M/s Indecomm Global Services India Pvt Ltd , Bangalore V. Deputy Commissioner of INcome TAx Circle-3(1)(1), Bangalore

MA 114/BANG/2020

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9631 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G ELAMURUGU
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Transfer pricing; International transaction
• Section: 13; 22; 92

Judgement Text

MP NO. 114 AND 128 BANG 2020 M/S/INDECOMM GLOBAL SERVICES (I) PVT.LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE-PRESIDENT AND SHRI B.R.BASKARAN , ACCOUNTANT MEMBER M.P.NO.114/BANG/2020 IN ITA NO. 2130/BANG/2017 ASSESSMENT YEAR: 2011 - 12 M/S.INDECOMM GLOBAL SERVICES (INDIA) PVT. LTD., 4 TH FLOOR, MARUTI INFOTECH BUILDING, AMARJYOTHI LAYOUT, INNER RING ROAD, DOMLUR, BENGALURU 560 071. PAN: AABCB 6817 E VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1), ROOM NO.227, 2 ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, 6 TH BLOCK, BENGALURU - 560095. APPELLANT/APPLICANT RESPONDENT/RESPONDENT M.P.NO.128/BANG/2020 IN ITA NO.2588/BANG/2017 ASSESSMENT YEAR : 2011 - 12 M/S.INDECOMM GLOBAL SERVICES (INDIA) PVT. LTD., 4 TH FLOOR, MARUTI INFOTECH BUILDING, AMARJYOTHI LAYOUT, INNER RING ROAD, DOMLUR, BENGALURU 560 071. PAN: AABCB 6817 E VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1), ROOM NO.227, 2 ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, 6 TH BLOCK, BANGALORE - 560095. RESPO NDENT/APPLICANT APPELLANT /RESPONDENT ASSESSEE BY : SHRI K.R.VASUDEVAN, ADVOCATE RESPONDENT BY : S HRI G. ELAMURUG U , JCIT DATE OF HEARING : 04 . 12 .20 20 DATE OF PRONOUNCEMENT : 04.12.2020 MP NO. 114 AND 128 BANG 2020 M/S/INDECOMM GLOBAL SERVICES (I) PVT.LTD. 2 O R D E R PER N.V. VASUDEVAN, VICE-PRESIDENT THESE ARE MISCELLANEOUS APPLICATIONS FILED BY THE A SSESSEE U/S.254(2) OF THE INCOME TAX ACT, 1961 (ACT) PRAYING FOR RECTIFICATIO N OF CERTAIN APPARENT ERRORS IN THE ORDER OF THE TRIBUNAL DATED 27.11.2019 PASSED IN TH E AFORESAID APPEALS. 2. ITA NO2130/B/17 AND 2588/B/17 WERE CROSS APPEALS F ILED BY THE ASSESSEE AND REVENUE RESPECTIVELY FOR THE ASSESSMENT YEAR 2011-1 2 AND THE APPEALS WERE DIRECTED AGAINST THE ORDER OF CIT(A)-3, BENGALURU, DATED 1.9 .2017. 3. THE ISSUES THAT WERE TO BE DETERMINED IN THE AFORE SAID CROSS APPEALS WERE IN RELATION TO THE DETERMINATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION OF SOFTWARE DEVELOPMENT SERVICES (SWD S ERVICES) AND INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISE(AE). THE TRANSACTION OF RENDERING OF SWD SERVICES AND IT ES TO ITS AE WERE INTERNATIONAL TRANSACTIONS AND IN VIEW OF THE PROVISIONS OF SEC. 92 OF THE INCOME TAX ACT, 1961 (ACT), INCOME ARISING FROM SUCH INTERNATIONAL TRANSACTIONS HAD TO BE DETERMINED HAVING REGARD TO ARMS LENGTH PRICE (ALP). 