Gameloft Software Private Limited, Hyderabad, Hyderabad V. DCIT, Circle-2(2), Hyderabad, Hyderabad

ITA 443/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2407 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-04-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 08-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SRINIVAS
• Assessee Lawyers: RAGHUNATHAN S
• Keywords: Transfer pricing; International transaction; Period of limitation; Condonation of delay
• Section: 234B; 133(6); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 443/HYD/2017 ASSESSMENT YEAR: 2012-13 GAMELOFT SOFTWARE PRIVATE LIMITED, HYDERABAD [PAN: AACCG4168L] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAGHUNATHAN, S. AR FOR REVENUE : SHRI D. SRINIVAS, CIT-DR DATE OF HEARING : 26-10-2017 DATE OF PRONOUNCEMENT : 10-11-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE ON THE ORDER U/S. 143( 3) R.W.S. 92CA(4) R.W.S. 144C(5) OF THE INCOME TAX ACT [ACT] C ONSEQUENT TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL [DRP]. A SSESSEE HAS RAISED AS MANY AS TEN GROUNDS RUNNING TO EIGHT PAGES WHICH INCLUDED DETAILED SUBMISSIONS ALSO. 2. GROUND NOS. 1 & 2 ARE ON THE ISSUE THAT THE DRP HAS REJECTED THE OBJECTIONS RAISED BY ASSESSEE BELATEDLY AND ACCORDINGLY, THE ORDER PASSED BY THE ASSESSING OFFICE R (AO) IS TIME BARRED. FURTHER, THE DRP HAS NOT GIVEN ANY DIRECTIONS IN VIEW OF NON-ADMISSION OF OBJECTIONS AND THEREFORE, THE FINAL O RDER IS VOID I.T.A. NO. 443/HYD/2017 :- 2 - : AB-INITIO AND NOT SUSTAINABLE. IN ADDITION TO THE ISSUE OF LEGAL GROUNDS, ASSESSEE HAS RAISED VARIOUS GROUNDS ON THE TRANSFER PRICING (TP) ADJUSTMENTS MADE PARTICULARLY ABOUT FUNCT IONALITY, SELECTION OF COMPARABLE COMPANIES, WORKING CAPITAL AD JUSTMENT, VARIOUS FILTERS ADOPTED, PROVISIONS DISALLOWED AND AL SO RISK ADJUSTMENTS. GROUND NO. 10 PERTAIN TO CHARGING OF IN TEREST U/S. 234B & 234C OF THE ACT. 3. AT THE OUTSET, IT WAS SUBMITTED THAT THE DRP HAS NOT CONDONED THE DELAY IN FILING THE OBJECTIONS PETITION AS IT WAS FILED BELATEDLY AND CONSEQUENTLY, THE ORDER PASSED BY THE AO , WHEREIN THE DRP HAS NOT GIVEN ANY DIRECTIONS FOR COMPLETION OF ASSESSMENT IN A PARTICULAR MANNER IS NOT CORRECT. 4. INITIALLY, LD. COUNSEL RELIED ON THE CO-ORDINATE B ENCH DECISION IN THE CASE OF M/S. PLANET ONLINE PRIVATE LI MITED VS. ACIT IN ITA NO. 519/HYD/2015 DT. 04-09-2015 [65 TAXMANN.CO M 46 (HYDERABAD-TRIB)]. HOWEVER, IT HAS BEEN BROUGHT TO T HE NOTICE OF THE BENCH THAT ASSESSEE HAS FILED A LETTER WITH THE AO THA T HE HAS FILED OBJECTIONS BEFORE THE DRP ON 05-04-2016 I.E., W ITHIN THE PERIOD BY WHICH FINAL ASSESSMENT ORDER WAS TO BE PAS SED. THEREFORE, THE DECISION RELIED UPON IS NOT DIRECTLY AP PLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, THE CASE WAS RE-FIXED FOR FRESH HEARING AND CASE WAS HEARD IN DETAIL. 4.1. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE, GAMELO FT SOFTWARE PRIVATE LIMITED (HEREINAFTER REFERRED TO AS ' GAMELOFT INDIA') IS A PRIVATE LIMITED COMPANY INCORPORATED UNDER COMPAN IES ACT, 1956. IT IS A SUBSIDIARY OF GAMELOFT S.A, FRANCE ('AE '). ASSESSEE- I.T.A. NO. 443/HYD/2017 :- 3 - : COMPANY IS ENGAGED IN PROVISION OF GAMING SOFTWARE DEVELOPMENT TO ITS AE. IT IS ALSO A DISTRIBUTOR OF THE DIGITAL SOFTWAR E GAMES DEVELOPED BY ITS PARENT, GAMELOFT SA. IT OPERATES FR OM TWO UNITS I.E. HYDERABAD UNIT AND NOIDA UNIT. THE HYDERABAD UNI T IS ENGAGED IN THE DEVELOPMENT OF SOFTWARE FOR GAMES AND THE NOIDA UNIT IS ENGAGED IN DISTRIBUTION OF SOFTWARE TO DOMESTIC USERS. THE INTERNATIONAL TRANSACTIONS OF ASSESSEE-COMPANY WITH AE S (ASSOCIATED ENTERPRISE) DURING THE YEAR ARE AS UNDER: I) DEVELOPMENT OF SOFTWARE FOR GAMES - RS. 14,18,76, 944/-: UNDER THIS SEGMENT, ASSESSEE-COMPANY RECEIVES ITS COMP ENSATION FOR PROVIDING SOFTWARE DEVELOPMENT SERVICES ON A COS T-PLUS BASIS WITHOUT REGARD TO THE SUCCESS OR FAILURE OF THE ACTIVITIE S. GAMELOFT INDIA HAD ENTERED INTO A SERVICE AGREEMENT WITH ITS A E PURSUANT TO WHICH IT PROVIDED SOFTWARE DEVELOPMENT SERVICES AT CO ST PLUS MARK- UP. II) DISTRIBUTION OF SOFTWARE IN DOMESTIC MARKET - RS. 2 ,76,24,525/-: ASSESSEE-COMPANY DISTRIBUTES SOFTWARE GAMES DEVELOPED BY ITS AE TO DOMESTIC UNRELATED THIRD PARTIES. IN THIS REGARD, AS SESSEE REMITS ROYALTY TO ITS AE BASED ON A REVENUE SHARING AGREEMEN T BETWEEN THE PARTIES. AS PER THE INTERCOMPANY SOFTWARE LICENSING AGREEMENT BETWEEN THE AE AND ASSESSEE, THE HOLDING COMPANY HAS GRANTED THE INDIAN SUBSIDIARY RIGHT TO DISTRIBUTE AND MARKET THE GAMES PUBLISHED BY THE PARENT COMPANY. 4.2. FOR THE AY 2012-13, ASSESSEE FILED ITS RETURN O F INCOME ON 30 TH NOVEMBER 2012 DISCLOSING A TOTAL INCOME OF RS. 81,07,129/- UNDER THE NORMAL PROVISIONS OF THE ACT. T HE AO HAD SELECTED THE CASE FOR SCRUTINY ASSESSMENT U/S 143(2) O F THE ACT, I.T.A. NO. 443/HYD/2017 :- 4 - : AND FURTHER MADE A REFERENCE U/S 92CA(1) OF THE ACT TO THE TPO (TRANSFER PRICING OFFICER) FOR DETERMINATION OF ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE- COMPANY WITH AE. THE TPO REJECTED THE TP DOCUMENTATION MAINTAIN ED BY THE ASSESSEE. TPO AGGREGATED THE SOFTWARE DEVELOPMENT AND SOFTWARE DISTRIBUTION SEGMENT AND DETERMINED THE ALP F OR PROVISION OF SOFTWARE DEVELOPMENT SERVICES AT 19.17% AFTER A WORKING CAPITAL ADJUSTMENT OF 0.88% AND CHARGED A NOTIO NAL INTEREST ON RECEIVABLES AT 14.75%. ACCORDINGLY, THE T PO MADE A TP ADJUSTMENT OF RS. 3,17,55,047/-. 4.3. THE AO COMPLETED THE DRAFT ASSESSMENT ORDER ON 1 9 TH FEBRUARY, 2016 AND THE ASSESSEE WAS SUPPOSED TO FILE THE OBJECTIONS WITHIN THIRTY DAYS I.E., ON OR BEFORE 23-03 -2016. IT SEEMS THAT ASSESSEE HAS COURIERED THE OBJECTIONS IN FO RM 35A TO AN ADDRESS IN NRUPATUNGA ROAD ON 05-04-2016 ALONG WI TH A LETTER DT. 30-03-2016 SEEKING CONDONATION OF DELAY OF THIRTEE N DAYS IN FILING THE OBJECTIONS BEFORE THE DRP. HOWEVER, THE SAM E WAS RETURNED AS IT WAS FOUND THAT IT WAS AN INVALID ADDRESS AND IT WAS STATED TO HAVE BEEN RESENT TO HMT BHAVAN, BELLARY ROAD ON 19 TH APRIL 2016 AND THE DOCUMENTS REMAINED UN-DELIVERED AN D FINALLY THE GROUNDS OF OBJECTIONS WERE FILED BEFORE THE DRP ON 2 ND MAY, 2016. ASSESSEE HAS PLEADED FOR CONDONATION OF THE OR IGINAL THIRTEEN DAYS DELAY AS WELL AS FURTHER DELAY DUE TO POSTAL REJE CTION OF THE COURIERED LETTER. THE DRP, HOWEVER, DID NOT CONDONE THE DELAY AND REJECTED THE OBJECTIONS FILED BY ASSESSEE VIDE ITS DI RECTIONS DT. 8 TH NOVEMBER 2016. THE AO PASSED FINAL ASSESSMENT ORDER DT. 30-12- 2016 AND DETERMINED THE TOTAL ADJUSTMENT AT RS. 3,17,55, 047/-. I.T.A. NO. 443/HYD/2017 :- 5 - : 5. AS STATED EARLIER IN GROUND NOS. 1 & 2, ASSESSEE IS CONTESTING THAT THE FINAL ORDER IS VOID AB-INITIO AND UN-SUSTAINABLE. LD. COUNSEL SUBMITTED THAT THE FINAL ORDER PASSED BY THE AO IS BAD IN LAW AS THE AO SHOULD HAVE COMPLETED THE FINAL ORD ER WITHIN THIRTY DAYS OF THE DUE DATE FOR FILING THE OBJECTIONS W AS OVER. HE HAS FILED A COMPARABLE CHART STATING THAT ASSESSEES CAS E IS EXACTLY SIMILAR TO THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S. PLANET ONLINE PRIVATE LIMITED VS. ACIT (SUPRA). HOWEVER, HE FAIRLY ADMITTED THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF M/S. INNO ESTATES PRIVATE LIMITED VS. DRP IN W.P. NO.1787/2 017 DT.14- 06-2017, HOWEVER, GAVE A JUDGMENT AGAINST THE ASSESSEE AND IN FAVOUR OF REVENUE ON SIMILAR FACTS. 6. LD.DR, HOWEVER, IN REPLY SUBMITTED THAT ASSESSEE HA S FILED A LETTER WITH THE AO THAT HE HAS FILED OBJECTIONS I N TIME AND THEREFORE, AO WAS MADE TO BELIEVE THAT ASSESSEES OBJEC TIONS ARE VALID. AO COULD NOT HAVE COMPLETED THE FINAL ORDER O NCE IT WAS INTIMATED TO HIM THAT OBJECTIONS WERE FILED. EVEN THOUG H THE DRP ULTIMATELY REJECTED THE OBJECTIONS ON THE ISSUE OF DEL AY, IT WAS HIS SUBMISSION THAT ORDER PASSED BY THE AO IS WELL WITHIN THE TIME LIMIT AS PRESCRIBED IN THE ACT. 7. WE HAVE CONSIDERED THIS ISSUE IN THE LIGHT OF THE SUBMISSIONS AND FACTS AS PLACED ON RECORD. IT IS TRUE THAT IN THE CASE OF M/S. PLANET ONLINE PRIVATE LIMITED VS. ACIT (SUPRA), THE CO-ORDINATE BENCH HAD STATED THAT THE FINAL ORDER PASSED BY THE AO WAS BARRED BY LIMITATION. HOWEVER, THE FACTS OF THA T CASE WERE THAT ASSESSEE HAD NOT FILED THE OBJECTIONS FOR A PERIOD OF NINE MONTHS WHICH WAS BEYOND THE STATUTORY LIMIT PROVIDED AN D ALSO THE I.T.A. NO. 443/HYD/2017 :- 6 - : TIME LIMITS FOR COMPLETION OF FINAL ORDER BY AO, IF NO OBJECTIONS WERE FILED AGAINST THE DRAFT ORDER. ON THOSE FACTS, SINCE TH E OBJECTIONS FILED BY ASSESSEE WERE REJECTED BY THE DRP, THE BENCH WAS OF THE OPINION THAT AO SHOULD HAVE PASSED THE ORDER WITHIN FU RTHER PERIOD AS PROVIDED, AS IF NO OBJECTIONS WERE RECEIVED. HOWE VER, IN THE PRESENT CASE, ASSESSEE NOT ONLY INTIMATED THE AO THAT I T HAS FILED OBJECTIONS BUT ALSO FILED THE OBJECTIONS WITH A CONDONA TION PETITION WITHIN THE TIME LIMIT PROVIDED TO THE AO, FOR COMPLETION OF FINAL ORDER AFTER THE EXPIRY OF THIRTY DAYS PERIOD. IN VIE W OF THAT, WE ARE OF THE OPINION THAT THE FACTS ARE DIFFERENT FROM THE FACTS IN THE CASE OF M/S. PLANET ONLINE PRIVATE LIMITED VS. ACIT (SUPRA). 7.1. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF M/ S. INNO ESTATES PRIVATE LIMITED (SUPRA) HAS CONSIDERED S IMILAR FACTS AS THAT OF ASSESSEE AND UPHELD THE FINAL ORDER PASSED BY THE AO. THE JUDGEMENT OF THE HON'BLE COURT IS AS UNDER: 9. IT IS NOT IN DISPUTE THAT THE PETITIONER HAS F ILED THEIR OBJECTION BEFORE THE 1ST RESPONDENT ONLY ON 29.04.2016 BY SPE CIFICALLY INDICATING AS THOUGH THE DRAFT ORDER OF ASSESSMENT WAS SERVED ON THEM ONLY ON 31.03.2016. THUS, IT IS EVIDENT THAT THE PETITIONER MADE THE 1ST RESPONDENT TO BELIEVE THAT THE OBJECTIONS WERE FILED IN TIME. HOWEVER, WHEN IT WAS POINTED OUT BY THE 2ND RESPONDENT TO THE 1ST RESPON DENT, THROUGH COMMUNICATION DATED 25.07.2016, THAT THE DRAFT ASSE SSMENT ORDER WAS SERVED ON THE ASSESSEE ON 29.03.2016 ITSELF, THE PE TITIONER FILED AN AFFIDAVIT BEFORE THE 1ST RESPONDENT ON 07.11.2016 R EITERATING THAT THEY RECEIVED THE DRAFT ASSESSMENT ORDER ONLY ON 31.03.2 016 AND EVEN OTHERWISE, THE DELAY IS ONLY ONE DAY, IF THE DATE O F SERVICE OF DRAFT ASSESSMENT ORDER IS TAKEN AS 29.04.2016. AFTER TAKI NG SUCH STAND BEFORE THE 1ST RESPONDENT, THE PETITIONER BEFORE THIS COUR T, IN THE AFFIDAVIT FILED IN SUPPORT OF THIS WRIT PETITION, HAS ADMITTED THE DAT E OF SERVICE OF THE DRAFT ASSESSMENT ORDER AS 29.03.2016. LEARNED COUNSEL FOR THE PETITIONER ALSO ADMITTED THAT THE DRAFT ASSESSMENT ORDER WAS SERVED ON THE PETITIONER ON 29.03.2016. THUS, IT IS EVIDENT THAT THE PETITIONER , HAVING RECEIVED THE DRAFT ASSESSMENT ORDER ON 29.03.2016, HAS DELIBERAT ELY AND INTENTIONALLY MISLED THE 1ST RESPONDENT AS THOUGH IT WAS SERVED O N THEM ONLY ON I.T.A. NO. 443/HYD/2017 :- 7 - : 31.03.2016, SO AS TO BRING THE FILING OF THE OBJECT IONS WITHIN THE PERIOD OF LIMITATION. 10. THEREFORE, IT IS NOT IN DISPUTE THAT THE PETITI ONER HAS FILED THE OBJECTION BEFORE THE 1ST RESPONDENT ONLY ON 29.04.2017. WHEN SUCH BEING THE ADMITTED FACTUAL POSITION, THE LETTER DATED 27.04.2 016 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT WOULD SHOW THAT TH E PETITIONER HAS DELIBERATELY MADE THE 2ND RESPONDENT TO BELIEVE AS IF THE APPEAL/OBJECTION HAS EITHER BEEN ALREADY FILED OR FILED ON 27.04.201 6 BEFORE THE 1ST RESPONDENT. FOR BETTER APPRECIATION, THE ABOVE LETT ER DATED 27.04.2016 IS EXTRACTED HEREUNDER: TO 27.04.2016 INCOME TAX OFFICER CORPORATE WARD 2(4) CHENNAI-24 MADAM, SUB: APPEAL FOR IT ASSESSMENT ORDER FOR ASSESSMENT YEAR 2012-13 REF: YOUR ORDER DATED 29-03-2016 PAN-AACC11592A (IN NO ESTATES PRIVATE LIMITED) PLEASE FIND ATTACHED THE ENTIRE SET OF DOCUMENTS FI LED BEFORE THE DISPUTE REDRESSAL PANEL. WE REQUEST YOU TO KEEP THE DEMAND IN ABEYANCE TILL THE DISPOSAL OF THE APPEAL. THANKING YOU, FOR INNO ESTATES PRIVATE LIMITED DIRECTOR. 11. IN THE ABOVE SAID LETTER, APART FROM MAKING THE 2ND RESPONDENT TO BELIEVE AS THOUGH THE OBJECTION WAS FILED IN TIME, THE PETITIONER HAS ALSO REQUESTED HIM TO KEEP THE DEMAND IN ABEYANCE TILL T HE DISPOSAL OF SUCH OBJECTION. THEREFORE, THE 2ND RESPONDENT IS STATUTO RILY PREVENTED FROM PASSING THE FINAL ASSESSMENT ORDER, AS CONTEMPLATED UNDER SECTION 144C(3) OF THE SAID ACT. A PERUSAL OF SECTION 144C( 2) OF THE SAID ACT WOULD SHOW THAT THE ASSESSEE, ON RECEIPT OF THE DRAFT ORD ER, SHALL FILE HIS OBJECTIONS WITHIN 30 DAYS OF THE RECEIPT OF THE DRA FT ORDER WITH DISPUTE RESOLUTION PANEL AND THE ASSESSING OFFICER. ONLY WH EN NO OBJECTIONS ARE RECEIVED WITHIN THE PERIOD SPECIFIED UNDER SUB- SEC TION 2, THE ASSESSING OFFICER SHALL COMPLETE THE ASSESSMENT ON THE BASIS OF THE DRAFT ORDER, AS I.T.A. NO. 443/HYD/2017 :- 8 - : CONTEMPLATED UNDER SECTION 144(C)(3) OF THE SAID AC T. IN THIS CASE, BY COMMUNICATION DATED 27.04.2016, THE PETITIONER, BY ATTACHING THE ENTIRE SET OF DOCUMENTS FILED BEFORE THE 1ST RESPONDENT, A SSERTED AND MADE THE ASSESSING OFFICER TO BELIEVE THAT THE OBJECTION WAS FILED IN TIME. THEREFORE, THE 2ND RESPONDENT IS JUSTIFIED IN DEFERRING THE MA TTER TILL AN ORDER IS PASSED BY THE 1ST RESPONDENT. AT THIS JUNCTURE, IT IS TO BE NOTED THAT WHAT IS CONTEMPLATED UNDER SECTION 144C(2) IS THE FILING OF THE OBJECTIONS BY THE ASSESSEE WITH THE DISPUTE RESOLUTION PANEL, IF HE I S NOT ACCEPTING THE DRAFT ASSESSMENT ORDER. OF COURSE, THE SAID PROVISION ALS O CONTEMPLATES FILING OF SUCH OBJECTION BEFORE THE ASSESSING OFFICER AS WELL . IF SUCH OBJECTION IS FILED IN TIME, THEN THE DISPUTE RESOLUTION PANEL AL ONE SHALL PROCEED TO DECIDE THE MATTER AS PROVIDED UNDER SECTION 144C(5) & (6)OF THE SAID ACT. THEREFORE, THE ASSESSING OFFICER CANNOT PROCEED TO PASS THE FINAL ORDER TILL THE DISPUTE RESOLUTION PANEL PASSES AN ORDER AS STA TED SUPRA. ONCE THE OBJECTION IS FILED WITHIN THE PERIOD OF LIMITATION, CONSIDERATION OF THE SAME IS VESTED ONLY WITH THE DISPUTE RESOLUTION PANEL AS PROVIDED UNDER SECTION 144C(5),(6),(7) & (8) OF THE SAID ACT AND AS SUCH THE ASSESSING OFFICER CANNOT DECIDE SUCH OBJECTION. THE REFORE, FILING OF SUCH OBJECTION BEFORE THE ASSESSING OFFICER WITHIN TIME ITSELF WILL NOT GET OVER THE PERIOD OF LIMITATION, IF SUCH FILING BEFORE THE DISPUTE RESOLUTION PANEL WAS AFTER SUCH PERIOD. 