DCIT, V. M/s Centillium India Pvt. Ltd., Bangalore

ITA 613/BANG/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2514 (ITAT-BANGALORE)
• Duration Of Justice: 6 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-08-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KABILA H

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER I T (TP) A NO. 613/ BANG/201 3 ASSESSMENT YEAR : 20 0 5 - 0 6 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11 (2), BANGALORE. VS. M/S. CENTILLIUM INDIA P. LTD., DAVANAM GOLDEN SQUARE PRIME, ROOM NO. 421, DEVANAM SAROVAR PORTICO SUITES, IV FLOOR, NEXT TO TOTAL MALL, OPP. MADIWALA POLICE STN., KORAMANGALA, BANGALORE 560 068. PAN: AAACT4902H APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SMT. KABILA .H, JCIT (DR) DATE OF HEARING : 1 9 .0 8 .2019 DATE OF PRONOUNCEMENT : 23 .0 8 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-IV, BANGALORE DATED 25.02.2013 FOR ASSESSMENT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. 1. THE ORDER OF THE LEARNED CIT (APPEALS). IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN EXCLUDING IGATE GLOBAL SOLUTIONS LTD M/S L&T INFOTECH LTD , SATYAM COMPUTERS LTD , INFOSYS TECHNOLOGIES LTD . M/S. FLEXTRONICS SOFTWARE SYSTEMS LTD. FROM THE LIST OF COMPARABLES HOLDING THAT THE SIZE, TURNOVER OF THE COMPANY ARE DECIDING FACTORS FOR TREATING A COMPANY AS A COMPARABLE. 3. THE LD. CIT(A) ERRED IN EXCLUDING EXENSYS SOFTWARE SOLUTIONS LTD IT(TP)A NO. 613/BANG/2013 PAGE 2 OF 4 AND THIRDWARE SOLUTIONS LTD. FROM THE LIST OF COMPARABLES BY REJECTING THE COMPANIES ON THE BASIS OF ABNORMAL PROFIT WITHOUT DEFINING WHAT CONSTITUTES ABNORMAL PROFIT FILTER AND HOW THE SAME IS DETERMINED 4. THE LEARNED CIT(A) ERRED IN REJECTING THE DIMINISHING REVENUE FILTER USED BY THE TPO TO EXCLUDE COMPANIES THAT DO NOT REFLECT THE NORMAL INDUSTRY TREND. 5. THE HONORABLE CIT(A) ERRED IN COMPUTING THE MARGINS OF M/S QUINTEGRA SOLUTIONS LTD, BY DETERMINING THE SAME AS AVERAGE OF MARGINS OF 6.85% AND 10.68% FOR FY ENDED 30/069/2004 AND 30/09/2005 RESPECTIVELY WITHOUT APPRECIATING THE FACT THAT AN AVERAGE CANNOT REPRESENT THE ARM'S LENGTH MARGIN 6. THE HONORABLE CIT(A) ERRED IN COMPUTING THE MARGINS OF M/S QUINTEGRA SOLUTIONS LTD, BY DETERMINING THE SAME AS AVERAGE OF MARGINS OF 6.85% AND 10.68% FOR FY ENDED 30/069/2004 AND 30/09/2005 RESPECTIVELY WITHOUT APPRECIATING THE FACT THAT THE SAME IS CONTRADICTORY TO CIT(A)'S OWN DECISION IN UPHOLDING THE REJECTION BY THE TPO OF MULTIPLE YEAR'S DATA AND USE OF ONLY CURRENT YEAR'S DATA FOR THE PURPOSE OF TP ANALYSIS. 7. THE HON'BLE CIT(A) HAS ERRED IN HOLDING THAT, THE DIFFERENT ACCOUNTING YEAR FILTER, WAS AN INAPPROPRIATE FILTER FOR THE PURPOSES OF COMPARABILITY ANALYSIS. 8. THE CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ERRED IN HOLDING THAT M/S. TATA ELXSI LTD, CANNOT BE TAKEN AS A COMPARABLE, BEING FUNCTIONALLY DIFFERENT WITHOUT APPRECIATING THE FACT THAT IT SATISFIES ALL THE QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE TPO 7. THE LEARNED CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. ERRED IN HOLDING THAT M/S. BODHTREE CONSULTING LTD AND GEOMETRIC SOFTWARE SOLUTIONS CO. LTD, CANNOT BE TAKEN AS COMPARABLES WITHOUT APPRECIATING THE FACT THAT THE COMPANIES QUALIFIES ALL THE QUANTITATIVE AND QUALITATIVE FILTERS APPLIED BY THE TPO IN SELECTION OF THESE COMPANIES AS COMPARABLES 8. THE LEARNED CIT (A) ERRED IN DIRECTING INCLUSION OF THE M/S. VJIL CONSULTING LTD., WITHOUT APPRECIATING THE TPO'S CONCLUSION THAT THE COMPANY DOES NOT SATISFY THE QUALITATIVE FILTERS APPLIED FOR THE PURPOSE OF COMPARABILITY ANALYSIS AND THEREFORE WAS AN INAPPROPRIATE COMPARABLE FOR THE PURPOSE OF DETERMINING THE ARM'S LENGTH PRICE. 10. THE LEARNED CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ERRED IN HOLDING THAT FOREIGN EXCHANGE LOSS/GAIN IS OPERATING IN NATURE WITHOUT APPRECIATING THE FACT THAT SUCH LOSS/GAIN THOUGH ATTRIBUTABLE TO THE OPERATING ACTIVITY IS NOT DERIVED FROM THE OPERATING ACTIVITY. IT(TP)A NO. 613/BANG/2013 PAGE 3 OF 4 11. THE CIT (A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO RECOMPUTE THE DEDUCTION ALLOWABLE U/S 10A OF THE I.T.ACT AFTER REDUCING THE TELECOMMUNICATION EXPENSES ATTRIBUTABLE TO DELIVERY OF SOFTWARE OUTSIDE INDIA FROM THE TOTAL TURNOVER ALSO. 12. THE LD. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THERE IS NO PROVISION IS SECTION 10A WHICH REQUIRES THE CONCERNED EXPENSES: WHICH ARE REQUIRED TO BE REDUCED FROM THE EXPORT TURNOVER AS PER CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A, TO BE REDUCED FROM THE TOTAL TURNOVER ALSO. 13. THE LD. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE JURISDICTIONAL HIGH COURT DECISION RELIED UPON BY HIM HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE HON'BLE SUPREME COURT WHICH IS PENDING. 14. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 15. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THIS APPEAL WAS FIXED FOR HEARING ON SEVERAL DATES. ON 11.03.2019, THE HEARING WAS ADJOURNED TO 03.07.2019 AND NOTICE WAS ISSUED TO ASSESSEE THROUGH RPAD AND THROUGH DR. THE NOTICE SENT THROUGH RPAD HAD COME BACK UNSERVED AND REVENUE COULD NOT PLACE EVIDENCE REGARDING SERVICE OF NOTICE ON THE ASSESSEE. BUT STILL, THE HEARING WAS ADJOURNED TO 07.08.2019 AND NOTICE WAS AGAIN ISSUED THROUGH DR. ON 07.08.2019 ALSO, THE LD. DR OF REVENUE COULD NOT PLACE ANY EVIDENCE REGARDING SERVICE OF NOTICE AND HEARING WAS AGAIN ADJOURNED TO 19.08.2019 AND NOTICE WAS AGAIN ISSUED THROUGH DR. ON 19.08.2019 ALSO, THE LD. DR OF REVENUE COULD NOT BRING AN EVIDENCE ON RECORD REGARDING SERVICE OF NOTICE ON THE ASSESSEE AND HENCE, FOR THIS REASON ALONE THAT THE REVENUE IS NOT ABLE TO SERVE NOTICE ON ASSESSEE IN SPITE OF SEVERAL OPPORTUNITIES AS NOTED ABOVE, WE FEEL IT PROPER TO DISMISS THE APPEAL OF THE REVENUE FOR WANT OF SERVICE OF THE NOTICE ON ASSESSEE BECAUSE EVEN IF THE OUTCOME OF THE APPEAL GOES IN FAVOUR OF THE REVENUE, THE REVENUE CANNOT COLLECT THE TAX FROM THE ASSESSEE WITHOUT LOCATING THE ASSESSEE AND THEREFORE, WE DISMISS THE APPEAL OF THE REVENUE FOR THIS REASON ALONE THAT THE REVENUE IS NOT IN A POSITION TO SERVE THE NOTICE ON THE ASSESSEE. WE WANT TO MAKE IT CLEAR THAT IF WITHIN THE TIME ALLOWED FOR FILING A MISCELLANEOUS PETITION U/S. 254 IT(TP)A NO. 613/BANG/2013 PAGE 4 OF 4 (2), THE REVENUE IS ABLE TO LOCATE THE ASSESSEE AND THE REVENUE IS IN A POSITION TO SERVE THE NOTICE ON THE ASSESSEE, THEN THE REVENUE CAN MOVE A MISCELLANEOUS PETITION AS PER LAW FOR RECALLING OF THIS TRIBUNAL ORDER. BUT AT THE PRESENT STAGE, WE DISMISS THE APPEAL OF THE REVENUE FOR THIS REASON ALONE THAT THE REVENUE IS NOT IN A POSITION TO SERVE THE NOTICE ON THE ASSESSEE AND THE TRIBUNAL ALSO COULD NOT SERVE THE NOTICE ON THE ASSESSEE THROUGH RPAD. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (BEENA PILLAI) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 23 RD AUGUST, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.