M/s Cisco Systems Capital (India) Private Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-2(1)(1), Bangalore

ITA 900/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3248 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Set aside
• Section: 143(3); 144C; 113; 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA 900 & 901/BANG/2019 ASSESSMENT YEARS : 2008 09 & 2009 10 M/S. CISCO SYSTEMS CAPITAL (INDIA) PVT. LTD., BRIGADE SOUTH PARADE, NO. 10, M. G. ROAD, BENGALURU 560 001. PAN NO : AACCC 4552 A VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1) (1) (1), ROOM NO. 217, 2 ND FLOOR, BMTC BUILDING, KORAMANGALA, BENGALURU. APPELLANT RESPONDENT & ITA 1009 & 1010/BANG/2019 ASSESSMENT YEARS : 2008 09 & 2009 10 JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE 2, ROOM NO. 245, 2 ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE. VS. M/S. CISCO SYSTEMS CAPITAL INDIA PVT. LTD., 2 ND FLOOR, BRIGADE SOUTH PARADE, NO. 10, M. G. ROAD, BANGALORE 560 001. PAN NO : AACCC 4552 A APPELLANT RESPONDENT APPELLANT BY : SHRI. RAJAN VORA, CA RESPONDENT BY : MS. NEERA MALHOTRA, CIT DR DATE OF HEARING : 26-02-2020 DATE OF PRONOUNCEMENT : 06 -03-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT CROSS APPEALS HAVE BEEN FILED BY ASSESSEE A S WELL AS REVENUE AGAINST ORDER DATED 27/02/2019 AND 28/02/2019 PASSED PAGE 2 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 BY LD.CIT (A)-2, BENGALURU FOR ASSESSMENT YEARS 200 8-09 AND 2009-10. GROUND NO. 1-2 RAISED BY ASSESSEE IS CHALLENGING VALIDITY OF ORDE R PASSED BY LD.AO U/S. 143 (3) READ WITH SECTION 254 READ WITH SECTION 263 OF THE ACT AS UNDER: A. GROUNDS OF APPEAL RELATING TO VALIDITY OF ORDER PASSED U/S. 143(3) R.W.S. 254 R.W.S. 263 OF THE ACT. 1. THE LD. CIT(A) HAS ERRED IN NOT QUASHING THE ORD ER PASSED U/S. 143(3) R.W.S. 254 R.W.S. 263 OF THE ACT WHICH IS IN VIOLATION OF THE MANDATE OF SECTION 144C OF THE ACT; 2. THE LD. CIT(A) HAS ERRED IN REJECTING THE APPELL ANTS PLEA THAT THE ORDER PASSED U/S. 143(3) R.W.S. 254 R.W.S. 263 OF T HE ACT IN PURSUANCE OF TRANSFER PRICING ORDER IS VOID AB INIT IO AS THE ASSESSING OFFICER HAS VIOLATED THE MANDATE OF SECTI ON 144C OF THE ACT. 2. IT HAS BEEN SUBMITTED THAT, VALIDITY OF ORDER PASSE D BY LD.AO HAS BEEN CHALLENGED FOR ASSESSMENT YEAR 2009- 10 ON IDENTICAL FACTS. HE SUBMITTED THAT, LEGAL ISSUE RA ISED BY ASSESSEE SHALL BE CONSIDERED BEFORE GOING INTO MERITS OF THE CASE. GROUND 1-2 (ASSESSEES APPEAL) 3. LD.AR SUBMITTED THAT, THE ISSUE OF VALIDITY OF ORDE R PASSED BY LD.AO WAS CHALLENGED BEFORE LD. CIT-(A) W HEREIN LD. CIT-(A) DECIDED THE ISSUE BY OBSERVING AS UNDER: 6.3 IN GROUND NO.10, THE APPELLANT HAS