OSI SYSTEMS PRIVATE LIMITED,HYDERABAD V. DY. COMMISSIONER OF INCOME TAX , CIRCLE-16(2), HYDERABAD

MA 22/HYD/2025

AI Insights

The case involves OSI Systems Private Limited, which filed a Miscellaneous Application against an order of the Income Tax Appellate Tribunal concerning the assessment year 2014-15. The application was based on alleged mistakes in the Tribunal's earlier order, which directed a specific turnover filter for selecting comparables in transfer pricing. The Tribunal, after reviewing the application and the original order, concluded that the application did not point out any mistakes apparent from the record but rather sought a re-evaluation of the decision, which is beyond the scope of Section 254(2) of the Income Tax Act. The Tribunal dismissed the application, reaffirming its earlier directives regarding the turnover filter.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398002 (ITAT-HYDERABAD)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Other Referred Cases: PCIT Vs. M/s Obobay Mobile Technology India Private Limited, ACIT Vs. McAfee Software (India) Pvt. Ltd, PCIT-7, Delhi Vs. Qualcomm India Pvt. Ltd, Symantec software India Pvt. Ltd Vs. DCIT
• Laws Referred To: Section 254 of the Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing

Judgement Text

"1 आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER M.A. No.22/Hyd/2025 आयकरअपीलसं./I.T.A. No.2379/Hyd/2018 (निर्धारण वर्ा/ Assessment Year : 2014-15) OSI Systems Private Limited, Hyderabad. PAN : AAACO4438M Vs. The Deputy Commissioner of Income Tax, Circle – 16(2), Hyderabad. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Darpan Kirpalani, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Shri T. Sunil Gowtham, Sr.DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 16.05.2025 घोषणा की तारीख/ Date of Pronouncement : 02.06.2025 O R D E R प्रतत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present Miscellaneous Application (in short, “M.A.”) filed by the assessee company arises from the order passed by the Tribunal while disposing of its appeal, viz. OSI Systems Private Limited Vs. DCIT, Circle 16(2), Hyderabad in ITA No.2379/Hyd/2018, dated 09.10.2024. M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 2 2. The assessee company in its application has stated that the order passed by the Tribunal while disposing of its appeal suffers from certain mistakes which are glaring and apparent from the record, therefore, it had rendered the same amenable for rectification under sub-section (2) of Section 254 of the Act. For the sake of clarity, the impugned multi-facet mistakes pointed out by the assessee company in its application are culled out as under: M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 3 M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 4 3. We have heard the learned Authorized Representatives of both the parties and perused the application in the backdrop of our order passed while disposing off the appeal in ITA No.2379/Hyd/2018, and also considered the material available on record. 4. Apropos the observations of the Tribunal wherein the A.O./TPO have been directed to take the turnover filter at ten times on both ends and conduct a search afresh for both the segments, viz. Software Development Services (SDS) segment and IT Enabled Service Segments (ITeS), we may herein observe, that the same was a conscious view arrived at after necessary deliberations and perusing the orders of the lower authorities. The Tribunal after referring to the divergent views on the issue, i.e. as to whether turnover is a relevant criterion for choosing companies as comparables for determining the Arms Length Price (ALP), had relied on the judgment of the Hon’ble High Court of Karnataka in the case of PCIT Vs. M/s Obobay Mobile Technology India Private Limited, and answered the said issue in the affirmative. Thereafter, the Tribunal after necessary deliberations relied upon the order of the ITAT, Bangalore in the case of ACIT Vs. McAfee Software (India) Pvt. Ltd, IT(TP)A No. 1388/Bang/2011 and IT(TP)A No. 04/Bang /2012, and thus refrained from considering the general practice of applying the range of Rs. 1 crore to Rs. 200 crore turnover for selecting M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 5 comparables, and took a conscious view that the turnover filter of ten times on both sides of the assessee’s turnover was the proper turnover filter. Thus, the Tribunal had directed the AO/TPO to adopt the aforesaid turnover filter and conduct the search afresh for selecting the comparables for both the segments, viz. software development service and IT enabled services. 5. We are of the firm conviction that as the Tribunal had taken a conscious view regarding the turnover filter to be applied for selecting the comparables, the assessee applicant cannot in the garb of the present application filed under sub-section (2) of Section 254 of the Act, seek review of the said order for the muti-facet reasons given in its application, viz. (i). the said filter was not sought for in the course of hearing of the appeal; (ii). the application of the turnover filter has resulted in the revision of the lower turnover limit from INR 1 crore to one-tenth of the revenue; and (iii). that it is not mentioned that as to whether the said filter is to be applied to the appellant and comparables entity wide turnover or segmental turnover. We are of the view that as the Tribunal after necessary deliberations had given unambiguous directions to the AO/TPO for applying the turnover filter in terms of its observations, therefore, the seeking of review of the same for the reasons stated hereinabove cannot be permitted. M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 6 6. Apropos the Ld. AR’s contention, that the Tribunal on the one hand in Para 13 of its order had directed the AO/TPO to take the turnover filter at ten times on both ends and conduct the search afresh for both Software Development Services (SDS) segment and IT Enabled Service Segments (ITeS), but at the same time had given directions regarding exclusion of specific comparables; therefore the said separate findings would result in an impossible/ambiguous and open-ended task for the department to pass an order giving effect, we are unable to persuade ourselves to concur with the same. The observations recorded by the Tribunal regarding the two comparables whose exclusion from the final list of comparables was sought for by the assessee appellant, viz. (i). Infobean Technologies India Limited (for SDS segment); and (ii). MPS Limited (for ITeS segment) were rendered in the context of the analysis of the functional profile of the said comparables. We are unable to comprehend how the directions of the Tribunal to the AO/TPO to apply afresh the turnover filter of ten times on both sides of the assessee’s turnover, and the separate findings on the functional profile of the aforesaid two comparables that were selected by the AO/TPO will make it impossible for the department to give effect to our order. We are of the view that as the aforesaid observation of the assessee applicant is in itself misconceived, therefore, the same being devoid and bereft of any substance is rejected. M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 7 7. We shall now deal with the assessee applicant’s claim that now when the Tribunal had not acceded to its claim that the upper turnover filter of INR 200 crore be accepted, it had been deprived of an opportunity to argue the inclusion/exclusion of other comparables. We are of the view that as the Tribunal had directed the AO/TPO to apply the turnover filter of ten times on both sides of the assessee’s turnover and conduct the search afresh for selecting the comparables for both its segments, viz. software development service and IT enabled services, therefore, having so directed, it could not have thereafter proceeded with on the issue of the inclusion/exclusion of the other comparables. Be that as it may, as there is no mistake in the order of the Tribunal on the aforesaid issue, therefore, the claim of the assessee company raising a claim to the contrary is rejected. 8. We shall now deal with the claim of the assessee applicant that the Tribunal had failed to consider the judgment of the Hon’ble High Court of Delhi in the case of PCIT-7, Delhi Vs. Qualcomm India Pvt. Ltd, ITA 586/2023, which it had in the course of hearing of the appeal pressed into service for the exclusion of Infobeans Technologies India Limited from the final list of comparables. As is discernible from the order of the Tribunal, it transpires that while dealing with the aforesaid comparable, viz. Infobeans Technologies India Limited., it had M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 8 observed, that while for the TPO had stated that the annual report of the subject comparable for the FY 2013-14 was not available in the public domain, but the DRP had recorded a finding that the annual report of the said comparable revealed that its entire revenue was derived from software services. At the same time, the DRP had observed that though the assessee company had claimed to have given some information in CD but no such information was available on record. The DRP, based on the annual report, concluded that as the entire revenue of the subject comparable was from providing software services, and thus upheld its inclusion in the final list of comparables. However, on appeal, the Tribunal observed, viz. (i). that the “Notes” to the financial statements of the subject comparable referred to the earning of about Rs. 33 crores (on FOB basis) from the export of goods/services – export sale of software; and (ii) sales tax deposits of the subject comparable revealed sale of products. The Tribunal based on the aforesaid facts, observed that it was difficult to conclude that the subject comparable apart from proving software services was also into the sale of certain products. It was observed that software as a service or as a product had to be looked into before arriving at a final conclusion. The Tribunal referring to the fact that the assessee company in the course of the proceedings before the authorities below, had claimed to have given certain information in a CD, observed that the same was indispensably required to be considered for reaching at a M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 9 conclusion as to the comparability of the subject entity. Accordingly, the Tribunal backed by the aforesaid facts had restored the matter to the file of the AO/TPO to verify whether the software services and software is a product or integral part of the same service, and also to consider the information to be furnished by the assessee. We are of the firm conviction that as the fact that whether the subject comparable, viz. Infobeans Technologies India Limited was into providing software development services and/or sale of products was not discernible from the annual report, records etc., therefore, the Tribunal considering the said material aspect had restored the matter with specific directions to the file of the AO/TPO, and had not returned any finding on the inclusion/exclusion of the said comparable from the final list of comparables. Also, the Tribunal had specifically directed the AO/TPO to consider the information that would be furnished by the assessee company before them. As the Tribunal had restored the matter to the file of the AO/TPO to collate the complete facts regarding the functional profile of the subject comparable, viz. Infobean Technologies India Limited, and thus, had not returned any finding regarding the inclusion/exclusion of the same from the final list of comparables,; therefore, we are unable to concur with the assessee applicant that the Tribunal had erred in not following the judgment of the Hon’ble High Court of Delhi in the case of PCIT-7, Delhi Vs. Qualcomm India Pvt. Ltd (supra). M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 10 9. Apropos the assessee’s claim that the Tribunal had failed to consider the order of the ITAT, Pune in the case of Symantec software India Pvt. Ltd. Vs. DCIT, ITA No. 1824/Pun/2018 for AY 2014-15 that was relied upon in the context of exclusion of MPS Limited from the final list of comparables (for ITeS segment), we find the same to be factually incorrect. The Tribunal in its order had in Para 7 of its order specifically referred to the order of the ITAT, Pune in the case of Symantec software India Pvt. Ltd. Vs. DCIT, ITA No. 1824/Pun/2018 for AY 2014-15, dated 17/02/2020 that was pressed into service by the Ld. AR in the course of hearing of the appeal. We, thus, are of the view that it is factually incorrect on the part of the assessee applicant to infer that the order of the coordinate bench of the Tribunal, i.e., ITAT, Pune in the case of Symantec software India Pvt. Ltd. Vs. DCIT, ITA No. 1824/Pun/2018 for AY 2014-15 was not considered by the Tribunal while disposing off the appeal. Be that as it may, we also cannot remain oblivion of the material act that Tribunal while disposing off the appeal had directed the AO/TPO to apply the turnover filter of ten times on both sides of the assessee’s turnover and conduct the search afresh for selecting the comparables for both its segments, viz. software development service and IT enabled services. Having so directed, any finding by the Tribunal regarding the said comparable prior to it being tested by the afresh turnover filter in the process ofr selection of the comparables would have been nothing but premature. M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 11 10. Also, the claim of the assessee applicant that the Tribunal had erred in not considering its claim for inclusion of Sagar Soft India Limited in the final list of comparables, we find is based on an admittedly misconceived factual position. As pointed out by the assessee applicant, the Tribunal while disposing off the appeal had in Para 6 of its order specifically taken note of the assessee’s contention, that though the DRP in respect of Sagar Soft India Limited (supra) prima facie felt that the said entity is functionally comparable but had directed the TPO to examine whether it satisfied the other filters adopted by him and in such case to consider the said entity as a comparable. The Tribunal had further observed that it was the grievance of the assessee company that the TPO had not given effect to the direction of the DRP. Once again, we may observe that now when the Tribunal had directed the AO/TPO to apply the turnover filter of ten times on both sides of the assessee’s turnover and conduct the search afresh for selecting the comparables for both its segments, viz. software development service and IT enabled services; therefore, having so directed, any finding regarding the said comparable prior to it being tested by the afresh turnover filter in the process of for selection of the comparables would have been premature. We, thus, finding no substance in the claim of the assessee company that the order passed by the Tribunal on the aforesaid issue suffers from a mistake apparent from record, reject the same. M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 12 11. Further, it is the grievance of the assessee applicant that the Tribunal while adjudicating the issue regarding imputing interest on outstanding receivable from its AEs, had while allowing an interest-free credit period of 60 days erred in not considering its earlier order passed in the assessee’s own case for the preceding year i.e AY 2013-14 in ITA No. 2228/Hyd/2017, wherein the interest-free credit period of 120 days was allowed. As the assessee applicant based on its aforesaid contention is seeking the review of the order passed by the Tribunal, which is not permissible as per the mandate of law, therefore, we are constrained to reject the same. 12. Before parting, we may herein observe, that as the assessee applicant company in the garb of the present application has sought for a review of the order that was passed by the Tribunal while disposing off the appeal, which is not permissible as per the mandate of law, therefore, the said application is liable to be dismissed on the said count itself. Our aforesaid view that the Tribunal cannot review its order is supported by the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax (IT-4) Vs. Reliance Telecom Ltd., (2021) 133 taxmann.com 41 (SC), wherein it was held as under: \"From the impugned judgment and order passed by the High Court, it appears that the High Court has dismissed the writ petitions by observing that (i) the Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order; (ii) the Revenue had not contended that the ITAT M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 13 had become functus officio after delivering its original order and that if it had to relook/revisit the order, it must be for limited purpose as permitted by Section 254(2) of the Act; and (iii) that the merits might have been decided erroneously but ITAT had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before ITAT. 6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case.\" We thus, fin terms of our aforesaid deliberations find no substance in the miscellaneous application filed by the assessee company. 13. Resultantly, the miscellaneous application filed by the assessee company is dismissed. Order pronounced in the Open Court on 02nd June, 2025. Sd/- Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखध सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यधनयक सदस्य/JUDICIAL MEMBER Hyderabad, dated 02.06.2025. *TYNM/sps M.A.No.22/Hyd/2025 in ITA No.2379/Hyd/2018 OSI Systems Private Limited 14 आदेशकी प्रतततिति अग्रेतषत/ Copy of the order forwarded to:- 1. तिर्ााररती/The Assessee : OSI Systems Private Limited, 4th Floor, Orion Building, V. IT Park, Plot No.17, Software Unit Layout, Madhapur, Hyderabad. 2. राजस्व/ The Revenue : The Deputy Commissioner of Income Tax, Circle – 16(2), Hyderabad. 3. The DIT (IT & TP), Hyderabad. 4. तवभागीयप्रतततितर्, आयकर अिीिीय अतर्करण, हैदराबाद / DR, ITAT, Hyderabad 5. The Commissioner of Income Tax 6. गार्ाफ़ाईि / Guard file आदेशािुसार / BY ORDER Sr. Private Secretary ITAT, Hyderabad "