4. THE ISSUE WITH REGARD TO DETERMINATION OF ALP IN P ROVIDING SWD SERVICES SEGMENT WAS DECIDED BY THE TRIBUNAL VIDE PARAGRAPH 3 TO 16 OF THE ORDER DATED 27.11.2019. A SUM OF RS.7,35,34,045/- WAS ADDED TO THE TOTAL INCOME AS ADDITION ON ACCOUNT OF DETERMINATION OF ALP IN SWD SERVICES SEG MENT. (PARAGRAPH 12.4 AT PAGE-36 & 37 OF THE TPOS ORDER DATED 28.1.2015). ON APPEA L BY THE ASSESSEE THE CIT(A) EXCLUDED 2 OUT OF THE 13 COMPARABLE COMPANIES CHOSE N BY THE TPO. BEFORE THE TRIBUNAL, THE ASSESSEE SOUGHT THE FOLLOWING RELIEFS VIZ., (I) NOT INCLUDING ONE COMPARABLE COMPANY WHICH IT HAD CHOSEN IN ITS TRANSFER PRICING ANALYSI S (TP ANALYSIS) VIZ., LGS GLOBAL LTD.,(RELEVANT GROUND OF APPEAL BEING 8.3 OF REVISE D GROUNDS OF APPEAL) AND (II) THE ACTION OF THE CIT(A) IN NOT EXCLUDING 7 OUT OF THE 11 RETA INED AS COMPARABLE COMPANIES BY THE DRP VIZ., (A) ACROPETAL TECHNOLOGIES LTD., (B) E-ZE ST SOLUTIONS LTD., (C) INFOSYS LTD., (D) MP NO. 114 AND 128 BANG 2020 M/S/INDECOMM GLOBAL SERVICES (I) PVT.LTD. 3 LARSEN & TOUBRO LTD., (E) PERSISTENT SYSTEMS & SOLU TIONS LTD., (F) PERSISTENT SYSTEMS LTD., AND (G) SASKEN COMMUNICATION TECHNOLOGIES LTD . THE RELEVANT GROUND OF APPEAL IN ASSESSEES GROUNDS OF APPEAL IS GROUND NO.8.2 (O F REVISED GROUNDS OF APPEAL). 5. THE FIRST GRIEVANCE OF THE ASSESSEE IN THIS MA IS THAT THE ASSESSEE HAS SOUGHT EXCLUSION OF SASKEN COMMUNICATION TECHNOLOGIES LTD. , BY PLACING RELIANCE ON THE DECISION OF ITAT BANGALORE RENDERED IN THE CASE OF AUTODESK INDIA PVT. LTD. VS. ACIT IT(TP)A.NO.156/BANG/16 FOR AY 2011-12 ORDER DATED 2 1.12.2018. IN PARAGRAPH 12 OF THE ORDER OF THE TRIBUNAL, THE TRIBUNAL HAS REFERRE D TO THE DECISION CITED AND OPINED THAT THE ISSUE OF COMPARABILITY OF THIS COMPANY HAS TO B E REMANDED TO THE AO/TPO FOR FRESH CONSIDERATION BUT THE PARAGRAPH IS INCOMPLETE. 6. WE HAVE CONSIDERED THE GRIEVANCE OF THE ASSESSEE IS IN THIS REGARD AND ARE OF THE VIEW THAT THERE IS AN APPARENT MISTAKE IN PARAGRAPH -12 OF THE ORDER OF THE TRIBUNAL. THE MISTAKE IS RECTIFIED BY SUBSTITUTING THE EXISTING P ARAGRAPH-12 OF THE ORDER OF THE TRIBUNAL BY THE FOLLOWING PARAGRAPH-12: 12. IN THE DECISION RENDERED IN AUTODESK INDIA PVT . LTD.,(SUPRA)(VIDE PARAGRAPH- 27) SASKEN COMMUNICATION TECHNOLOGIES LTD., EXCLUSI ON OF THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES WAS REMANDED TO TH E TPO FOR FRESH CONSIDERATION BY FOLLOWING THE DECISION IN THE CASE OF APPLIED MA TERIALS (I) PVT.LTD. VS. ACIT ON THE GROUND THAT IN IT (TP) A.NO.17 & 39/BANG/201 6 FOR AY 2011-12 ORDER DATED 21.9.2016, WHEREIN THE TPO/AO WAS DIRECTED TO OBTAIN SEGMENTAL DETAILS OF THE SWD SERVICES SEGMENT AND SOFTWARE PRODUCT SEGME NT. FOLLOWING THE SAID DECISION, THE TPO/AO IS DIRECTED TO EXAMINE THE COM PARABILITY OF THIS COMPANY AFRESH AS DIRECTED IN THE CASE OF APPLIED MATERIALS (I) PVT.LTD. (SUPRA). 