Cisco Systems (India) Private Limited, Bangalore V. The Assistant Commissioner Of Income Tax, Circcle-2(1)(1), Bangalore

MA 92/BANG/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8881 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 18-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Related party transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER M.P No.92 & 93/Bang/2021 [In IT(TP)A No.505 & 508/Bang/2015] Assessment year : 2010-11 M/s Cisco Systems (India) Pvt. Ltd., Brigade South Parade, No.16, Mahatma Gandhi Road, Bengaluru-560 001. PAN – AABCC 0258 Q Vs. The Asst. Commissioner of Income-tax, Circle-2(1)(1), Bengaluru. APPELANT RESPONDENT Revenue by : Shri Priyadarshi Mishra, Addl.CIT (DR) Assessee by : Shri Pranay Gandhi, C.A Date of hearing : 29.10.2021 Date of Pronouncement : 11.10.2021 O R D E R Per Chandra Poojari, Accountant Member These Miscellaneous Petitions are filed by the assessee seeking rectification of the order of the Tribunal in ITA Nos.505/Bang/2015 and 508/Bang/2015 dated 15/4/2021. 2 The ld.AR submitted that the assessee came in appeal before this Tribunal in ITA No.505/Bang/2015. M.P Nos.92 & 93/Bang/2021 Page 2 of 9 The Tribunal vide order dated 15/4/2021 disposed of the appeal of the assessee. However, the assessee raised in ground No.13.1 with regard to exclusion of Persistent Systems Ltd., from list of comparable for software development services segment. The Tribunal inadvertently failed to adjudicate this ground in its findings. 3. The ld.DR fairly conceded that this issue may be adjudicated by Tribunal. 4. We have heard both parties and perused the materials on record. Admittedly, the assessee has raised the ground before this Tribunal with regard to exclusion of Persistent Systems Ltd. from the list of comparable for software development services segment. In our opinion, the issue is squarely covered by the order of the Tribunal in the case Electronics for Imaging India Private Limited in IT(TP)A No.212/Bang/2015 for the asst. year 2010-11. The Tribunal vide order dated 24/2/2016 held as under:- Persistent Systems Ltd: “24. We have heard the Id DR as well as ld.AR and considered the relevant material on record. The assessee raised objections against selection of this company on the ground that this company is functionally not comparable as M.P Nos.92 & 93/Bang/2021 Page 3 of 9 engaged in the product development. The segmental information for services and product is not available. Further, the assessee has also pointed out that there was an acquisition and restructuring during the year under consideration. 25. The DRP has noted the fact that this company has reported the entire receipt from sales and software services and product Therefore, no segmental information was found to be available for sale of software services and product. Further, the DRIP has noted that as per Note 1 of Schedule 15, this company is predominantly engaged in outsource software development service. Apart from the revenue from software services, it also earns income from licence of products, royalty on sale of products, income from maintenance contract. etc. These facts recorded by the DRP has not been disputed before us. 26. Therefore, when this company is engaged in diversified activities and earning revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, Etc., the same cannot be considered as functionally comparable with the assessee. Further, this company also earns income from outsource product development. In the absence of any segmental data of this company, we do not find any error or illegality in the findings of the DRP that this company cannot be compared with the assessee and the same is directed to be excluded from the set of comparables.” 5. In view of the above order of the Tribunal, we direct the AO/TPO to exclude Persistent Systems Ltd., from the list of comparables in software development services segment. Accordingly, ground No.13.1 in the main ground of appeal is allowed. 6. Further, it is submitted that the assessee has raised ground No.15F, which reads as follows:- M.P Nos.92 & 93/Bang/2021 Page 4 of 9 “Grant suitable working capital adjustment, denied by the lower authorities despite claim being made by the assessee.” 7. The said ground is relating to working capital adjustment is not granted by the lower authorizes despite claim being made by the assessee. 8. The ld.AR submitted that the issue is squarely covered by the earlier order of the Tribunal in the case of M/s Logitech Engineering Design India Pvt. Ltd., Vs. DCIT in IT(TP)A No.287/Bang/2015 dated 3/3/2017 and in the case of Apigee Technologies (India) Pvt. Ltd., Vs. JCIT in IT(TP)A No.870/Bang/2013 dated 23/09/2015 9. The ld.DR relied on the order of the lower authorities. 10. We have heard the rival submissions and perused the materials on ground.Admittedly, the assessee has raised the above ground before this Tribunal, which the Tribunal failed to adjudicate. In our opinion, the issue is squarely covered by the order of the Tribunal in the above cases as cited by the ld.AR. M.P Nos.92 & 93/Bang/2021 Page 5 of 9 12. In the cse of M/s Logitech Engineering Design India Pvt. Ltd., (Supra), which is held as under: “12. The next issue is that the DRP did not grant the working Capital adjustment. This Tribunal in Moong Controls India P Ltd ITA 551/Bang/2015 ay 2010 dt 27.11.2015, has directed the TPO to allow actual adjustment towards the differences in the of working capital position between the assessee and the entrepreneurial companies selected as comparable. We direct the TPO to follow this decision. To this extent, the assessee's appeal ground is allowed.” 13. Similarly, in the case of Apigee Technologies (India) Pvt. Ltd., (Supra). Hence, we direct the AO/TPO to work out the suitable working capital adjustment as held in the above case. 14. In the result, the miscellaneous petition filed by the assessee is allowed. M.P No.93/Bang/2021 15. The ld.AR submitted that while adjudicating the ground No.9 in Revenue’s appeal in relation to exclusion of Persistent Systems and Solution Ltd., in para 7.4 to 7.4.1 at page 30 of the Tribunal order, it is wrongly mentioned as Persistent System Ltd., instead of M.P Nos.92 & 93/Bang/2021 Page 6 of 9 Persistent System Solution Ltd., The same may be rectified. 16. In our opinion, there was an error crept in this order and the Tribunal wrongly mentioned as Persistent System Ltd., in para 7.4 to 7.4.1 of the order at page No.30 which has to be read as Persistent System and Solution Ltd., instead of Persistent System Ltd., mentioned therein and ordered accordingly. 17. Further, the ld.AR submitted that in ground No.19 of the Revenue has raised the ground as follows:- “19. On the facts and in the circumstances of the case whether Hon'ble Dispute Resolution Panel is correct in excluding M/s Apitco Ltd, ICR/I Online Ltd and M/s Kshitj Investment Advisory Co Ltd in Administration and other support services and Management services segment, while the comparables is qualifying all the qualitative and quantitative filters applied by the TPO.” 18. However, while adjudicating the ground No.19 of Revenue’s appeal at para 13, 13.1 and 13.2 at page No.45 of the Tribunal order, the Tribunal inadvertently failed to adjudicate the matter. M.P Nos.92 & 93/Bang/2021 Page 7 of 9 19. The ld.AR prayed that in Revenue’s appeal inclusion of ICRA Online Ltd., and Kshitij Ltd., has not been adjudicated by this Tribunal from the list of comparable companies. The same was excluded for asst. year 2009-10 in assessee’s own case. Accordingly, it was submitted that this ground may be adjudicated by this Tribunal. 20. The ld.DR squarely conceded that the Tribunal has failed to adjudicate the above ground. 21. We have heard the rival submissions and perused the material on record. 22. The comparable company ICRA Online Ltd., came up for consideration before this Tribunal in assessee’s own case in ITA No.271/Bang/2014 in asst. year 2009- 10, the Tribunal held as under:- “53.34 ICRA Online. This company fails the TPC's filter of companies. whose income from services is less than 75% of the total operating revenues and therefore had to be excluded from the list of comparables.” 23. Next comparable company is Kshitji Investment Advisory Co. Ltd. This comparable came up for consideration in assessee’s own case for asst. year M.P Nos.92 & 93/Bang/2021 Page 8 of 9 2009-10 in ITA No.271/Bang/2014. The Tribunal vide order dated 14/8/2014 held as under:- “53.35 Kshitij Investment Advisory Co. Ltd.: This company has related party transactions of more than 25% and applying TPOs own filter, this company has to be excluded from the list of comparables.” 24. Accordingly, these 2 comparables has to be excluded. Thus, the above ground of appeal of the Revenue’s appeal is dismissed. 25. In the result, both the miscellaneous applications filed by the assessee are allowed. Order pronounced in the open court on 11 th Nov, 2021. Sd/- Sd/- (GEORGE GEORGE K) ( CHANDRA POOJARI) Judicial Member Accountant Member Bangalore, Dated, 11 th Nov, 2021 / vms / 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. M.P Nos.92 & 93/Bang/2021 Page 9 of 9 1. Date of Dictation ............................................. 2. Date on which the typed draft is placed before the dictating Member ......................... 3. Date on which the approved draft comes to Sr.P.S ................................... 4. Date on which the fair order is placed before the dictating Member .................... 5. Date on which the fair order comes back to the Sr. P.S. ....................... 6. Date of uploading the order on website................................... 7. If not uploaded, furnish the reason for doing so ................................ 8. Date on which the file goes to the Bench Clerk ....................... 9. Date on which order goes for Xerox & endorsement.......................................... 10. Date on which the file goes to the Head Clerk ......................... 11. The date on which the file goes to the Assistant Registrar for signature on the order ..................................... 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order ............................... 13. Date of Despatch of Order. .....................................................