Hitachi Consulting software India Pvt Ltd(Formerly known as Sierra Atlantic Software Services Limited), Hyderabad v. DCIT, Circle-3(2), Hyderabad

ITA 1911/HYD/2011 | 2005-06
Pronouncement Date: 24-03-2021 | Result: Allowed

Appeal Details

RSA Number 191122514 RSA 2011
Bench Hyderabad
Appeal Number ITA 1911/HYD/2011
Appellant Hitachi Consulting software India Pvt Ltd(Formerly known as Sierra Atlantic Software Services Limited), Hyderabad
Respondent DCIT, Circle-3(2), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB-B
Tribunal Order Date 24-03-2021
Date Of Final Hearing 18-02-2021
Next Hearing Date 18-02-2021
Last Hearing Date 16-07-2018
First Hearing Date 15-12-2020
Assessment Year 2005-06
Appeal Filed On 11-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S. GODARA JUDICIAL MEMBER AND SHRI L.P. SAHU ACCOUNTANT MEMBER ITA NO. 992/HYD./201 1 ITA NO. 1911/HYD./2011 ASSESSMENT YEAR: 2005 - 06 M/S HITACHI CONSULTING SOFTWARE SERVICES VS. DY.CIT CIRCLE 3(2) INDIA PRIVATE LIMITED . HYDERABAD (FORMERLY KNOWN AS SIERRA ATLANTIC SOFTWARE SERVICES INDIA LTD. HYDERABAD. [PAN: AACCS8350A] ITA NO. 1082/HYD./2011 A SSESSMENT YEAR: 2005 - 06 ACIT CIRCLE 3(2) VS . M/S SIE RRA ATLANTIC SOFTWARE SERVICES INDIA LTD. HYDERABAD [NOW KNOWN AS M/S HITACHI CONSULTING SOFTWARE SERVICES INDIA LTD. ] HYDERABAD CROSS OBJECTION NO. 53/HYD./2011 (IN ITA NO. 1082/HYD./2011) A SSESSMENT YEAR: 2005 - 06 M/S SIERRA ATLANTIC SOFTWARE SERVICES INDIA LTD. VS. ACIT CIRCLE 3(2) HYDERABAD HYDERABAD ITA NO. 1638/HYD./2010 A SSESSMENT YEAR: 200 6 - 07 & ITA NO. 1795 /HYD./201 1 ASSESSMENT YEAR: 2 007 - 08 M /S HITACHI CONSULTING SOFTWARE SERVICES INDIA LTD. VS. ACIT CIRCLE 3(2) HYDERABAD HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 2 FOR ASSESSEE : SHRI PVSS PRASAD A.R. FOR REVENUE : SH. YVST SAI CIT D.R. DATE OF HEARING : 18/02/2021 DATE OF PRONOUNCEMENT : 24 /03/2021 O R D E R PER S.S. GODARA J.M. THE INSTANT BATCH OF SIX APPEALS PERTAINS TO A SINGLE ASSESSEE M/S HITACHI CONSULTING SOFTWARE SERVICES INDIA PVT. LTD (FORMERLY KNOWN AS SIERRA ATLANTIC SOFTWARE SERVICES INDIA LTD). FIRST AND FOREMOST ASSESSMENT YEAR 2005 - 06 INVOLVES ASSESSEES AND REVE NUES CROSS APPEALS ITA NOS. 992 AND 1082/HYD/2011 ALONG WITH FORMERS CROSS OBJECTION IN THE LATTER APPEAL C.O . NO. 53/HYD/2011 PREFERRED AGAINST THE CIT(A) - III HYDERABAD ORDER DATED 29.3.2011 PASSE D IN CASE NO. 0052/CIT(A) - III/10 - 11 INVOLVING P ROCEEDINGS U/S 143(3) RWS 92CA(3) OF THE INCOME TAX ACT 1961; IN SHORT THE ACT. THIS IS FOLLOWED BY THE FORMERS APPEAL ITA 1911/HYD/2011 DIRECTED AGAINST THE VERY LOWER APPELLATE ORDER IMPOSING SEC.271(1)(C ) PENALTY OF RS.2 65 97 751/ - BY INVOKING S EC. 271(1)(C) AND QUA ENHANCEMENT OF RS.7 26 86 351/ - U/S 92CA OF THE ACT. THE ASSESSEES NEXT APPEALS ITA 1638/HYD/2010 AND 1795/HYD/2011 FOR AYS 2006 - 07 AND 2007 - 08 DATED 25.10.2010 AND 2.92011; FRAMED IN FURTHERANCE TO THE DISPUTE RESOLUTION PANEL DR P HYDERABADS DIRECTION DATED 24.9.2010 AND 9.8.2011; RESPECTIVELY INVOKING PROCEEDINGS U/S 143(3) RWS 144C OF THE ACT. ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 3 HEARD BOTH THE PARTIES. CASE FILE PERUSED. IT TRANSPIRE S D URING THE COURSE OF HEARING THAT ALMOST ALL THE ISSUES RAISED IN THE INSTANT BATCH OF CASES ARE IDENTICAL / INTER - CONNECTED ONES. WE THUS PROCEED ASSESSMENT YEAR WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. A.Y. 2005 - 06 T HIS FIRST AND FOREMOST ASSESSMENT YEAR 2005 - 06 INVOLVES ASSESSEES AND R EVENUES Q UANTUM APPEALS ITA 992 AND 1082/H/2011 ALONG WITH FORMERS C.O. 53/HYD/2011 IN LATTERS CASE. THIS IS FOLLOWED BY ASSESEES APPEAL ITA 1911/H/2011 IN PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2. WE ADVERT TO THE FORMER 3 CASES INVOLVING QUANTUM ASSESSMENT. LEARNED AUTHORIZED REPRESENTATIVE AT THIS STAGE INVITED OUR ATTENTION TO THE ASSESSEES PETITION DATED 24.9.2020 HIGHLIGHTING THE FACT THAT MUTUAL AGREEMENT PROCEDURE MAP RESOLUTION DATED 24. 9 .2020 HAS ALRE ADY ATTAINED FINALITY QUA ITS INTERNATIONAL TRANSACTIONS WITH ITS OVERSEAS ASSOCIATED ENTERPRISE S AES IN USA. LEARNED COUNSEL FIRST OF ALL TOOK US TO THE CBDTS COMMUNICATION DATED 10.02.2021 TO THIS EFFECT AS FOLLOWS. ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 4 ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 5 ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 6 ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 7 ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 8 THE RE VENUE IS EQUALLY FAIR IN NOT DISPUTING ALL THESE INTERVENING DEVELOPMENTS. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE FOREGOING PLEADINGS REGARDING THE CLINCHING DEVELOPMENT OF MA P HAVING FINALIZED AS PER RULE 46G OF THE INCOME T AX RULES 1962. THE ASSESSEES INTERNATIONAL TRANSACTIONS IN THESE THREE ASSESSMENT ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 9 YEARS 2005 - 06 2006 - 07 AND 2007 - 08 COVERED UNDER THE ABOVE M A P ARE TO THE EXTENT OF 94.7% TO 96% AND 93% FORMING SUBJECT MATTER OF THE ALP IN THESE ASSESSMENT YEAR S. COMING TO THE REMAINING INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES IN OTHER JURISDICTIONS I.E. SINGAPORE ETC . THE R EVENUE FAILS TO DISPUTE THAT EVEN THE T RANSFER P RICING O FFICER HAS NOT DRAWN ANY DISTINCTION QUA THE ALP IN ALL THE SUBSTANTIVE GROUNDS RAISED HEREIN. WE THUS HOLD THAT THE M A P MARGIN OF 15.49% 15.34% AND 15.76% DESERV ES TO BE APPLIED QUA THE REMAINING PORTION OF NON - USA BASED INTERNATIONAL TRANSACTIO NS AS WELL . CONSEQUENTLY THE ASSESSEES APPEALS ITA 992 /H/11 RAISING SUBSTANTIVE GROUNDS NO.1 TO 11 R EVENUES CROSS APPEAL ITA 1082 /H/11 CANVASSING THE SOLE ISSUE OF PROPORTIONATE OPERATING COST FIGURES QUA TRANSFER PRICING MECHANISM OF RS. 52 92 38 786/ - AND FORMERS CROSS OBJECTION 53/H/11 THEREIN ; ARE DISMISSED AS RENDERED INFRUCTUOUS. SAME IS THE OUTCOME IN ASSESSEES REMAINING APPEALS ITA 1638/H/10 AND 1795/H/11 FOR LATTER TWO RAISING THE VERY ISSUE OF ALP ADJUSTMENT(S) INVOLVING VARYING SUM ( S ) . THESE LATTER TWO APPEALS ARE ALSO DISMISSED AS RENDERED INFRUCTUOUS/ DISMISSED AS WITHDRAWN IN ABOVE TERMS. 4. WE ARE NOW LEFT WITH ASSESSEES 12 TH TO 14TH GROUNDS IN ITA 992/HYD/2011 CHALLENGING SEC.37(1) DISALLOWANCE OF RS. 7 24 122/ - THEREBY TREATING IT'S IMPROVEMENTS TO LEASEHOLD PREMISES CLAIMED AS CAPITAL EXPENDITURE ON THE GROUND THAT THE SAME RESULTED IN MAJOR IMPROVEMENTS. WE FIND NO MERIT IN R EVENUES STAND DISALLOWING ASSESSEES CLAIM IN VIEW OF (I) CIT VS. CITI FINANCIAL CONSUMER FIN LTD. (2012) 20 TAXMANN . COM 452 ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 10 (DELHI HC);; (II) AMWAY INDIA ENTERPRISES VS. DCIT (2009) 27 SOT 344 (DELHI) AND (IIII ) CIT VS. AMWAY INDIA ENTERPRISES (2012) 22 TAXMANN.COM 22 (DELHI HC); HOLDING THAT SUCH IMPROVEMENTS ARE IN THE NATURE OF REVENUE EXPENDITURE ONLY. THE IMPUGNED DISALLOWANCE IS DIRECTED TO BE DELETED THEREFORE. ASSESSEES CORRESPONDING APPEAL 992/H/11 IS PARTLY ACCEPTED . 5. WE ARE NOW LEFT WITH ASSESSEES PENALTY APPEAL ITA 1911/HYD/2011 INVOLVING A SUM OF RS. 2 65 97 751/ - QUA ENHANCEMENT IN ITS INCOME ON THE GROUND THAT IT HA D FAILED TO DISCLOSE THE CORRECT FIGURES. 6. WE NOTICE I N THIS FACTUAL BACKDROP AND FROM A PERUSAL OF PARA 10 PAGE 28 OF CIT(A)S LOWER APPELLATE ORDER IN QUANTUM PROCEEDINGS THAT THE CORRESPONDING MISTAKE IN OMITTING TO ADOPT CORRECT FIGURES IN ASSESSEES FORM 3 CEB HAD BEEN MADE AT THE TPOS END WHICH STOOD ADMITTED IN HIS LETTER DATED 7.2.2011 TH A N INVOLVING ANY CONCEALMENT OF PARTICULARS OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AT TAXPAYERS BEHEST . THIS CLINCHING FACT HAS GONE UNREBUTTED FROM REVENUE SIDE DURING THE COURSE OF HEARING. WE THUS ACCEPT ASSESSEES INSTANT PENALTY APPEAL ITA 1911/H/11 AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. TO SUM UP ASSESSEES APPEAL ITA 992/H/11 FOR AY 2005 - 06 IS PARTLY ACCEPTED . THE REVENUES CROSS APPEAL ITA NO.1082/HYD /2011 IS DISMISSED. THE ASSESSEES CROSS OBJECTION ITA NOS. 992/H/11 1911/H/11 1082/H/11 CO 53/H/11 AY 2005 - 06 ITA NOS. 1638/H/10 AY 2006 - 07 1795/HYD/2011 AY 2007 - 08 HITACHI CONSULTING SOFTWARE SERVICES INDIA PRIVATE LIMITED HYDERABAD 11 C.O.NO.53/HYD/2011 THEREIN IS DISMISSED AS RENDERED INFRUCTUOUS. ITS PENALTY APPEAL ITA 1911/HYD/201 1 IS ALLOWED . THE ASSESSEES APPEALS ITA NOS. 1 638 /H/ 20 10 AND 1795/HYD/201 1 ARE DISMISSED AS RENDERED INFRUC TUOUS IN ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN OPEN COURT ON 24 /03/2021. SD/ - SD/ - (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH MARCH 2021 *GMV COPY OF ORDER FORWARDED TO: 1. M/S HITACHI CONSULTING SOFTWARE SERVICES INDIA LTD. (FORMERLY KNOWN AS SIERRA ATLANTIC SOFTWARE SERVICES LTD ) PLOT 9 GACHIBOWLI HYDERABAD 500 032 2. DY.CIT CIRCLE 3( 2 ) HYDERABAD. 3. ACIT RANGE 3 HYDERABAD 4. PR.CIT - 3 HYDERABAD 5 . D.R. ITAT HYDERABAD 6. GUARD FILE