOR DEPRECIATION CHARGED IN EXCESS OF SC HEDULE XIV OF COMPANIES ACT 1956. 2.2 UNUTILIZED CAPACITY ADJUSTMENT: THE LEARNED DR P /TPO ERRED IN NOT PROVIDING THE ADJUSTMENTS SOUGHT BY APPELLANT FOR ITS UN-OCCUPIED CAPACITY DURING RELEV ANT FINANCIAL YEAR. 3. RISK ADJUSTMENT NOT PROVIDED BY LEARNED DRP/TPO: 3.1 THE LEARNED DRP ITPO ERRED IN NOT PROVIDING FOR RISK ADJUSTMENT AS SOUGHT BY THE APPELLANT. 4. WORKING CAPITAL ADJUSTMENT NOT GIVEN BY LEARNED DRP/TPO 4.1 THE LEARNED DRP ITPO ERRED IN NOT GIVING ADJUSTMENT TO PLI OF APPLICANT FOR DIFFERENCES IN W ORKING - - ITA 363/15 3 CAPITAL OF COMPARABLE COMPANIES. 5. ERRONEOUS COMPARABILITY ANALYSIS CARRIED OUT BY TPO 5.1 THE LEARNED DRP/TPO GROSSLY ERRED IN REJECTING THE COMPARABILITY ANALYSIS OF THE APPELLANT AND OUG HT TO HAVE ACCEPTED THE COMPARABLES PROVIDED BY THE APPEL LANT. 5.2 THE LEARNED DRP ITPO ERRED IN SELECTING THE FOLLOWING COMPANIES AS COMPARABLES TO THE APPELLANT :- I. TAKSHEEL SOLUTIONS LTD II. FCS SOFTWARE SOLUTIONS LTD III. CTIL LTD IV. ICRA TECHNO ANALYTICS LTD. V. SPRY RESOURCES VI. KALS INFORMATION SYSTEMS 5.3 THE LEARNED DRP ITPO ERRED IN NOT SELECTING THE FOLLOWING COMPANIES AS COMPARABLES OF THE APPELLANT : I. QUINTEGRA SOLUTIONS LTD II. TELEDATA TECHNOLOGY SOLUTIONS LTD III. VJIL CONSULTING LTD IV. SILVERLINE TECHNOLOGIES LTD V. R SYSTEMS INTERNATIONAL LTD VI. AVANI CIMCON TECHNOLOGIES LTD VII. RS SOFTWARE (INDIA) LTD VIII. TECHVISION VENTURES LTD IX. TELEDATA MARINE SOLUTIONS LTD - - ITA 363/15 4 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE TO ITS PARENT CO MPANY AND OTHER AES. DURING THE FINANCIAL YEAR 2009-10, THE ASSESSEES TOTAL TURNOVER IS ` 20.64,96,337/-, WHICH INCLUDES EXPORTED SOFTWARE OF TO ITS AE AT ` 20,25,67,826/-. THE ASSESSEE IN ITS FORM NO.3CEB REPORT ADOPTED THE TAMM AS THE MOST APPROPRIATE METHOD OF DETERMINING THE ALP OF ITS IN TERNATIONAL TRANSACTION. THE ASSESSEE IN ITS REPORT ADOPTED 1 6 COMPARABLES TO JUSTIFY THE ALP OF ITS AE TRANSACTIONS. ON VERI FICATION, THE TPO NOTICED THAT CERTAIN COMPARABLE ARE NOT COMPARABLE WITH THE ASSESSEES CASE, EITHER ON FUNCTIONAL DISSIMILARITI ES/CONTINUOUS LOSSES SUFFERED BY THE SAID COMPARABLES ETC. HENC E, THE TPO REJECTED 10 OUT OF 16 COMPARABLE SELECTED BY THE AS SESSEE. IN ADDITION, THE TPO ALSO SELECTED FIVE MORE COMPARABL ES SIMILAR TO THE ACTIVITIES OF THE ASSESSEE. THUS, THE TPO FINA LLY SELECTED A TOTAL OF 11 COMPAPRABLES, WHOSE ARITHMETIC MEAN OF PLI (OP/OC) IS 24.04%, TO DETERMINE THE ALP OF THE ASSE SSEES TRANSACTIONS WITH AES. ACCORDINGLY, THE TPO DETERM INED THE ALP OF THE ASSESSEES INTERNATIONAL TRANSACTIONS AT - - ITA 363/15 5 ` 22,37,26.360/-, AS AGAINST ` 20,64,95,337/- DECLARED BY THE ASSESSEE AND PROPOSED AN UPWARD ADJUSTMENT OF ` 2,11,58,534/- 4. THE OBJECTIONS OF THE ASSESSEE BEFORE THE DRP AR E BASICALLY THREE FOLD, I.E. A. THAT THE TPO REJECTED SOME OF THE COMPARABLES SE LECTED BY BY THE ASSESSEE B. THAT THE TPO SELECTED SOME NEW COMPARABLES C. THAT THE TPO FAILED TO CONSIDER SOME OF THE CLAI MS AND THE ALLOWANCES CLAIMED BY THE ASSESSEE, LIKE - HIGHER RATES OD DEPRECIATION CLAIMED BY THE ASSES SEE IN ITS P & L ACCOUNT - SERVICE TAXES WRONGLY PAID AND DEBITED IN THE P & L ACCOUNT, WHICH WAS SUBSEQUENTLY REFUNDED, - ALLOWANCES FOR CAPITAL UTILIZATION, WORKING CAPIT AL ALLOWANCE ETC. 4.1 ON APPEAL, THE DRP CONFIRMED THE ORDER OF T HE TPO BY OBSERVING THAT THE TPO IN HIS ORDER HAS CLEARLY EXAMINED EACH OF THE COMPARABLES SELECTED BY THE ASSESSEE, COMPARED WITH THE ASSESSEE'S CASE AND REJECTED SOME OF THE SAID COMPARABLES AFTER ASSIGNING PROPER REASONS. THE DRP FURTHER OBSERVED THAT THE TPO ALSO SELECTED FIVE NEW COMPARABLES BY ASSIGNING THE - - ITA 363/15 6 REASONS WHILE SELECTING THEM, THUS THE ISSUE OF REJECTING SOME OF THE ASSESSEE'S COMPARABL ES AND/OR SELECTION OF FIVE NEW COMPARABLES BY THE TPO WAS WITH EXHAUSTIVE ANALYSIS AND PROPER REASONING, ACCORDINGLY, THE TPO FINALLY SELECTED 11 COMPARABLE S AND DETERMINED ARITHMETIC MEAN AT RS.24.04%. THE ACTION OF THE TPO IN THIS REGARD IS JUSTIFIED. THER EFORE, THE DRP CONFIRMED THE ACTION OF THE ASSESSING OFFIC ER, AS FAR AS THE SELECTION OF 11 COMPARABLES AND DETERMINATION OF THE ARITHMETIC MEAN AT RS.24.04%. 4.2. THE OTHER OBJECTIONS BEFORE THE DRP WERE RELATING TO THE HIGHER RATES OF DEPRECIATION AND THE ASSESSEE IN ITS P&L ACCOUNT, SERVICE TAXES WRONGLY PAID AND DEBITED IN THE P & L ACCOUNT (WHICH WAS SUBSEQUENTLY REFUNDED), ALLOWANCES FOR CAPITAL UTILIZATION, WORKING CAPITAL ALLOWANCE ETC. EVEN TH ESE ISSUES WERE EXAMINED BY THE TPO IN HIS ORDER. ACCORDING TO THE DRP, THE TPO IN HIS ORDER HAS OBSERVED THAT EVEN SOME OF THE COMPARABLES HAVE - - ITA 363/15 7 CLAIMED HIGHER RATES OF DEPRECATION IN THE P&L ACCOUNTS, AS PER THE COMPANIES ACT. AFTER NOTICING THESE FACTS, THE TPO REJECTED THE ASSESSEE'S CLAIM OF 'HIGHER RATES OF DEPRECIATION DEBITED BY THE ASSESS EE IN ITS P&L ACCOUNT'. THE DRP ALSO OBSERVED THAT EV EN THE ISSUES OF DEBITING THE SERVICE CHARGES, CAPITAL UTILIZATION, WORKING CAPITAL ALLOWANCE ETC HAVE ALS O BEEN EXAMINED IN DETAIL BY THE TPO IN HIS ORDER AND REJECTED THE SAME. ACCORDING TO THE DRP, THE TPO DEALT WITH THESE ISSUES EXHAUSTIVELY IN HIS ORDER A ND THEREFORE, CONFIRMED THE ACTION OF THE ASSESSING OFFICER, IN THIS REGARD. 4.3. AFTER CONSIDERING THE DISCUSSIONS MADE IN T HE TPOS ORDER, THE DRP CONFIRMED THE ACTION OF THE TP O IN DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS AT ` 22,37,26,360/-, AS AGAINST `2 0,64,96,337/- DECLARED BY THE ASSESSEE, AND ITS PROPOSED UPWARD ADJUSTMENT OF ` 2,11,58,534/-. AGAINST THIS, THE ASSESSEE FILED APPEAL BEFORE US. - - ITA 363/15 8 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PRIMARY OBJECTION OF THE L D. AR IS THAT THE ORDER OF THE DRP IS NOT IN CONSONANC E WITH THE PROVISIONS OF SEC.144C OF THE ACT. WE HAV E GONE THROUGH THE PROVISIONS OF SEC.144C, WHICH READ S AS UNDER: (5) THE DRP SHALL, IN CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB-S.(2), ISSUE SUCH DIRECTIONS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE AO TO ENABLE HI M TO COMPLETE THE ASSESSMENT. (6) THE DRP SHALL ISSUE THE DIRECTIONS REFERRED TO IN SUB-S. (5), AFTER CONSIDERING THE FOLLOWING, NAMELY - (A) DRAFT ORDER; (B) OBJECTIONS FILED BY THE ASSESSEE; (C) EVIDENCE FURNISHED BY THE ASSESSEE; (D) REPORT, IF ANY, OF THE AO, VALUATION OFFICER OR TPO OR ANY OTHER AUTHORITY; (E) RECORDS RELATING TO THE DRAFT ORDER; (F) EVIDENCE COLLECTED BY, OR CAUSED TO BE COLLECTE D BY, IT; AND (G) RESULT OF ANY ENQUIRY MADE BY, OR CAUSED TO BE MADE BY, IT. (7) THE DRP MAY, BEFORE ISSUING ANY DIRECTIONS REFERRED TO IN SUB-S. (5),- (A) MAKE SUCH FURTHER ENQUIRY, AS IT THINKS FIT; OR - - ITA 363/15 9 (B) CAUSE ANY FURTHER ENQUIRY TO BE MADE BY ANY IT AUTHORITY AND REPORT THE RESULT OF THE SAME TO IT. (8) THE DRP MAY CONFIRM, REDUCE OR ENHANCE THE VARIATIONS PROPOSED IN THE DRAFT ORDER SO, HOWEVER, THAT IT SHALL NOT SET ASIDE ANY PROPOSED VARIATION OR ISSUE ANY DIRECTION UNDER SUB-S.(5) FOR FURTHER ENQ UIRY AND PASSING OF THE ASSESSMENT ORDER. (9) IF THE MEMBERS OF THE DRP DIFFER IN OPINION ON ANY POINT, THE POINT SHALL BE DECIDED ACCORDING TO THE OPINION OF THE MAJORITY OF THE MEMBERS. (10) EVERY DIRECTION ISSUED BY THE DRP SHALL BE BINDING ON THE AO. (11) NO DIRECTION UNDER SUB-S. (5) SHALL BE ISSUED UNLESS AN OPPORTUNITY OF BEING HEARD IS GIVEN TO TH E ASSESSEE AND THE AO ON SUCH DIRECTIONS WHICH ARE PREJUDICIAL TO THE INTEREST OF THE ASSESSEE OR THE INTEREST OF THE REVENUE, RESPECTIVELY. (12) NO DIRECTION UNDER SUB-S. (5) SHALL BE ISSUED AFTER NINE MONTHS FROM THE END OF THE RNONTH IN WHI CH THE DRAFT ORDER IS FORWARDED TO THE ELIGIBLE ASSESS EE. (13) UPON RECEIPT OF THE DIRECTIONS ISSUED UNDER SU B- S. (5), THE AO SHALL, IN CONFORMITY WITH THE DIRECT IONS, COMPLETE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN S. 153, THE ASSESSMENT WITHOUT PROVIDING ANY FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WITHIN ONE MONTH FROM THE END OF THE MONTH IN WHICH SUCH DIRECTION IS RECEIVED.' 6. WE FIND THAT THE DRP IN THIS CASE, AGAINST THE ABOVE PROVISIONS OF THE ACT, PASSED A VERY NON-SPEAKING O RDER, THOUGH THE ASSESSEES COUNSEL MADE A VOLUMINOUS SUBMISSION S BEFORE - - ITA 363/15 10 THE DRP AGAINST THE ASSESSMENT ORDER DATED 18.12.20 14. IT IS ACCEPTED BY THE DRP THAT IT HAS TO BE CONSIDERED EV ERY POINT OF DISPUTE AND PASSE A SPEAKING ORDER. CONTRARY TO TH IS, THE ORDER PASSED BY THE DRP VERY CRITIC AND THERE IS NO ADDRE SSING ANY ISSUED RAISED BY THE ASSESSEE AND IT WAS NOT PROPER LY ADJUDICATED. BEING OF, WE ARE NOT IN A POSITION TO UPHOLD THE ORDER OF THE DRP AS IT IS NOT CONSISTENT WITH THE P ROVISIONS OF SEC.194 C OF THE ACT. WE FIND THAT THE SUPREME CO URT IN THE CASE OF SAHARA INDIA VS. CIT & ANR. (300 ITR 403) H AS HELD THAT EVEN AN ADMINISTRATIVE ORDER HAS TO BE CONSISTENT WITH THE RULES OF NATURAL JUSTICE. THE SAME VIEW HAS BEEN TAKEN BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GAP INTERNATI ONAL SOURCING INDIA (P) LTD. VS. DCIT (8 ITR 0177). FURTHER, IN THE CASE OF M/S. ADOBE SYSTEMS INDIA PRIVATE LTD. V. ADDL. CIT IN IT A NO.5043/DEL/2010 DATED 21.01.2011, THE DELHI BENCH OF THE TRIBUNAL HELD THAT WHEN THE DRP PASSED THE ORDER IN CURSORY AND LACONIC ORDER WITHOUT GOING INTO THE DETAILS OF THE SUBMISSIONS, IT SHOULD BE DECIDED AFRESH. CONSIDERING ALL THESE FA CTS AND CIRCUMSTANCES, WE ARE INCLINED TO THE REMIT THE ISS UES BACK TO THE DRP TO PASS A SPEAKING ORDER ON THE DISPUTED ISSUES . SINCE, WE - - ITA 363/15 11 HAVE ADJUDICATED THE PRIMARY GROUND, WE REFRAIN FRO M GOING TO OTHER ISSUES RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 11 TH OF SEPT., 2015 AT CHENNAI. SD/- SD/- ( ' . . ' . #$ ) ( % & ' ( ) ) N.R.S.GANESAN * )+,-./0-1223-04* 5 67 /JUDICIAL MEMBER 6789::2;.<-.<=>?@>0 %5 /CHENNAI, A6 /DATED, THE 11 TH SEPT., 2015. MPO* 6$ BCDC /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. E)* /CIT(A) 4. E /CIT 5. CF# G /DR 6. #HI /GF.