CONTENDED TH AT THE AO SHOULD HAVE ISSUED DRAFT ASSESSMENT ORDER WHILE GIVING EFFECT T O THE ORDER OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAD SET ASIDE THE MATTER TO TH E FILE OF AO IN RELATION TO CORPORATE TAX MATTERS PERTAINING TO ALLOWANCE OF DE PRECIATION OF NETWORKING EQUIPMENTS AND ON TRANS-APPRISING MATTERS RELATING TO PAYMENT OF ADMINISTRATIVE SUPPORT SERVICES. IN THIS REGARD, TH E APPELLANT HAS PLACED PAGE 3 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N CASE OF ACIT VS NOKIA PVT. LTD., (SLP (CIVIL) DIARY NO(S) 7302/2018) WHER EIN THE SUPREME COURT HAS AFFIRMED THE DECISION OF ORDERABLE DELHI HIGH COURT (WPC NO. 3629/2017) WHEREIN IT WAS HELD AS FOLLOWS: ONCE THERE IS A CLEAR ORDER OF SETTING ASIDE OF AN ASSESSMENT ORDER WITH THE REQUIREMENT OF THE AO/TPO TO UNDERTAKE A FRESH EXER CISE OF DETERMINING THE ARMS LENGTH PRICE, THE FAILURE TO PASS A DRAFT ASS ESSMENT ORDER, WOULD VIOLATE 144C (1) OF THE ACT. THIS IS NOT A CURABLE DEFECT I N TERMS OF SECTION 292B OF THE ACT AS HELD BY THIS COURT IN ITS DECISION DATED 17/ 07/2015 IN ITA NO. 275/2015 PR. CIT VS CITI FINANCIAL CONSUMER FINANCE INDIA PVT. LTD.,. THEREFORE, IS SUBMITTED THAT ONCE THE TPOS ORDER I S REMANDED BACK TO THE TPO/AO BY THE ITAT, THE AO/TPO SHOULD HAVE IDEALLY PASSED THE DRAFT ORDER CONSIDERING THE WRITTEN SUBMISSIONS FILED AND NOT A FINAL ORDER AND IT IS NOT CURABLE DEFECT AS PER THE SC ORDER. HOWEVER, IT IS SEEN THAT THE HONBLE TRIBUNAL HAD SET ASIDE THE MATTER TO THE FILE OF TH E AO IN RELATION TO THE CORPORATE TAX MATTERS PERTAINING TO ALLOWANCE OF DE PRECIATION OF NETWORKING EQUIPMENTS AND ON TRANSFER PRICING MATTERS RELATIN G TO PAYMENT OF ADVERTISEMENT SUPPORT SERVICES. THE TPO WHILE PASSI NG THE ORIGINAL TP ORDER U/S.92CA HAD FOLLOWED THE DUE PROCEDURE PASSING THE DRAFT ASSESSMENT ORDER AND SINCE THERE IS NO CHANGE IN THE ORDER PURSUANT IN PURSUANT OF 254 ORDER, THE TPO HAS NOT PASSED AGAIN A DRAFT ORDER AND THER EFORE THE ACTION OF TPO IN PASSING THE ORDER U/S.92 CA R.W.S. 254 WITHOUT DRAF T ORDER IS JUSTIFIED. THIS GROUND IS THEREFORE DISMISSED. 4. LD.AR SUBMITTED THAT, AUTHORITIES BELOW FAILED TO APPRECIATE THAT, FINAL ASSESSMENT ORDER STANDS VITI ATED FOR FAILURE TO ADHERE TO THE MANDATE OF REQUIREMENTS OF FIRST P ASSING DRAFT ASSESSMENT ORDER IN TERMS OF SECTION 144C (1) OF TH E ACT. HE SUBMITTED THAT, THERE IS SERIES OF DECISIONS BY VAR IOUS HIGH COURTS TO WHICH LD.AR HAS REFERRED TO IN WRITTEN SUBMISSIO N FILED BEFORE US, DATED 18/09/2019 WHICH ARE AS UNDER: PAGE 4 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 1. HONBLE SUPREME COURT IN THE CASE OF ACIT VS. NOKIA INDIA PVT. LTD., (SPECIAL LEAVE PETITION (CIVIL) DIARY NO. 730 2 OF 2018). 2. HONBLE SUPREME COURT IN THE CASE OF CONTROL RIS K INDIA PVT. LTD., VS. DCIT (W.P.(C) 5722/2017 & C.M. NO. 23860/2017). 3. HONBLE DELHI HIGH COURT IN THE CASE OF TURNER I NTERNATIONAL INDIA (P) LTD., VS. CIT[2017] 82 TAXMANN.COM 124 (DELHI). 4. HONBLE HIGH COURT OF DELHI IN JCB INDIA VS. DCI T [2017[] 85 TAXMANN.COM 155 (DEL). 5. PCIT VS. LIONBRIDGE TECHNOLOGIES PVT. LTD., (INC OME TAX APPEAL NO. 522 OF 2016). 6. ZUARI CEMENT LTD., VS. ACIT (DECISION DATED 21 ST FEBRUARY, 2013 IN WP(C) NO. 5557/20212), THE DIVISION BENCH (DB) O F THE ANDHRA PRADESH HIGH COURT. 7. VIJAY TELEVISION (P.) LTD., VS. DISPUTE RESOLUTI ON PANEL [2014] 369 ITR 113 (MAD.). 8. ESPN SPORTS MAURITIUS S.N. C. ET COMPAGNIE VS. U NION OF INDIA [2016] 388 ITR 383 (DEL.). 5. ON THE CONTRARY, LD. CIT DR SUBMITTED THAT, THERE I S NOTHING IN THE WORDING OF SECTION 144C (1) WHICH WO ULD INDICATE THAT THIS REQUIREMENT OF PASSING DRAFT ASSESSMENT O RDER IN THE REMAND PROCEEDINGS OF AN ISSUE BY ITAT IS TO BE SAT ISFIED. IT WAS SUBMITTED THAT, ASSESSMENT ORDER CANNOT BE CONSIDER ED TO BE INVALID BECAUSE EVEN IF THERE IS ANY FAILURE TO PAS S DRAFT ASSESSMENT ORDER U/S 144C OF THE ACT THE SAME IS CU RABLE U/S. 292B OF THE ACT. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US 6. THE ISSUE THAT ARISES FROM ARGUMENTS ADVANCED BY BO TH SIDES IS; WHETHER ON A REMAND BY TRIBUNAL IN CASE OF AN ELIGIBLE PAGE 5 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 ASSESSEE, CAN LD.AO WITHOUT ISSUING DRAFT ASSESSMEN T ORDER U/S. 144C (1) OF THE ACT, STRAIGHTAWAY PASSED THE FINAL ASSESSMENT ORDER U/S. 143 (3) OF THE ACT. SEQUENCE OF EVENTS IN THE PRESENT APPEALS ARE AS UN DER: PECULIARITY IN THESE ORDERS ARE AS THAT, SUBSEQUENT TO PASSING OF FINAL ASSESSMENT ORDER IN ORIGINAL PROCE EDINGS, ON 12/10/2012 AND 31/12/2013 FOR YEARS UNDER CONSIDERA TION RESPECTIVELY, LD.PR.CIT INITIATED REVIEW PROCEEDING S U/S. 263. ORDER U/S.263 WAS PASSED ON 30/03/2015 FOR BOTH YEA RS UNDER CONSIDERATION BY HOLDING ASSESSMENT ORDER IN ORIGINAL PROCEEDING BY LD.AO TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. LD.PR.CIT WAS OF THE VIEW THAT, LD.AO PROCEEDED WITH ASSESSMENT WITHOUT MAKING ANY ENQUIR Y WITH REGARD TO ELIGIBILITY OF DEPRECIATION IN THE HANDS OF ASSESSEE, WITHOUT ASCERTAINING WHETHER ASSESSEE COULD BE CONS IDERED TO BE THE OWNER OF ASSETS, AS IS REQUIRED BY SECTIO N 32 OF THE ACT. THIS ORDER U/S.263 WAS CHALLENGED BY ASSESSEE BEFORE THIS TRIBUNAL , WHICH WAS QUASHED FOR REASONS RECORDED THEREIN. SIMULTANEOUSLY, AGAINST FINAL ASSESSMENT ORDER IN O RIGINAL PROCEEDINGS WAS CHALLENGED BY ASSESSEE BEFORE THIS TRIBUNAL . THIS TRIBUNAL VIDE ORDER DATED 19/09/2014 IN ITA (TP) A NO. 1558/B/2012 FOR ASSESSMENT YEAR 2007-08 AND VIDE OR DER DATED 10/10/2014 IN ITA (TP) A NO. 116/B/2014, REMA NDED CORPORATE TAX ISSUE PERTAINING TO DEPRECIATION ALLO WABLE ON AUDIO-VISUAL EQUIPMENTS AS WELL AS TRANSFER PRICING ISSUE REGARDING INTERNATIONAL TRANSACTION OF AVAILING ADM INISTRATIVE PAGE 6 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 SERVICES BY ASSESSEE FROM ITS AE TO LD.AO/TPO FOR R E- ADJUDICATING AFRESH. LD.TPO VIDE SEPARATE ORDERS DATED 28/03/2016 COMPUT ED PROPOSED ADJUSTMENT AT RS.2,16,37,189/- FOR ASSESSM ENT YEAR 2008-09 AND FOR ASSESSMENT YEAR 2009-10 PROPOS ED ADJUSTMENT WAS COMPUTED AT RS.7,35,53,154/-. FOR ASSESSMENT YEAR 2008-09 LD.TPO PASSED FINAL ASSESSMENT ORDER DATED 13/03/2016 U/S. 143 (3) R.W. S.254 R.W.S.263 OF THE ACT COMPUTING ADDITION AND ISSUING DEMAND NOTICE AND CHALLAN. FOR ASSESSMENT YEAR 2009-10 SIMILAR ORDER WAS PASSE D ON 26/10/2016, U/S.143 (3) R.W.S.254 R.W.S.263 OF THE ACT COMPUTING ADDITION, AND ISSUING DEMAND NOTICE AND C HALLAN. 7. LD.AO WHILE PASSING IMPUGNED ORDERS HAS NOT FOLLOWE D DUE PROCEDURE OF LAW LAID DOWN U/S. 144C OF THE ACT . FOR ASSESSMENT YEAR 2008-09, LD.AO PASSED FINAL ASSESSM ENT ORDER IMMEDIATELY WITHIN 2 DAYS OF RECEIPT OF REPORT FROM LD. TPO WHEREAS FOR ASSESSMENT YEAR 2009-10 FINAL ASSESSMEN T ORDER WAS PASSED AFTER A PERIOD OF 6 MONTHS FROM THE DATE OF RECEIPT OF TRANSFER PRICING REPORT. 8. ADMITTEDLY, PRESENT ASSESSEE IS AN ELIGIBLE ASSESSE E, AS DEFINED IN SECTION 144C (15) (B) OF THE ACT. ON PER USAL OF SECTION 144C OF THE ACT, NON-COMPLIANCE WITH SECTION IN CAS E OF AN ELIGIBLE ASSESSEE CANNOT BE CONSIDERED TO BE A MERE IRREGULARITY AS HAS BEEN ARGUED BY LD. CIT-DR. PLETHORA OF DECI SIONS REFERRED TO HEREIN ABOVE AND RELIED UPON BY LD.AR SUPPORTS T HIS VIEW. ADMITTEDLY, IN PRESENT FACTS OF THE CASE, FOR YEARS UNDER PAGE 7 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 CONSIDERATION, THE LD.AO HAS NOT FOLLOWED THE MANDA TE REQUIRED UNDER SECTION 144C (1), WHEREIN HE IS REQUIRED TO F ORWARD DRAFT OF PROPOSED ORDER OF ASSESSMENT TO THE ELIGIBLE ASSESS EE, IF HE PROPOSES TO MAKE ANY VARIATION IN THE INCOME OR LOS S RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF ASSESSEE. T HIS IS A NON- OBSTINATE CLAUSE THAT GIVES AN OVERRIDING EFFECT TO THE PROCEDURE. 