ITO, Bangalore V. M/s Cenduit India Services Pvt. Ltd., Bangalore

MA 282/BANG/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6059 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NAGESWAR RAO DR P V PRADEE
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER M.P. NO. 226/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/201 6) ASSESSMENT YEAR : 20 11 - 12 M/S. CENDUIT INDIA SERVICES PVT. LTD., #3, GROUND & FIRST FLOOR, SAFINA TOWERS, ALI ASKER ROAD, BANGALORE 560 052. PAN: AABCI 6552K VS. THE INCOME TAX OFFICER, WARD 2 (1)(1), BANGALORE. APPELLANT RESPONDENT AND M.P. NO. 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/201 6) ASSESSMENT YEAR : 2011-12 (BY REVENUE) ASSESSEE BY : SHRI NAGESWAR RAO, ADVOCATE RE VENUE BY : DR. P.V. PRADEEP KUMAR , ADDL. CIT (DR) DATE OF HEARING : 0 5 .01.2018 DATE OF PRONOUNCEMENT : 19 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THE ASSESSEE AND REVENUE HAD FILED ONE MP EACH POIN TING OUT CERTAIN APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER DATED 07.07. 2017. BOTH THE MPS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE MP FILED BY THE REVENUE. A S PER THIS MP, THIS IS THE CONTENTION RAISED BY THE REVENUE THAT GROUND NO. 6 OF APPEAL OF REVENUE HAS NOT BEEN DECIDED BY TRIBUNAL IN THE IMPUGNED ORDER. IN THE MP FILED BY THE ASSESSEE, THIS IS THE CONTENTION RAISED THAT AS PER PARA NO. 7 OF THE IMPUGNED M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 2 OF 7 TRIBUNAL ORDER, THIS ISSUE WAS DECIDED BY TRIBUNAL ON THIS BASIS THAT OUT OF NINE COMPARABLES EXCLUDED BY DRP, IT WAS THE CONTENTION RAISED BY LD. AR OF ASSESSEE DURING THE COURSE OF HEARING THAT FIVE COM PARABLES ARE TO BE EXCLUDED BY APPLYING THE TURNOVER FILTER AND IN RESPECT OF F OUR COMPARABLES ACCEPTED BY DRP ALSO, TWO COMPARABLES ARE TO BE EXCLUDED BY APP LYING TURNOVER FILTER. BUT THIS IS A FACTUAL MISTAKE BECAUSE EVEN AS PER THE G ROUNDS OF APPEAL RAISED BY THE REVENUE AS REPRODUCED BY TRIBUNAL ON PAGE NO. 2 OF THE IMPUGNED TRIBUNAL ORDER, IT HAS BEEN STATED IN GROUND NO. 1 THAT DRP WAS NOT JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE BY EXCLUDING M/S. RS SOFTWAR E, M/S. ACROPETAL TECHNOLOGIES LTD., M/S. MINDTREE LTD. AND M/S. L&T INFOTECH LTD. ON THE GROUND THAT THESE COMPARABLES ARE HAVING SIGNIFICANT ONSIT E REVENUE AND THAT THEY ARE FUNCTIONALLY DISSIMILAR. THE LD. AR OF ASSESSEE SU BMITTED BEFORE US THAT EVEN IN THE GROUND RAISED BY THE REVENUE, THIS IS NOT THE C ONTENTION RAISED BY THE REVENUE THAT ANY COMPARABLE WAS EXCLUDED BY DRP BY APPLYING TURNOVER FILTER. HE FURTHER POINTED OUT THAT AS PER GROUND NO. 2 OF THE REVENUES APPEAL, THIS IS THE CONTENTION RAISED THAT WHETHER THE DRP WAS JUST IFIED IN EXCLUDING M/S. EZEST SOLUTIONS ON THE GROUND OF FUNCTIONAL DISSIMI LARITY AND FOR THIS EXCLUSION ALSO, THERE IS NO SUCH GROUND TAKEN BY THE REVEN UE THAT THE DRP HAS EXCLUDED THIS COMPANY ON ACCOUNT OF TURNOVER FILTER . HE FURTHER POINTED OUT THAT AS PER GROUND NO. 3 OF THE APPEAL, THE ISSUE RAISED BY THE REVENUE IS REGARDING EXCLUSION OF M/S. ICRA TECHNO ANALYTICS LTD. ON THE GROUND THAT IT IS INTO DIVERSIFIED ACTIVITY AND NO SEGMENTAL DATA IS AVAIL ABLE AND THEREFORE, IT IS SEEN THAT THERE IS NO OBJECTION OF THE REVENUE THAT DRP HAS EXCLUDED THIS COMPARABLE BY APPLYING TURNOVER FILTER. FURTHER HE POINTED OUT THAT AS PER GROUND NO. 4 OF THE APPEAL FILED BY THE REVENUE, TH E OBJECTION OF THE REVENUE IS REGARDING M/S. INFOSYS TECHNOLOGIES LTD. WHICH WAS EXCLUDED BY DRP ON THE GROUND THAT IT IS FUNCTIONALLY DIFFERENT. HE FURTH ER POINTED OUT THAT AS PER GROUND NO. 5 OF THE APPEAL RAISED BY THE REVENUE, THE ISSU E RAISED IS THIS THAT DRP FAILED TO APPRECIATE THE FACT THAT M/S. TATA ELXSI LTD. IS A GOOD COMPARABLE BECAUSE IT IS FUNCTIONALLY SIMILAR WITH THAT OF THE ASSESSEE. HENCE FOR THIS EXCLUSION ALSO, THIS IS NOT THE OBJECTION OF THE RE VENUE THAT THIS COMPARABLE WAS EXCLUDED BY DRP BY APPLYING TURNOVER FILTER. HE SU BMITTED THAT IN VIEW OF THESE M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 3 OF 7 FACTS, IT HAS TO BE ACCEPTED THAT IN THE IMPUGNED T RIBUNAL ORDER, THE TRIBUNAL HAS PROCEEDED ON A MISTAKEN BASIS THAT AS PER THE C HART SUBMITTED BY LD. AR OF ASSESSEE IN THE COURSE OF HEARING OF THE APPEAL, FI VE COMPARABLES ARE TO BE EXCLUDED ON THE BASIS OF TURNOVER FILTER. HE SUBMI TTED THAT AS PER THE CHART FILED BY THE LD. AR OF ASSESSEE IN THE COURSE OF HEARING OF THE APPEAL, IT CAN BE SEEN THAT ALTHOUGH QUANTUM OF TURNOVER OF VARIOUS COMPAR ABLES IS INDICATED BY THE ASSESSEE IN THE CHART BUT IN THE COLUMN REGARDING R EASONS FOR ACCEPTANCE / REJECTION GIVEN BY THE DRP AND NEXT COLUMN CONTAINI NG CONTENTIONS OF DEPARTMENT BEFORE ITAT AND IN THE NEXT COLUMN, CONT AINING CONTENTIONS OF ASSESSEE BEFORE ITAT, IT HAS BEEN MADE CLEAR THAT I T IS NOT THE OBJECTION OR STAND OF ANY SIDE THAT THE TURNOVER FILTER HAS TO B E APPLIED FOR EXCLUSION / RETENTION OF A COMPARABLE. HE SUBMITTED THAT UNDER THESE FACTS, IT IS APPARENT THAT AN INADVERTENT AND APPARENT MISTAKE HAS CREPT IN THE TRIBUNAL ORDER WHICH SHOULD BE RECTIFIED. THE LD. DR OF REVENUE SUBMITT ED THAT IN PARA NO. 3 OF THE IMPUGNED TRIBUNAL ORDER, A CATEGORICAL FINDING HAS BEEN GIVEN BY TRIBUNAL THAT AS PER THE CHART SUBMITTED BY LD. AR OF ASSESSEE, I T WAS POINTED OUT THAT TPO HAS SELECTED 13 COMPARABLES OUT OF WHICH THE DRP HA S DIRECTED TO EXCLUDE 9 COMPARABLES AND THE REVENUE IN ITS APPEAL IS DISPUT ING THE EXCLUSION OF 8 COMPARABLES OUT OF 9 COMPARABLES EXCLUDED BY THE DR P AND AS PER THE ASSESSEE, 5 COMPARABLES ARE TO BE EXCLUDED ON THE B ASISOF TURNOVER FILTER ALONG WITH NAMES OF THOSE FIVE COMPARABLES. HE SUBMITTED THAT IN VIEW OF THIS CATEGORICAL FINDING RECORDED BY THE TRIBUNAL THAT A S PER THE ARGUMENT OF LD. AR OF ASSESSEE BEFORE THE TRIBUNAL, 5 COMPARABLE COMPANIE S ARE TO BE EXCLUDED BY APPLYING TURNOVER FILTER, THERE IS NO APPARENT MIST AKE IN THIS TRIBUNAL ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE DEAL WITH THE MP FILED BY THE REVENUE. IN THIS REGARD, WE FIND THAT GROUND N O. 6 OF THE APPEAL BY THE REVENUE WAS IN FACT NOT DECIDED BY TRIBUNAL AS PER THE TRIBUNAL ORDER AND THEREFORE, THIS IS AN APPARENT MISTAKE IN THE TRIBU NAL ORDER WHICH WE RECTIFY BY RECALLING THE IMPUGNED TRIBUNAL ORDER FOR THE PURPO SE OF DECIDING THIS GROUND. M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 4 OF 7 4. NOW WE TAKE UP THE MP FILED BY THE ASSESSEE. AS PER THIS MP, IT IS POINTED OUT THAT IN PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER, IT IS STATED BY THE TRIBUNAL THAT EMPLOYEES COST FILTER WAS APPLIED BY DRP FOR T HE FIRST TIME BUT IN FACT, THE TPO HAD ALREADY APPLIED EMPLOYEES COST FILTER AS ON E OF THE FILTER ACROSS ALL COMPARABLE COMPANIES AND THEREFORE, THIS IS AN APPA RENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. IT IS ALSO SUBMITTED IN T HE MP THAT AS PER THE CHART SUBMITTED BEFORE THE TRIBUNAL IN THE COURSE OF HEAR ING OF THE APPEAL, IT IS CLEARLY MENTIONED THAT FUNCTIONAL SIMILARITY IS ONE OF THE SEVERAL REASONS FOR EXCLUSION OF VARIOUS COMPARABLES IN ADDITION TO OTHER FACTORS WHICH INTER-ALIA INCLUDED TURNOVER. BUT AS PER PARA NO. 7 OF THE IMPUGNED TR IBUNAL ORDER, THIS ASPECT WAS INADVERTENTLY MISSED TO TAKE COGNIZANCE AND DECISIO N WAS TAKEN ON THIS BASIS THAT EXCLUSION IS REQUESTED ONLY ON ACCOUNT OF TURN OVER FILTER. 5. IN THE COURSE OF HEARING BEFORE US, THE LD. AR O F ASSESSEE RAISED THE SAME CONTENTIONS AND SUBMITTED THAT SINCE THE EXCLUSION WAS REQUESTED MAINLY FOR FUNCTIONAL DISSIMILARITY, THERE IS APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER BECAUSE THE APPEAL WAS DECIDED BY SAYING THAT 5 COMPARABLES ARE TO BE EXCLUDED BY APPLYING TURNOVER FILTER OUT OF 8 COMPA RABLES EXCLUDED BY DRP AND OUT OF 4 COMPARABLES NOT EXCLUDED BY DRP ALSO, TWO COMPARABLE COMPANIES ARE TO BE EXCLUDED BY APPLYING THE SAME TURNOVER FI LTER AND AS PER THE IMPUGNED TRIBUNAL ORDER, THE MATTER WAS RESTORED BA CK TO THE FILE OF AO / TPO FOR FRESH DECISION IN THE LIGHT OF JUDGEMENT OF HON BLE DELHI HIGH COURT RENDERED IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (IN DIA) (P.)LTD. VS. DCIT AS REPORTED IN 376 ITR 183. HE SUBMITTED THAT THIS TR IBUNAL ORDER SHOULD BE RECALLED FOR FRESH DECISION ON THE BASIS OF CORRECT FACTS REGARDING EXCLUSION ON THE BASIS OF FUNCTIONAL DISSIMILARITY ETC. THE LD. DR OF REVENUE SUBMITTED THAT THERE IS NO APPARENT MISTAKE IN THE IMPUGNED TRIBUN AL ORDER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE REPRODUCE THE PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER WHICH IS AS UNDER. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND WE FIND THAT AS PER THE CHART FILED BY THE LD. AR OF THE ASSESSEE, 5 COMPAR ABLES ARE TO BE EXCLUDED BY APPLYING THE TURNOVER FILTER OUT OF 8 C OMPARABLES EXCLUDED BY DRP AND OUT OF 4 COMPARABLE ACCEPTED BY THE DRP ALSO, M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 5 OF 7 TWO COMPARABLES ARE TO BE EXCLUDED BY APPLYING THE SAME TURNOVER FILTER. WE HAVE ALREADY NOTED THAT AS PER THE JUDG MENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CHRYSCAPI TAL INVESTMENT ADVISORS (IND.) PVT. LTD (SUPRA), BEFORE EXCLUDING A COMPARABLE BY APPLYING THE TURNOVER FILTER, SOME MORE EXERCISE HA S TO BE CARRIED OUT BY THE AO/TPO TO FIND OUT AS TO WHETHER SUCH HIGH T URNOVER OR LOW TURNOVER AS THE CASE MAY BE IS EFFECTING THE PRICE OR NOT AND WHETHER REASONABLE ADJUSTMENT CAN BE MADE TO ELIMINATE THE MATERIAL EFFECT OF SUCH DIFFERENCE. REGARDING APPLICATION OF EMPLOYEE S COST FILTER ALSO, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. DR OF T HE REVENUE THAT THE FILTER SHOULD BE APPLIED TO ALL THE COMPARABLES AND NOT ONLY TO ONE COMPARABLE AND THIS IS NOT SHOWN THAT OTHER COMPARA BLE COMPANIES NOT EXCLUDED ARE SATISFYING THE EMPLOYEES COST FILT ER. CONSIDERING THESE FACTS, WE FEEL IT PROPER TO RESTORE THE ENTIR E T P MATTER TO AO/TPO FOR FRESH DECISION IN THE LIGHT OF THE ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. WE ORDER ACCORDINGLY. 7. FROM THE ABOVE PARA, IT IS SEEN THAT THE DECISIO N IS ON THIS BASIS ALONE THAT SEVERAL COMPARABLES ARE TO BE EXCLUDED BY APPLYING TURNOVER FILTER AND MATTER HAS BEEN RESTORED BACK TO THE FILE OF AO / TPO FOR FRESH DECISION ON THAT ASPECT ALONE. AS PER THE CHART SUBMITTED BY LD. AR OF ASS ESSEE IN COURSE OF HEARING OF THE APPEAL WHICH IS AVAILABLE ON RECORD, IT IS SEEN THAT IN CASE OF M/S. ACROPETAL TECHNOLOGIES LTD., THE ASSESSEES STAND WAS THIS TH AT THE COMPANY WAS INTO DIVERSIFIED ACTIVITIES SUCH AS ENGINEERING DESIGN S ERVICES, HEALTHCARE, ENTERPRISE SOLUTIONS AND IT INFRASTRUCTURE SOLUTIONS. 8. SIMILARLY IN THE CASE OF M/S. EZEST SOLUTIONS LT D. THE REASON GIVEN BY THE DRP FOR EXCLUSION WAS THIS THAT THIS COMPANY IS FUNCTIO NALLY DIFFERENT AND THIS WAS THE ASSESSEES STAND ALSO THAT THIS COMPANY IS FUNC TIONALLY DIFFERENT BECAUSE IT IS A CERTIFIED PRODUCT ENGINEERING AND SOFTWARE DEV ELOPMENT COMPANY HAVING SPECIAL EXPERTISE IN EMERGING TECHNOLOGIES. ONE MO RE ARGUMENT FOR THIS COMPANY IS THAT ANNUAL REPORT DEPICTS THAT THERE AR E INVENTORIES WHICH MEANS THAT THE COMPANY IS ALSO A PRODUCT COMPANY. 9. REGARDING M/S. ICRA TECHNO ANALYTICS LTD., THIS WAS THE FINDING OF DRP THAT NO SEGMENTAL INFORMATION IS AVAILABLE AND THE ASSESSEE S CONTENTION RAISED ABOUT THIS COMPANY ALSO THAT THE COMPANY IS FUNCTIONALLY DIFFERENT. M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 6 OF 7 10. FOR M/S. INFOSYS LTD. ALSO, THIS WAS THE FINDIN G OF DRP THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AND IT IS A GIANT COMPANY AN D THE ASSESSEES STAND IS ALSO THIS THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT. ALTHOUGH IT WAS STATED BY ASSESSEE THAT THE TURNOVER OF THIS COMPANY IS VERY HIGH RS. 25385 CRORES WHEREAS THE TURNOVER OF THE ASSESSEE COMPANY WAS ON LY RS. 17.5 CRORES. SIMILARLY IN THE CASE OF VARIOUS OTHER COMPARABLES ALSO, IT IS SEEN THAT VARIOUS ASPECTS OTHER THAN TURNOVER ASPECT WERE INADVERTENT LY MISSED BY THE TRIBUNAL IN THE IMPUGNED TRIBUNAL ORDER AND THEREFORE, WE FIND THAT THERE IS APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER BECAUSE THE WHOLE DECISION IS ON A MISTAKEN BASIS. THEREFORE, WE RECALL THIS TRIBUNAL ORDER IN ENTIRETY FOR FRESH DECISION AFTER HEARING BOTH SIDES. WE ORDER ACCORD INGLY. THIS TRIBUNAL ORDER IS RECALLED TO DECIDE TO DECIDE ALL GROUNDS RAISED BY THE REVENUE AFRESH INCLUDING GROUND NO. 6 OF THE REVENUES APPEAL FOR WHICH THE MP IS FILED BY THE REVENUE AND THE REMAINING GROUNDS FOR WHICH THE MP IS FILED BY THE ASSESSEE. 11. THE REGISTRY IS DIRECTED TO FIX THIS APPEAL FOR HEARING ON 14.03.2018. SINCE THE DATE OF HEARING IS PRONOUNCED IN THE OPEN COURT, NO SEPARATE NOTICE OF HEARING IS TO BE ISSUED. 12. IN THE RESULT, BOTH THE MPS ARE 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 19 TH JANUARY, 2018. /MS/ M.P. NOS. 226 & 282/BANG/2017 (IN IT(TP)A NO. 59/BANG/2016 & C.O. NO. 57/BANG/2016) PAGE 7 OF 7 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.