12. THE NEXT CONTENTION RAISED BY THE PETITIONER IS THAT THE ORDER PASSED BY THE 1ST RESPONDENT DOES NOT CONTAIN ANY DIRECTIONS TO THE 2ND RESPONDENT AND THEREFORE, THE FINAL ORDER PASSED BY TH 2ND RES PONDENT ON 18.11.2016 CANNOT BE TREATED AS THE ONE PASSED IN ACCORDANCE W ITH SECTION 144C(13) OF THE SAID ACT. I DO NOT THINK THE LEARNE D COUNSEL FOR THE PETITIONER IS JUSTIFIED IN MAKING SUCH CONTENTION I N VIEW OF SUB-SECTION 8 OF SECTION 144C WHICH READS AS FOLLOWS: (8) THE DISPUTE RESOLUTION PANEL MAY CONFIRM, REDUC E 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-SECTION (5) FOR FURTHER ENQUIRY AND PASSING OF THE ASSESSMENT ORDER (EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE POWER OF THE DISPUTE RESOLUTION PANEL TO ENHANCE THE VARI ATION SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED THE POWER T O CONSIDER ANY MATTER ARISING OUT OF THE ASSESSMENT PROCEEDINGS RELATING TO THE DRAFT ORDER, NOTWITHSTANDING THAT SUCH MATTER WAS RAISED OR NOT BY THE ELIGIBLE ASSESSEE) 13. A PERUSAL OF THE ABOVE SAID PROVISION OF LAW WO ULD UNDOUBTEDLY MAKE IT CLEAR THAT THE DISPUTE RESOLUTION PANEL MAY CONF IRM, REDUCE OR ENHANCE THE VARIATION PROPOSED IN THE DRAFT ORDER. IT IS NO T IN DISPUTE THAT THE 1ST RESPONDENT REJECTED THE OBJECTION FILED BY THE PETI TIONER ON 10.11.2016, OF COURSE, ON THE GROUND THAT IT IS BARRED BY LIMITATI ON. STILL IT IS AN ORDER REJECTING THE OBJECTIONS. ONCE, THE 1ST RESPONDENT HAS CHOSEN TO REJECT THE I.T.A. NO. 443/HYD/2017 :- 9 - : OBJECTIONS EITHER ON MERITS OR ON THE GROUND OF DEL AY, IT GOES WITHOUT SAYING THAT RESULTANT POSITION OF SUCH REJECTION IS NOTHING BUT CONFIRMATION OF THE DRAFT ORDER PASSED BY THE 2ND RESPONDENT, AS CONTEMPLATED UNDER SECTION 144C(8) OF THE SAID ACT. CONSEQUENTLY , THE FINAL ORDER PASSED BY THE 2ND RESPONDENT ON 18.11.2016 IS CERTA INLY AN ORDER PASSED UNDER SECTION 144C(13) OF THE SAID ACT, MORE PARTIC ULARLY, WHEN THE 1ST RESPONDENT IN ITS ORDER DATED 10.11.2016 CLEARLY ST ATED THAT THE DIRECTIONS ARE COMMUNICATION TO THE ASSESSEE AND THE DEPARTMEN TAL AUTHORITIES AS PER THE PROVISION OF SECTION 144C(5) OF THE SAID AC T. 14. NO DOUBT, THE LEARNED COUNSEL FOR THE PETITIONE R EMPHASIZED THAT THERE IS NO SPECIFIC DIRECTION, WHATSOEVER IN THE SAID OR DER DATED 10.11.2016. IN MY CONSIDERED VIEW, THE DISMISSAL OR REJECTION OF T HE OBJECTIONS FILED BY THE PETITIONER, ON WHATEVER THE GROUND MAY BE, ITSELF I S A DIRECTION TO THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT IN ACC ORDANCE WITH DRAFT ORDER AS CONTEMPLATED UNDER SECTION 144C(5) WHICH R EADS AS FOLLOWS: (5) THE DISPUTE RESOLUTION PANEL SHALL, IN A CASE W HERE ANY OBJECTION IS RECEIVED UNDER SUB-SECTION (2), ISSUE SUCH DIRECTIO NS, AS IT THINKS FIT, FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. 15. HENCE, THE DISMISSAL OR REJECTION OF THE OBJECT ION AND COMMUNICATION OF THE SAME HAS TO BE TREATED AND CONSTRUED AS A DIREC TION GIVEN TO THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT AS PER DRAFT ORDER. ONLY WHEN THE PANEL CHOSES TO REDUCE OR ENHANCE THE VARI ATION PROPOSED, IT CAN GIVE ANY SPECIFIC DIRECTIONS. THEREFORE, I DO NOT T HINK THAT THE PETITIONER IS JUSTIFIED IN CONTENDING THAT THE FINAL ORDER IS NOT AN ORDER PASSED UNDER SECTION 144C(13) OF THE SAID ACT. 16. THE NEXT QUESTION THAT WOULD ARISE FOR CONSIDER ATION IS AS TO WHAT IS THE REMEDY AVAILABLE TO THE PETITIONER AS AGAINST T HE ORDER PASSED UNDER SECTION 144C(13) OF THE SAID ACT. I HAVE ALRE ADY FOUND THAT THE FINAL ORDER PASSED BY THE 2ND RESPONDENT DATED 18.11.2016 IS THE ONE PASSED UNDER SECTION 144C(13) OF THE SAID ACT. I HAVE ALSO FOUND THAT THE SAID ORDER WAS PASSED WELL WITHIN THE PERIOD OF LIMITATI ON. IN SUCH A SITUATION, THE PETITIONER IS ENTITLED TO FILE AN APPEAL BEFORE THE APPELLATE AUTHORITY AS CONTEMPLATED UNDER SECTION 246(1)(A) OF THE SAID AC T, WHICH COVERS AN ORDER PASSED AGAINST THE ASSESSEE UNDER SECTION 144 OF THE SAID ACT AS WELL. WHEN SUCH STATUTORY APPELLATE REMEDY IS AVAIL ABLE TO THE PETITIONER, THIS COURT IS NOT INCLINED TO ENTERTAIN THIS WRIT P ETITION BY GOING INTO THE CONTENTIONS RAISED ON THE MERITS OF THE MATTER BY E ITHER PARTIES. IT IS WELL SETTLED THAT WHEN A STATUTORY APPELLATE REMEDY IS A VAILABLE, MORE PARTICULARLY IN FISCAL MATTERS, PARTIES SHOULD NOT BE PERMITTED TO RESORT TO THE REMEDY UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA. THE RELIANCE PLACED ON BY THE LEARNED COUNSEL FOR THE PETITIONER IN THE DECISIONS REPORTED IN 2016(75) TAXMANN.COM (RAIN CEMENTS LTD. V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), HYDERABAD) AND 2013(31) I.T.A. NO. 443/HYD/2017 :- 10 -: TAXMANN.COM 396 (INTIMATE FASHIONS (INDIA) (P,) LTD . VS. ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCL EII(3), CHENNAI) IS NOT HELPING THE PETITIONER IN ANY MANNER AS THE FAC TS AND CIRCUMSTANCES INVOLVED IN THOSE CASES ARE TOTALLY DIFFERENT AND D ISTINGUISHABLE. 7.2. SINCE THE OBJECTIONS RAISED BY ASSESSEE IN GROU ND NOS. 1 & 2 ARE DIRECTLY COVERED BY THE JUDGMENT OF HON'BLE HIGH COURT OF MADRAS, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT TH E FINAL ORDER PASSED BY THE AO IS WITHIN THE TIME LIMITS AND ACCORDINGLY, THERE IS NO MERIT IN THE GROUNDS RAISED BY ASSESSEE. 8. COMING TO OTHER GROUNDS ON THE MERITS OF THE TP ADDITION MADE, IT WAS FAIRLY SUBMITTED THAT ASSESSEE IS I N THE SPECIFIED BUSINESS AND THE COMPARABLE COMPANIES ARE NOT AT ALL COMPARABLE. THIS ISSUE WAS DISCUSSED BY THE CO-ORDI NATE BENCH IN ASSESSEES OWN CASE FOR THE AYS. 2008-09 AND 2010 -11. THE DECISION OF THE CO-ORDINATE BENCH OF ITAT, HYDERABAD IN PARA 17 ONWARDS IS AS UNDER: 17. GROUND NO. 9 IS WITH REGARD TO COMPARABLES SEL ECTED UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961. LD. AR SUBMITTED THAT AT THE TIME OF TP STUDY ASSESSEE HAD NO ACCESS TO SUCH DAT A THEREFORE SUCH DATA CANNOT BE CONSIDERED AS COMPARABLES. THE TPO ALSO H AS SELECTED GENERAL SOFTWARE DEVELOPMENT SERVICES COMPANIES AND ALSO SE RVICES PROVIDERS. THERE ARE NO GAMING COMPANIES DURING THAT PERIOD. H ENCE, THE TP STUDY OF ASSESSEE HAS TO BE ACCEPTED. IN THIS CONNECTION, LD . AR RELIED ON THE DECISION OF HEWLETT PACKARD INDIA SOFTWARE OPERATIO N PVT. LTD VS ACIT 67 TAXMANN.COM 309 (BANG TRIB). 18. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORIT IES. 19. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES . WE AGREE WITH THE ASSESSEE THAT THE ASSESSEE IS A SOFTWARE DEVELOPER IN GAMING SECTOR AND CANNOT BE COMPARED WITH THE GENERAL SOFTWARE DEVELO PMENT OR SERVICE PROVIDERS. IT IS UNIQUE IN TERMS OF UTILIZATION OF TECHNICAL MANPOWER, ETC. IT CAN BE DISTINGUISHED AS WE DISTINGUISH THE SOFTWARE DEVELOPMENT AND KPO. BOTH ARE SIMILAR BUT DISTINCT. WE DIRECT THE A O/TPO TO ELIMINATE ALL I.T.A. NO. 443/HYD/2017 :- 11 -: THOSE GENERAL SOFTWARE COMPANIES AS COMPARABLES AND IDENTIFY ONLY THOSE COMPANIES WHICH ARE EXCLUSIVELY INVOLVED IN THE DEV ELOPMENT OF GAMES SOFTWARE. TPO CAN TAKE THE HELP OF ASSESSEE TO IDEN TIFY THESE COMPARABLES AND DETERMINE THE ALP. ACCORDINGLY, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. . 8.1. SINCE THE VERY BASIS OF THE SELECTION OF COMPARA BLES IS QUESTIONED, THE CONSEQUENT ISSUES OF FILTERS, WORKING C APITAL ADJUSTMENT AND RISK ADJUSTMENTS BECOME ACADEMIC. IN LI NE WITH THE DECISION OF THE CO-ORDINATE BENCH IN OTHER ASSESSME NT YEARS AS STATED SUPRA, WE ARE OF THE OPINION THAT EXERCISE OF SEL ECTION OF COMPARABLES HAS TO BE DONE SPECIFICALLY KEEPING IN M IND THE SPECIAL NATURE OF ASSESSEES BUSINESS IN DEVELOPING GAMING SOFTWARE. THE AO IS DIRECTED TO KEEP THE DETAILED ORDE RS OF THE CO- ORDINATE BENCH IN AYS. 2008-09 & 2010-11 (SUPRA) AND CAN RE- EXAMINE THE ISSUE OF TP ADJUSTMENT AFRESH AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. FOR THESE REASONS, THE ISSU ES ON MERITS ARE CONSIDERED ALLOWED AND THE ORDER OF THE TPO/AO WI TH REFERENCE TO TP ADJUSTMENT IS SET ASIDE WITH A DIRECTION TO RE-DO I T AFRESH AS DIRECTED ABOVE. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 10 TH NOVEMBER, 2017 TNMM I.T.A. NO. 443/HYD/2017 :- 12 -: COPY TO : 1. GAMELOFT SOFTWARE PRIVATE LIMITED, FM HOUSE, 25 HUDA RESIDENTIAL COMPLEX, ROAD NO. 2, BANJARA HILLS, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2( 2), HYDERABAD. 3. DISPUTE RESOLUTION PANEL (DRP), HYDERABAD. 4. DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICI NG), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.