7. THE NEXT APPARENT MISTAKE POINTED OUT IN THE ORDER OF THE TRIBUNAL IS A TYPOGRAPHICAL ERROR IN PARAGRAPH-15 OF THE ORDER OF THE TRIBUNAL WHEREBY THE NAME LGS GLOBAL LTD., HAS BEEN INCORRECTLY MENTIONED AS LGC GLOBAL LTD. THE MISTAKE IS RECTIFIED MP NO. 114 AND 128 BANG 2020 M/S/INDECOMM GLOBAL SERVICES (I) PVT.LTD. 4 BY DIRECTING THAT THE NAME LGC GLOBAL LTD., AS FOUN D IN PARAGRAPH-15 OF THE ORDER OF THE TRIBUNAL BE READ AS LGS GLOBAL LTD. 8. THE NEXT MISTAKE POINTED OUT IN THE ORDER OF THE TR IBUNAL DATED 27.11.2019 IS IN THE PORTION OF THE ORDER OF THE TRIBUNAL WHEREIN TH E DETERMINATION OF ALP IN RESPECT OF THE ITES SEGMENT IS DEALT WITH. IN THE ITES SEGMEN T, THE ASSESSEE SOUGHT FOR EXCLUSION OF A COMPANY BY NAME ACCENTIA TECHNOLOGIES LTD., WH ICH WAS A COMPARABLE CHOSEN BY THE TPO AND RETAINED BY THE CIT(A) AS A COMPARABLE COMPANY. THE TRIBUNAL OMITTED TO ADJUDICATE THE SAID ISSUE THOUGH THE SAME WAS ARGUE D BY BOTH THE PARTIES. THE STAND TAKEN IN THE MA IS CORRECT. VERIFICATION OF THE LO G BOOK SHOWS THAT THE ISSUE WAS ARGUED. A CHART WAS ON 21.11.2019 THE DATE OF HEARING OF TH E APPEAL, WHICH IS ON RECORD IN WHICH THIS COMPANY WAS SOUGHT TO BE EXCLUDED BY THE ASSES SEE ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND OTHER GROUNDS AND BY PLACING RELI ANCE ON A DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF FINASTRA SOFTWARE SO LUTIONS (INDIA)PVT.LTD. VS. ACIT IT(TP) A. NO.491 & 529/BANG/2016 ORDER DATED 2.5.20 18. A COPY OF THE ORDER REPORTED IN (2018) 93 TAXMANN.COM 460(BANG-TRIB) WAS ALSO FI LED WHICH IS AVAILABLE IN THE FILE. WE THEREFORE RECTIFY THE APPARENT MISTAKE BY INCLUD ING THE NAME OF THE COMPANY ACCENTIA TECHNOLOGIES LTD., BEFORE THE WORDS ACRO PETAL TECHNOLOGIES LTD. IN THE SIXTH LINE OF PARAGRAPH-19 OF THE ORDER. WE ALSO DIRECT THAT THE FOLLOWING SENTENCES BE INCLUDED IN 1 ST LINE OF PARAGRAPH-20 OF THE ORDER OF THE TRIBUNAL BEFORE THE SENTENCE COMMENCING WITH THE WORDS AS FAR AS. AS FAR AS EXCLUSION OF ACCENTIA TECHNOLOGIES LTD., IS CONCERNED, ITAT BANGALORE BENCH IN THE CASE OF SWISS RE SHARED IND IA PVT. LTD. VS. ACIT FOR AY 2011-12, IN THE DECISION REPORTED IN (2016) 76 T AXMANN.COM 22 (BANG-TRIB), ( A COMPANY WHICH IS ALSO ENGAGED IN PROVIDING ITES SUCH AS THE ASSESSEE), WAS PLEASED TO HOLD THAT THIS COMPANY CANNOT BE REGARDE D AS COMPARABLE COMPANY WITH COMPANIES PROVIDING ITES. FOLLOWING THE SAID DECISION, WE HOLD THAT THIS COMPANY HAS TO BE EXCLUDED FROM THE LIST OF COMPARA BLE COMPANIES. MP NO. 114 AND 128 BANG 2020 M/S/INDECOMM GLOBAL SERVICES (I) PVT.LTD. 5 9. IN THE RESULT, THE MPS ARE ALLOWED AS INDICATED AB OVE. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF DECEMBER, 2020. SD/- SD/- (B.R.BASKARAN) ( N.V. VASUDEVA N) ACCOUNTANT MEMBER VICE-PRESIDENT BANGALORE, DATED, THE 4 TH DECEMBER, 2020. */DESAI MURTHY/* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.