GSS Infotech Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-2(2), Hyderabad

MA 16/Hyd/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0896 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 18-06-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANYAM TOTA
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 254(2)

Judgement Text

MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY , ACCOUNTANT MEMBER M.A. NOS. 16 & 17/HYD/2021 (ARISING OUT OF ITA NO S . 2255/ HYD/201 7 & 2367/HYD/2018) ASSESSMENT YEAR S: 2013 - 14 & 2014 - 15 GSS INFOTECH LTD HYDERABAD PAN:AADCM6759Q VS. DY. C.I.T CIRCLE 2(2) HYDERABAD ( APPELLANT) (RESPONDENT) ASSESSEE BY: SRI P. MURALI MOHANA RAO REVENUE BY : SRI SUBRAMANYAM TOTA, DR DATE OF HEARING: 18 / 06 / 2021 DATE OF PRONOUNCEMENT: 14 / 0 7 /20 21 ORDER PER SMT. P. MADHAVI DEVI, J.M. TH ESE M.AS ARE FILED BY THE ASSESSEE U/S 254(2) OF THE ACT SEEKING RECTIFICATION OF ALLEGED MISTAKE S IN THE ORDERS OF THE TRIBUNAL DATED 23 RD JANUARY, 2020 IN ITA NO.2255/HYD/2017 & 2367/HYD/2018 AND IS SEEKING RECTIFICATION OF THE SAME . I) ACCORDING TO THE ASSESSEE , W HILE DECIDING THE GROUNDS OF APPEAL IN RELATION OF ITES SE GMENT, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO CONSIDER ONLY THE MARGIN OF INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH ITS AES AND FURTHER DIRECTED THAT IF THE MARGIN OF THE ASSESSEE WAS 37.54% AND AFTER GIVING THE NEGATIVE WORKING CAPITAL ADJUSTMENT OF ( - )8.64%, THE MARGIN OF THE ASSESSEE WOULD FALL WITHIN (+ - ) OF THE MARGINS OF THE COMPARABLES, THEN THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE SHOULD BE CONSIDERED AT TO BE AT ALP AND NO ADJUSTME NT WOULD BE REQUIRED . IT MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 2 OF 6 IS FURTHER SUBMITTED THAT THEREAFTER, THE TRIBUNAL HAS HELD THAT IT WAS NOT GOING INTO THE ACCEPTABILITY OR OTHERWISE OF THE FUNCTIONAL DISSIMILARITIES OF THE COMPARABLES CHALLENGED BY THE ASSESSEE AS IT WOULD ONLY RESULT IN AN A CADEMIC EXERCISE AT TH AT STAGE. IT IS SUBMITTED THAT WHILE DECIDING THIS ISSUE, THE TRIBUNAL HAS NOT GIVEN ANY DIRECTION ON THE GROUNDS OF EXCLUSION AND INCLUSION OF THE COMPANIES RAISED IN GROUNDS 1.1.2 OF THE APPEAL AND ALSO GROUNDS 6,7,8 AND 9 , WHICH I S A MISTAKE APPARENT FROM RECORD. THE ASSESSEE THUS WANTS RECALL OF THE ORDER OF THE TRIBUNAL AND ADJUDICAT ION OF SUCH GROUNDS. 2. THE LEARNED DR, HOWEVER, SUBMITTED THAT THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL WHICH NEEDS RECTIFICATION. 3. HAVING RE GARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT WITH REGARD TO THE ALP ADJUSTMENT IN RESPECT OF ITES SERVICES, WE HAVE TAKEN INTO CONSIDERATION THE ASSESSEES CONTENTION THAT THE MARGIN OF THE INTERNATIONAL TRANSACTION OF THE ASSESS EE WAS 37.54% AND THAT THE AVERAGE MARGIN OF THE COMPARABLES ADOPTED BY THE TPO WAS 33.13% AND THEREFORE IT WAS DIRECTED THAT IF AFTER THE NEGATIVE CAPITAL WORKING ADJUSTMENT IS GIVEN , THE MARGIN OF THE ASSESSEE WOULD FALL WITHIN + _ 3% OF THE COMPARABLE S, THEN THE INTERNATIONAL TRANSACTION OF THE ASSESSEE SHOULD BE CONSIDERED TO BE AT ALP AND NO ADJUSTMENT WOULD BE REQUIRED. THUS, IT IS CLEAR THAT SINCE THE ASSESSEES MARGIN WAS HIGHER THAN THE MEAN MARGIN OF THE COMPARABLES, THE FUNCTIONAL DISSIMILARI TIES OR OTHERWISE OF THE COMPARABLE COMPANIES WAS NOT NECESSARY TO BE CONSIDERED AND THE ASSESSEE HAD AGREED FOR THE SAME AT THE TIME OF HEARING. EVEN AT THE TIME OF HEARING OF THE M.A, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NO T PRESSING THIS POINT FOR RECTIFICATION. THEREFORE, ON THIS ISSUE WE DO NOT FIND ANY MISTAKE WHICH NEEDS RECTIFICATION. MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 3 OF 6 II) THE SECOND POINT RAISED BY THE ASSESSEE IN THIS M.A IS I N RELATION TO THE ADDITIONS MADE O F INTEREST ON ADVANCES . IT IS THE CASE OF THE ASSESSEE THAT THE TRIBUNAL HAS NOT CONSIDERED THAT THESE ADVANCES WERE GIVEN FOR THE PURPOSE OF EQUITY INVESTMENT AND THAT IN THE SUBSEQUENT YEARS, THE INVESTMENT WAS CONVERTED INTO EQUITY AND THAT THE SHARES WERE ALLOTTED TO THE ASSESSEE COMPA NY. IT IS SUBMITTED THAT THE TRIBUNAL HAS NOT CONSIDERED ITS OWN DECISION IN THE ASSESSEES OWN CASE IN ITA NO.267/HYD/2014. 