Appeal details
Counselvise Citation
[2017] 124 COUNSELVISE.COM (IT) 5756 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
08-09-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2009-2010
Appeal Filed On
20-04-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER M.P. NOS. 84 & 85/BANG/2017 (IN IT (TP) A NO S . 264 & 177/BANG/2014) ASSESSMENT YEAR: 20 0 9 - 1 0 M/S. SYMBOL TECHNOLOGIES INDIA PVT. LTD., #3B, RMZ ECOSPACE, SARJAPUR OUTER RING ROAD, BANGALORE 560 103. PAN: AAECS 7171H VS. THE INCOME TAX OFFICER, WARD 12(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI UMASHANKAR GAUTAM, ADVOCATE RESPONDENT BY : SMT. PADMA MEENAKSHI, JCIT(DR) DATE OF HEARING : 0 1 .0 9 .201 7 DATE OF PRONOUNCEMENT : 08 .0 9 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER BOTH THESE MISCELLANEOUS PETITIONS ARE FILED BY THE ASSESSEE CONTENDING THAT THERE ARE CERTAIN MISTAKES IN THE COMBINED TRIBUNAL ORDER DATED 26.10.2016 IN RESPECT OF THE APPEAL OF THE ASSESSEE AND THE REVENUE FOR ASSE SSMENT YEAR 2009-10 IN IT(TP)A NOS. 264 & 177/BANG/2014. IN THE MISCELLAN EOUS PETITION FILED BY THE M.P. NOS. 84 & 85/BANG/2017 (IN IT(TP)A NOS. 264 & 177/BANG/2014) PAGE 2 OF 6 ASSESSEE, PARA NOS. 5 TO 7 ARE RELEVANT AND THEREFO RE, THESE PARAS ARE REPRODUCED HEREIN BELOW. 5. AGGRIEVED BY THIS ORDER OF THE AO, THE ASSESSEE HAS PREFERRED APPEAL BEFORE US. GROUND 5 OF THE APPEAL FILED BEFORE US READS AS FOLLOWS: INCLUDING THE TWO COMPARABLE COMPANIES IN THE FINAL SET OF COMPARABLE COMPANIES, THAT WERE ELIMINATED BY THE L EARNED TPO ON THE BASIS THAT THE IMPACT OF THE WORKING CAP ITAL POSITION ON ITS OPERATING MARK UP WAS GREATER THAN 4%; AND GRANTING REVISED WORKING CAPITAL ADJUSTMENT ON THE BASIS OF THE REVISED SET OF FINAL COMPARABLES UPHELD BY THE LEARNED PANEL. THE ID. COUNSEL SUBMITTED BEFORE US AS FOLLOWS: 'THAT THE LEARNED AO/LEARNED TPO ERRONEOUSLY APPLIE D WORKING CAPITAL IMPACT ON PROFIT AS A FILTER BY ARB ITRARILY APPLYING A LIMIT OF 4% TO REJECT THE COMPANIES TH INKSOFT GLOBAL SERVICES LTD., AND FCS SOFTWARE SOLUTIONS LT D., WHICH WERE OTHERWISE HELD BY THE ID. TPO HIMSELF TO BE FUNCTIONALLY COMPARABLE TO THAT OF THE ASSESSEE.' 6. THE LEARNED COUNSEL POINTED OUT TO PAGE NO. 56 O F THE DRP'S ORDER THAT AT GROUND NO. 9 RAISED BEFORE THE DRP ON THE ISSUE OF ERRONEOUS APPLICATION OF WORKING CAPITAL ON PROFIT AS A FILTER BY ARBITRARILY APPLYING LIMIT OF 4% TO REJECT THE TWO COMPANIES VIZ., M/S. THINKSOFT AND M/S. FCS SOFTWARE. 7. THE DRP HELD AS FOLLOWS: 'WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE . WE HAVE TAKEN A VIEW IN OTHER CASES THAT ONCE TPO H AS AGREED IN PRINCIPLE TO GRANT WORKING CAPITAL ADJUSTMENTS, THERE SHOULD BE NO REASON TO EITHER RESTRICT THE SAME OR SELECT OR REJECT THE ENTITIES ON THE BASIS OF QUANTUM OF SUCH ADJUSTMENT . CONSEQUENTLY THE ENTITIES ARE NOT REQUIRED TO BE RE JECTED ON THIS GROUND ALONE. SINCE THE TPO HAD CONSIDERED THESE EN TITIES AS COMPARABLE IN THE SHOW CAUSE NOTICE AND REJECTED TH EM ON THE BASIS OF ONLY WORKING CAPITAL ADJUSTMENT, WE DIRECT THE AO/TPO TO INCLUDE THESE ENTITIES AS COMPARABLES.' 2. IN THE COURSE OF HEARING OF THESE MISCELLANEOUS PET ITIONS, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IN THE IMPUGNED TRIBUNAL ORDER, ONLY ONE ISSUE WAS DECIDED REGARDING INCLUSION OF TWO COMPARABLES I.E. FCS SOF TWARE SOLUTIONS LTD. AND M/S. M.P. NOS. 84 & 85/BANG/2017 (IN IT(TP)A NOS. 264 & 177/BANG/2014) PAGE 3 OF 6 THINKSOFT GLOBAL SERVICES LTD. RAISED BY THE ASSESS EE AS PER GROUND NO. 5 BUT THE REMAINING GROUNDS RAISED BY THE ASSESSEE WERE NOT D ECIDED BY THE TRIBUNAL AND THEREFORE, THIS IS AN APPARENT MISTAKE WHICH SHOULD BE RECTIFIED. AT THIS JUNCTURE, IT IS POINTED OUT BY THE BENCH THAT AS PER PARA 4 O F THE TRIBUNAL ORDER, A CATEGORICAL FINDING IS GIVEN BY THE TRIBUNAL THAT THE LD. COUNS EL OF THE ASSESSEE SUBMITTED THAT HE HAD NOT PRESSED OTHER GROUNDS OF APPEAL AS THEY ARE CONCEPTUAL IN NATURE. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT FOR ASSESSMENT YEAR 2011-12, SIMILAR APPEALS IN IT (TP) ANO. 622 AND 399/BANG/20 16 WERE HEARD BY THE SAME COMBINATION ON THE SAME DATE I.E. 13.10.2016 AND SE PARATE ORDER WAS PASSED FOR THAT YEAR ON 10.01.2017 AND IN THAT ORDER, OTHER IS SUES RAISED BY THE ASSESSEE WERE RESTORED BACK TO THE FILE OF TPO FOR FRESH ADJUDICA TION AND THEREFORE, IN ASSESSMENT YEAR 2009-10 ALSO, OTHER ISSUES SHOULD H AVE BEEN RESTORED BACK TO THE FILE OF TPO FOR FRESH DECISION. THE LD. DR OF REVE NUE SUBMITTED THAT IN VIEW OF CATEGORICAL FINDING OF THE TRIBUNAL IN PARA NO. 4 O F TRIBUNAL ORDER, THERE IS NO MISTAKE IN THE IMPUGNED TRIBUNAL ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS.FIRST OF A LL WE REPRODUCE GROUND NOS. 1 TO 4 RAISED BY THE ASSESSEE IN THE PRESENT YEAR IN ITA NO. 264/BANG/2014. THESE GROUNDS ARE AS UNDER. 1.THAT THE ORDER OF THE INCOME TAX OFFICER, WARD 12 (2), (`ASSESSING OFFICER' OR THE AO'), TO THE EXTENT PRE JUDICIAL TO THE APPELLANT, IS BAD IN LAW, CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND LIABLE TO BE QUASHED. M.P. NOS. 84 & 85/BANG/2017 (IN IT(TP)A NOS. 264 & 177/BANG/2014) PAGE 4 OF 6 2. BASED ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED AO/ JOINT COMMISSIONER OF INCOME TAX (TRANSFER PRICING II) ('THE LEARNED TPO') ERRED IN MAKING A TOTAL ADJUSTMENT TO THE TRANSFER PRICE OF THE APP ELLANT'S INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES ('AES') AMOUNTING TO INR 6,57,95,860. 3. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED PANEL ERRED IN UPHOLDING THE REJECTION BY THE LEARNED TPO OF THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE APPELLANT UNDER SECTION 92D OF TH E ACT ON A BONAFIDE BASIS, ON THE BASIS THAT THE NON- USAGE OF FINANCIAL DATA FOR THE CURRENT YEAR HAS RENDERED THE TRANSFER PRICING DOCUMENTATION OF THE APPELLANT, UNRELIABLE. THE LEARNED PANEL ERRED IN UPHOLDING THE APPROACH O F THE LEARNED AO/ TPO IN USING DATA WHICH WAS NOT CONTEMPORANEOUS AND WHICH WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF CONDUCTING THE TRANSFE R PRICING STUDY BY THE APPELLANT. THE LEARNED PANEL ERRED IN UPHOLDING THE APPROACH O F THE LEARNED AO/ TPO IN LAW AND ON FACTS DISREGARDING TH E APPLICATION OF MULTIPLE-YEAR DATA WHILE COMPUTING T HE ARM'S LENGTH MARK UP ON COST FOR THE COMPARABLE COMPANIES . 4. THE LEARNED AO/THE DISPUTE RESOLUTION PANEL ('TH E LEARNED DRP') ERRED ON FACTS AND IN LAW IN UPHOLDIN G THE APPROACH OF THE LEARNED (A) IN CONDUCTING A FRESH BENCHMARKING ANALYSIS APPLYIN G HIS OWN FILTERS SUCH AS EXPORT SALES FILTER, EMPLOY EE COST FILTER ETC., BASED ON HIS OWN CONJECTURES AND ASSUM PTIONS AND SUBSTITUTING THE APPELLANT'S ANALYSISAND (B) IN REJECTING THE COMPARABILITY ANALYSIS OF THE APPE LLANT IN THE TP DOCUMENTATION AND IN DISREGARDING THE SUBMISSIONS MADE DURING THE ASSESSMENT PROCEEDINGS AND CONFIRMING THE COMPARABILITY ANALYSIS AS ADOPTE D BY THE TPO IN THE TP ORDER, WHICH IS BASED ON INAPPROP RIATE FILTERS AND APPLICATION OF INCONSISTENT COMPARABILI TY CRITERIA. 4. FROM THE GROUNDS REPRODUCED ABOVE, IT IS SEEN THAT IN FACT, THESE GROUNDS ARE GENERAL IN NATURE AND NO SPECIFIC OBJECTION HAS BEE N RAISED AGAINST INCLUSION / EXCLUSION OF ANY PARTICULAR COMPARABLE. NOW WE ALS O REPRODUCE GROUND NOS. 6 AND 7 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 201 1-12 IN ITA NO. 399/BANG/2016 WHICH IS AVAILABLE ON PAGE NO. 8 OF T RIBUNAL ORDER DATED M.P. NOS. 84 & 85/BANG/2017 (IN IT(TP)A NOS. 264 & 177/BANG/2014) PAGE 5 OF 6 10.01.2017 WHICH HAS BEEN SUBMITTED BY THE ASSESSEE ALONG WITH THE MISCELLANEOUS PETITION FILED BY IT. THESE ARE AS U NDER. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER IN PURSUANCE OF T HE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ERRED IN INCLUDING COMPANIES, WHICH ARE NOT FUNCTIONALLY COMPARABLE SUCH AS ACROPETAL TECHNOLOGIES LTD, E- INFOCHIP LTD.,E-ZEST SOLUTIONS LTD., ICRA TECHNO ANALYTICS LTD., PERSISTENT SYSTEMS AND SOLUTIONS LT D.; 7.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ERRED IN NOT INCLUDING CERTAIN COMPARABLE COMPANIES SELECTED BY THE APPELLANT IN ITS TP STUDY / SUBMITTED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS SUCH AS AKSHAY SOFTWARE TECHNOLOGIES LTD., SPRY RESOURCES INDIA PVT. LTD.; 5. FROM THESE GROUNDS REPRODUCED FROM THE TRIBUNAL ORD ER IN ASSESSMENT YEAR 2011-12, IT IS SEEN THAT IN THAT YEAR, SPECIFIC OBJ ECTIONS WERE RAISED IN RESPECT OF 7 COMPARABLES AND IT HAS BEEN CLAIMED IN THAT YEAR TH AT THESE COMPARABLE COMPANIES ARE FUNCTIONALLY NOT COMPARABLE. IN VIEW OF THESE FACTUAL DIFFERENCES IN BOTH YEARS, IT CANNOT BE SAID THAT THE FACTS IN BOTH THE SE YEARS ARE SIMILAR AND THEREFORE, THIS TRIBUNAL ORDER FOR ASSESSMENT YEAR 2011-12 HAS NO RELEVANCE FOR DECIDING THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE FOR AS SESSMENT YEAR 2009-10. WE HAVE ALREADY SEEN THAT AS PER GROUNDS RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2009-10 WHICH ARE REPRODUCED ABOVE, IT IS CLEAR THA T THESE GROUNDS ARE ONLY CONCEPTUAL AND NO SPECIFIC OBJECTION WAS RAISED BY THE ASSESSEE AGAINST ANY INCLUSION / EXCLUSION OF ANY PARTICULAR COMPARABLE. WHEN WE SEE THE FINDING OF THE TRIBUNAL IN PARA NO. 4 OF THE IMPUGNED TRIBUNAL ORDER ALONG WITH THESE FACTS M.P. NOS. 84 & 85/BANG/2017 (IN IT(TP)A NOS. 264 & 177/BANG/2014) PAGE 6 OF 6 AND GROUNDS AS DISCUSSED ABOVE, WE ARE OF THE CONSI DERED OPINION THAT THERE IS NO APPARENT MISTAKE IN THE TRIBUNAL ORDER PARTICULARLY WHEN A CATEGORICAL FINDING WAS GIVEN BY THE TRIBUNAL THAT THE LD. AR OF THE ASSESS EE HAS NOT PRESSED THE REMAINING GROUNDS OF APPEAL EXCEPT GROUND NO. 5 WHICH IS ALRE ADY DECIDED BY THE TRIBUNAL. 6. IN THE RESULT, THE MISCELLANEOUS PETITIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH SEPTEMBER, 2017. /MS/ 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.
