M/s Blue Coat Network (India) Private Limited, Bangalore V. Deputy Commissioner of Income Tax Circle-1(1)(2), Bangalore

MA 57/BANG/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4288 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 25-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Services rendered outside India
• Section: 254(2); 113

Judgement Text

MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER MP No.57/Bang/2021 (Arising out of IT(TP)A No.78/Bang/2019 Assessment Year: 2014-15 M/s. Blue Coat Network (India) Private Limited Unit No.1001 & 1002, 10 th Floor RMZ Campus, 8-B Plot No.C-L, Sarjapur Marathahalli Outer Ring road Bangalore 500 037 PAN NO : AAHCS7844Q Vs. Deputy Commissioner of Income-tax Circle-1(1)(2) Bengaluru APPELLANT RESPONDENT Appellant by : Shri Chavali Narayanan, A.R. Respondent by : Shri Sankar Ganesh D., D.R. Date of Hearing : 20.05.2022 Date of Pronouncement : 20.05.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: By this miscellaneous application assessee seeks rectification of order of Tribunal in IT(TP)A No.78/Bang/2019 dated 23.11.2020. First ground in this miscellaneous application is with regard to exclusion of comparable namely Thirdware Solutions Ltd. The MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 2 of 8 Tribunal discussed this issue in its Order at page no.16, para-17 to 20 which is as follows:- “17. Ld. A.R. submitted that this is not comparable to assessee’s case as Thirdware Solutions Limited is engaged in sale of products, subscription contracts, sale of user license, etc. and are having huge intangible assets, besides segmental data of various activities not available in public domain. He relied on the following case laws: 1. McAfee Software (India) Pvt. Ltd. (IT(TP)A No.04/Bang/2012, IT(TP)A No.1388/Bang/2011 2. Cypress Semiconductor Technology India Pvt. Ltd. (IT(TP)A No.614/Bang/2013, CO No.166/Bang/2015 3. Microchip Technology India Pvt. Ltd. (IT(TP)A No.1247/Bang/2011, 34/Bang/2012, 40/Bang/2012 4. (2020) 113 Taxmann.com 214 (Hyderabad – Trib.) Kony IT Services (P) Ltd. Vs. Deputy Commissioner of Income-tax for AY 2014-15 18. On the other hand, Ld. D.R. relied on the order of the Tribunal in the case of Goldman Sachs Pvt. Ltd. in ITA No.3244/Bang/2018 dated 29.1.2020. 19. We have heard the rival submissions and perused the materials available on record. Admittedly, this Thirdware Solutions Pvt. Ltd. was considered by this Tribunal in the case of Goldman Sachs Services Pvt. Ltd. and observed in para 5.1.4 as follows: “This comparable has been considered by Ld.TPO which has been objected by assessee. Ld.AR submits that this company is functionally different and earned revenues from export of services, subscription and training and sale of licensing. Ld.AR submitted that there are no segmental details in respect of this comparable. Ld.CIT DR however placed reliance upon decision of Hon'ble Delhi High Court in case of Steria India Ltd vs DCIT reported in (2018) 92 Taxmann.com 120. She submitted that Hon'able Delhi High Court held this comparable to be a good company. MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 3 of 8 We have perused submissions advanced by both sides in light of records placed before. From the annual report of this company placed at page 2334-2444, it is observed that at page 2413, segment reporting of this company is set to be comprised of software development, implementation and support services. Further - it has been submitted therein that primary segment reporting is based on geographical areas, viz Domestic = India (products and services) and International = rest of the world (exports-software services). It is also been submitted therein that this company maintains separate books of account for the reported segments. In profit and loss account at page 2431, it is observed that during the year under consideration, this company earned revenue from sale of products whereas, revenue from sale of services is shown to be at 'nil'. Ld.TPO while considering this comparable only considered footnote at page 2433, wherein bifurcations of revenue from sale of products has been given as; export of software services has been recorded to be at Rs.20194.37, software services from local units amounting to Rs.414.07, revenue from subscription and training amounting to Rs.59.32 and sale of licenses amounting to Rs.7.98. We therefore reject the contention of assessee that segmental details are not available in respect of this comparable. In our view Ld.TPO has considered the export of software service segment for purposes of comparability with that of assessee (refer computation of margin for this comparable at page 55 of order passed by Ld.TPO). Respectfully following decision of Hon'ble Delhi High Court in case of Steria India Ltd us DCIT (supra) we do not find any infirmity in the view of authorities below in including this company. Accordingly, we uphold the inclusion of this comparable to the finalist.” 20. Taking a consistent view, we uphold the order of the lower authorities on this comparable and it has to be included as a comparable in the list of comparables.” 2. The contention of Ld. A.R. is that the Tribunal relied on the case laws in the case of Goldman Saches Solutions Pvt. Ltd. in ITA No.3244/Bang/2018 dated 29.1.2020 to decide the issue of this comparable as to be included as a comparable. According to the Ld. A.R. the Tribunal ought to have directed the AO/TPO to consider MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 4 of 8 segmental financials while including Thirdware Solutions Ltd., though the same was stated in the ruling of Goldman Saches Ltd. 3. We have heard the rival submissions and perused the record. In this case, Tribunal has followed the earlier order of the coordinate bench in the case of Goldman Saches Pvt. Ltd. Cited (supra) and it has not taken any independent view on this matter and directed the AO/TPO to follow the same order. Now the assessee wanted to give direction to AO/TPO to consider segmental financials while including Thirdware Solutions Ltd. In our opinion, consideration of this argument of the Ld. A.R. amounts to review of earlier order of Tribunal for which Tribunal has no power. The Tribunal directed the AO/TPO to follow the order of coordinate bench in the case of Goldman Saches Pvt. Ltd. And it has not committed any error by directing the AO/TPO but follow the earlier order of the Tribunal cited (supra). The argument of the Ld. A.R. is totally misconceived and we have no hesitation once again confirming our view that AO/TPO bound to follow the ratio laid down by the Tribunal in the case of Goldman Saches Pvt. Ltd. Cited (supra). This issue in this MA raised by the assessee is dismissed 4. Next grievance of the assessee is with regard to the finding of the Tribunal that the comparable namely Sankya Infotech Ltd. Keerthi Soft Technologies and Celstream Technologies Ltd. were not MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 5 of 8 adjudicated by the Tribunal and dismissed as not pressed. The Ld. A.R. submitted that these 3 comparables were argued before this Tribunal and the Tribunal is required to adjudicate these 3 comparables. 5. We have heard the rival submissions and perused the record. We have gone through the log book. We find that at the time of hearing, the Ld. Counsel for the assessee has not pressed these comparables for inclusion but now the Ld. A.R. wants inclusion of these 3 comparables which is not permitted u/s 254(2) of the Act. Accordingly, this argument of the assessee’s counsel is rejected. 6. Next argument of the Ld. A.R. is that assessee contested for inclusion of Evoke Technologies Ltd. as a comparable company, which was excluded on the ground that the financial statements contains un-audited figures pertaining to US branch of the company. The Tribunal has considered this issue in para 41 to 45 of the above cited order in IT(TP)A 78/Bang/2019 (supra) as follows:- “41. Ld. A.R. submitted that revenue is identified geographical separate India and USA, hence financials related to India should be considered in the entirety and there after it should be included as a comparable. 42. On the other hand, Ld. D.R. submitted that one unaudited financial statement was made available to the lower authorities. Further, as per the geographical segmentation information, the revenue from India was given to be Rs.3621.72 lakhs and that the revenue from USA was given to be Rs.924.87 lakhs. Thus, it can be seen that the export revenue constitute only 20.34% of the total revenue. Therefore, this company cannot be considered as comparable. 43. He relied on the order of the Tribunal in the case of Goldman Sachs Research Pvt. Ltd. in IT(TP)A No.3244/Bang/2018 dated 29.1.2020 for this proposition. MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 6 of 8 44. We have heard the rival submissions and perused the materials available on record. Admittedly, this comparable was considered by this Tribunal and observed in para 6.1 in the case of Goldman Sachs Research Pvt. Ltd. (supra) as follows: “Ld.AR submitted that the assessee prayed for inclusion of this company before DRP. However, DRP rejected the prayer of the assessee for the reason that financial results incorporated branch revenue and profit, which was based on unaudited financial statements of branch outside India. It was also observed by DRP that export revenue constituted only 20.34% which did not fulfill filter applied by Ld.TPO. Ld.AR placed reliance upon annual reports of this company placed at page 2491 of paper book volume 6 wherein at page 2511 geographic income has been tabulated for year under consideration and income from software services and products by this company has been shown to be at 3621.72 lakhs. It is observed at page 2512 that this company is earning Rs.35,99,47, 572/-in foreign exchange under software development segment.” 45. Taking a consistent view, we are of the opinion that this should be excluded from the list of comparables. This ground of the assessee is rejected.” 7. Accordingly, it was held that this comparable company has to be excluded from the list of comparables. Now the contention of the Ld. A.R. is that assessee has not given any opportunity to put his arguments with regard to placing reliance on the order of the Tribunal in the case of Goldman Saches Research Pvt. Ltd. Cited (supra). In our opinion, the Ld. A.R wanted to re-argue the case before us once again which is not permitted u/s 254(2) of the Act. Accordingly, this ground is dismissed. 8. Next contention of the Ld. A.R. is that the Ld. A.R submitted that assessee has taken specific ground as ground No.4.11 with regard to allocation of expenditure on the basis of actual basis and not on the basis of revenue. According to the Ld. A.R. this issue was argued by the assessee before TPO as well as DRP and the finding MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 7 of 8 recorded by the Tribunal that “the issue was not assailed by the lower authorities and on that count it was remitted back to the AO/TPO which is incorrect.” 9. We have heard the rival submissions and perused the record. The Tribunal has taken a view on this matter and remitted the issue back to the AO/TPO for fresh consideration. The Ld. A.R. wanted to interfere with the decision making process of the Tribunal which is not permitted. There may be error of judgement, which cannot be subject matter of rectification proceedings u/s 254(2) of the Act. Accordingly, this ground raised by the assessee in its MA is dismissed. 10. Next ground with regard to non-granting of working capital adjustment as raised in ground No.4.12 in original grounds. The Tribunal considered this ground in para 49 of its order and observed that no argument has been advanced by the Ld. A.R. Now the Ld. A.R. wanted to re-argue this issue by way of miscellaneous petition which is not permitted u/s 254(2) of the Act. Accordingly, this issue in this MA is dismissed. MP No.57/Bang/2021 M/s. Blue Coat Network (India) Pvt. Ltd., Bangalore Page 8 of 8 11. In the result, the miscellaneous application filed by the assessee is dismissed. Order pronounced in the open court on 20 th May, 2022. Sd/- (N.V. Vasudevan) Vice President Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 20 th May, 2022. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.