IBM India Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 753/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5344 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 27-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETI GARG
• Assessee Lawyers: AJAY ROTTISHRI SRIRAM SESHADRI
• Keywords: Depreciation; Transfer pricing; International transaction; Unabsorbed depreciation
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NOS.753 & 754(BNG)/09 (ASSESSMENT YEARS : 2002-03 & 2003-04) M/S. IBM INDIA PVT. LTD., SUBRAMANYA ARCADE, NO.12, BANNERGHATTA MAIN ROAD, BANGALORE. VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT. RESPONDENT. APPELLANT BY : SHRI AJAY ROTTI/SHRI SRIRAM SESHADRI . RESPONDENT BY : SMT. PREETI GARG. O R D E R PER SMT. P. MADHAVI DEVI : THESE APPEALS ARE FILED BY THE ASSES SEE-COMPANY FOR THE ASSESSMENT YEARS 2002-03 & 2003-04. IN BOTH THE APPEALS, THOU GH THE ASSESSEE HAS RAISED A NUMBER OF GROUNDS RELATING TO THE DETERMINATION OF ARMS LENGTH PRICE, THE MAIN GRIEVANCE IS WITH REGARD TO THE ORDER OF THE C OMMISSIONER OF INCOME TAX (APPEALS) IN RESTORING THE ISSUE OF DETERMINATION O F THE ARMS LENGTH PRICE (IN SHORT ALP) TO THE LEARNED TRANSFER PRICING OFFICER (IN SHORT TPO) WITH CERTAIN DIRECTIONS TO THE LEARNED ASSESSING OFFICER/TPO TO MAKE A FRESH DETERMINATION OF THE ALP. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS AND THE ASSESSING OFFICER REFERRED THE MATTER TO THE TPO UNDER SECTION 92AC OF THE INCOME TAX ACT, 1961 FOR DETERM INATION OF THE ALP. THE ITA NOS.753 & 754(BNG)/09 - 2 - TPO DETERMINED THE ALP AND THE ASSESSING OFFICER CO NFIRMED THE SAID DETERMINATION. AGGRIEVED, THE ASSESSEE APPEALED BE FORE THE CIT(A) AND THE CIT(A) VIDE ORDER DT.30.4.2009 NOT ONLY RESTORED TH E MATTER TO THE TPO BUT ALSO PROVIDED DIRECTIONS TO THE ASSESSING OFFICER/TPO TO MAKE A FRESH DETERMINATION OF THE ALP. THE ASSESSEE IS IN APPEAL BEFORE US ON BOTH THE DETERMINATION OF THE ALP AS WELL AS RESTORING THE ISSUE TO THE AO/TP O. 3. WE HAVE TAKEN UP THE INITIAL OBJECTION OF THE AS SESSEE THAT THE CIT(A) SHOULD NOT HAVE RESTORED THE MATTER FOR DETERMINATI ON OF THE ALP TO THE TPO. IT IS SEEN THAT SECTION 251(1)(A) OF THE INCOME TAX ACT, 1961 DEALING WITH THE POWERS OF CIT(A) HAS BEEN AMENDED W.E.F. 1.10.1998 OMITTING THE PORTION BEGINNING WITH THE WORDS OR HE MAY SET ASIDE AND ENDING WITH THE WORD ON THE BASIS OF SUCH FRESH ASSESSMENT FROM THE SAID P ROVISION. THUS IT CAN BE SEEN THAT THE CIT(A) HAS NO POWER TO REMAND THE ISSUE OR SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER W.E.F. 1.10.1998 BUT HAVE TO TAKE A DECISION ON THE ISSUE RAISED IN THE APPEAL. FOR THIS PURPOSE, IF T HERE IS NECESSITY OF ANY INFORMATION OR VERIFICATION OF ANY DETAILS, HE MAY CALL FOR THE SAME BY CALLING FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IT IS SEEN IN THE CASE BEFORE US THAT THE CIT(A) HAD ALSO CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDERING THE SAME, HE HAS SET ASIDE TH E ISSUE TO THE TPO WITH A FURTHER DIRECTIONS. IN OUR OPINION, THE CIT(A) HAS EXCEEDED HIS POWER BY SETTING ASIDE THE ISSUE TO THE FILE OF AO/TPO. ITA NOS.753 & 754(BNG)/09 - 3 - 4. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORD ER OF THE CIT(A) AND REMAND THE ISSUE TO THE FILE OF CIT(A) WITH A DIREC TION TO DISPOSE OFF THE APPEAL ON THE BASIS OF THE CONTENTIONS RAISED BY THE ASSES SEE AND ALSO BY CALLING FOR A FURTHER REMAND REPORT, IF NECESSARY, FROM THE ASSES SING OFFICER. 5. IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. 6. IN ADDITION TO THE ABOVE GROUND OF APPEAL IN BOT H THE APPEALS, FOR THE A.Y. 2003-04, THE ASSESSEE HAS ALSO RAISED THE GRO UND THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE RELIEF UNDER SECTION 10A SHOULD BE PROVIDED AFTER SETTING OFF OF BROUGHT FORWARD LOSSES. AS REGARDS THIS GROUND OF APPEAL, WE FIND THAT THE ASSESSING OFFICER DISALLOWED THE EXEMPTION UNDER SE CTION 10A ON THE GROUND THAT THE ASSESSEE WAS NOT MAINTAINING SEPARATE BOOK S OF ACCOUNTS AND THAT PORTION OF THE SOFTWARE DEVELOPMENT ACTIVITY WAS BE ING CARRIED OUT BY SUB- CONTRACTORS. THE CIT(A) ALLOWED THE EXEMPTION UNDE R SECTION 10A TO THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2000-01 BUT HOWEVER RESTRICTED THE RELIEF TO BE ALLOWED AFTER SETTING OFF OF BROUGHT FORWARD LOSSES. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE TRIED TO DI STINGUISH THE FACTS OF THE CASE BEFORE US AS TO WHY THE RELIEF UNDER SECTION 1 0A SHOULD BE PROVIDED WITHOUT SETTING OFF OF BROUGHT FORWARD LOSSES. HOW EVER, WE FIND THAT THE ISSUE AS TO WHETHER OR NOT THE EXEMPTION UNDER SECTION 10 A IS TO BE GRANTED AFTER SETTING OFF OF BROUGHT FORWARD LOSSES, IS COVERED B Y THE DECISION OF THE A ITA NOS.753 & 754(BNG)/09 - 4 - BENCH OF THE ITAT IN ITA NO.1021/BANG/09 DT.12.3.20 09 FOR A.Y. 2004-05 IN THE CASE OF INTELLINET TECHNOLOGIES INDIA PVT. L TD. VS. ITO, WHEREIN AFTER REFERRING TO THE VARIOUS DECISIONS, WHICH ARE IN FA VOUR OF THE ASSESSEE AND ALSO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. HIMATASINGIKE SEIDE LTD. (286 ITR 255) HAS HELD THA T THE ASSESSING OFFICER HAS ERRED IN GIVING EXEMPTION UNDER SECTION 10A BEFORE SETTING OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF THE E ARLIER ASSESSMENT YEAR. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF TH E CO-ORDINATE BENCH AND ALSO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT CI TED (SUPRA), WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF CIT(A) TO INTERFERE W ITH AS IT IS IN CONSONANCE WITH THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT. HOWEVER IF THERE IS ANY FACTUAL INCONSISTENCY, THE ASSESSEE SHALL BE AT LIB ERTY TO POINT OUT THE SAME TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER SHALL T AKE A DECISION ACCORDINGLY IN THE APPROPRIATE PROCEEDINGS. 8. IN THE RESULT, THIS GROUND OF APPEAL I S REJECTED. 9. IN THE RESULT THE APPEAL IN ITA NO.753(BNG)/09 I S ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL IN ITA NO.754(BNG)/09 IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.04.2010. SD/- SD/- (DR. O.K.NARAYANAN) (P. MADHAVI DEVI) VICE PRESIDENT JUDICIAL MEMBER BANGALORE, DT.27.04.2010. ITA NOS.753 & 754(BNG)/09 - 5 - COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. * GPR