M/s Winphoria Networks India Pvt. Limited, Bangalore V. JCIT(OSD), Bangalore

MA 253/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7214 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 10-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: UMASHANKAR GAUTAM
• Keywords: Related party transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER M.P. NO. 253/BANG/2017 (IN IT (TP) A NO. 25 / BANG/201 2 ) ASSESSMENT YEAR : 20 05 - 06 M/S. WINPHORIA NETWORKS INDIA PVT. LTD., [MERGED WITH MOTOROLA SOLUTIONS INDIA PVT. LTD. (FORMERLY KNOWN AS MOTOROLA INDIA PVT. LTD.)], #66/1, BAGAMANE TECH PARK, C V RAMAN NAGAR POST, BANGALORE 560 093. PAN: AAACW3222F VS. THE JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE 12(5), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI UMASHANKAR GAUTAM, ADVOCATE REVENUE BY : SHRI R. N. SIDDAPPAJI , ADDL . CIT (DR) DATE OF HEARING : 11 . 01 .201 9 DATE OF PRONOUNCEMENT : 16 . 01 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; THIS M.P. IS FILED BY THE ASSESSEE POINTING OUT CER TAIN APPARENT MISTAKES IN THE IMPUGNED TRIBUNAL ORDER DATED 24.05.2017. THE MIST AKE POINTED OUT BY THE ASSESSEE IN THIS M.P. IS CONTAINED IN PARA NOS. 4 T O 6 OF THE M.P. WHICH ARE REPRODUCED HEREIN BELOW FOR READY REFERENCE:- 4. DURING THE COURSE OF HEARING OF THE APPEAL BEFOR E THE HON'BLE TRIBUNAL, THE AUTHORIZED REPRESENTATIVE OF WINPHORI A INDIA WHILE DEFENDING ITS CASE HAD SOUGHT FOR EXCLUSION OF 8 CO MPARABLE COMPANIES NAMELY EXENSYS SOFTWARE SOLUTIONS LTD, SA NKHYA INFOTECH LTD., FOUR SOFT LTD, THIRDWARE SOLUTION LTD, GEOMET RIC SOFTWARE SOLUTIONS LTD, TATA ELXSI LTD (SEG), FLEXTRONICS (S EG) AND INFOSYS LTD ON THE GROUND OF FUNCTIONAL DISSIMILARITY. THE AUTH ORIZED REPRESENTATIVE HAD SUBSTANTIATED ITS ARGUMENTS BEFO RE THE HON'BLE TRIBUNAL BY FILING ITS SUBMISSION IN FORM OF STRATE GY CHARTS IN THE OPEN COURT DURING THE COURSE OF HEARING. HOWEVER, INFOSY S LTD, WHICH WAS SOUGHT FOR EXCLUSION BY THE AUTHORIZED REPRESENTATI VE IS LEFT UNADJUDICATED IN THE ORDER PASSED, WHICH IS NEITHER EXCLUDED NOR COMMENTED UPON. 5. FURTHER, THE COMPANY WOULD LIKE TO MENTION THAT INFOSYS LTD HAS M.P. NO. 253/BANG/2017 (IN IT(TP)A NO. 25/BANG/2012) PAGE 2 OF 5 INADVERTENTLY NOT BEEN MENTIONED BY THE HON'BLE TRIBUNAL IN THE L IST OF COMPARABLES ARGUED BY THE AUTHORIZED REPRESENTATIVE TO BE EXCLU DED ON GROUND OF FUNCTIONAL DISSIMILARITY, AS MENTIONED IN PARA 9.2 OF THE IMPUGNED ORDER. 6. SINCE INFOSYS LTD IS LEFT UNADJUDICATED AS APPAR ENT FROM THE IMPUGNED ORDER, WHICH WAS SOUGHT FOR EXCLUSION BY T HE AUTHORIZED REPRESENTATIVE, IT IS HUMBLY REQUESTED TO ADJUDICAT E ON THIS COMPARABLE, SINCE THE SAME IS FUNCTIONALLY NOT COMP ARABLE TO THE COMPANY FOR THE REASONS MENTIONED BELOW: IT IS ENGAGED IN PROVISION OF DIVERSIFIED OPERATION S SUCH AS RE- ENGINEERING, SYSTEM INTEGRATION, ETC. (REFER PAGE 5 96 OF THE ANNUAL REPORT COMPENDIUM) IT HAS PRESENCE OF HUGE BRANDS AND INTANGIBLES; (RE FER PAGE 563, 667 AND 668 OF THE ANNUAL REPORT COMPENDIUM) ENGAGED IN DEVELOPMENT OF PRODUCTS; (REFER PAGE 561 AND 562 OF THE ANNUAL REPORT COMPENDIUM) INVESTS SUBSTANTIAL AMOUNT IN RESEARCH & DEVELOPMEN T ACTIVITIES. (REFER PAGE 568 OF THE ANNUAL REPORT CO MPENDIUM) IN ADDITION TO THE ABOVE, THE COMPANY WOULD ALSO LI KE TO PLACE RELIANCE ON THE FOLLOWING RULINGS OF THE JURISDICTI ONAL TRIBUNAL WHICH WAS ALSO SUBMITTED AND RELIED UPON BY THE COMPANY A T THE TIME OF HEARING ON APRIL 3, 2017: M/S SYMBOL TECHNOLOGIES INDIA PVT LTD VS ACIT( IT(T P)A NO.391/BANG/2012) - AY 2005-06 (PAGE 6 OF THE RULIN G) (REFER PAGE 113 OF THE CASE LAW COMPENDIUM) M/S SUNQUEST INFORMATION SYSTEMS (INDIA) PVT LTD( I T(TP)A NO.1302/BANG/2011 & 92/BANG/2012) - AY 2005-06 (PAG E 10 OF THE RULING) (PAGE 85 OF THE CASE LAW COMPENDIUM) THE REASONS AND THE JUDICIAL RULINGS MENTIONED ABOV E MAKE IT EVIDENT THAT INFOSYS LTD IS FUNCTIONALLY NOT COMPARABLE TO THE BUSINESS OPERATION OF THE COMPANY. 2. IN COURSE OF HEARING OF THE M.P., IT WAS SUBMITT ED BY LD. AR OF ASSESSEE THAT IN RESPECT OF ASSESSEES ARGUMENTS FOR EXCLUSION OF EIGHT COMPARABLES ON THE GROUND OF FUNCTIONAL DISSIMILARITY, THE TRIBUNA L HAS NOTED THE NAME OF 7 COMPARABLES ONLY IN PARA 9.2 OF THE IMPUGNED ORDER AND THE 8 TH COMPARABLE INFOSYS LTD. WAS NOT NOTED. IT WAS SUBMITTED THAT IT IS AN APPARENT MISTAKE WHICH HAS TO BE RECTIFIED BY EITHER RECALLING THE I MPUGNED TRIBUNAL ORDER FOR DECIDING THE 8 TH COMPARABLE WHICH IS UNDECIDED OR BY DECIDING THAT ISSUE IN M.P. NO. 253/BANG/2017 (IN IT(TP)A NO. 25/BANG/2012) PAGE 3 OF 5 THE M.P. ORDER ITSELF. THE LD. DR OF REVENUE SUBMI TTED THAT THERE IS NO MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN PARA 8 OF THE IMPUGNED TRIBUNAL ORDER, IT IS NOTED BY THE TRIBUNA L THAT LD. CIT(A), VIDE IMPUGNED ORDER, GRANTED RELIEF TO THE ASSESSEE BY H OLDING THAT THE COMPANIES HAVING RELATED PARTY TRANSACTIONS SHOULD BE EXCLUDED FROM THE COMPARABLES. THE TRIBUNAL NOTED 12 SUCH COMPARABLE COMPANIES WHICH INCLUDES FIVE COMPARABLES OUT OF 7 COMPARABLES NOTE D BY THE TRIBUNAL IN PARA 9.2 OF THE IMPUGNED ORDER. OUT OF 7 COMPARABL ES NOTED BY THE TRIBUNAL IN PARA 9.2, TWO COMPARABLES I.E. EXENSYA SOFTWARE SOLUTIONS LTD. AND SANKHYA INFOTECH LTD. ARE NOT INCLUDED IN THE LIST OF 12 COMPARABLES NOTED BY THE TRIBUNAL IN PARA 8. THESE 12 COMPANIES NOTED IN PARA 8 ARE AS UNDER. 1. SASKEN NETWORK SYSTEMS LTD. 2. FOUR SOFT LTD. 3. THIRDWARE SOLUTION LTD. 4. R S SOFTWARE (INDIA) LTD. 5. GEOMETRIC SOFTWARE SOLUTIONS CO.LTD. 6. TATA ELXSI LTD. (SEG) 7. SASKENCOMMUNICATIOR TECHNOLOGIES LTD. (SEG) 8. IGATE SOLUTIONS LTD.(SEG.) 9. FLEXTRONICS SOFTWARE LTD.(SEG) 10. L&T INFOTECH 11. SATYAM COMPUTER SERVICES LTD. 12. INFOSYS TECHNOLOGIES LTD. 4. NOW WE REPRODUCE PARA 9.2 OF THE IMPUGNED TRIBUN AL ORDER WHICH CONTAINS 7 NAMES. THIS PARA READS AS UNDER. 9.2 ON THE OTHER HAND, LEARNED AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE SOUGHT EXCLUSION OF THE FOLLOWING COMPANIE S ON THE GROUND OF FUNCTIONAL DISSIMILARITIES: I. EXENSYS SOFTWARE SOLUTIONS LTD. II. SANKHYA INFOTECH LTD. III. FOUR SOFT LTD. IV. THIRDWARE SOLUTION LTD. V. GEOMETRIC SOFTWARE SOLUTIONS LTD. VI. TATA ELXSI LTD.(SEG) VII. FLEXTRONICS (SEG) 5. ON PAGE NOS. 16 AND 17 OF THE IMPUGNED TRIBUNAL ORDER, IT WAS HELD BY THE TRIBUNAL THAT FOLLOWING FOUR COMPANIES SHOULD BE IN CLUDED IN THE LIST OF COMPARABLES AND THE FOLLOWING 3 COMPANIES SHOULD BE EXCLUDED FROM THE M.P. NO. 253/BANG/2017 (IN IT(TP)A NO. 25/BANG/2012) PAGE 4 OF 5 LIST OF FINAL COMPARABLES. THE NAME OF FOUR COMPAN IES DIRECTED TO BE INCLUDED ARE (I) EXENSYS SOFTWARE SOLUTIONS LTD. (II) SANKHYA INFOTECH LTD. (III) GEOMETRIC SOFTWARE SOLUTIONS LTD. AND (IV) FLEXTRONICS SOFTWARE SYSTEMS LTD. 6. THE THREE COMPANIES DIRECTED TO BE EXCLUDED ARE. (I) FOURSOFT LTD., (II) THIRDWARE SOLUTIONS LTD. AND (III) TATA ELXSI LTD. 7. FROM THE IMPUGNED TRIBUNAL ORDER, IT IS SEEN THA T OUT OF 7 COMPANIES NOTED BY TRIBUNAL IN PARA 9.2, THE TRIBUNAL HELD TO INCLU DE FOUR COMPANIES IN THE LIST OF COMPARABLES AND CONFIRMED THE ORDER OF CIT( A) IN RESPECT OF EXCLUSION OF THREE COMPANIES. 8. AS PER THE M.P. FILED BY THE ASSESSEE, THIS IS T HE CLAIM OF THE ASSESSEE THAT ASSESSEE HAS ALSO ARGUED FOR EXCLUSION OF INFOSYS L TD. ON THE BASIS OF FUNCTIONAL COMPARABILITY WHICH IS NOT DECIDED BY TH E TRIBUNAL. BE THAT AS IT MAY BUT SINCE THIS IS NOT A FINDING OF THE TRIBUNAL IN THE IMPUGNED TRIBUNAL ORDER THAT INFOSYS LTD. SHOULD BE INCLUDED IN THE L IST OF COMPARABLES, THERE CANNOT BE ANY GRIEVANCE OF THE ASSESSEE IN RESPECT OF NON-DECIDING OF THIS ISSUE I.E. REGARDING EXCLUSION OF INFOSYS LTD. FOR THE ASSESSEE, THE DECISION OF CIT (A) STILL STANDS THAT INFOSYS LTD. STANDS EX CLUDED FROM THE LIST OF COMPARABLES. THE REVENUE HAS NOT FILED ANY M. P. FOR DECISION ON THAT ASPECT I.E. EXCLUSION OF INFOSYS LTD. AND HENCE, IN OUR CONSIDERED OPINION, THE PRESENT M.P. OF ASSESSEE IS ACADEMIC AND THEREF ORE, NO DECISION ON THIS IS CALLED FOR. 9. IN THE RESULT, THE M.P. FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH JANUARY, 2019. /MS/ M.P. NO. 253/BANG/2017 (IN IT(TP)A NO. 25/BANG/2012) PAGE 5 OF 5 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.