Aptean India Pvt. Ltd., Bangalore V. Asst.C.I.T., Bangalore

ITA 464/BANG/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5546 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIA
• Assessee Lawyers: G S PRASHANTH
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALI T KUMAR, JUDICIAL MEMBER IT (TP) A NO. 464 /BANG/201 6 ASSESSMENT YEAR : 201 1 - 1 2 M/S. APTEAN INDIA PVT. LTD., (FORMERLY M/S. CONSONA CRM SOFTWARE SERVICES INDIA PVT. LTD.), LEVEL-5, (8 TH FLOOR), GOLDEN HEIGHTS, NO. 1/2, 59 TH C CROSS, 4 TH M BLOCK, RAJAJINAGAR, BANGALORE -560 010. PAN: AADCC 6528R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 (1)(1), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI G.S. PRASHANTH, CA REVENUE BY : SHRI R.K. JHA, CIT (DR) DATE OF HEARING : 1 4 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 23 . 0 2.201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ASSESSMENT ORDER DATED 18.01.2016 PASSED U/S. 143(3) R.W.S. 14 4C OF THE IT ACT AS PER THE DIRECTIONS OF THE DRP. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDERS OF THE TPO / DRP / ASSESSING OFFICER IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, WEIG HT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTA NCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF TO BE ASSESSED ON A TOTAL INCOME OF RS. 3,25,57,536/- AS AGAINST INCOME OF RS.2,39,83,500 / - DECLARED BY THE APPELLANT. 3. A) THE ORDER OF THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION UNDER SECTION 92CA OF THE ACT DID NOT EXIST, OR HAVING NOT BEEN COMPLIED WITH AND CON SEQUENTLY THE ORDER OF THE ASSESSING OFFICER IS BAD IN LAW FOR WA NT OF REQUISITE IT(TP)A NO. 464/BANG/2016 PAGE 2 OF 6 JURISDICTION. B) THE ASSESSING OFFICER ERRED IN NOT PROVIDING THE COPY OF THE APPROVAL GRANTED BY THE COMMISSIONER WHICH IS IN VI OLATION OF THE SETTLED PRINCIPLES OF NATURAL JUSTICE AND THUS THE ORDER OF ASSESSMENT NEEDS TO BE SET ASIDE. 4. THE ADDITION OF RS. 85,74,036/- BEING ADJUSTMENT UNDER SECTION 92CA OF THE ACT MADE BY THE ASSESSING OFFICER IS BA D IN LAW AND THUS THE ADDITION MADE NEEDS TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE TPO, DRP AND THE AO ERRED IN REJECTING THE C OMPARABLES SELECTED BY THE APPELLANT WITHOUT GIVING ANY COGENT REASONS. 6. A) THE TPO AND THE AO ERRED IN SELECTING COMPARA BLE COMPANIES WITH TURNOVER MORE THAN 10 TIMES THAT OF THE APPELL ANT RESULTING IN AN ILLOGICAL COMPARISON OF FINANCIAL DATA. B) WITHOUT PREJUDICE, THE TPO AND AO OUGHT TO HAVE APPLIED THE TURNOVER FILTER OF RS.1 CRORE TO RS.200 CRORE UNDER THE FACTS OF THE CASE. RELIANCE IS PLACED ON THE DECISION OF THE HON 'BLE BANGALORE TRIBUNAL IN APPELLANT'S GROUP COMPANY CASE FOR THE ASSESSMENT YEAR 2009-10 REPORTED IN 52 TAXMANN.COM 407. 7. A) THE AUTHORITIES BELOW ERRED IN CONSIDERING PE RSISTENT SYSTEMS AND SOLUTIONS LTD. AS COMPARABLE ON THE FACTS OF TH E CASE. WITHOUT PREJUDICE HOLD THAT THE COMPARABLE NEEDS TO BE REJE CTED EVEN BASED ON THE PRINCIPLES OF CONSISTENCY. B) THE DRP AND THE AO ERRED IN REJECTING EVOKE TECH NOLOGIES AS A COMPARABLE ON THE FACTS OF THE CASE. 8. A) THE TPO, DRP AND THE AO FAILED TO APPRECIATE THAT THE APPELLANT BEING A CAPTIVE SERVICE PROVIDER RUNS A ' SINGLE CUSTOMER RISK'. B) THE TPO, DRP AND THE AO FURTHER ERRED IN NOT APP RECIATING THAT THE APPELLANT RENDERS SERVICES ONLY TO THEIR PARENT COMPANY AND THUS SUITABLE RISK ADJUSTMENT NEEDS TO BE MADE IN CASE O F THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE TPO, DRP AND THE ASSESSING OFFICER ERRED IN NOT GRANTING THE BENEFIT OF THE PROVISO TO SECTION 92C(2) OF THE ACT WHICH IS MANDATORY UNDER THE SCHEME OF THE ACT. 10. THE TPO, DRP AND THE AO FAILED TO UNDERSTAND TH E SPIRIT AND INTENT OF RULE 10B(1)(E)(II) AS PER WHICH EVEN IF O NE OF THE COMPARABLES SELECTED BY THE APPELLANT SATISFIES THE COMPUTATION MECHANISM FOR DETERMINATION OF THE ALP, THE DETERMI NATION OF ALP BY USING ARITHMETIC MEAN OF DIFFERENT COMPARABLES IS N OT WARRANTED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. IT(TP)A NO. 464/BANG/2016 PAGE 3 OF 6 11. THE APPELLANT DENIES ITSELF LIABLE TO BE LEVIED TO INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT AND FURTHER THE C OMPUTATION OF INTEREST UNDER SECTIONS 234B AND 234C WAS NOT PROVI DED TO THE APPELLANT AS REGARD TO THE RATE, PERIOD AND METHOD OF CALCULATION OF INTEREST UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELET E, AND MODIFY ANY OF THE GROUNDS WHICH ARE URGED ABOVE. 13. FOR THE ABOVE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS YOUR HONOUR TO CONS IDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND JUSTICE BE RENDERED. 3. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT SOME ADDITIONAL GROUNDS WERE RAISED BEFORE THE DRP WHICH WERE NOT D ECIDED BY DRP. IN SUPPORT OF HIS CONTENTION, THE LD. AR OF ASSESSEE S UBMITTED AN AFFIDAVIT OF SHRI PRASHANTH K L, CA IN WHICH IT IS STATED THAT ON THE DATE OF HEARING I.E. ON 07.12.2015, SOME ADDITIONAL GROUNDS WERE FILED BEFO RE THE DRP AND THE SAME WERE NOT ADJUDICATED BY DRP. IT IS ALSO STATED IN THE AFFIDAVIT THAT HE HAS INSPECTED THE RECORDS ON 19.12.2017 AND ASCERTAINED THAT THE ADDITIONAL GROUNDS FILED ARE PART OF THE RECORDS OF THE DRP AN D THE DRP HAS ALSO CONFIRMED THE FILING OF ADDITIONAL GROUNDS BY WAY O F NOTING IN THE ORDER SHEET. AT THIS JUNCTURE, A QUERY WAS RAISED BY THE BENCH F ROM THE LD. DR OF REVENUE AND HE WAS WAS ASKED AS TO WHETHER THE ADDITIONAL G ROUNDS RAISED BY THE ASSESSEE BEFORE THE DRP WERE DECIDED BY THE DRP OR NOT. THE LD. DR OF REVENUE SUBMITTED THAT THESE GROUNDS ARE NOT DECIDE D BY DRP AND THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF DRP FOR DECIDING THE ADDITIONAL GROUNDS RAISED BEFORE THE DRP. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE THE AFFIDAVIT OF SHRI PRASHANTH K L, CA FILED BEFORE US ON 14.02.2018. THE SAME IS AS UNDER. I PRASHANTH K L , CHARTERED ACCOUNTANT, PARTNER OF M/S. GURU & JANA, HAVING OFFICE AT NO. 41, PATALAMMA TEMPLE S TREET, BASAVANAGUDI, NEAR SOUTH END CIRCLE, BENGALURU - 56 0004, DO HEREBY SOLEMNLY DECLARE AND AFFIRM ON OATH AS FOLLO WS: 1. THAT, I WAS THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE, M/S. APTEAN INDIA PRIVATE LIMITED FOR THE ASSESSMENT YEAR 2011-12 HAD REPRESENTED THE ASSESSEE BEFORE THE DISPUTE RES OLUTION IT(TP)A NO. 464/BANG/2016 PAGE 4 OF 6 PANEL (DRP). 2. THAT ON THE DATE OF HEARING I.E. ON 07.12.2015, I HAD FILED ADDITIONAL GROUNDS BEFORE THE LEARNED DRP. 3. THAT THE LEARNED DRP HAS NOT ADJUDICATED THE ADD ITIONAL GROUNDS FILED BY ME. 4. THAT I HAD INSPECTED THE RECORDS ON 19.12.2017 A ND ASCERTAINED THAT THE ADDITIONAL GROUNDS FILED ARE P ART OF THE RECORDS OF THE DRP. 5. THAT THE DRP HAS ALSO CONFIRMED THE FILING OF AD DITIONAL GROUNDS BY WAY OF NOTING IN THE ORDER SHEET. 6. THAT THE ADDITIONAL GROUNDS WERE NOT ADJUDICATED BY THE LEARNED DRP AND THUS I PLEAD BEFORE THE HONBLE BEN CH THAT THE MATTER IN DISPUTE SHOULD BE SENT BACK FORRE-ADJUDIC ATION IN THE INTEREST OF EQUITY AND JUSTICE. 7. THAT, I REITERATE THAT THE ADDITIONAL GROUNDS FI LED WERE NOT ADJUDICATED BY THE DRP AND THEREFORE I PLEAD BEFORE THE HONBLE BENCH THAT JUSTICE BE RENDERED. 8. THAT, I STATE THAT WHATEVER STATED ABOVE IN PARA S 1 TO 7 IS TRUE AND CORRECT TO THE BEST OF MY KNOWLEDGE AND BELIEF. 9. THAT THE SIGNATURE AFFIXED BELOW IS THAT OF MINE . THIS AFFIDAVIT IS EXECUTED ON THIS 05 TH DAY OF FEBRUARY 2018, AT BENGALURU 5. WE ALSO REPRODUCE THE ADDITIONAL GROUNDS RAISED BEFORE THE DRP, COPY OF WHICH WAS FILED BEFORE US BY THE LEARNED AR OF THE ASSESSEE. PRAYER FOR ADMITTING ADDITIONAL GROUNDS OF OBJECTIONS THE ASSESSEE BEGS TO SUBMIT THE UNDER MENTIONED ADD ITIONAL GROUNDS OF OBJECTIONS WHICH WERE NOT URGED SPECIFICALLY IN THE ORIGINAL GROUNDS OF OBJECTIONS FILED AT THE TIME OF INSTITUT ION OF OBJECTIONS. THESE GROUNDS DO NOT INVOLVE ANY INVESTIGATION OF A NY FACTS OTHERWISE ON THE RECORD OF THE DEPARTMENT AND ARE ALSO PURE Q UESTIONS OF LAW, WHICH GOES INTO THE VERY ROOT OF THE MATTER OF JURI SDICTION AND VALIDITY OF THE PROCEEDINGS AND THEREFORE, IT IS PRAYED THAT THE ADDITIONAL GROUNDS MAY KINDLY BE ADMITTED AND DISPOSED OFF ON MERITS FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. RELIAN CE IS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF N ATIONAL THERMAL POWER CO. LTD. VS. CIT REPORTED IN 229 ITR 383. IT(TP)A NO. 464/BANG/2016 PAGE 5 OF 6 1. THE TRANSFER PRICING OFFICER [TPO] AND THE ASSES SING OFFICER [AO] ERRED IN REJECTING THE USE OF MULTIPLE YEAR DATA WH ILE ARRIVING AT APPROPRIATE COMPARABLES ON THE FACTS OF THE CASE. 2. THE TPO AND THE AO ERRED IN REJECTING THE USE OF DATA OF COMPANIES WHOSE FINANCIAL YEARS ENDED ON A DATE OTH ER THAN 31 ST MARCH WHILE ARRIVING AT APPROPRIATE COMPARABLES ON THE FACTS OF THE CASE. 3. A) THE TPO & THE AO ERRED IN REJECTING THE COMPA NIES THAT HAVE EXPORT SALES LESS THAN 75% OF THE SALES FROM SOFTWA RE DEVELOPMENT SERVICES UNDER THE FACTS OF THE CASE. B) THE PROPOSAL TO APPLY A 75% THRESHOLD FOR EXPORT INCOME IS AGAINST ALL KNOWN CANONS OF COMPUTATION OF ALP AND BY ITSEL F IS UNSUSTAINABLE IN LAW AND THUS THE ORDERS OF THE AUTHORITIES BELOW NEED TO BE SET- ASIDE IN THE INTEREST OF EQUITY AND JUSTICE. 4. A) THE TPO & THE AO ERRED IN REJECTING THE COMPA NIES THAT HAVE SALES FROM SOFTWARE DEVELOPMENT SERVICES LESS THAN 75% OF THE TOTAL OPERATING INCOME. B) THE PROPOSAL TO APPLY A 75% THRESHOLD FOR SERVIC E INCOME IS AGAINST ALL KNOWN CANONS OF COMPUTATION OF ALP AND BY ITSELF IS UNSUSTAINABLE IN LAW AND THUS THE ORDERS OF THE AUT HORITIES BELOW NEED TO BE SET-ASIDE IN THE INTEREST OF EQUITY AND JUSTI CE. 5. THE TPO FAILED TO APPRECIATE THAT THE ASSESSEE H AS A SINGLE CUSTOMER RISK AND HE ERRED IN NOT PROVIDING ANY RI SK ADJUSTMENT UNDER THE FACTS OF THE CASE. 6. THE TPO AND THE AO ERRED IN REJECTING THE COMPAR ABLES APPLIED BY THE ASSESSEE ALTHOUGH SUCH COMPARABLES WERE APPROPR IATE FOR COMPARISON UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE DRAFT ORDER OF THE ASSESSING OFFICER IS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION UND ER SECTION 92CA OF THE ACT DID NOT EXIST, OR HAVING NOT BEEN COMPLIED WITH AND CONSEQUENTLY THE ORDER OF THE ASSESSING OFFICER IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. 8. THE TPO AND THE ASSESSING OFFICER FAILED TO UNDE RSTAND THE SPIRIT AND INTENT OF RULE 10B(1)(E)(II) OF THE RULES AS PE R WHICH EVEN IF ONE OF THE COMPARABLES SELECTED BY THE ASSESSEE SATISFI ES THE COMPUTATION MECHANISM FOR DETERMINATION OF THE ALP, THE DETERMI NATION OF ALP BY USING ARITHMETIC MEAN OF DIFFERENT COMPARABLES IS N OT WARRANTED. 9. THE COPY OF THE APPROVAL GRANTED BY THE COMMISSI ONER WAS NOT PROVIDED WHICH IS IN VIOLATION OF THE SETTLED PRINC IPLES OF NATURAL JUSTICE AND THUS THE DRAFT ORDER OF ASSESSMENT NEED S TO BE SET ASIDE. IT(TP)A NO. 464/BANG/2016 PAGE 6 OF 6 10. THE ORDERS OF THE TPO AND ASSESSING OFFICER IN SO FAR AS IT IS AGAINST THE ASSESSEE IS OPPOSED TO LAW, WEIGHT OF E VIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE. 11. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 12. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING, THE ASSESSEE PRAYS THAT THE OB JECTIONS BE CONSIDERED IN THE INTEREST OF EQUITY AND JUSTICE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN VI EW OF THIS FACTUAL POSITION THAT SOME ADDITIONAL GROUNDS WERE RAISED BY THE ASSESSEE BEFORE THE DRP AND THE SAME WERE NOT DECIDED BY DRP, WE FEEL IT PROPER TO RESTORE THE ENTIRE MATTER BACK TO THE FILE OF DRP FOR FRESH DECISION WITH THE DIRECTION THAT THE DRP SHOULD DECIDE THE ADDITIONAL GROUNDS ALSO ALONG WITH MAIN GROUNDS RAISED BY THE ASSESSEE. THE DRP SHOULD DECIDE ALL GROUNDS BY WAY OF A SPEAKING AND REASONED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. IN VIEW OF THIS DECISION, NO ADJUDICATION I S CALLED FOR REGARDING THE VARIOUS ISSUES ON MERIT RAISED BY THE ASSESSEE BEFO RE US. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIT KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 23 RD FEBRUARY, 2018. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.