M/s.Evolving Systems Network India Pvt. Ltd., Bangalore V. Income-Tax Officer, Ward-2(1)(2), Bangalore

MA 10/BANG/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3428 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Transfer pricing; International transaction
• Section: 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.V VASUDEVAN, VICE PRESI DENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER M.P NO.10/BANG/2019 (IN IT(TP)A NO.216/BANG/2017) ASSESSMENT YEAR : 2012-13 M/S EVOLVING SYSTEMS NETWORK INDIA PVT. LTD., GURUDAS HERITAGE, 3 RD FLOOR, 59/2, 100 RING ROAD, BANASHANKARI II STAGE, BENGALURU. PAN AABCE 2761 N. VS. THE INCOME-TAX OFFICER, WARD-2(1)(2), BENGALURU. APPLICANT RESPONDENT APPLICANT BY : SHRI PADAMCHAND KHINCHA, C.A RESPONDENT BY : DR. PRADEEP KUMAR, ADDL. CIT (DR, ITAT, BENGALURU) DATE OF HEARING : 15.02.2019 DATE OF PRONOUNCEMENT : 22.02.2019 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS MISC. APPLICATION FILED BY THE ASSESSEE U/S 254(2) OF THE INCOME-TAX ACT, 1961 (THE ACT) PRAYING FOR RECTIFICATION OF THE ORDER DATED 21/12/2108 OF CERTAIN APPARENT ERRORS. 2. THE ISSUE INVOLVED IN THE ABOVE APPEAL WAS WITH REGARD TO DETERMINATION OF ARMS LENGTH PRICE U/S 92 OF THE ACT IN RESPECT O F INTERNATIONAL TRANSACTION OF PROVIDING SOFTWARE DEVELOPMENT SERVICES BY THE ASSE SSEE TO ITS HOLDING MP NO.10/B/19 2 PROVIDING SOFTWARE DEVELOPMENT SERVICES BY THE ASSE SSEE TO ITS HOLDING COMPANY. IT IS A GRIEVANCE OF THE ASSESSEE IN THIS MISC. APPLICATION THAT THE TRIBUNAL DID NOT ADJUDICATE GROUND 4.1(G) IN THE GR OUNDS OF APPEAL FILED ON 11/12/2017 AND RE-NUMBERED AS GROUND 3.1(G) OF THE GROUND OF APPEALS FILED ON 11/5/2018. THE ABOVE GROUND RELATES TO TREATMEN T OF FOREIGN EXCHANGE GAIN AS FARMING PART OF THE OPERATING PROFIT OF THE ASSESSEE FOR THE PURPOSE OF DETERMINING THE PROFIT LEVEL INDICATOR OF THE ASSES SEE. IN THIS MISC. APPLICATION, THE ASSESSEE HAS POINTED OUT THAT TRIBUNAL IN ITS O RDER DATED 21/12/2018 AT PARAGRAPH -16 HELD THAT OTHER GROUNDS OF APPEAL OTH ER THAN THE ONE DECIDED BY THE TRIBUNAL VIDE ORDER DATED 21/12/1018 WERE NOT P RESSED. IT IS A PLEA OF THE ASSESSEE THAT THE GROUNDS WITH REGARD TO TREATING F OREIGN EXCHANGE GAIN AS PART OF THE OPERATING PROFIT WHILE DETERMINING THE PLI OF THE ASSESSEE WAS AGITATED. IT IS POINTED OUT THAT CASE LAWS IN SUPP ORT OF THE CLAIM OF THE ASSESSEE WAS ALSO FILED BEFORE THE TRIBUNAL WHICH A RE CONTAINED IN PAGE NOS.777 & 788 OF THE ASSESSEES PAPER BOOK. IT HAS BEEN SUBMITTED THAT FAILURE TO ADJUDICATE THE GROUND GIVE RAISE TO MIST AKE APPARENT ON THE FACE OF THE RECORD AND IN THIS REGARD RELIANCE WAS PLACED O N THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. K.M SU GAR MILLS PVT. LTD., 275 IR 247 (ALL). 3. THE LD COUNSEL FOR THE ASSESSEE REITERAT ED THE FACTS AS CONTAINED IN MISC. APPLICATION PRAYED FOR RECTIFICATION OF THE O RDER. 4. THE LD DR RELIED ON THE ORDER OF THE TR IBUNAL. 5. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND CONTENTIONS IN THE MISC. PETITION AND THE RECORD. IT IS CORRECT THAT THE ASSESSEE HAD MADE SUBMISSION ON FOREIGN EXCHANGE GAIN BEING PART OF THE OPERATING PROFIT OF THE ASSESSEE FOR THE PURPOSE OF DETERMINI NG THE PLI OF THE ASSESSEE AND THE COMPARABLES AND IN THIS REGARD, THE ASSESSE E HAS EVEN DRAWN ATTENTION OF THE BENCH TO DECISION OF THE DELHI HIG H COURT IN THE CASE OF PR. MP NO.10/B/19 3 CIT VS. AMERIPRICE INDIA PVT. LTD., IN ITA NO.206/2 016 DATED 23/3/2016 AND PR. CIT VS. S.T ERICSSON INDIA LTD., IN ITA NO.821 //2017 ORDER DATED 31/1/2018 THIS TRIBUNAL HAS TAKEN A VIEW THAT FOREI GN EXCHANGE GAIN OR LOSS RESULTING FROM TRADING ITEMS HAS TO BE CONSIDERED A S PART OF THE OPERATING PROFIT OR LOSS. WE ARE THEREFORE, OF THE VIEW THAT THERE IS AN ERROR APPARENT ON THE FACE OF THE RECORD AND THE SAME IS RECTIFIED BY INS ERTING THE FOLLOWING AS PARAGRAPH 14A. 14A) AS FAR AS FOREIGN EXCHANGE GAIN EARNED BY THE ASSESSEE IS CONCERNED, THE SAME SHOULD BE TREATED AS PART OF THE OPERATING PROFIT OR NOT HAS ALREADY BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF PRL.CIT VS. S.T.ERICSSON INDI A LTD. (SUPRA) AND AMERIPRICE INDIA PVT. LTD., (SUPRA ).IT IS THE PLEA OF THE ASSESSEE THAT FOREIGN EXCHANGE GAIN AROSE FROM TRADING ITEMS AND THEREFORE IT SHOU LD BE REGARDED AS PART OF THE OPERATING PROFIT. WE ARE OF THE VIEW THAT THE CLAIM MADE BY THE ASSESSEE IN THIS REGARD DESERVES TO BE ACCEPTED AND AO IS DIRECTED TO TREAT THE FOREIGN EXCHANGE GAIN AS PART OF THE OPERATING PROFIT AND COMPUTE THE PLI OF THE ASSESSEE ACCORDINGLY. 8. IN THE RESULT, MISC. PETITION IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2019 . SD/- SD/- (JASON P BOAZ) (N.V VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 22 /2/2019 VMS MP NO.10/B/19 4 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGI STRAR, ITAT, BANGALORE