Ariba Technolgoies I P Ltd, Bangalore V. Income tax officer, Ward-11(1), Bangalore

MA 68/BANG/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4637 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 08-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: P K PRASAD; UMASHANKAR GAUTAM C AS
• Keywords: Transfer pricing; Rectification of order; International transaction
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER M.P. NO.68/BANG/2016 (IN I.T . (T.P) A. NO S . 441 & 442 /BANG/20 12) (ASSESSMENT YEAR : 20 07 - 08 ) M/S. ARIBA T ECHNOLOGIES INDIA PVT. LTD., RMZ ICON, NO.51, PALACE ROAD, BANGALORE - 560 052 . PETITIONER. VS. INCOME TAX OFFICER, WARD 11(1), BANGALORE. .. RESPONDENT. PETITIONER BY : S/SHRI P.K. PRASAD, & UMASHANKAR GAUTAM, C.AS REVENUE BY : SHRI P.K. SRIHARI, ADDL. CIT (D.R) DATE OF HEARING : 29.07.2016. DATE OF PRONOUNCEMENT : 08. 09. 2016. O R D E R PER SHRI VIJAY P AL RAO, J .M . : BY WAY OF THIS MISC. PETITION, THE ASSESSEE IS SEEKING RECTIFICATION OF MISTAKE IN THE ORDER DT.2.2.2016 OF THIS TRIBUNAL. 2. THE LEARNED A UTHORISED REPRESENTATIVE OF THE PETITIONER HAS SUBMITTED THAT IN THE APPEAL THE ASSESSEE RAISED THE ISSUE OF EXCLUSION OF 2 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) CERTAIN COMPANIES FROM THE SET OF COMPARABLES SELECTED BY THE TPO WHILE DETERMINING THE ALP FOR INTERNATIONAL TRANSACTIONS REPRESENTIN G SOFTWARE DEVELOPMENT SERVICE CHARGES. HE FURTHER SUBMITTED THAT THE ASSESSEE PRAYED FOR EXCLUSION OF AVANI CINCOM TECHNOLOGIES LTD. FROM THE SET OF COMPARABLES ON THE GROUND THAT THE SAID COMPANY IS FUNCTIONALLY DIS - SIMILAR WITH THE ASSESSEE'S INTERNATI ONAL TRANSACTIONS AS BESIDE BEING THE SOFTWARE DEVELOPMENT ACTIVITY, THIS COMPANY WAS ALSO INTO PRODUCTS LIKE DXCHANGE AND THEREFORE THE SAME CANNOT BE CONSIDERED AS A COMPARABLE OF THE ASSESSEE FOR WANT OF SEGMENTAL DATA OF INCOME IN RESPECT OF SOFTWA RE DEVELOPMENT SERVICES AND PRODUCT SEPARATELY. HE HAS REFERRED PARAS 10.2.1 TO 10.2.4 OF THE IMPUGNED ORDER AND SUBMITTED THAT THE ASSESSEE RELIED UPON VARIOUS DECISIONS OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL WHEREIN THE INFORMATION CONTAINED IN REL EVANT ANNUAL REPORT AS WELL AS AT THE WEB SITE OF THE SAID COMPANY WAS CONSIDERED AND HELD THAT THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE OF A SOFTWARE DEVELOPMENT SERVICES PROVIDER. THE LEARNED AUTHORISED REPRESENTATIVE HAS FURTHER SUBMITTED THAT THE DECISION OF THE HYDERABAD BENCHES OF TRIBUNAL IN THE CASE OF DE SHAH INDIA SOFTWARE 3 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) PVT. LTD. IN ITA NO.2071/HYD/2011 HAS BEEN UPHELD BY THE HON'BLE TELANGANA & ANDHRA PRADESH HIGH COURT THEREFORE BY NOT FOLLOWING THE DECISION OF THE CO - ORDINATE BENCHES AS WELL AS HON'BLE HIGH COURT CONSTITUTE A MISTAKE IN THE IMPUGNED ORDER WHICH REQUIRES TO BE RECTIFIED UNDER SECTION 254(2) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSUE OF COMPARABILITY AFTER CONSIDERING ALL THE FACTS AND CONTENTIONS OF THE ASSESSEE AS RAISED AT THE TIME OF HEARING THEREFORE THE DECISION TAKEN ON MERIT CANNOT BE REVISED OR REVIEWED UNDER THE PROCEEDINGS OF SECTION 254(2) OF THE ACT. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE CONTENTIONS AS RAISED BY THE LD. AR IN THE MISC. PETITION AS WELL AS IN THE ARGUMENT AT THE TIME OF HEARING OF MISC. PETI TION WERE ALSO RAISED AT THE TIME OF HEARING OF THE APPEAL WHICH WERE RECORDED BY THE TRIBUNAL IN PARAS 10.2.1 AND 10.2.2 AS UNDER : 10.2.1 AVANI CINCOM TECHNOLOGIES LTD. : - THE ASSESSEE OBJECTED THE INCLUSION OF THIS COMPANY IN THE LIST OF CO MPARABLES ON THE GROUND OF FUNCTIONAL DIS - SIMILARITY. THE CIT (APPEALS) INSTEAD OF DECIDING THE FUNCTION AL DIS - SIMILARITY HAS EXCLUDED THIS COMPANY BY APPLYING THE RPT FILTER AT 0%. 4 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) 10.2.2 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE A SSESSEE HAS SUBMITTED THAT THIS COMPANY IS ENGAGED IN THE SOFTWARE DEVELOPMENT SERVICES AND IT SERVICES TRAVEL SOLUTIONS, INSURANCE SOLUTIONS, RELATION SHIP MANAGEMENT, ETC. THERE IS NO SEGMENTAL DATA AVAILABLE IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES . THEREFORE THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS : CASES PERTAINING TO ASSTT. YEAR TRILOGY E BUSINESS SOFTWARE ITA NO. 1054/ BANG /2011 (AY 2007 - 08) BEARING POINT BUSINESS CONSULTING PRIVATE LTD. (ITA NO. 1124/BANG/2011, TS - 758 - ITAT - 2012(BANG) - TP, ITAT BANGALORE)(AY 2007 - 08) CSR INDIA PVT. LTD. {ITA NO. 1119/BANG/2011, [2013] 31 TAXMANN.COM 265 (BANGALORE - TRIB.), [TS - 68 - ITAT - 2013(BANG) - TP]}, I TAT BANGALORE(AY 2007 - 08) M/S. HUAWEI TECHNOLOGIES INDIA PRIVATE LIMITED (IT(TP) A. NO.583/BANG/2012) (AY 2007 - 08) EMC DATA STORAGE SYSTEMS (INDIA) PVT. LTD. (IT(TP) A NO. 973/BANG/2010) (AY 2007 - 08) AFTER CONSIDERING THOSE CONTENTIONS, THE TRIBUNAL HAS DECIDED THE ISSUE IN PARA 10.2.4 OF THE IMPUGNED ORDER AS UNDER : 10.2.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS REL EVANT MATERIAL ON RECORD. T HE LEARNED AUTHORISED REPRESENTATIVE HAS CONTENDED THAT THIS COMPANY IS ENGA G ED IN THE D IVERSIFIED ACTIVITY WHICH ARE DIS - SIMIALR TO THE ASSESSEE. HE HAS ASSERTED THAT THIS COMPANY IS ENGAGED IN THE SOFTWARE DEVELOPMENT AND IT SERVICES AND THERE IS NO SEGMENTAL DATA AVAILABLE FOR SOFTWARE DEVELOPMENT. IN SUPPORT OF HIS CONTENTION, HE HAS RE LIED UPON VARIOUS DECISIONS. AFTER GOING THROUGH THE ANNUAL REPORT OF THIS COMPANY AS WELL AS THE AUDITOR S REPORT, WE FIND THAT THIS COMPANY IS A SOFTWARE SERVICE PROVIDER AND DOES NOT REQUIRE TO HOLD INVENTORIES AS CLEARLY REPORTED BY THE AUDITOR OF THE ASSESSEE. FURTHER THIS COMPANY HAS RECEIVED THE REVENUE OF RS.3,54,77,523 AS EARNING IN FOREIGN EXCHANGE OF SOFTWARE EXPORT SERVICES. FROM THE PROFIT AND LOSS ACCOUNT, THIS COMPANY HAS 5 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) REPORTED ONLY ONE SOURCE OF INCOME FRO M OPERATIONS AND THAT IS EXPOR T IN FOREIGN CURRENCY. APART FROM THIS REVENUE, ONLY A MINOR AMOUNT HAS BEEN SHOWN FROM THE INTEREST IN THE PROFIT AND LOSS ACCOUNT. FURTHER, WE FIND THAT THERE IS NO O THER REVENUE GENERATING SOURCE DURING THE YEAR UNDER CONSIDERATION. THEREFORE, WE FI ND FROM THE ANNUAL REPORT OF THE COMPANY, THERE IS ONE SEGMENT I.E. SOFTWARE EXPORTS. THUS THE CONTENTION OF THE ASSESSEE IS THAT THIS COMPANY IS IN THE DIVERSIFIED ACTIVIT Y IS NOT FOU ND SUPPORT FROM THE RECORD AND THEREFORE IT IS CONTRARY TO THE RECORD. THE DECISIONS RELIED UPON BY THE ASSESSEE ALSO DOES NOT GIVE ANY FINDING OF FACT ON FUNCTIONAL DISSIMILARITY BUT THE EARLIER ORDER OF THE TRIBUNAL IN SOME OTHER CASES HAS BEEN FOLLOWED IN THESE DECISIONS. THERE IS NO I NDEPENDENT FINDING BY ANALYSING THE FACTS ON RECORD IN THESE DECISIONS . T HEREFORE WHEN WE ANALYSE THE RELEVANT RECORD AND DETAILS AS GIVEN IN THE ANNUAL REPORT, PROFIT AND LOSS ACCOUNT AND AUDITOR S REPORT, WE FIND THAT THIS COMPANY HAS EARNED REVENUE FROM ONLY ONE SOURCE WHICH IS SOFTWARE E XPORTS IN FOREIGN CURRENCY. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE OBJECTIONS RAISED BY THE ASSESSEE IN THIS APPEAL. AS REGARDS THE HIGH PROFITS, THE SAME ITSELF IS NOT A GROUND FOR EXCLUSION OF THIS COMPANY OR TREATING THE SAME AS NOT COMPARABLE U NTIL AND UNLESS ANY EXTRA ORDINARY EVENT OCCUR ED DURING THE YEAR WHICH HAS RESULT ED ABNORMAL PROFIT. THEREFORE, ONLY THE EXTRA ORDINARY EVENT WHICH COULD HAVE RESULTED IN ABNORMAL RESULTS OR INCOME OF THE COMPARABLE COMPANY CAN BE CONSIDERED AS A REASON F OR EXCLUSION BUT IF THE COMPANY IS EARNING COMPARABLY HIGH PROFITS FROM ITS NORMAL BUSINESS ACTIVITY, THEN THE SAME ITSELF IS NOT A GROUND FOR EXCLUSION, IF OTHERWISE COMPARABLE TO THAT OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT (APPE ALS) EXCLUDING THIS COMPANY ON THE GROUND OF RELATED PARTY FILTER AT 0% AND RESTORE THE ORDER OF THE TPO/A.O. ON FUNCTIONAL COMPARABILITY OF THIS COMPANY. THUS IT IS CLEAR THAT THE TRIBUNAL DID CONSIDER ALL THE RELEVANT FACTS AS REPORTED IN THE ANNUAL R EPORT OF THE SAID COMPANY AS WELL AS AUDITOR S 6 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) REPORT WHEREIN IT WAS REPORTED THAT THIS COMPANY DOES NOT REQUIRE TO HOLD INVENTORIES. FURTHER THE REVENUE RECEIVED BY THE SAID COMPANY WAS SHOWN FROM FOREIGN EXCHANGE OF SOFTWARE EXPORT SERVICES. FROM ALL T HESE DETAILS, THE TRIBUNAL REACHED TO THE CONCLUSION THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE COMPANY HAS EARNED ANY REVENUE FROM THE SOFTWARE PRODUCT. ONCE THE ISSUE HAS BEEN DECIDED ON MERITS AND THERE IS NO CASE OF THE ASSESSEE IN THE MISC. PET ITION THAT ANY RELEVANT FACT HAS BEEN WRONGLY CONSIDERED OR ASSUMED BY THE TRIBUNAL THEN THE DECISION TAKEN ON MERITS CANNOT BE REVISED OR REVIEWED IN THE PROCEEDINGS UNDER SECTION 254(2) OF THE ACT. THE DECISIONS RELIED UPON BY THE ASSESSEE ARE BASED ON THE COMMENTARY REPORTED IN THE ANNUAL REPORT AND NOT BASED ON THE ACTUAL INFORMATION AND FINANCIAL DETAILS REPORTED IN THE ANNUAL REPORT OF THE SAID COMPANY. IT IS SETTLED PRINCIPLE OF LAW THAT THE SCOPE OF PROCEEDINGS UNDER SECTION 252 IS LIMITED AND SUB SCRIBED ONLY FOR RECTIFICATION OF APPARENT MISTAKE ON RECORD WHICH DOES NOT REQUIRE ANY LONG DRAWN ARGUMENTS OR REASONING. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE MISCELLANEOUS PETITION. 7 M.P. NO.48/BANG/2016 (IN IT (TP) A NO S . 441 & 442 /BANG/201 2 ) 5. IN THE RESULT, THE MISC. PETITION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 8TH DAY OF SEPT., 201 6 . SD/ - ( INTURI RAMA RAO ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE