M/s ACI Worldwide Solutions Private Ltd., Bangalore V. The Assistant Commissioner of Income Tax, Circle 1(1)(1), Bangalore

MA 86/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5107 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD K
• Assessee Lawyers: PADMACHAND KHINCHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P NO.86/BANG/2020 (IN IT(TP)A NO.160 & 211/BANG/2016) ASSESSMENT YEAR : 2011 12 M/S ACI WORLDWIDE SOLUTIONS PVT. LTD., NO.9, SALARPURIA CAMBRIDGE MALL, CAMBRIDGE ROAD, ULSOOR, BANGALORE-560 008. PAN AAACV 7566 R VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI PADMACHAND KHINCHA, C.A RESPONDENT BY : DR. SHANKAR PRASAD K, ADDL. CIT (DR) DATE OF HEARING : 18-09-2020 DATE OF PRONOUNCEMENT : 12-10-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT MISCELLANEOUS APPLICATION IS FILED BY ASSESSEE SEEKING ALLEGED MISTAKE APPARENT ON RECORD IN ORDER DATED 2 7/04/2020 PASSED BY THIS TRIBUNAL WHILE DECIDING ONE COMPARAB LE RAISED BY ASSESSEE IN GROUND 6(E). PAGE 2 OF 7 M.P NO.86/BANG/2020 LD.AR SUBMITTED THAT, THIS TRIBUNAL WHILE CONSIDERING COMPARABILITY OF SASKEN COMMUNICATIONS TECHNOLOGIES LTD., WITH THAT OF ASSESSEE IGNORED THAT THIS COMPARABLE IS H AVING HUGE TURNOVER, THAT IS, MORE THAN 200 CRORES, AND THAT I T DESERVES TO BE EXCLUDED. IT HAS BEEN SUBMITTED THAT, IN PARA 9.3.7 TO 9.3.10 VARIOUS OTHER COMPARABLES WERE EXCLUDED BY THIS TRIBUNAL IN IMPUGNED ORDER BY APPLYING TURNOVER FILTER. 2. LD.AR SUBMITTED THAT, THIS TRIBUNAL HAS ERRED IN REMANDING THIS COMPARABLE TO LD.AO/TPO FOR VERIFICATION OF SE GMENTAL DATA. HE SUBMITTED THAT DETAILED WRITTEN SUBMISSION WAS S UBMITTED HIGHLIGHTING REASONS FOR EXCLUSION OF THIS COMPARA BLE FROM THE FINALIST. 3. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT, NO PRE JUDICE IS CAUSED TO ASSESSEE, AS THIS COMPARABLE HAS BEEN REM ANDED TO LD.TPO FOR DUE VERIFICATION OF SEGMENTAL DETAILS IF AVAILABLE. HE PLACED RELIANCE ON OBSERVATIONS OF THIS TRIBUNAL IN RESPECT OF THIS COMPARABLE. 4. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SID ES IN LIGHT OF RECORDS PLACED BEFORE US. 5. WE NOTE THAT LD.AR AT THE TIME OF HEARING ARGUED FOR EXCLUSION OF THIS COMPARABLE FOR NOT HAVING SEGMENT AL INFORMATION FOR PURPOSES OF COMPARING RELEVANT SEG MENT. WE ALSO NOTE THAT LD.A.R. ALLEGED FOR EXCLUSION OF THIS CO MPARABLE FOR NOT SATISFYING TURNOVER FILTER. HOWEVER AT THE TIME OF DICTATION, WE NOTED THAT THERE WAS SEGMENTAL INFORMATION REGARDIN G REVENUE EARNED BY THIS COMPARABLE UNDER VARIOUS SEGMENTS, B ECAUSE OF PAGE 3 OF 7 M.P NO.86/BANG/2020 WHICH THIS TRIBUNAL REMANDED THIS COMPARABLE TO LD. AO/TPO FOR VERIFICATION. THIS VIEW WAS TAKEN FOR THE REASON TH AT SEGMENTAL REVENUE GENERATED BY THIS COMPARABLE DID NOT SATISF Y THE TURNOVER CRITERIA REQUIRED FOR EXCLUSION. 6. WHILE ARGUING MISCELLANEOUS PETITION, LD.AR SUB MITTED THAT, THIS COMPARABLE IN ITS ANNUAL REPORT PROVIDE D SEGMENTAL INFORMATION OF REVENUE, WITHOUT APPORTIONING EXPEN DITURE TO THE RELEVANT SEGMENTS. UNDER SUCH CIRCUMSTANCES, LD.AO/ TPO CONSIDERED ENTITY LEVEL FIGURES. HE SUBMITTED THAT , IN E LECTRONICS FOR IMAGING INDIA PVT. LTD., VS. DCIT FOR ASSESSMENT YEAR 2011-12 REPORTED IN [2017] 85 TAXMANN.COM 124 , THIS COMPARABLE WAS EXCLUDED BY OBSERVING THAT SEGMENTAL DETAILS WERE A VAILABLE ONLY IN RESPECT OF REVENUE WHEREAS SEGMENTAL INFORMATION OF EXPENDITURE HAS NOT BEEN PROVIDED FOR IN THE ANNUAL REPORTS OF THIS COMPARABLE. 7. WE HAVE PERUSED THE DECISION RELIED BY LD.AR AND NOTE THAT THE ASPECT ON WHICH THIS TRIBUNAL REMANDED THIS COMPARABLE TO LD.AO/TPO, HAS BEEN CONSIDERED BY THIS TRIBUNAL IN E LECTRONICS FOR IMAGING INDIA PVT. LTD., VS. DCIT (SUPRA). ADMITTEDLY VIEW TAKEN BY THIS TRIBUNAL IN ELECTRONICS FOR IMAGING (SUPRA) WENT OUT OF SIGHT WHILE DISCUSSING THE COMPARABLE. 8. WE THEREFORE ARE OF THE OPINION THAT MISTAKE HAS CREPT IN WHILE DECIDING COMPARABILITY OF SASKEN IN COMMUNICA TION TECHNOLOGIES LTD WITH THAT OF ASSESSEE. WE THEREFOR E AFTER CONSIDERING THE ANNUAL REPORT PLACED ON RECORD VIS- -VIS FAR PAGE 4 OF 7 M.P NO.86/BANG/2020 ANALYSIS OF ASSESSEE IN LIGHT OF VIEW TAKEN BY THIS TRIBUNAL IN ELECTRONICS FOR IMAGING (SUPRA) DECIDE THE COMPARABLE IN FOLLOWING MANNER. HENCE FORTH FOLLOWING PARA WOULD BE READ AS PARA C AT PAGE 20 OF ORDER DATED 24/04/2020. C. SASKEN COMMUNICATION TECHNOLOGIES LTD. LD.AR SUBMITTED THAT, THIS COMPANY IS ENGAGED IN DEVELOPM ENT OF SOFTWARE PRODUCTS, AS IT HAS INVENTORIES, INTANGIBL E ASSETS AND ALSO BECAUSE IT HAS HIGH EXPENDITURE ON R&D, AN D IS THEREFORE FUNCTIONALLY NOT COMPARABLE TO THE ASSESS EE. LD.AR PLACED RELIANCE ON DECISION OF THIS TRIBUNAL IN CASE OF ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA). WE FIND THAT AS PER ITS ANNUAL REPORT, SASKEN DERIVES REVENUE FR OM SOFTWARE PRODUCTS AND, WHAT IS MORE, EVEN LAUNCHED A NEW PRODUCT CALLED VYPAAR SEWA DURING FY 2010-11. FURTH ER, AS CAN BE SEEN FROM ITS ANNUAL REPORT, R&D CONSTITUTES AN IMPORTANT PART OF THE OPERATIONAL AND FUNCTIONAL PR OFILE OF SASKEN. ALSO, AS SASKEN HAS SIGNIFICANT INTANGIBLES AND INVENTORIES, THE ASSESSEE SUBMITS THAT IT OUGHT TO BE REJECTED AS A COMPARABLE. THUS, SASKEN HAS DIVERSE FUNCTIONS AND SEGMENTAL DETAILS ARE NOT GIVEN SEPARATELY FOR THE VARIED ACTIVITIES IT IS ENGAGED IN. IT IS THUS SUBMITTED T HAT THIS COMPARABLE OUGHT TO BE EXCLUDED FROM THE FINAL LIST . PAGE 5 OF 7 M.P NO.86/BANG/2020 WE REFER TO AND RELY ON THE OBSERVATIONS OF THIS T RIBUNAL IN CASE OF ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA) AS UNDER: ' (VI) SASKEN COMMUNICATIONS TECHNOLOGIES LTD. 15.1 THE TPO INCLUDED THIS COMPANY IN THE SET OF CO MPARABLES DESPITE THE ASSESSEE'S OBJECTION THAT IT WAS FUNCTI ONALLY DIFFERENT AND ALSO HAD PRODUCT PORTFOLIO. 15.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FI ND FROM PAGE 58 OF THE TPO'S ORDER THAT HE HAS RECOGNIZED SALE OF S OFTWARE PRODUCTS TO THE TUNE OF RS. 37 CRORE AND ODD. THOUGH THE BRE AK-UP OF REVENUE FROM SOFTWARE SERVICES AND SOFTWARE PRODUCT S IS AVAILABLE, BUT, THE BREAK-UP OF OPERATING COSTS AND NET OPERAT ING REVENUES FROM THESE TWO SEGMENTS HAVE NOT BEEN GIVEN. IT IS FURTHER OBSERVED THAT THE TPO HAS TAKEN ENTITY LEVEL FIGURES FOR THE PURPOSES OF MAKING COMPARISON. SINCE SUCH ENTITY LEVEL FIGURES CONTAIN REVENUE FROM BOTH SOFTWARE SERVICES AND SOFTWARE PR ODUCTS, AS AGAINST THE ASSESSEE ONLY PROVIDING SOFTWARE SERVIC ES, WE ARE DISINCLINED TO TREAT THIS COMPANY AS COMPARABLE. TH E ASSESSEE'S CONTENTION IS ACCEPTED ON THIS ISSUE.' WE FURTHER NOTE THAT THE HON'BLE HIGH COURT VIDE IT S DECISION DT.28.09.2016 HAS CONFIRMED THE DECISION OF THE DEL HI BENCH OF ITAT. WE ARE AWARE THAT THE CO-ORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF APPLIED MATERIALS INDIA( P)LTD. (SUPRA) HAS REMI TTED THE ISSUE OF FUNCTIONAL COMPARABILITY OF SASKEN COMMUNICATION TE CHNOLOGIES LTD. THAT IN THE SAID CASE THE DRP DID NOT ADJUDICATE TH E OBJECTIONS OF THE ASSESSEE. THEREFORE IN VIEW OF THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SAXINDIA ( P.)LTD. (SUPRA) WHICH HAS BEEN CONFIRMED BY THE HON'BLE DELHI HIGH COURT, WE DIREC T THE TPO/AO TO EXCLUDE THESE TWO COMPANIES FROM THE SET OF COMPARA BLES. WE ALSO FIND THAT THIS TRIBUNAL IN FINASTRA SOFTWARE SOLUTIONS (INDIA) (P.) LTD. V. ACIT IN (2018) 93 TAXMANN.COM 460 (PARA 17) ; CYPRESS SEMI-CONDUCTOR TECHNOLOGY INDIA PVT. LTD. V. DCIT IN IT(TP)ANO.356/BANG/2016 (PARA8) ; AND COMMSCOPE NETWORKS (INDIA) PVT. LTD. V. ITO IN IT(TP)A NOS.166 AND 181/BANG/2016 (PARA 9) DIRECTED EXCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE COMPANIES. PAGE 6 OF 7 M.P NO.86/BANG/2020 BASED ON THE ABOVE DISCUSSION AND ANALYSIS, WE ARE OF THE VIEW THAT, THIS COMPARABLE CANNOT BE COMPARED W ITH A CONTRACT SERVICE PROVIDER LIKE ASSESSEE AND ACCORDI NGLY DIRECT LD. AO/TPO TO EXCLUDE THIS COMPANY FROM FINALIST. ACCORDINGLY THIS COMPARABLE STANDS EXCLUDED. IN THE RESULT, WE ALLOW MISCELLANEOUS PETITION FILE D BY ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OCT, 2020 SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 12 TH OCT, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 7 OF 7 M.P NO.86/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -10-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -10-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -10-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -10-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -10-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -10-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -10-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS