Coreone Technologies India Private Limited, Bangalore V. ITO, Bangalore

ITA 556/BANG/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8768 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUZAFFAR HUSSAIN
• Keywords: Transfer pricing; International transaction; Tax effect
• Section: 143(3); 144C

Judgement Text

IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUTANT MEMBER IT(TP)A NO.257/BANG/2015 ASSESSMENT YEAR: 2010-11 ITO WARD-2(1)(1) BENGALURU PAN NO : AACCC1734G VS. M/S. CORE ONE TECHNOLOGIES PVT. LTD. (FORMERLY M/S. CAPCO IT SERVICES INDIA PVT. LTD.) SYMPHONY TELECA, 6 TH FLOOR NO.5A, PRITECH SEZ PARK BELLANDUR OUTER RING ROAD ECOSPACE CAMPUS BENGALURU-103. APPELLANT RESPONDENT IT(TP)A NO.556/BANG/2015 ASSESSMENT YEAR: 2010-11 M/S. CORE ONE TECHNOLOGIES PVT. LTD. (FORMERLY M/S. CAPCO IT SERVICES INDIA PVT. LTD.) SYMPHONY TELECA, 6TH FLOOR NO.5A, PRITECH SEZ PARK BELLANDUR OUTER RING ROAD ECOSPACE CAMPUS BENGALURU-103. VS. ITO WARD-2(1)(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI MUZAFFAR HUSSAIN, D.R. RESPONDENT BY : SHRI BHARATH. L., A.R. DATE OF HEARING : 23.07.2020 DATE OF PRONOUNCEMENT : 24.07.2020 IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 2 OF 8 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY THE A.O. FOR ASSESSMENT YEAR 2010-11 U/S 143(3) R.W.S. 144C (13) OF THE ACT IN PURSUANCE OF DIRECTI ONS ISSUED BY LD DISPUTE RESOLUTION PANEL (DRP) . 2. THE GROUNDS URGED IN APPEALS OF BOTH PARTIES REL ATE TO THE TRANSFER PRICING ADJUSTMENT MADE BY AO/TPO. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTW ARE DESIGNING, PROGRAMMING, DEVELOPMENT, TESTING AND RE LATED SERVICES. 4. AT THE OUTSET, BOTH THE PARTIES SUBMITTED THAT T HE TAX EFFECT INVOLVED IN THE GROUNDS URGED BY THE REVENUE IN ITS APPEAL IS LESS THAN RS.50.00 LAKHS. ACCORDINGLY IT WAS SUBMITTED THAT, AS PER THE CBDT CIRCULAR NO.17/2019 DATED 8.8.2019, THE REVENUE IS PRECLUDED FROM PURSU ING THE PRESENT APPEAL. IN VIEW OF THE ABOVE SUBMISSION S, WE DISMISS THE APPEAL OF THE REVENUE IN LIMINI. 5. IN THE APPEAL FILED BY THE ASSESSEE, VARIOUS GROUNDS RELATING TO TRANSFER PRICING ADJUSTMENT HAVE BEEN R AISED. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS, IN TER ALIA, CHALLENGING THE NEGATIVE WORKING CAPITAL ADJUSTMENT MADE BY THE TPO. 6. THE LD. A.R. SUBMITTED THAT THE ASSESSEES INTERNATIONAL TRANSACTION WOULD BE AT ARMS LENGTH, IF IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 3 OF 8 NEGATIVE WORKING CAPITAL ADJUSTMENT MADE BY THE TPO IS DELETED. THE LD. A.R. SUBMITTED THAT THE ASSESSEE S PLEA IS SUPPORTED BY THE DECISION RENDERED BY THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF IZMO LTD. (FORMERL Y LOGIS MICROSYSTEMS LTD.) VS. DCIT (IT(TP)A NO.453/BANG./20 15 AND IT(TP)A NO.186/BANG/2016 DATED 29.1.2020). 7. THE LD. A.R. SUBMITTED THAT, PRIMA FACIE, TH E ADJUDICATION OF REMAINING GROUNDS MAY NOT BE REQUIR ED. HOWEVER, THE ASSESSEE MAY BE GIVEN LIBERTY TO MOVE APPROPRIATE PETITION TO URGE THE REMAINING GROUNDS, IN CASE EVEN AFTER DELETION OF NEGATIVE WORKING CAPITAL, AN Y PART OF ADDITION IS SUSTAINED. 8. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE THAT THE ISSUE OF NEGATIVE WORKI NG CAPITAL HAS BEEN EXAMINED BY THE BANGALORE BENCH OF TRIBUNA L IN THE CASE OF IZMO LTD. (SUPRA) AND IT WAS HELD THAT THE NEGATIVE WORKING CAPITAL ADJUSTMENT OUGHT NOT TO HA VE BEEN MADE BY THE TPO. IN THIS REGARD, THE TRIBUNAL HAS PLACED ITS RELIANCE ON THE DECISION RENDERED BY ANO THER COORDINATE BENCH IN THE CASE OF FNF INDIA PVT. LTD. (IT (TP)A NO.195/BANG/2016 AND 459./BANG/2017 DATED 3.7.2019) . FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE R ELEVANT OBSERVATIONS MADE IN THE CASE OF IZMO LTD.(SUPRA). IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 4 OF 8 IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 5 OF 8 IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 6 OF 8 IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 7 OF 8 9. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, WE HOLD THAT THE ACTION OF THE REVENUE AU THORITIES IN MAKING NEGATIVE WORKING CAPITAL ADJUSTMENT AND T HEREBY INCREASING THE AVERAGE ARITHMETIC PROFIT MARGIN OF COMPARABLE COMPANIES IS NOT SUSTAINABLE IN THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE, WHICH IS IDENTIC AL TO THE CASE DECIDED BY THE TRIBUNAL IN THE CASE OF FNF IND IA PVT. LTD. (SUPRA). ACCORDINGLY, THIS GROUND OF THE APPE AL IS ALLOWED. 10. SINCE THE ASSESSEE HAS STATED THAT THE ADJUDICA TION OF OTHER GROUNDS MAY NOT BE NECESSARY, IF GROUND RELAT ING TO NEGATIVE WORKING CAPITAL ADJUSTMENT IS DECIDED IN I TS FAVOUR, WE DECLINE TO ADJUDICATE OTHER GROUNDS URGE D BY THE ASSESSEE. HOWEVER, AS REQUESTED, WE GIVE LIBERTY T O THE ASSESSEE TO MOVE APPROPRIATE PETITION IN ACCORDANCE WITH LAW FOR ADJUDICATION OF OTHER GROUNDS, IF IT IS SO WARRANTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2020. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 24 TH JULY, 2020. VG/SPS IT(TP)A NOS.257 & 556/BANG/2015 M/S. CORE ONE TECHNOLOGIES PVT. LTD., BENGALURU PAGE 8 OF 8 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.