9. HONBLE COURTS IN DECISIONS RELIED UPON HEREINABOV E HAS HELD THAT PROCEDURE LAID DOWN U/S 144C OF THE A CT IS OF GREAT IMPORTANCE. IT HAS BEEN HELD THAT, WHEN AN ASSESSIN G OFFICER PROPOSES TO MAKE VARIATION TO THE RETURNED INCOME D ECLARED BY AN ELIGIBLE ASSESSEE, HE HAS TO FIRST PASS DRAFT OR DER, PROVIDE A COPY THEREOF TO ASSESSEE AND ONLY THEREUPON THE ASS ESSEE COULD EXERCISE THE RIGHT UNDER 144C (2) OF THE ACT TO RAI SE OBJECTIONS BEFORE DRP ON PROPOSED VARIATIONS. THIS REQUIREMENT THE COURTS HAS BEEN HELD TO BE MANDATORY THAT GIVES SUBSTANTIV E RIGHTS TO ASSESSEE TO OBJECT TO ANY ADDITIONS, BEFORE THEY AR E MADE, AND SUCH OBJECTIONS HAVE TO BE CONSIDERED NOT BY THE AS SESSING OFFICER BUT BY THE DRP. WE THEREFORE REJECT THE ARGUMENT OF LD. CIT DR THAT FAILURE TO ADHERE TO REQUIREMENT UNDER 144C (1 ) IS CURABLE DEFECT U/S. 292B OF THE ACT. RESPECTFULLY FOLLOWING RATIO LAID DOWN BY VARIOUS H IGH COURTS ON THIS ISSUE REFERRED TO HEREIN ABOVE, WE SET ASIDE A ND QUASH ORDERS DATED 30/03/2016 FOR ASSESSMENT YEAR 2008-09 AND 26/10/2016 FOR ASSESSMENT YEAR 2009-10. ACCORDINGLY, ASSESSEE SUCCEEDS ON LEGAL ISSUE RAISE D IN GROUND 1-2 FOR BOTH YEARS UNDER CONSIDERATION. PAGE 8 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 OTHER GROUNDS RAISED ON MERITS BY ASSESSEE NOW BECO MES ACADEMIC AND THEREFORE NOT ADJUDICATED BY US. ACCORDINGLY, APPEAL FILED BY ASSESSEE FOR ASSESSMEN T YEARS 2008-09 AND 2009-10 STANDS ALLOWED. IN REVENUES APPEAL THE CHALLENGE IS ON THE ISSUE C ONSIDERED BY LD. AO WHILE GIVING ORDER EFFECT TO ORDER PASSED U/ A. 263 BY LD. PR. CIT. 10. AT THE OUTSET BOTH SIDES SUBMITS THAT, AS ASSESSMEN T ORDER ITSELF STANDS QUASHED AND SET-ASIDE REVENUES APPEAL BECOMES INFRUCTUOUS. IN ANY EVENT, WHILE THE ORDER GIVING EFFECT OF ORDER U/S. 263 WAS PASSED BY LD. AO THIS TRIBUNAL HAD QUASHED ORDER PASSED BY PRINCIPAL CIT, U/S. 263 OF THE ACT. WE THEREFORE DISMISS APPEALS FILED BY REVENUE AS NO CAUSE OF ACTION ARISES OUT OF THE SAME. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEARS 2008-09 AND 2009-10 STANDS ALLOWED ON LEGAL I SSUE RAISED AND APPEALS FILED BY REVENUE FOR ASSESSMENT YEARS 2008-09 AND 2009-10 STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MARCH, 2020. SD/- SD/- (PRADIP KUMAR KEDIA) ( BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 6 TH MARCH, 2020. /VMS/ PAGE 9 OF 9 ITA 900 & 901/BANG/2019 & ITA 1009 & 1010/BANG/19 A. YS : 2008 09 & 2009 10 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. DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR 04-03-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 05-03-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 05-03-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 05-03-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 06-03-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE 10-03-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK 10-03-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS