Gameloft Software Private Limited, Hyderabad V. Income Tax Officer, Ward-2(2), Hyderabad

ITA 432/Hyd/2018

AI Insights

The case involves Gameloft Software Private Limited, which appealed against the final assessment order passed by the Income Tax Officer, Ward-2(2), Hyderabad, for the Assessment Year 2013-14. The primary contention was the non-compliance of the Assessing Officer with the directions issued by the Dispute Resolution Panel (DRP). The Tribunal noted that the Assessing Officer did not adhere to the DRP's directions regarding the Arm's Length Price (ALP) determination for certain payments, which led to the appeal. The Tribunal referenced several precedents and emphasized that the proper course of action for non-compliance with the DRP's directions is to remand the matter back to the Assessing Officer to comply with these directions, rather than quashing the entire assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133110 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 18-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2018
• Other Referred Cases: Yokogawa India Ltd. Vs ACIT, Apollo Health Street Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Set aside
• Section: 92C; 143(3)

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 432/Hyd/2018 (निर्धारण वर्ा / Assessment Year: 2013-14) Gameloft Software Private Limited, Delhi [PAN No. AACCG4168L] Vs. Income Tax Officer, Ward-2(2), Hyderabad अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध / Assessee by: Shri Ajit Jain, AR रधजस्‍व द्वधरध / Revenue by: Shri Rajendra Kumar, CIT-DR सुिवधई की तधरीख/Date of hearing: 19/12/2022 घोर्णध की तधरीख/Pronouncement on: 09/01/2023 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 31/10/2017, passed by the learned Income Tax Officer, Ward-2(2), Hyderabad (“learned Assessing Officer”) in the case of M/s. Gameloft Software Pvt. Limited (“the assessee”) for the AY.2013-14, under section 143(3) read with section 92CA(3) read with section 144C(13) of the Income Tax Act, 1961 (for short “the Act”), consequent to the directions of Hon'ble Dispute Resolution Panel, Bengaluru (“learned DRP”), assessee filed this appeal. ITA No. 432/Hyd/2018 Page 2 of 6 2. At the outset, learned AR submitted that though the assessee preferred this appeal on various grounds, by way of additional grounds filed on 26/09/2022 the main plank of argument of the assessee is in respect of the legality or otherwise of the final assessment order dated 31/10/2017. According to him, such an order was passed without complying with the directions of the learned DRP issued on 12/09/2017 in violation of the mandate of Section 144C(13) of the Act, and, therefore, the same deserves to be quashed and the entire addition is liable to be deleted. He brought to our notice that though the learned Assessing Officer in his final assessment order referred to the directions of the learned DRP passed on 12/09/2017 wherein the DRP directed the learned Assessing Officer to consider the assessee’s claim regarding payments towards compensation and research and development, but in the very same paragraph, in utter disregard to such a direction of the learned DRP, he determined the Arm’s Length Price (‘ALP’) under section 92C of the Act at Rs. 4,26,44,633/- which was the same as determined in the draft assessment order dated 26/12/2016 but was modified by the directions of the learned DRP. 3. Learned AR placed reliance on the decisions of the Co- ordinate Bench of the Bangalore Tribunal in the cases of M/s. Flextronics Technologies (India) Private Limited (IT(TP)A No. 832/Bang/2017, M/s. Software Paradigms Infotech Private Limited (IT(TP)A No. 150/Bang/2014), M/s. Lenovo India Private Limited (IT TP(A) Nos. 580 & 581/Bang/2015, M/s. Espn Star Sports Mauritius S.N.C. ET Companies (W.P(C) 2384/2015 & CM No. 4277/2015), M/s. July Systems & Technologies Pvt. Ltd., (IT(TP)A No. 368/Bang/2016), Xchanging Solutions Limited (IT(TP)A No. 2664/Bang/2017, Trivium eSolutions Pvt. Ltd., (IT(TP)A No. 444/Bang/2022) and M/s. Olympus Medical Systems Pvt. Ltd., (ITA ITA No. 432/Hyd/2018 Page 3 of 6 No. 873/Del/2021) and submitted that because of this violation of the mandatory requirement under law, the final assessment order has to be quashed and the addition has to be deleted. 4. Per contra, learned DR submitted that it is not settled that for passing the final assessment order in non-compliance with the directions of the learned DRP, the assessment order goes and the addition has to be deleted. He submitted that the Bangalore Bench of the Tribunal in the case of Yokogawa India Ltd. Vs ACIT in ITA(TP)A No. 1715 & 692/Bang/2016 had considered the decisions of Co-ordinate Benches rendered in - M/s. Flextronics Technologies (India) Pvt. Ltd. (supra), M/s. Software Paradigms Infotech Pvt. Ltd. (supra), M/s. Lenovo India Pvt. Ltd. (supra), M/s. Espn Star Sports Mauritius S.N C E T Companies in WP.(C) 2384/2015 &CM No.4277/2015 (supra), M/s. July Systems & Technologies Pvt. Ltd. (supra), and particularly in the case of M/s. Xchange Solutions Pvt. Ltd., (supra) and Flextronics Technologies (India) Private Limited (supra) – and took a different view. He further brought to our notice that the Hyderabad Bench of the Tribunal has taken similar view as could be seen from M/s. Apollo Health Street Vs. DCIT in 45 Taxmann.com 507 by order dt.17/04/2014 and as on the date no contrary view has been taken on this aspect. 5. We have gone through the record in the light of the submissions made on either side. It is evident from the final assessment order itself that despite the directions issued by the learned DRP, learned Assessing Officer though referred to the directions of the learned DRP in the final assessment order, determined the ALP of the payment towards compensation and Research and Development at the very same amount as he determined in the draft assessment order itself. This goes without ITA No. 432/Hyd/2018 Page 4 of 6 saying that the learned Assessing Officer did not give due regard to the directions of the learned DRP. 6. Now the question that arises is whether the order of the learned Assessing Officer has to be quashed in toto resulting in the deletion of the entire addition. On this aspect, we are of the considered opinion that under section 144C(13) of the Act, the learned Assessing Officer is expected to give effect to the directions of the learned DRP. If the learned Assessing Officer did not comply with the directions of the learned DRP, whatsoever may be the reason, may be oversight or due to lack of or improper understanding of the directions, the proper course is to seek the learned Assessing Officer or the superior authorities, the compliance with the order of the learned DRP, but not to quash the entire proceedings thereby nullifying the entire exercise conducted by the learned DRP. What is applicable for non-compliance with the directions of the Tribunal, if any by the learned Assessing Officer would equally be made applicable to the directions of the learned DRP. 7. With this view of the matter, we are inclined to follow the decision of the Bangalore Bench of the Tribunal in the case of Yokogawa India Ltd., (supra). In this decision, the decisions relied upon by the learned AR are considered by the Co-ordinate Bench of the Tribunal preferred to set aside the impugned orders only to restore the issue to the file of the learned Assessing Officer to pass a fresh and appropriate assessment order in accordance with law having regard to the directions of the learned DRP. Same was the view taken by the Hyderabad Bench of the Tribunal in the case of M/s. Apollo Health Street (supra). ITA No. 432/Hyd/2018 Page 5 of 6 8. It is, therefore, clear that the issue is now squarely covered and the consistent view in Yokogawa India Ltd., (supra), and M/s. Apollo Health Street (supra) is that the matter needs to be remanded to the file of the learned Assessing Officer in case there is non-compliance with the directions of learned DRP. We, therefore, find it difficult to direct the learned Assessing Officer to delete the impugned addition. Instead, while respectfully following the view taken in Yokogawa India Ltd., (supra), and M/s. Apollo Health Street (supra), we set aside the final assessment order and remand the issue to the file of learned Assessing Officer/learned TPO to pass appropriate order in accordance with law having regard to the directions of the learned DRP. Learned Assessing Officer/learned TPO will afford proper opportunity to the assessee in this regard and the assessee is directed to put forth all their contentions before the learned Assessing Officer/learned TPO. Grounds are, therefore, treated as allowed for statistical purpose. 8. In the result, appeal is treated as allowed for statistical purpose. Order pronounced in the open court on this the 9 th day of January, 2023. Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 09/01/2023 TNMM ITA No. 432/Hyd/2018 Page 6 of 6 Copy forwarded to: 1. Gameloft Software Private Limited, Unit No. 706, 7 th Floor, DLF South Court Saket, Delhi. 2. Income Tax Officer, Ward-2(2), Hyderabad. 3. The Dispute Resolution Panel (DRP), Bengaluru. 4. The Director of Income Tax (IT & TP), Hyderabad. 5. The Addl. Commissioner of Income Tax (Transfer Pricing), Hyderabad. 6. DR, ITAT, Hyderabad. 7. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD