M/s.ISG Novasoft Technologies Ltd., Bangalore V. Asst. Commissioner of Income Tax, Bangalore

MA 250/BANG/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5969 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER M.P. NO. 250/BANG/2017 (IN IT(TP)A NO. 244/BANG/2017) ASSESSMENT YEAR : 20 1 2 - 1 3 M/S. ISG NOVASOFT TECHNOLOGIES LTD., MARUTHI SAPPHIRE, 2 ND FLOOR, MADIVALAMACHIDEVA ROAD, (HAL OLD AIRPORT ROAD), MURUGESHPALYA, BANGALORE 560 017. PAN: AABC I 2488Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3 (1) (1), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI CHAVALI NARAYAN, CA REVENUE BY : SMT. PADMA MEENAKSHI, JCIT (DR) DATE OF HEARING : 2 4 . 1 1 .201 7 DATE OF PRONOUNCEMENT : 15 .1 2 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS MP IS FILED BY THE ASSESSEE CONTENDING THAT TH ERE ARE CERTAIN MISTAKES IN THE IMPUGNED TRIBUNAL ORDER DATED 28.07.2017. 2. IN THE MP, THIS IS THE CONTENTION RAISED THAT AS PER GROUND NO. 7 OF THE APPEAL OF THE ASSESSEE, THIS WAS THE CONTENTION OF THE ASSESS EE THAT THE AO / TPO HAVE ERRED BY ACCEPTING CERTAIN ADDITIONAL COMPARABLE CO MPANIES BY CONDUCTING A FRESH INDEPENDENT SEARCH DURING TP ASSESSMENT PROCE EDINGS WHICH ARE FUNCTIONALLY DISSIMILAR. THIS IS ALSO CONTENDED TH AT GROUND NO. 9 WAS ALSO RAISED IN THE APPEAL OF THE ASSESSEE AS PER WHICH THIS IS THE GRIEVANCE OF THE ASSESSEE THAT BY NOT TAKING INTO CONSIDERATION THE FOREIGN EXCHANGE GAIN / LOSS AS OPERATING IN NATURE FOR THE PURPOSE OF COMPUTING MARGIN OF THE ASSESSEE AS WELL AS OF THE COMPARABLE COMPANIES, THE LD. AO AND TPO HAVE ERRED. THE PRAYER IN THE MP IS THIS THAT THESE TWO GROUNDS 7 A ND 9 WERE NOT DECIDED BY M.P. NO. 250/BANG/2017 (IN IT(TP)A NO. 244/BANG/2017) PAGE 2 OF 4 TRIBUNAL IN THE IMPUGNED ORDER AND THEREFORE, THIS IS AN APPARENT MISTAKE WHICH SHOULD BE RECTIFIED. 3. IN THE COURSE OF HEARING BEFORE US, THE SAME CON TENTIONS WERE REITERATED BY LD. AR OF ASSESSEE. THE LD. DR OF REVENUE SUBMITTED TH AT THERE IS NO APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT AT THE TIME OF HEARING OF THE APPEAL, THE LD. AR OF ASSESSEE HAS FILED A C HART AND THE APPEAL WAS HEARD ON THE BASIS OF CHART. IN THE SAID CHART, TH E CONTENTIONS ARE RAISED REGARDING MARGIN COMPUTATIONAL ERROR IN RESPECT OF TWO COMPARABLES I.E. ACCENTIA TECHNOLOGIES LTD. AND E4E HEALTHCARE BUSIN ESS SERVICES PVT. LTD. AND FOR THE REMAINING FOUR COMPARABLES, THE ONLY CO NTENTION RAISED WAS REGARDING TURNOVER FILTER AND THERE IS NO CONTENTIO N RAISED REGARDING THE FUNCTIONALITY ASPECT. HENCE ON THIS ASPECT, WE FIN D NO APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER BECAUSE IT APPEARS THAT NO ARGUMENT WAS MADE IN RESPECT OF THIS ASPECT. 5. REGARDING THE SECOND ASPECT I.E. REGARDING FOREI GN EXCHANGE FLUCTUATION GAIN / LOSS, IN THE CHART, SEVERAL JUDGEMENTS ARE CITED BY LD. AR OF ASSESSEE BUT IN THE IMPUGNED TRIBUNAL ORDER ALTHOUGH GROUND NO. 9 IS RE PRODUCED BY THE TRIBUNAL ON PAGE NO. 4 OF THE TRIBUNAL ORDER, THERE IS NO DE CISION ON THIS ASPECT AND THEREFORE, THIS IS AN APPARENT MISTAKE IN THE IMPUG NED TRIBUNAL ORDER. HENCE WE DECIDE THIS ASPECT AS PER GROUND NO. 9 RAISED BE FORE THE TRIBUNAL. WE FIND THAT THE DETAILS REGARDING FOREIGN EXCHANGE GAIN / LOSS IS NOT AVAILABLE ON RECORD AS TO WHETHER THE GAIN / LOSS IS IN RESPECT OF TURN OVER OF THE PRESENT YEAR OR IT IS IN RESPECT OF THE TURNOVER OF AN EARLIER YEAR. IN RESPECT OF COMPUTATION OF ALP, PROFIT MARGIN PERCENTAGE IS WORKED OUT BY DIVIDING THE OPERATING PROFIT OF THE TESTED PARTY BY THE TURNOVER OF THE TESTED PARTY AN D THEREFORE, IF THE FOREIGN EXCHANGE GAIN/LOSS IS NOT IN RESPECT OF TURNOVER OF THE PRESENT YEAR, THEN SUCH GAIN/LOSS CANNOT BE CONSIDERED FOR COMPUTING THE PR OFIT PERCENTAGE EVEN AFTER HOLDING THE SAME AS OPERATING PROFIT/LOSS BECAUSE I F THE CORRESPONDING TURNOVER IS NOT A PART OF THE DENOMINATOR, THE PROFIT IN RES PECT OF SUCH TURNOVER CANNOT BE M.P. NO. 250/BANG/2017 (IN IT(TP)A NO. 244/BANG/2017) PAGE 3 OF 4 INCLUDED IN THE NUMERATOR BECAUSE IF THIS IS DONE, IT WILL GIVE AN ABSURD RESULT. HENCE WE FEEL IT PROPER TO RESTORE BACK THIS MATTER TO THE FILE OF AO / TPO FOR FRESH DECISION AFTER EXAMINING THIS ASPECT AND WE H OLD THAT IF THE FOREIGN EXCHANGE GAIN / LOSS IS IN RESPECT OF THE PRESENT Y EAR TURNOVER THEN THE SAME SHOULD BE CONSIDERED AS PROFIT/LOSS OF THE CURRENT YEAR FOR WORKING OUT THE PROFIT PERCENTAGE OF THE TESTED PARTY BUT IF SUCH FOREIGN EXCHANGE GAIN / LOSS IS NOT IN RESPECT OF CURRENT YEAR TURNOVER THEN THE SAME SHOU LD NOT BE CONSIDERED IN THE CASE OF TESTED PARTY. SIMILARLY, IN THE CASE OF CO MPARABLE COMPANIES ALSO, IF THERE IS ANY FOREIGN EXCHANGE GAIN / LOSS AND THIS INFORMATION IS AVAILABLE IN THE ANNUAL REPORT OF THE CONCERNED COMPANY AS TO WHETHE R THE FLUCTUATION GAIN / LOSS IS IN RESPECT OF CURRENT YEAR TURNOVER OR EARL IER YEAR TURNOVER THEN THE SAME TREATMENT SHOULD BE GIVEN TO FOREIGN EXCHANGE GAIN / LOSS IN CASE OF COMPARABLE COMPANY ALSO BUT IF SUCH INFORMATION IS NOT AVAILABLE IN THE ANNUAL REPORT OF SUCH COMPANY THEN IT SHOULD BE TAKEN AS F OREIGN EXCHANGE GAIN / LOSS IN RESPECT OF EARLIER YEARS TURNOVER BECAUSE IN MO ST OF THE CASES, SUCH FOREIGN EXCHANGE GAIN / LOSS IS IN RESPECT OF TURNOVER OF T HE EARLIER YEAR BECAUSE ANY GAIN / LOSS ON ACCOUNT OF FOREIGN EXCHANGE DIFFEREN CE FOR CURRENT YEAR TURNOVER IS GENERALLY INCLUDED IN SALE PROCEEDS AND IS NOT S HOWN SEPARATELY IN THE FINAL ACCOUNTS. THE AO / TPO SHOULD DECIDE THIS ISSUE AFR ESH AS PER ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY O F BEING HEARD TO ASSESSEE. GROUND NO. 9 OF THE ASSESSEES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE MP FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE, DATED, THE 15 TH DECEMBER, 2017. /MS/ M.P. NO. 250/BANG/2017 (IN IT(TP)A NO. 244/BANG/2017) PAGE 4 OF 4 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.