M/s CGI Information Systems and Management Consultants Pvt ltd (successor-in-interest to Logica Private Limited), Bangalore V. The Deputy commissioner of Income Tax, Circle 2(1)(1), Bangalore

MA 89/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2038 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 27-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B.R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P NO.89/BANG/2020 (IN IT(TP)A NO.626/BANG/2016) ASSESSMENT YEAR : 2011 12 CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS PVT. LTD., (SUCCESSOR-IN-INTEREST TO LOGICA PVT. LTD.,) E CITY TOWER 2, 95/1 AND 95/2, ELECTRONIC CITY PHASE 1 (WEST) BENGALURU-560 100. PAN AAACL 3330 M VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SMT. TANMAYEE RAJKUMAR, ADVOCATE RESPONDENT BY : SHRI PRIYADARSHI MISHRA, JCIT (DR) DATE OF HEARING : 16-10-2020 DATE OF PRONOUNCEMENT : 04-12-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT MISCELLANEOUS PETITION HAS BEEN FILED B Y ASSESSEE SEEKING TO RECTIFY FOLLOWING MISTAKES APPARENT FROM RECORD IN COMMON ORDER PASSED BY THIS TRIBUNAL DATED 30/01/2020. PAGE 2 OF 8 M.P NO.89/BANG/2020 1. LD.AR SUBMITTED THAT ASSESSEE SOUGHT FOR EXCLUSION OF PERSISTANT SYSTEMS LTD., UNDER SWD SEGMENT. THIS TRIBUNAL WHILE CONSIDERING THIS COMPARABLE WRONGLY MENTIONED NAME AS PERSISTANT SYSTEMS AND SOLUTIONS LTD. LD.AR SUBMI TTED THAT CONTENTS OF THE COMPARABLE PERTAIN TO PERSISTANT SY STEMS LTD. MISTAKE HAS CREPT ONLY IN THE TITLE OF COMPARABLE. SHE THUS URGED TO RECTIFY NAME OF COMPARABLE AS PERSISTANT SYSTEM S LTD. 1.1 LD.SR.DR DID NOT OBJECT FOR THE REQUEST ADVANCE D BY LD.AR. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 1.2. WE NOTE THAT SUBMISSIONS OF LD.AR ARE CORRECT. 1.3. ACCORDINGLY THE NAME OF COMPARABLE APPEARING AT PAG E 18 UNDER PARA 3.2. STANDS RECTIFIED. HENCEFORTH THE NA ME OF COMPARABLE SHALL BE READ AS PERSISTANT SYSTEMS LTD. 2. NEXT ISSUE ALLEGED BY LD.AR IN MISCELLANEOUS PETITI ON IS THAT THAT, THIS TRIBUNAL ERRED IN REMANDING SASKEN COMMUNICATION TECHNOLOGIES LTD. TO LD.AO/TPO FOR VERIFICATION OF SEGMENTAL DATA. HE SUBMITTED THAT DETAILED WRITTEN SUBMISSION WAS SUBMITTED HIGHLIGHTING THE REASONS FOR EXCLUSION OF THIS COMPARABLE FROM THE FINALIST. 2.1. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT, NO P REJUDICE IS CAUSED TO ASSESSEE AS THIS COMPARABLE HAS BEEN REMA NDED TO LD.TPO FOR DUE VERIFICATION OF SEGMENTAL DETAILS IF AVAILABLE. HE PLACED RELIANCE ON THE OBSERVATIONS OF THIS TRIBUNAL IN RESPECT OF THIS COMPARABLE SOUGHT FOR EXCLUSION. PAGE 3 OF 8 M.P NO.89/BANG/2020 2.2. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE NOTE THAT LD.AR AT THE TIME OF HEARING ARGUED FO R EXCLUSION OF THIS COMPARABLE FOR NOT HAVING SEGMENTAL INFORMATIO N FOR PURPOSES OF COMPARING THE RELEVANT SEGMENT. WE ALSO NOTE THAT LD.AR HAD ALSO ALLEGED FOR EXCLUSION OF THIS COMPAR ABLE FOR NOT SATISFYING TURNOVER FILTER. HOWEVER AT THE TIME OF DICTATION, WE NOTED THAT THERE WORDS SEGMENTAL INFORMATION REGARD ING REVENUE EARNED BY THIS COMPARABLE UNDER VARIOUS SEGMENTS BE CAUSE OF WHICH THIS TRIBUNAL THOUGHT OF REMANDING THIS COMPA RABLE TO LD.AO/TPO FOR VERIFICATION. THIS VIEW WAS TAKEN FOR THE REASON THAT THE SEGMENTAL REVENUE GENERATED BY THIS COMPAR ABLE DID NOT SATISFY THE TURNOVER CRITERIA REQUIRED FOR EXCLUSIO N. AS LD.AO/TPO HAD NOT VERIFIED FAR OF THIS COMPARABLE WITH ASSESS EE IT WAS REMANDED WHILE PASSING THE IMPUGNED ORDER. HOWEVER WHILE ARGUING THE MISCELLANEOUS PETITION, LD.AR SUBMITTED THAT THIS COMPARABLE ONLY HAS PROVIDED SEGMENTAL INFORMATION OF REVENUE WITHOUT APPORTIONING THE EXPENDITURE TO THE RELEVAN T SEGMENTS. UNDER SUCH CIRCUMSTANCES, LD.AO/TPO CONSIDERED THE 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 AVAILABLE ONLY IN RESPE CT OF REVENUE WHEREAS SEGMENTAL INFORMATION OF EXPENDITURE HAS NO T BEEN PROVIDED FOR IN THE ANNUAL REPORTS OF THIS COMPARAB LE. PAGE 4 OF 8 M.P NO.89/BANG/2020 2.3. WE HAVE PERUSED THE DECISION RELIED BY LD.AR AND NO TE 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). 2.4. WE THEREFORE ARE OF THE OPINION THAT MISTAKE HAS CR EPT IN WHILE DECIDING COMPARABILITY OF SASKEN COMMUNICATIO N TECHNOLOGIES LTD., WITH THAT OF ASSESSEE. WE THEREF ORE DECIDE THE COMPARABLE IN FOLLOWING MANNER. FOLLOWING PARAGRAPH STANDS INSERTED AT PAGE 19-20 OF IMPUGNED ORDER. SASKEN COMMUNICATION TECHNOLOGIES LTD. LD.AR SUBMITTED THAT, THIS COMPANY IS ENGAGED IN DEVELOPMENT OF SOF TWARE PRODUCTS, AS IT HAS INVENTORIES, INTANGIBLE ASSETS AND ALSO BECAUSE IT HAS HIGH EXPENDITURE ON R&D, AND IS THEREFORE FU NCTIONALLY NOT COMPARABLE TO THE ASSESSEE. LD.AR PLACED RELIANCE O N DECISION OF THIS TRIBUNAL IN CASE OF ELECTRONICS FOR IMAGING IN DIA PVT.LTD (SUPRA). WE FIND THAT AS PER ITS ANNUAL REPORT, SA SKEN DERIVES REVENUE FROM SOFTWARE PRODUCTS AND, WHAT IS MORE, E VEN LAUNCHED A NEW PRODUCT CALLED VYPAAR SEWA DURING FY 2010-11. FURTHER, AS CAN BE SEEN FROM ITS ANNUAL REPORT, R&D CONSTITU TES AN IMPORTANT PART OF THE OPERATIONAL AND FUNCTIONAL PR OFILE OF SASKEN. ALSO, AS SASKEN HAS SIGNIFICANT INTANGIBLES AND INV ENTORIES, THE ASSESSEE SUBMITS THAT IT OUGHT TO BE REJECTED AS A COMPARABLE. THUS, SASKEN HAS DIVERSE FUNCTIONS AND SEGMENTAL DE TAILS ARE NOT GIVEN SEPARATELY FOR THE VARIED ACTIVITIES IT IS EN GAGED IN. IT IS THUS SUBMITTED THAT THIS COMPARABLE OUGHT TO BE EXCLUDED FROM THE FINAL LIST. PAGE 5 OF 8 M.P NO.89/BANG/2020 WE REFER TO AND RELY ON THE OBSERVATIONS OF THIS TR IBUNAL IN CASE OF ELECTRONICS FOR IMAGING INDIA PVT.LTD (SUPRA) AS UN DER: ' (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 FUNCTIONALLY DIFFE RENT 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 SOFTWARE PRODUCTS TO THE TUNE OF RS. 37 CRORE AND ODD. THOUGH THE BREAK-UP OF REVENU E FROM SOFTWARE SERVICES AND SOFTWARE PRODUCTS IS AVAILABLE, BUT, T HE BREAK-UP OF OPERATING COSTS AND NET OPERATING REVENUES FROM THESE TWO SEG MENTS HAVE NOT BEEN GIVEN. IT IS FURTHER OBSERVED THAT THE TPO HAS TAKE N ENTITY LEVEL FIGURES FOR THE PURPOSES OF MAKING COMPARISON. SINCE SUCH ENTIT Y LEVEL FIGURES CONTAIN REVENUE FROM BOTH SOFTWARE SERVICES AND SOFTWARE PR ODUCTS, AS AGAINST THE ASSESSEE ONLY PROVIDING SOFTWARE SERVICES, WE A RE DISINCLINED TO TREAT THIS COMPANY AS COMPARABLE. THE ASSESSEE'S CONTENTI ON 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 DELHI BENCH OF IT AT. WE ARE AWARE THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF A PPLIED MATERIALS INDIA( P)LTD. (SUPRA) HAS REMITTED THE IS SUE OF FUNCTIONAL COMPARABILITY OF SASKEN COMMUNICATION TECHNOLOGIES LTD. THAT IN THE SAID CASE THE DRP DID NOT ADJUDICATE THE OBJECTIONS OF T HE ASSESSEE. THEREFORE IN VIEW OF THE DECISION OF THE DELHI BENCH OF THE TRIB UNAL IN THE CASE OF SAXINDIA ( P.)LTD. (SUPRA) WHICH HAS BEEN CONFIRMED BY THE H ON'BLE DELHI HIGH COURT, WE DIRECT THE TPO/AO TO EXCLUDE THESE TWO COMPANIES FROM THE SET OF COMPARABLES. WE ALSO FIND THAT THIS TRIBUNAL IN FINASTRA SOFTWAR E SOLUTIONS (INDIA) (P.) LTD. V. ACIT IN (2018) 93 TAXMANN.COM 460 (PARA 17); CYPRESS SEMI-CONDUCTOR TECHNOLOGY INDIAPVT. LT D. V. DCIT IN IT(TP)ANO.356/BANG/2016(PARA8); AND COMMSCOPE NETWO RKS (INDIA) PVT. LTD. V. ITO IN IT(TP)A NOS.166 AND 18 1/BANG/2016 (PARA 9) DIRECTED EXCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE COMPANIES. BASED ON THE ABOVE DISCUSSION AND ANALYSIS, WE ARE OF THE VIEW THAT, THIS COMPARABLE CANNOT BE COMPARED WITH A CON TRACT SERVICE PAGE 6 OF 8 M.P NO.89/BANG/2020 PROVIDER LIKE ASSESSEE AND ACCORDINGLY DIRECT LD. A O/TPO TO EXCLUDE THIS COMPANY FROM FINALIST. ACCORDINGLY THIS COMPARABLE STANDS EXCLUDED. 3. NEXT ISSUE RAISED BY LD.AR IN THE MISCELLANEOUS PET ITION IS REGARDING NON-ADJUDICATING ONE COMPARABLE UNDER ITE S SEGMENT. SHE SUBMITTED THAT, AT PAGE 15 OF IMPUGNED ORDER, T HIS TRIBUNAL RECORDS COMPARABLES WAS SOUGHT FOR EXCLUSION BY ASS ESSEE UNDER ITES SEGMENT. HOWEVER ACROPETAL TECHNOLOGIES PVT.LT D WAS NOT ADJUDICATED. 3.1. LD.SR.DR DID NOT OBJECT TO THE SUBMISSION OF L D.AR. 3.2. WE HAVE PERUSED OUR RECORDS AND NOTE THAT SUBM ISSION BY LD.AR IS CORRECT. 3.3. ACCORDINGLY WE RECALL ORDER PASSED BY THIS TRIBUNAL DATED 30/01/2020 FOR ADJUDICATING ACROPETAL TECHNOLOGIES PVT.LTD. 3.4. WE DIRECT REGISTRY TO FIX ASSESSEES APPEAL FO R HEARING FOR LIMITED PURPOSES OF ADJUDICATING ACROPETAL TECHNOLO GIES PVT.LTD IN IT(TP)A NO.626/BANG/2016 FOR ASSESSMENT YEAR 201 1-12. IN THE RESULT, WE ALLOW MISCELLANEOUS PETITION FILE D BY ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DEC, 2020 SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 4 TH DEC, 2020. /VMS/ PAGE 7 OF 8 M.P NO.89/BANG/2020 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 8 OF 8 M.P NO.89/BANG/2020 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -12-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -13-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -12-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -12-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -12-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -12-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -12-2020 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