Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 6326 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-07-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2011-2012
Appeal Filed On
07-04-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.496/HYD/2016 ASSESSMENT YEAR 2011-2012 INVENSYS DEVELOPMENT CENTRE INDIA PRIVATE LTD., HYDERABAD. PAN AABCI1140F VS., DCIT, COMPANY CIRCLE-2(1) HYDERABAD. (APPLICANT (RESPONDENT) FOR ASSESSEE : MR. RAGHUNATHAN SAMPATH FOR REVENUE : MR. MOHANKUMAR SINGHANIA DATE OF HEARING : 25.07.2016 DATE OF PRONOUNCEMENT : 29.07.2016 ORDER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2011-2012 A GAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) RE AD WITH SECTION 92CA(4) READ WITH SECTION 144C(1) OF THE I. T. ACT, 1961. 2. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO INTERN ATIONAL TRANSACTIONS WITH ITS A.E. FOR RENDERING SOFTWARE DEVELOPMENT SERVICES AND HAS ACCORDINGLY MAINTAINED THE DOCUMEN TS AS REQUIRED UNDER RULE 10D OF I.T. RULES. HE SUBMITTED THAT THE A.O. HAS REFERRED THE COMPUTATION OF THE ARMS LENGTH PRI CE (ALP) TO 2 ITA.NO.496/HYD/2016 INVENSYS DEVELOPMENT CENTRE PRIVATE LIMITED, HYDERABAD. THE TPO UNDER SECTION 92CA OF THE ACT AND THE TPO H AS ACCEPTED THE FOLLOWING FOUR COMPANIES WHICH WERE ADOPTED BY THE ASSESSEE AMONGST OTHERS AS COMPARABLE TO THE ASSESSEE (1) AKSHAY SOFTWARE TECHNOLOGIES LTD., (2) EVOKE TECHNOLOGIES PVT. LTD., (3) MINDTREE LTD., (4) R.S. SOFTWARE (I) LTD., 2.1. HE SUBMITTED THAT THE TPO HAD PROPOSED TO ADO PT SOME OTHER COMPANIES AS COMPARABLE TO THE ASSESSEE AGAIN ST WHICH ASSESSEE RAISED ITS OBJECTIONS BEFORE THE TPO. BUT THE TPO EJECTED THE ASSESSEES OBJECTIONS AND HAS SUGGESTED ADJUSTM ENTS TO THE ALP. HE SUBMITTED THAT AGGRIEVED ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP AGAINST THE COMPARABLES TAKEN BY THE TPO, BUT THE DRP AFTER CONSIDERING THE ASSESSEES OBJECTIONS AGA INST THE FILTERS ADOPTED BY THE TPO, HAS HELD THAT AT THE TIME OF T. P. ANALYSIS DONE BY THE TPO, THE TPO RELIED UPON THE INFORMATION AVA ILABLE IN THE DATA BASE(S) WITHOUT CONSIDERING THE ANNUAL REPORTS OF THE COMPARABLE COMPANIES. BUT BEFORE THE DRP, OBJECTION S ARE TAKEN BY THE RESPECTIVE ASSESSEES BASED ON THE INFORMATI ON AVAILABLE IN THE ANNUAL REPORTS AND IN SUCH CIRCUMSTANCES, IT IS NOT A PROPER APPROACH TO EXAMINE THE COMPARABILITY OF ONLY THOSE COMPARABLES WHICH ARE OBJECTED TO BY THE ASSESSEE, BUT TO FOLLO W A FAIR APPROACH, IT IS NECESSARY TO EXAMINE ALL OTHER COMPARABLES OF THE TPO AS WELL AS THE ASSESSEE BASED ON ANNUAL REPORTS TO ARRIVE A T A CORRECT CONCLUSION. HE SUBMITTED THAT THEREAFTER, THE DRP P ROCEEDED TO 3 ITA.NO.496/HYD/2016 INVENSYS DEVELOPMENT CENTRE PRIVATE LIMITED, HYDERABAD. CONSIDER THE COMPARABILITY OF ALL THE COMPANIES TAK EN AND ACCEPTED BY THE TPO AND DIRECTED EXCLUSION OF THE ABOVE FOUR COMPANIES WITHOUT GIVING ANY OPPORTUNITY OF HEARING TO THE AS SESSEE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DRP, THOUGH WAS RIGHT IN HOLDING THAT THE ANNUAL RE PORTS OF THE COMPARABLE COMPANIES SHOULD BE TAKEN INTO CONSIDERA TION FOR MAKING A COMPARABILITY ANALYSIS, IT OUGHT NOT TO HA VE DONE SO WITHOUT GIVING ANY NOTICE OF HEARING TO THE ASSESSE E. HE HAS DRAWN OUR ATTENTION TO SUB-SECTION (11) OF SECTION 144C O F THE I.T. ACT WHEREIN IT HAS BEEN CLEARLY PROVIDED THAT NO ORDER SHALL BE PASSED BY THE DRP UNDER SUB-SECTION (5) OF SECTION 144C OF THE ACT WITHOUT GIVING ANY OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, ACCORDING TO HIM, THE ORDER OF THE DRP IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND IS TO BE SET ASIDE. 4. THE LD. D.R. HOWEVER, SUPPORTED THE ORDERS OF T HE DRP. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE TPO, ON THE BASIS OF TH E MATERIAL AVAILABLE BEFORE HIM AT THE TIME OF T.P. STUDY, HAS ACCEPTED CERTAIN COMPANIES ADOPTED BY THE ASSESSEE AS COMPARABLE TO IT. IN MOST OF THE CASES, THE TPO RELIES UPON THE DATA AVAILABLE I N THE PUBLIC DOMAIN I.E., DATA BASES, AS THE ANNUAL REPORTS OF T HE RESPECTIVE COMPANIES ARE NOT COMPLETE OR ARE NOT AVAILABLE AT THE TIME OF T.P. STUDY. BUT BEFORE THE DRP OR THE TRIBUNAL OR THE HI GHER FORUMS, THE ASSESSEE SHALL PRODUCE AND RELIANCE UPON THE AN NUAL REPORTS OF 4 ITA.NO.496/HYD/2016 INVENSYS DEVELOPMENT CENTRE PRIVATE LIMITED, HYDERABAD. THE RESPECTIVE COMPANIES TO DEMONSTRATE THAT THE SA ID COMPANIES ARE/ARE NOT COMPARABLE TO THE ASSESSEE ON VARIOUS G ROUNDS. SINCE ANNUAL REPORTS ARE MORE RELIABLE THAN THE INFORMATI ON AVAILABLE IN THE DATA BASES, THE HIGHER FORUMS ACCEPT THE SAME AS RELIABLE DATA AND GIVE THEIR FINDING AS TO THE COMPARABILITY OF T HE SAID COMPANY TO THE ASSESSEE THEREIN. THE OBSERVATIONS OF THE DR P THAT THE COMPARABILITY OF ALL THE COMPANIES ACCEPTED BY THE TPO ALSO NEED TO BE CONSIDERED IN VIEW OF THEIR ANNUAL REPORTS IS REASONABLE AND CORRECT. HOWEVER, WHILE EMBARKING UPON SUCH AN EXER CISE, THE DRP SHOULD ALSO KEEP IN MIND THE PRINCIPLES OF NATURAL JUSTICE AND ALSO THE PROVISIONS OF LAW AND THE RULES THEREUNDER FOR COMPLETING SUCH TASK. SUB-SECTION (11) OF SECTION 144C CLEARLY LAYS DOWN THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARI NG BEFORE THE DRP PASSES AN ORDER UNDER SUB-SECTION (5). THOUGH THE D RP AT PAGE-10 OF ITS ORDER OBSERVED THAT THE ISSUE WAS DISCUSSED DURING THE HEARING, IT IS NOT EVIDENT FROM THE OTHER PARAGRAPH S OF THE ORDER, AS TO WHETHER THE ASSESSEE HAS BEEN GIVEN AN OPPORTUNI TY OF PRESENTING ITS CONTENTIONS AND ALSO THAT THE DRP HA S CONSIDERED SUCH OBJECTIONS, IF ANY, RAISED BY THE ASSESSEE. TH EREFORE, THE PRESUMPTION DRAWN BY US IS THAT ASSESSEE HAS NOT BE EN GIVEN ANY OPPORTUNITY TO PRESENT ITS CASE ON THE COMPARABILIT Y OR OTHERWISE OF THE COMPANIES TO THE ASSESSEE ON THE BASIS OF THE A NNUAL REPORTS OF THE SAID COMPANIES. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE DRP AND REMAND THE SA ME TO THE FILE OF THE DRP FOR DE NOVO CONSIDERATION IN ACCORDANCE WIT H LAW. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 5 ITA.NO.496/HYD/2016 INVENSYS DEVELOPMENT CENTRE PRIVATE LIMITED, HYDERABAD. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07. 2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI ) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH JULY, 2016 VBP/- COPY TO : 1. INVENSYS DEVELOPMENT CENTRE PRIVATE LIMITED, PLO T NO.18, 7 TH FLOOR, C' BLOCK, I LABS CENTRE, SOFTWARE UNITS LAYOUT, MADHAPUR, HYDERABAD 500 081. 2. THE DCIT, COMPANY CIRCLE-2(1), ROOM NO.825, B BLOCK, 8 TH FLOOR, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 3. DISPUTE RESOLUTION PANEL-1, G-16, GROUND FLOOR, CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU 560 001. 4. PR. CIT-II, HYDERABAD. 5. DCIT (TRANSFER PRICING)-II, 3 RD FLOOR, D BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 6. D.R. ITAT A BENCH, HYDERABAD. 7. GUARD FILE
