M/s Trinit Advanced Software Labs Pvt Ltd., Hyderabad V. ACIT., 2(3), Hyderabad

MA 136/HYD/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2685 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 30-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD; Y R RAO
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER M.A.NO.136/HYD/2014 ARISING OUT OF ITA.NO.1129/HYD/2005 - ASSESSMENT YEAR 2002-2003 M/S. TRINITI ADVANCED SOFTWARE LABS (P) LTD., SECUNDERABAD. PAN AAACE7968E VS. THE ACIT 2(3) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. Y.R. RAO & MR. K.A. SAI PRASAD. FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 09.01.2015 DATE OF PRONOUNCEMENT : 09.01.2015 ORDER PER P.M. JAGTAP, A.M. BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE I S SEEKING RECTIFICATION OF THE MISTAKE ALLEGED TO HAV E CREPT IN THE ORDER OF THE TRIBUNAL DATED 15.07.2011 PASSED IN ITA.NO.1129/HYD/2005. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL ON RECORD. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITE D OUR ATTENTION TO PARAGRAPH NO.9 OF THE TRIBUNAL ORD ER DATED 15.07.2011 (SUPRA) WHEREBY THE ISSUE RELATING TO T. P. ADJUSTMENT WAS RESTORED BY THE TRIBUNAL TO THE FILE OF A.O. FOR DECIDING THE SAME AFRESH AS PER THE FOLLOWING DIREC TIONS : 2 MA.NO.136/HYD/2014 M/S. TRINITI ADVANCED SOFTWARE LABS P. LTD., SECUNDERABAD. 9. FIRSTLY, IN OUR OPINION, COMPARISON OF ASSESSEE S PRICE WITH THE PRICE OF THE M/S. WIPRO IS NOT AT AL L FEASIBLE. AS SUBMITTED BY THE ASSESSEES COUNSEL, T HE ASSESSEE IS A NEW ENTRANT IN THE FIELD AND CAME INT O BUSINESS IN MARCH, 2000 AND BEING SO THE ASSESSEE I S NOT IN A POSITION TO CHARGE AT 22 USD PER MAN HOUR AS T HAT OF M/S. WIPRON IS CHARGING. M/S. WIPRO IS A LARGE INDUSTRIAL GIANT UNDERTAKING WORKING INDEPENDENTLY WITH PRINCIPLES TO PRINCIPLE RELATIONSHIP. ON THE OTHER HAND, THE ASSESSEE IS DEPENDENT CONTRACTOR. THE ASSESSEE HAS ALSO STATED BEFORE US THAT THE BILLING RATE CHANGES DEPE NDING UPON THE VARIOUS FACTORS AS ENUMERATED IN THE REPOR T OF NASCOM WHICH HAS BEEN FILED BY THE ASSESSEE BEFORE THE CIT(A) AND NOT CONSIDERED THE SAME AS BEING ADDITIO NAL EVIDENCE. THERE IS A FORCE IN THE ARGUMENTS OF THE ASSESSEES COUNSEL. AS WE HAVE OBSERVED EARLIER, TH E RATE CHARGEABLE BY M/S. WIPRO CANNOT BE COMPARABLE TO ASSESSEES CASE. BEING SO, IN OUR OPINION, THE ASSE SSING OFFICER IS REQUIRED TO BRING ON RECORD THE COMPARAB LE CASE TO DETERMINE THE PRICE. IF THE ASSESSING OFFICER IS UNABLE TO BRING ON RECORD THE COMPARABLE CASE, THE ASSESSING OFFICER IS AT LIBERTY TO CONSIDER THE RAT E ADOPTED BY THE ASSESSEE IMMEDIATE NEXT YEAR AND THEREAFTER HE IS REQUIRED TO DISCOUNT THE SAME AFTE R CONSIDERING THE INFLATIONARY RATE. ONCE HE ARRIVED AT THE DISCOUNTED RATE, THERE IS NO QUESTION OF FURTHE R GIVING ANY DEDUCTION TOWARDS ANY ADJUSTMENT AT 5%. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO FOL LOW THE CUP METHOD AS ADOPTED BY THE ASSESSEE ITSELF IN THI S ASSESSMENT YEAR. HOWEVER, HE HAS TO RE-DETERMINE TH E TPO AS PER THE ABOVE DIRECTIONS. 4. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO INVITE D OUR ATTENTION TO RULE 10B(4) OF I.T. RULES, 1962 WHICH READS AS UNDER : THE DATA TO BE USED IN ANALYSING THE COMPARABILITY OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRAN SACTION SHALL BE THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO : PROVIDED THAT DATA RELATING TO A PERIOD NOT BEING M ORE THAN TWO YEARS PRIOR TO SUCH FINANCIAL YEAR MAY ALS O BE 3 MA.NO.136/HYD/2014 M/S. TRINITI ADVANCED SOFTWARE LABS P. LTD., SECUNDERABAD. CONSIDERED IF SUCH DATA REVEALS FACTS WHICH COULD H AVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES I N RELATION TO THE TRANSACTIONS BEING COMPARED. 5. RELYING ON THE ABOVE RULE, HE HAS SUBMITTED THA T THE ALTERNATE DIRECTION GIVEN BY THE TRIBUNAL TO TH E ASSESSING OFFICER TO CONSIDER THE RATE ADOPTED BY THE ASSESSE E IN THE IMMEDIATELY NEXT YEAR BY DISCOUNTING THE SAME IS CO NTRARY TO RULE 10C(4) AS THE SAID RULE DOES NOT PERMIT USE OF DATA OF SUBSEQUENT YEARS IN ANALYSING THE COMPARABILITY OF UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRAN SACTION AND THIS POSITION CLEARLY EVIDENT FROM THE PROVISIONS O F RULE 10B(4) IS NOT DISPUTED EVEN BY THE LEARNED D.R. IN THE VAR IOUS DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSE SSEE, THE COORDINATE BENCHES OF THIS TRIBUNAL HAS ALSO TAKEN A CONSISTENT VIEW RELYING ON THE PROVISIONS OF RULE 1 0B(4) THAT THE DATA OF SUBSEQUENT YEAR/YEARS CANNOT BE USED IN COMPARABILITY ANALYSIS. KEEPING IN VIEW THE CLEAR A ND UNAMBIGUOUS PROVISIONS OF RULE 10B(4) AS FURTHER IN TERPRETED BY THE TRIBUNAL IN VARIOUS DECISIONS, WE FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE IS A MISTAKE OF LAW IN THE ORDER OF THE TRIBUNAL IN GI VING ALTERNATE DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE RATE ADOPTED BY THE ASSESSEE IN THE IMMEDIATELY NEXT YEAR FOR CO MPARABILITY ANALYSIS AND THE SAME BEING APPARENT FROM RECORD, W E RECTIFY THE SAME BY DELETING SUCH ALTERNATE DIRECTION GIVEN BY THE TRIBUNAL IN PARAGRAPH NO.9 (HIGHLIGHTED PORTION) OF ITS ORDER. TO THAT EXTENT, THE ORDER OF THE TRIBUNAL DATED 15. 07.2011 IS MODIFIED AND THE MISCELLANEOUS APPLICATION OF THE A SSESSEE IS ALLOWED. 4 MA.NO.136/HYD/2014 M/S. TRINITI ADVANCED SOFTWARE LABS P. LTD., SECUNDERABAD. 6. IN THE RESULT, MISCELLANEOUS APPLICATION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.01.2015. SD/- SD/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 09 TH JANUARY, 2015 VBP/- COPY TO 1. M/S. TRINITI ADVANCED SOFTWARE LABS P. LTD., 301, A SHOKA MYHOME CHAMBERS, S.P. ROAD, SECUNDERABAD. 2. ACIT, CIRCLE 2(3), HYDERABAD. 3. CIT(A)-III, HYDERABAD 4. CIT-II, HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD.