NI Systems (India)P Ltd, Bangalore v. Deputy Commissioner of Income tax, circle-12(2), Bangalore

ITA 1337/BANG/2014 | 2009-2010
Pronouncement Date: 10-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 133721114 RSA 2014
Assessee PAN AABCN1159K
Bench Bangalore
Appeal Number ITA 1337/BANG/2014
Duration Of Justice 3 year(s) 9 day(s)
Appellant NI Systems (India)P Ltd, Bangalore
Respondent Deputy Commissioner of Income tax, circle-12(2), Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 10-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 10-11-2017
Date Of Final Hearing 28-08-2017
Next Hearing Date 28-08-2017
First Hearing Date 28-08-2017
Assessment Year 2009-2010
Appeal Filed On 31-10-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA ACCOUNTANT MEMBER IT (TP) A NO. 1337/BANG/2014 ASSESSMENT YEAR : 2009 - 10 M/S. NI SYSTEMS (INDIA) PVT. LTD. 81/1 & 82/1 SALARPURIASOFTZONE WING B 5 TH FLOOR BLOCK A BELLANDUR VARTHURHOBLI BANGALORE 560 103. PAN: AABCN 1159K VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(2) BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI P.K. PRASAD ADVOCATE & SHRI UMASHANKAR GAUTAM ADVOCATE REVENUE BY : SMT. PADMAMEENAKSHI JCIT (DR) DATE OF HEARING : 07 . 1 1 .201 7 DATE OF PRONOUNCEMENT : 10 .1 1 .2017 O R D E R PER SHRI A.K. GARODIA ACCOUNTANT MEMBER THIS IS AN ASSESSEES APPEAL WHICH IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)- IV BANGALORE DATED 03.09.2014 FOR ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED BY ASSESSEE AS PER THE REVISE D GROUNDS FILED BY THE ASSESSEE ARE AS UNDER. 1) THE ORDER PASSED BY THE LEARNED DEPUTY COMMISSIO NER OF INCOME-TAX CIRCLE 12(2) BANGALORE ('LD. AO') AND LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - IV BANGALOR E ['LD. CIT(A)']; TO THE EXTENT PREJUDICIAL TO THE APPELLAN T IS BAD IN LAW AND LIABLE TO BE QUASHED. [CORRESPONDING TO ORIGINAL GR OUNDS OF APPEAL (GOA) NO. 1] 2) THE LD. AO AND LD. CIT(A) ERRED IN LAW AND ON FA CTS IN CONFIRMING THE ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INT ERNATIONAL TRANSACTION WITH THE ASSOCIATED ENTERPRISE BY UPHOL DING THE REJECTION OF TRANSFER PRICING DOCUMENTATION OF THE APPELLANT AND BY ACCEPTING THE COMPARABILITY ANALYSIS PERFORMED BY THE LEARNED TRANSFER PRICING OFFICER ('LD. TPO') : [CORRESPONDING TO ORIGINAL GO A NO. 2 AND 3(A)] IT(TP)A NO.1337/BANG/2014 PAGE 2 OF 5 3) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY USIN G THE SINGLE YEAR DATA PERTAINING TO FINANCIAL YEAR 2008-09 AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS INSTEAD OF MULTIPLE YEAR DAT A USED BY THE APPELLANT. [CORRESPONDING TO ORIGINAL GOA NO. 3(B) AND 3 (C)] 4) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY NOT ALLOWING ADJUSTMENTS ON ACCOUNT OF DIFFERENCES IN THE RISK P ROFILE OF THE APPELLANT VIS-A-VIS OF THE COMPARABLE [CORRESPONDIN G TO ORIGINAL GOA NO. 3 (D)] 5) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY INCLUDING BODHTREE CONSULTING LTD. ON THE GROUNDS OF FUNCTIONAL SIMILARITY WHEREAS THIS COMPARABLE SHOULD BE EXCLUDED ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND ALSO HIGHLY FLUCTUATING AND ABNOR MAL PROFIT MARGINS [CORRESPONDING TO ORIGINAL GOA NO. 3 (E) AND ADDITI ONAL GOA NO. 6 FILED ON FEBRUARY 21 2017] 6) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY INCLUDING KALS INFORMATION SYSTEMS LTD. ON THE GROUNDS OF FUNCTIONAL SIMILARITY WHEREAS THIS COMPARABLE SHOULD BE EXCLUDED ON THE GROUND OF BEING FUNCTIONALLY DISSIMILAR [CORRESPONDING TO ORIGINAL GOA NO. 3 (E)] 7) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY NOT INCLUDING OTHERWISE FUNCTIONALLY SIMILAR COMPARABLES NAMELY THINKSOFT GLOBAL SERVICES LIMITED AND FCS SOFTWARE SOLUTIONS LIMITED WHICH WERE EXCLUDED BY THE LD. AO/ LD. TPO ON THE BASIS OF HIG H WORKING CAPITAL POSITION OF BOTH THESE COMPANIES ALLEGING THAT IT CAUSES DISTORTION IN THEIR MARK-UP [CORRESPONDING TO ORIGINAL GOA NO. 3( F)] 8) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY UPHO LDING THE DECISION OF THE LD. TPO TO LIMIT THE WORKING CAPITAL ADJUSTM ENT COMPUTATION AND THUS NOT GRANTING APPROPRIATE WORKING CAPITAL A DJUSTMENT FOR THE APPELLANT [CORRESPONDING TO ORIGINAL GOA NO. 3 (G)] 9) THE LD. CIT(A) FAILED TO FOLLOW THE PRINCIPLE OF NATURAL JUSTICE IN THE COURSE OF APPELLATE PROCEEDINGS BY NOT APPRECIA TING THE ADDITIONAL TIME GRANTED FOR FILING THE WRITTEN SUBMISSION TILL SEPTEMBER 15 2014 AND ERRED IN PASSING THE ORDER ON SEPTEMBER 03 201 4 (PRIOR TO FILING THE WRITTEN SUBMISSION BY THE APPELLATE) [CORRESPON DING TO ORIGINAL GOA NO. 4 (A)] 10) THE LD. CIT(A) FAILED TO FOLLOW THE PRINCIPLE O F NATURAL JUSTICE IN THE COURSE OF APPELLATE PROCEEDINGS BY NOT ADDRESSI NG THE APPELLANT GRIEVANCE IN FULL BY NOT TAKING COGNIZANCE OF WRITT EN SUBMISSION FILED BY THE APPELLANT ON SEPTEMBER 04 2014 I.E. WELL WITHIN THE ADDITIONAL TIME GRANTED BY THE LD. CIT(A) [CORRESPO NDING TO ORIGINAL GOA NO. 4 (B)] IT(TP)A NO.1337/BANG/2014 PAGE 3 OF 5 11) THE LD. CIT(A) ERRED IN LAW AND FACTS BY UPHOLD ING THE ORDER OF THE LD. AO IN CHARGING INTEREST UNDER SECTION 234B AND 234C OF THE INCOME-TAX ACT 1961. [CORRESPONDING TO ORIGINAL GO A NO. 5] 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT AS P ER REVISED GROUNDS OF APPEAL GROUND NOS. 1 TO 4 AND 9 TO 10 ARE GENERAL AND NO A DJUDICATION IS CALLED FOR IN RESPECT OF THESE GROUNDS. HE FURTHER SUBMITTED THA T AS PER GROUND NO. 5 THE ASSESSEE IS REQUESTING FOR EXCLUSION OF ONE COMPARA BLE I.E. BODHTREE CONSULTING LTD. AND AS PER GROUND NO. 6 THE ASSESS EE IS REQUESTING FOR EXCLUSION OF ONE MORE COMPARABLE I.E. KALS INFORMAT ION SYSTEMS LTD. AND AS PER GROUND NO. 7 THE ASSESSEE IS REQUESTING FOR IN CLUSION OF TWO COMPARABLES I.E. THINKSOFT GLOBAL SERVICES LTD. AND FCS SOFTWAR E SOLUTIONS LTD. REGARDING GROUND NO. 8 HE SUBMITTED THAT IN THIS GROUND THE GRIEVANCE OF THE ASSESSEE IS REGARDING UPHOLDING BY CIT(A) OF THE DECISION OF TP O TO LIMIT THE WORKING CAPITAL ADJUSTMENT COMPUTATION. 4. HE SUBMITTED THAT THE ISSUE REGARDING EXCLUSION OF TWO COMPARABLES I.E. KALS INFORMATION SYSTEMS LTD. AND BODHTREE CONSULTING LT D. IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS ORDER RENDERED IN TH E CASE OF M/S. INFINERA INDIA PVT. LTD. VS. ITO IN IT(TP)A NOS. 1008& 977/BANG/20 14 COPY AVAILABLE ON PAGES 1003 TO 1023 OF PAPER BOOK. HE ALSO SUBMITTED A COPY THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. AT & T GLOBAL BUSINESS SERVICES INDIA PVT. LTD. VS. ITO IN ITA NO. 154/BANG/2014 DATED 11.10.2017 F OR THE SAME ASSESSMENT YEAR AND SUBMITTED THAT IN THIS ORDER THE TRIBUNAL HAS FOLLOWED THE EARLIER TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. INFINER A INDIA PVT. LTD. VS. ITO (SUPRA) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE. 5. REGARDING THE ASSESSEES CLAIM FOR INCLUSION OF TWO COMPARABLES HE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE TRIBUNAL ORDER RENDERED IN THE CASE OF VMWARE SOFTWARE INDIA PVT. LTD. VS. DCIT IN IT(TP)A NO. 1311/BANG/2014 DATED 06.01.2017 COPY AVAILABLE ON PAGES 957 TO 1002 OF PAPER BOOK. IT(TP)A NO.1337/BANG/2014 PAGE 4 OF 5 6. REGARDING THIRD ISSUE I.E. OF WORKING CAPITAL AD JUSTMENT HE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE T RIBUNAL ORDER RENDERED IN THE CASE OF VMWARE SOFTWARE INDIA PVT. LTD. VS. DCIT (S UPRA). 7. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT (A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE DECIDE THE ISSUE REGARDING THE ASSESSEES CLAIM FOR EXCLUSION OF TWO COMPARABL ES I.E. BODHTREE CONSULTING LTD. AND KALS INFORMATION SYSTEMS LTD. AS PER THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. AT & T GLOBAL SERVICES PVT. LTD. V S. ITO (SUPRA) FOR THE SAME ASSESSMENT YEAR IT WAS NOTED BY TRIBUNAL THAT IN T HAT CASE ALSO THE ASSESSEE WAS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVI CES. THE TRIBUNAL IN THAT CASE FOLLOWED THE TRIBUNAL ORDER RENDERED IN THE CA SE OF M/S. INFINERA INDIA PVT. LTD. VS. ITO (SUPRA) AND HELD THAT BOTH THESE COMPA RABLES I.E. BODHTREE CONSULTING LTD. AND KALS INFORMATION SYSTEMS LTD. A RE NOT GOOD COMPARABLES BECAUSE THESE ARE FUNCTIONALLY DISSIMILAR. RESPECT FULLY FOLLOWING THESE TRIBUNAL ORDERS WE HOLD THAT IN THE PRESENT CASE ALSO THES E TWO COMPARABLES ARE TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 9. REGARDING THE ISSUE IN RESPECT OF INCLUSION OF T WO COMPARABLES I.E. THINKSOFT GLOBAL SERVICES LTD. AND FCS SOFTWARE SOLUTIONS LTD . WE FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL ORDER RENDERED IN THE CASE OF VMWARE SOFTWARE INDIA PVT. LTD. VS. DCIT (S UPRA) AND SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LD. DR OF REVENUE WE HOLD THAT THESE TWO COMPARABLES SHOULD BE INCLUDED IN THE FINAL LIS T OF COMPARABLES BY RESPECTFULLY FOLLOWING THE JUDGMENT CITED BY LD. AR OF ASSESSEE. 10. REGARDING THE THIRD ISSUE THE WORKING CAPITAL ADJUSTMENT WE FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TR IBUNAL ORDER RENDERED IN THE CASE OF VMWARE SOFTWARE INDIA PVT. LTD. VS. DCIT (S UPRA). RESPECTFULLY FOLLOWING THE SAME WE DIRECT THE AO/TPO TO DECIDE THE ISSUE AFRESH REGARDING QUANTIFICATION OF WORKING CAPITAL ADJUSTMENT IN THE LIGHT OF THIS JUDGMENT. ACCORDINGLY GROUND NOS. 5 6 7 AND 8 ARE ALLOWED IN THE TERMS INDICATED ABOVE. IT(TP)A NO.1337/BANG/2014 PAGE 5 OF 5 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 10 TH NOVEMBER 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL BANGALORE.