M/s Verifone India Technology Pvt Ltd , Bangalore V. Income Tax Officer Ward-7(1)(3), Bangalore

MA 98/BANG/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8763 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-11-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 19-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P. No. 98/Bang/2022 (in ITA No. 3088/Bang/2018) Assessment Year : 2011-12 M/s. Verifone India Technology Pvt. Ltd., A 101, 1 st Floor, Cyber Park, Plot No. 76, 77 & 78, Doddathogur Village, Begur Hobli, Bangalore South Taluk, Bangalore – 560 100. PAN: AACCV1683K Vs. The Income Tax Officer, Ward – 7 (1) (3), Bangalore. APPELLANT RESPONDENT & M.P. No. 99/Bang/2022 (in ITA No. 3089/Bang/2018) Assessment Year : 2012-13 M/s. Verifone India Technology Pvt. Ltd., A 101, 1 st Floor, Cyber Park, Plot No. 76, 77 & 78, Doddathogur Village, Begur Hobli, Bangalore South Taluk, Bangalore – 560 100. PAN: AACCV1683K Vs. The Deputy Commissioner of Income Tax, Circle – 7 (1)(2), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Ankur Pai, Advocate Revenue by : Shri K.R. Narayana, Addl. CIT (DR) Date of Hearing : 04-11-2022 Date of Pronouncement : 10-11-2022 Page 2 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present miscellaneous petitions are filed by assessee seeking certain typographic mistakes in the order passed by this Tribunal dated 25/03/2022. M.P. No. 98/Bang/2022 2. The Ld.AR submitted that while deciding ground no. 7, L&T Infotech was inadvertently missed out and Persistent Systems & Solutions Ltd. was decided. On perusal of para 8, where ground no. 7 is dealt, by this Tribunal in the impugned order, we note that the submissions of the assessee is correct. 2.1 The Ld.AR submitted that for exclusion of L&T Infotech Ltd., assessee relied on decision of Coordinate Bench of this Tribunal in case of LG Soft India Pvt. Ltd vs. DCIT in IT(TP)A No.52 & 97/Bang/2016 for the same assessment year A.Y 2011-12, by order dated 05/08/2020. 2.2 Considering the submissions of Ld.AR, we note that typographic mistake that has crept in para 9 and the same is rectified. Henceforth para 9 shall be read as under: 9. We note that the Coordinate bench of this Tribunal in the case of M/s.Fiber Link Software Pvt. Ltd. (supra), for the same assessment year A.Y 2011-12, excluded Sasken Communications Technologies Ltd. by observing as under: “7. We have considered the rival submissions. Even, if the assessee had included these three companies in the list of comparables as part of the TP study analysis, however, mere inclusion of the companies in the list of comparables does not operate as estoppel against the assessee, if on examination of the relevant facts it is found that these companies are functionally not comparable with that of assessee. Therefore, the selection Page 3 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) of the companies by the assessee itself is not the finality of the comparability of the entities when the TPO has to examine the functional comparability as well as the other filters for inclusion or exclusion of the companies in the list of comparables for determination of ALP. We find that prima facie assessee has made out a case that in a series of decisions of this Tribunal, these three companies are held to be not comparable on various reasons and therefore it necessitates the functional examination of these companies for the purpose of inclusion or exclusion in the list of comparables. The Special Bench of this Tribunal at Chandigarh in the case of Quark Systems P. Ltd, (supra) has held that if a company is otherwise not found to be comparable with the assessee then simply it is included in the list of comparables in the TP study would not be considered as estoppel for raising an objection by the assessee for exclusion of such company for the purpose of determination of ALP. We therefore accept the plea of the Assessee, for admission of exclusion of the aforesaid three companies. 8. As far as the plea for exclusion of Persistents Systems & Solutions Ltd., Persisten Systems Ltd., and Sasken Communication Technologies Ltd., is concerned,this Tribunal in the case of a software development service provider such as the Assessee for the very same AY 2011- 12 in the case of Autodesk India Ltd. Vs. ACIT in IT(TP) A.No.156 & 220/Bang/2016 by order dated 21.12.2018 held that these three companies are not comparable companies. It is pertinent to mention that the very same thirteen companies chosen in the case of the Assessee in this appeal and in the case of Autodesk India Ltd. (supra) were identical. The tribunal held on the comparability of the aforesaid three companies as follows: “26. In ground No. 3(k), the assessee has prayed for exclusion of all 3 companies which were retained by the DRP in the impugned order. In this IT(TP)A.No.156 & 220/Bang/2016 Page 15 of 18 regard, the ld. counsel for the assessee has brought to our notice that Persistent Systems & Solutions Ltd. was regarded not comparable for the reason that it had diverse functions and segmental details were not available and that it was product company and that there was abnormal increase in turnover due to funding from holding company. These aspects were considered by the Tribunal in the case of Applied Materials (I) P. Ltd. (supra) and vide para 9.2.1 to 9.2.4, the Tribunal regarded this company as not comparable. Persistent Systems Ltd. was also considered Page 4 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) as not comparable in the aforesaid order vide same paras referred to above for the reason that it was engaged in diverse activities and in the absence of segmental details, besides holding IPRs. 27. The other company is Sasken Communication Technologies Ltd. which was retained by the DRP. As far as this company is concerned, the plea of the assessee is that this company is a software product company and segmental details between the software development services and software products is not available. Our attention was drawn to the decision of the Bangalore Bench of the Tri in the case of Applied Materials (I) P. Ltd. (supra) wherein in para 9.3.1 to 9.3.3 this Tribunal came to the conclusion that comparability of this company has to be decided afresh by the TPO after considering the facts as recorded in the decisions rendered by the Tribunal in the case of Electronics for Imaging India P. Ltd. (2017) 85 taxmann.com 124 (Bang.Trib.). We are of the view that similar directions would be appropriate in the present assessment year also. Thus, ground No.3(k) is decided accordingly.” Respectfully following the aforesaid decision, we direct exclusion of the aforesaid three comparable companies from the list of comparable companies chosen by the TPO.” There is nothing placed on record by the revenue to take a different view. Respectfully following the above view, we direct the Ld.AO/TPO to exclude Sasken Communications Technologies Ltd. from the final list. Accordingly this ground raised by the assessee stands partly allowed. As L&T Infotech Ltd. was inadvertently missed for adjudication, following paras 9.1 and 9.2 shall be read in continuation as under: “9.1 The Ld.AR relied on the decision of this Tribunal in case of LG Soft India Pvt. Ltd vs. DCIT in IT(TP)A No.52 & 97/Bang/2016 for Assessment year A.Y Page 5 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) 2011-12, by order dated 05/08/2020 wherein this comparable has been excluded by observing as under: 14. The Mumbai Tribunal in the case of Ness Technologies (I) Pvt. Ltd. v. DCIT in ITA No.696/Mum/2016 held Infosys Ltd. to be not comparable for the reason that this company was engaged in manufacturing of software products and was a giant company assuming various risks. As far as Larsen & Toubro Infotech Ltd., is concerned, vide paragraph-8 page-16 of the order in the case of Electronics for imaging India Pvt. Ltd., (supra) this tribunal excluded this company on the ground of presence of onsite revenue of more than 50% and that the related party transaction was more than 15% (18.66%). 9.2 Nothing has been placed on record by the revenue in order to take a different view. Respectfully following the above view, we direct the Ld.AO/TPO to exclude L&T Infotech from the final list of comparables.” 2.3 In para 11, we note that additional ground raised by assessee for A.Y. 2011-12 has been adjudicated. We note that Sasken Communication Technologies Ltd. was raised by assessee in the original ground of appeal which has already been considered while deciding ground no. 7. Accordingly, the comparable Sasken Communication Technologies Ltd. stands deleted from para 11. M.P. No. 99/Bang/2022 3. It is the submission of assessee that in para 20 while considering the comparables on turnover filter, this Tribunal contesting the issue of Mindtre Ltd. being functionally not similar and also observed that this comparable is having a turnover of more than Rs. 200 crores and therefore is not comparable with Page 6 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) that of assessee that has a turnover of only 94.5 crores. However in the concluding para in para 22 inadvertently this comparable has been missed out be referred. 3.1 Accordingly, para 22 shall be read as under: “22. Admittedly the turnover of Infosys Ltd., R S Software India Ltd., Sasken Communication Technologies Ltd. and Mindtree Ltd. are more than 200 crores. Considering the assessee being a captive service provider, aforesaid three companies should be excluded from the list of comparable companies . Accordingly Ground no. 6 & Additional Ground no.6A stands allowed in favour of assessee.” 4. No other portion of the order has been sought for any rectification and the result remains to be the same. In the result, both the M.Ps. filed by the assessee stands allowed. Order pronounced in the open court on 10 th November, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 10 th November, 2022. /MS / Page 7 M.P. Nos. 98 & 99/Bang/2022 (in ITA Nos. 3088 & 3089/Bang/2018) Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore