Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 6126 (ITAT-BANGALORE)
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
28-09-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
23-09-2020
Assessment Year
2011-2012
Appeal Filed On
18-01-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.39/BANG/2016 ASSESSMENT YEAR : 2011-12 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU VS. M/S APPLIED MATERIALS INDIA PVT. LTD., UNIT-5, 3 RD FLOOR, EXPLORER BUILDING, INTERNATIONAL TECH PARK, WHITEFILED ROAD, BENGALURU-560 066. PAN AAECA 2635 C APPELLANT RESPONDENT IT(TP)A NO.17/BANG/2016 ASSESSMENT YEAR : 2011-12 M/S APPLIED MATERIALS INDIA PVT. LTD., UNIT-5, 3 RD FLOOR, EXPLORER BUILDING, INTERNATIONAL TECH PARK, WHITEFILED ROAD, BENGALURU-560 066. PAN AAECA 2635 C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU APPELLANT RESPONDENT ASSESSEE BY : SHRI PRADEEP KUMAR, CIT REVENUE BY : SHRI T SURYANARAYANA, ADVOCATE DATE OF HEARING : 23-09-2020 DATE OF PRONOUNCEMENT : 28-09-2020 PAGE 2 OF 6 IT(TP)A NO.17 & 39/BANG/2016 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL ARISES OUT OF MP NO.269/BANG/20 17 FILED BY REVENUE IN IT(TP)A NO.39/BANG/2016. 2. ON PERUSAL OF ORDER DATED 26/12/2017 PASSED IN M P, WE NOTE THAT THIS TRIBUNAL RECALLED ITS ORDER DATED 21/09/2016, FOR LIMITED PURPOSES OF ADJUDICATING GR OUND NO.7 IN IT(TP)A NO.39/BANG/2016. THUS, IN ORDER DAT ED 26/12/2017 PASSED IN MP, THIS TRIBUNAL OBSERVED AS UNDER: 04. HAVING HEARD THE PARTIES, AND ORDER PASSED BY T HE TRIBUNAL, IN OUR CONSIDERED OPINION THE TRIBUNAL HAS COMMITTE D MISTAKE APPARENT FROM THE RECORD AS THE TRIBUNAL HAS NOT AD JUDICATED THE GROUND NUMBER 7, THEREFORE WE DEEM IT APPROPRIATE T O RECALL THE DECISION FOR THE LIMITED PURPOSE OF ADJUDICATING GR OUND 7 OF THE REVENUE'S APPEAL. 3. BASED ON ORDER PASSED IN MP NO.269/BANG/2017, REVENUE APPEAL AND ASSESSEE ARE PLACED BEFORE THIS BENCH. WE NOTE THAT NO ISSUES RELATING TO ASSESSEE APPEAL IN IT(TP)A NO.17/BANG/2016 IS A SUBJECT MATTER OF ISSUE IN MP NO.269/BANG/2017. OBSERVATIONS OF THIS TRIBUNAL IN ORIGINAL ORDER DATED 21/09/2016 HAS BEEN ACCEPTED BY BOTH SI DES AND HAS ATTAINED FINALITY. HOWEVER, ASSESSEES AP PEAL HAS BEEN PLACED BEFORE US ALONG WITH REVENUE APPEAL. IN SUCH CIRCUMSTANCES, NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, ASSESSEES APPEAL STANDS ALLOWED AS INDICATED IN ORDER DATED 21/09/2016. PAGE 3 OF 6 IT(TP)A NO.17 & 39/BANG/2016 4. VIDE ORDER 26/12/2017 PASSED IN MP NO.269/BANG/2017, IN REVENUE APPEAL GROUND NO.7 NEE DS TO BE ADJUDICATED THAT, READS AS UNDER: 7. THE DRP ERRED IN DIRECTING TO EXCLUDE E-INFOCHIP S LTD., FROM THE LIST OF COMPARABLES HOLDING THAT NO SEGMENTAL INFOR MATION IS AVAILABLE AND THAT IT FAILS 75% SERVICE REVENUE FIL TER, BY NOT ACKNOWLEDGING THE FACT THAT THE DETERMINATION OF AL P BY CARRYING OUT COMPARABILITY ANALYSIS OF THE COMPARABLE COMPAN IES IS AN ART AND NOT EXACT SCIENCE AS NO TWO COMPANIES ARE EXACT LY SAME AND ALSO THE DRP ERRED IN APPLYING THE SERVICE REVENUE INCOME FILTER BY TAKING 'SOFTWARE SERVICE INCOME' TO TURNOVER RAT IO RATHER THAN 'SERVICE INCOME' TO TURNOVER RATIO. 5. IT HAS BEEN ALLEGED THAT, DRP EXCLUDED E-INFOCHI PS LTD., ON THE GROUND OF HAVING SERVICE INCOME LESS T HAN 75% OF SALES, WHICH IS ALLEGED TO BE CONTRARY TO OBSERV ATIONS OF LD.TPO. 6. LD.CIT DR SUBMITTED IN WRITTEN SUBMISSION THAT LD.TPO WHILE ANALYSING COMPARABLES OBSERVED THAT, T HIS COMPANY HAS REVENUE FROM SOFTWARE DEVELOPMENT UP TO 88%. HE SUBMITTED THAT PER CONTRA, DRP OBSERVED THAT REV ENUE EARNED BY THIS COMPANY IS LESS THAN 75%, AND THEREF ORE CANNOT BE INCLUDED. HE SUBMITTED THAT, BASIS OF DR P TO HOLD REVENUE IS LESS THAN 75% HAS NOT BEEN DEMONSTRATED AND THEREFORE NEEDS TO BE RECONSIDERED. LD.CIT.DR PLACE D RELIANCE ON DECISION OF LD.TPO. 7. LD.AR PLACED RELIANCE ON DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA) WHEREIN, E- INFOCHIPS LTD IS EXCLUDED FOR FAILING IN SERVICE INCOME FILTER. WE HAVE PERUSED S UBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED B EFORE US. PAGE 4 OF 6 IT(TP)A NO.17 & 39/BANG/2016 IT IS OBSERVED, THAT THIS TRIBUNAL IN CASE OF AUTODESK INDIA PVT LTD. VS ACIT (SUPRA) EXCLUDED E- INFOCHIPS LTD., BY FOLLOWING VIEW TAKEN BY THIS TRIBUNAL IN CASE OF COMSCOP NETWORK (INDIA) PVT. LTD. VS ITO IN IT (TP) A/BANG/ 2016 DATED 22/02/17 WHEREIN, THIS COMPANY WAS EXCLUDED FOR REASON THAT, THERE IS NO SEGMENTAL INFORMATION REGARDING D IVERSE FUNCTIONS PERFORMED BY THIS COMPANY AND THAT THERE WAS MAJOR FLUCTUATION IN ITS PROFITS, WHICH INFLUENCED TURNOVER OF THIS COMPANY. WE ALSO NOTE THAT THIS TRIBUNAL IN CASE OF DCIT VS CGI INFORMATION SYSTEMS (SUPRA) HAD ENCOUNTERED IDENTICAL SITUATION FOR YEAR UNDER CONSIDERATION. T HIS TRIBUNAL OBSERVED AS UNDER: 24. AS FAR AS GROUND NO. 4 RAISED BY REVENUE IS CONCER NED, THE SAID GROUND OF APPEAL IS WEAK AND ANY EVENT COMPARABILITY OF CO MPANIES THAT WERE EXCLUDED BY THE DRP WERE ON VALID GROUNDS CONTEMPLA TED BY THE RELEVANT STATUTORY PROVISIONS OF THE ACT AND RULES. AS FAR A S GROUND NO. 5 IN REVENUES APPEAL IS CONCERNED, THE REVENUE SEEKS TO CHALLENGE THE EXCLUSION OF AE INFOTECH LTD. ON THE GROUND THAT IT FAILED DIRECT S OFTWARE SERVICE INCOME FILTER AT 75%. AT THE OUTSET, THE ASSESSEE SUBMITS THAT E INFOTECH LTD WAS EXCLUDED BY THE DRP ON THE GROUND THAT: (I) NO SEGMENTAL INF ORMATION IS REGARDING ITS DIVERSE FUNCTIONS IS AVAILABLE; (II) IT FAILED THE SOFTWARE SERVICE INCOME FILTER AND 75%; (III) THERE WERE MAJOR FLUCTUATIONS IN PRO FIT AND TURNOVER EVERY YEARS WHICH SEEMS TO BE INFLUENCED BY EXTRAORDINARY/PECUL IAR CIRCUMSTANCES; AND (IV) THERE IS A PRESENCE OF INVENTORY (PAGE 10 AND 11 OF THE DRPS DIRECTIONS). THE REVENUE, IN ITS APPEAL HAS CHALLENGED ITS EXCLU SION ONLY ON THE 2 ND GROUND. IN OTHER WORDS, THE REVENUE HAS NOT CHALLEN GED ITS EXCLUSION ON THE OTHER GROUNDS STATED HEREINABOVE AND THUS ITS EXCLU SION ON THESE GROUNDS HAVE ATTAINED FINALITY AND CANNOT BE DISTURBED BY T HIS HONBLE TRIBUNAL. EVEN OTHERWISE, WE ARE OF THE VIEW THAT THE DRP RIG HTLY ARRIVED AT THE FINDING THAT COMPANIES SOFTWARE DEVELOPMENT SERVICE REVENUE FOR FY 2010-11 WAS LESS THAN 75% OF ITS TOTAL OPERATING REVENUE FOR TH E YEAR. THUS THE ABOVE ACTION OF THE DRP IN REJECTING THE ABOVE COMPANIES CORRECT. 8. FROM THE ABOVE, IT IS OBSERVED BY THIS TRIBUNAL CONSISTENTLY IN VARIOUS DECISIONS FOR A.Y: 2011-12 HELD THAT, THIS COMPANY DOES NOT SATISFY SERVICE INCOME FILTER BEING PAGE 5 OF 6 IT(TP)A NO.17 & 39/BANG/2016 75%. WE THEREFORE, DO NOT SEE ANY REASON TO SET AS IDE THIS COMPANY TO LD.TPO. 9. THEREFORE, RESPECTFULLY FOLLOWING VIEW TAKEN BY COORDINATE BENCH OF THIS TRIBUNAL IN DCIT VS M/S CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTATIONS PV T. LTD., (SUPRA) , WE DIRECT LD. TPO TO EXCLUDE THIS COMPANY. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPT, 2020. (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE SEPT, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL. BANGALORE. PAGE 6 OF 6 IT(TP)A NO.17 & 39/BANG/2016 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -09-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -09-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -09-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -09-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -09-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -09-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -09-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS
