Asst.C.I.T., Bangalore V. M/s Arctor R & D Software Private Limited, Bangalore

MA 36/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5443 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD SHARMA
• Keywords: Transfer pricing; Principle of natural justice
• Section: 92C; 234B; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER M.P. NO. 36/BANG/2019 (IN IT (TP) A NO. 397 /BANG/201 6 ) ASSESSMENT YEAR : 20 11 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 (1) (1), BANGALORE. VS. M/S. ARCOT R & D SOFTWARE PVT. LTD., C/O CA (I) TECHNOLOGIES PVT. LTD., RMZ TITANIUM BUILDING 135, 2 ND & 4 TH FLOOR, OLD AIRPORT ROAD, KODIHALLI, BANGALORE 560 017. PAN: AADCA4367L APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI VINOD SHARMA, JCIT (DR) DATE OF HEARING : 20 .0 9 .2019 DATE OF PRONOUNCEMENT : 27. 0 9 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS M.P. IS FILED BY THE REVENUE IN WHICH IT IS STATED THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE IMPUGNED TRIBUNAL ORDER WHICH SHOULD BE RECTIFIED. THIS M.P. WAS FIXED FOR HEARING ON SEVERAL DATES BUT ON NONE OF THESE DATES, ANYBODY FROM THE ASSESSEE MADE ANY APPEARANCE. HENCE, THE M.P. OF THE REVENUE WAS HEARD EX-PARTE QUA THE ASSESSEE. 2. THE LD. DR OF REVENUE SUBMITTED THAT THE TRIBUNAL IN THE IMPUGNED TRIBUNAL ORDER HAS DECIDED ABOUT INCLUSION OF THREE COMPARABLES I.E. M/S. PERSISTENT SYSTEMS LTD., M/S. PERSISTENT SYSTEMS AND SOLUTIONS LTD. AND M/S. SASKEN COMMUNICATION TECHNOLOGIES LTD. BUT NO SUCH GROUND WAS RAISED BY THE ASSESSEE IN ITS APPEAL OR IN THE C.O. FILED BY THE ASSESSEE AND THEREFORE, THERE IS APPARENT MISTAKE IN THE TRIBUNAL ORDER FOR DECIDING THIS ISSUE WITHOUT ANY GROUND FROM THE ASSESSEE. M.P. NO. 36/BANG/2019 (IN IT(TP)A NO. 397/BANG/2016) PAGE 2 OF 4 3. AT THE TIME OF HEARING, IT WAS POINTED OUT BY THE BENCH THAT ALTHOUGH AS PER THE TRIBUNAL, THE TRIBUNAL HAS REPRODUCED THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL I.E. IT(TP)A NO. 437/BANG/2016 BUT BY MISTAKE, INSTEAD OF REPRODUCING THE GROUNDS OF APPEAL, THE TRIBUNAL HAS REPRODUCED THE STATEMENT OF FACTS FILED WITH THE TRIBUNAL ALONG WITH THE APPEAL MEMO AND BECAUSE OF THIS, THERE IS SOME CONFUSION AS TO WHETHER ANY GROUND WAS RAISED BY ASSESSEE OR NOT REGARDING EXCLUSION OF THESE THREE COMPARABLES. BUT IN FACT, AS PER GROUND NO. 5 RAISED BY ASSESSEE BEFORE US IN IT(TP)A NO. 437/BANG/2016, THIS ISSUE WAS RAISED BY THE ASSESSEE IN RESPECT OF EXCLUSION OF 3 COMPARABLES. HENCE, WE RECTIFY THE TRIBUNAL ORDER BY CORRECTLY REPRODUCING THE GROUNDS RAISED BEFORE US. THE LD. DR OF REVENUE HAD NOTHING TO SAY. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE REVENUE AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN PARA 3 OF THE IMPUGNED TRIBUNAL ORDER, THE TRIBUNAL SAYS THAT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED BUT IN FACT, THE TRIBUNAL HAS REPRODUCED BY MISTAKE THE STATEMENT OF FACTS FILED BEFORE THE TRIBUNAL. HENCE, WE RECTIFY THIS PARA 3 OF THE IMPUGNED TRIBUNAL ORDER WHICH SHOULD BE READ AS UNDER. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. ASSESSING OFFICER ('AO'), THE LD. TRANSFER PRICING OFFICER ('TPO') AND HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAVE ERRED IN: 1. PASSING THE ORDER WHICH IS BAD ON FACTS AND IN LAW AND UPHOLDING THE LD. TPO'S ORDER EVEN THOUGH IT WAS PASSED IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 2. USING ONLY THE DATA FOR THE CURRENT YEAR AND COMPLETELY DISREGARDING THE DATA FOR EARLIER YEARS USED BY THE APPELLANT IN ITS TP STUDY. 3. INCORRECTLY REJECTING THE APPELLANT'S TP STUDY GROUNDS RELATING TO 'SOFTWARE DEVELOPMENT SERVICES' SEGMENT 4. INCORRECTLY REJECTING THE COMPARABLES SELECTED BY THE APPELLANT IN ITS TP STUDY. 5. INCORRECTLY ACCEPTING COMPANIES NAMELY PERSISTENT SYSTEMS LIMITED, PERSISTENT SYSTEMS & SOLUTIONS LIMITED AND SASKEN COMMUNICATION TECHNOLOGIES LIMITED FROM THE LD. TPO'S SEARCH AS BEING COMPARABLE TO THE APPELLANT. 6. NOT ACCEPTING GOLDSTONE TECHNOLOGIES LTD AND CHERRYTEC INTELISOLVE LTD AS ADDITIONAL COMPANIES PROPOSED BY THE APPELLANT DURING THE ASSESSMENT. 7. INCORRECTLY REJECTING EVOKE TECHNOLOGIES LTD., MINDTREE LTD. AND R S SOFTWARE (INDIA) LTD FROM THE FINAL SET OF COMPARABLES BY THE HON'BLE M.P. NO. 36/BANG/2019 (IN IT(TP)A NO. 397/BANG/2016) PAGE 3 OF 4 DRP AT THE TIME OF PASSING THE DIRECTIONS. 8. INCORRECTLY COMPUTING THE PLI OF COMPARABLE COMPANIES. GROUNDS RELATING TO 'SOFTWARE DISTRIBUTION SEGMENT 9. CONDUCTING A NEW STUDY WHICH WAS NOT LEGALLY TENABLE. 10. INCORRECTLY REJECTING THE COMPARABLES SELECTED BY THE APPELLANT IN ITS TP STUDY. 11. INCORRECTLY ACCEPTING COMPANIES NAMELY ADINATH BIO-LABS LTD. AND SILVERLINE TECHNOLOGIES LIMITED FROM THE LD. TPO'S SEARCH AS BEING COMPARABLE TO THE APPELLANT. 12. MAKING A FACTUALLY INCORRECT OBSERVATION THAT THE ANNUAL REPORTS OF THE COMPARABLES SELECTED BY THE APPELLANT AND THE LD. TPO HAD NOT BEEN FILED BY THE APPELLANT DURING THE DRP PROCEEDINGS. 13. NOT PROVIDING AN ADJUSTMENT FOR THE INITIAL START-UP PHASE OF THE APPELLANT. 14. NOT CONSIDERING RESALE PRICE METHOD TO BE THE MOST APPROPRIATE METHOD. OTHER GROUNDS 15. INCORRECTLY COMPUTING PLI OF THE APPELLANT RELATING TO ITS 'SOFTWARE DEVELOPMENT SERVICES' SEGMENT BY NOT CONSIDERING FOREX GAIN/LOSS AS NON-OPERATING. 16. INCORRECTLY PROVIDING THE WORKING CAPITAL ADJUSTMENT TO THE 'SOFTWARE DEVELOPMENT SERVICES' SEGMENT. 17. NOT PROVIDING WORKING CAPITAL ADJUSTMENT TO THE 'SOFTWARE DISTRIBUTION' SEGMENT. 18. NOT GRANTING ANY RISK ADJUSTMENT AND CONCLUDING THAT THE APPELLANT IS BEARING SINGLE RISK CUSTOMER. 19. NOT GRANTING THE BENEFIT OF PROVISO TO SECTION 92C (2) OF THE ACT. 20. INCORRECTLY EXCLUDING LEASE LINE CHARGES (`TELECOMMUNICATION CHARGES') AND EXPENSES INCURRED IN FOREIGN CURRENCY TOWARDS TRAVEL FROM THE EXPORT TURNOVER AND TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. 21. INCORRECT DISALLOWANCE UNDER SECTION 10A OF THE ACT BY INCORRECTLY CONSIDERING THE AMOUNT OF RELIEF GRANTED BY THE HON'BLE DRP. 22. INCORRECT DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT FOR NON- DEDUCTION OF TAXES AT SOURCE UNDER SECTION 195 OF THE ACT, ON THE PURCHASE OF COMPUTER SOFTWARE FROM ITS HOLDING COMPANY. 23. NOT GRANTING CREDIT FOR TAXES DEDUCTED AT SOURCE EVEN THOUGH THE CORRESPONDING INCOME WAS OFFERED TO TAX IN AY 2011-12. 24. INCORRECTLY COMPUTING THE TAX LIABILITY AND INTEREST THEREON UNDER SECTION 234B OF THE ACT. 25. INCORRECT CONSIDERATION OF REFUND ISSUED TO THE APPELLANT AND CONSEQUENTIAL LEVY OF INTEREST UNDER SECTION 234D OF THE ACT. THE APPELLANT SUBMITS THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY DELETION, SUBSTITUTION OR OTHERWISE, THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. M.P. NO. 36/BANG/2019 (IN IT(TP)A NO. 397/BANG/2016) PAGE 4 OF 4 5. FROM THE CORRECT GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL AS REPRODUCED ABOVE, IT IS SEEN THAT AS PER GROUND NO. 5 OF THE APPEAL RAISED BY THE ASSESSEE, THE ASSESSEE IS AGGRIEVED ABOUT INCLUSION OF 3 COMPARABLES VIZ., PERSISTENT SYSTEMS LTD., PERSISTENT SYSTEMS & SOLUTIONS LTD. AND SASKEN COMMUNICATION TECHNOLOGIES LTD. HENCE, THIS CONTENTION RAISED BY THE REVENUE IN THE M.P. THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL WITHOUT THERE BEING GROUNDS RAISED BY ASSESSEE IN ITS APPEAL OR CO IS NOT FACTUALLY CORRECT AND HENCE, THIS CONTENTION IS REJECTED. THE M.P. FILED BY THE REVENUE STANDS DISMISSED SUBJECT TO REPRODUCTION OF CORRECT GROUNDS RAISED BY ASSESSEE IN ITS APPEAL. 6. IN THE RESULT, THE M.P. FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH SEPTEMBER, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.