4. AS REGARDS THIS ISSUE OF INTEREST ON ADVANCES FOR INVESTMENT TO AES IS CONCERNED, WE FIND THAT IN THE ASSESSEES OWN CASE FOR THE EARLIER A.YS IN ITA NO.267/HYD/2014, THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER/TPO WITH A DIRECTION TO CONSIDER THE SAME DENOVO. SINCE FACTS AND CIRCUMSTANCES ARE S IMILAR AND THE ASSESSEE HAD RELIED UPON THE SAME DURING THE COURSE OF HEARING BUT THE SAME HAS NOT BEEN CONSIDERED, WE AGREE THAT THERE IS A MISTAKE APPARENT FROM RECORD WHICH NEEDS RECTIFICATION. THEREFORE, WE DEEM IT FIT AND PROPER TO SUBSTITUTE PARA NO . 5.4 OF OUR ORDER DATED 23.01.2020 AS UNDER: HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER/TPO WITH A DIRECTION TO EXAMINE AS TO WHETHER THE INVEST MENT WAS MADE FOR THE PURPOSE OF EQUITY AND WHETHER THE ASSESSEE HAS BEEN ALLOTTED SHARES. IF THE SHARES HAVE BEEN ALLOTTED TO THE ASSESSEE, THEN THE TRANSACTION SHALL NOT BE CONSIDERED AS CAPITAL FINANCING. THIS GROUND IS ACCORDINGLY TREATED AS ALLOWED FO R STATISTICAL PURPOSES. MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 4 OF 6 III) THE THIRD ISSUE RAISED IN THIS M.A IS T HAT THE TRIBUNAL , WHILE ADJUDICATING THE GROUNDS RELATING TO INTEREST ON OUTSTANDING RECEIVABLES HAS ERRED IN NOT CONSIDERING THAT THE WORKING CAPITAL ADJUSTMENT TAKES INTO CONSIDERATION, THE INTEREST ON DELAYED RECEIVABLES BEYOND THE CREDIT PERIOD AND SINCE THE ITAT HAS DIRECTED THE WORKING CAPITAL ADJUSTMENT TO BE TAKEN INTO CONSIDERATION, NO SEPARATE ADDITION IS REQUIRED TO BE MADE. THEREFORE, ACCORDING TO THE ASSESSEE THE TPO SHOULD HAVE BEEN DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST ON OUTSTANDING RECEIVABLES . 5. AS REGARDS THE ALLEGED MISTAKE ON ACCOUNT OF INTEREST ON OUTSTA NDING RECEIVABLES IS CONCERNED, WE FIND THAT WHILE DETERMINING THE ALP ADJUSTMENT OF ITES SERVICES, WE HAD OBSERVED THAT THE ASSESSING OFFICER HAD GIVEN THE NEGATIVE WORKING CAPITAL ADJUSTMENT. BUT THE WORKING CAPITAL ADJUSTMENT TAKES CARE OF THE INTEREST ON RECEIVABLES AS ON THE CLOSING DATE OF THE ACCOUNTING YEAR AND DOES NOT TAKE CARE OF THE INTEREST ON DELAYED RECEIVABLES DURING THE RELEVANT YEAR. THEREFORE, WE DO NOT SEE ANY MISTAKE IN THE ORDER OF THE TRIBUNAL ON THIS ISSUE AND THE ASSESSEES ARGUM ENT IS ACCORDINGLY REJECTED. 6. IN THE RESULT, M.A. NO.16/HYD/2021 IS PARTLY ALLOWED. M.A. NO.17/HYD/2021 7. IN THIS M.A., THE VERY SAME ISSUES WHICH HAVE BEEN RAISED IN M.A. NO.16/HYD/2021 ARE RAISED AND FOR THE DETAILED REASONS IN MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 5 OF 6 M.A. NO.16/HYD/2021 O F EVEN DATED, THIS M.A IS ALSO TREATED AS PARTLY ALLOWED. 8. TO SUM UP, BOTH THE M.AS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JU LY , 2021 . SD/ - SD/ - (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 14 TH JU LY , 2021 . VINODAN/SPS COPY TO: S.NO ADDRESSES 1 M/S.GSS INFOTECH LTD C/O. P.MURALI & CO. C.AS, 6 - 3 - 655/2/3 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 DY.CIT, CIRCLE 2(2) HYDERABAD 3 INCOME TAX OFFICER WARD 2(2) HYDERABAD 4 DRP - 1 BENGALURU 5 PR.CIT - 2 HYDERABAD 6 PR.CIT - 4 HYDERABAD 7 DR, ITAT HYDERABAD BENCHES 8 GUARD FILE BY ORDER MA NOS 16 AND 17 OF 2021 GSS INFOTECH LTD HYDERABAD PAGE 6 OF 6 1. DRAFT DICTATED ON JUNE, 2021 2. DRAFT PLACED BEFORE AUTHOR JUNE, 2021 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JUNE, 2021 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JUNE, 2021 5 APPROVED DRAFT COMES TO THE SR.P.S./PS JUNE, 2021 6. KEPT FOR PRONOUNCEMENT ON JUNE, 2021 7. FILE SENT TO THE BENCH CLERK JUNE, 2021 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK JUNE, 2021 9 DATE OF DISPATCH OF ORDER JUNE, 2021