Telsima Communication Private Limited, Bangalore v. DCIT, Bangalore

ITA 497/BANG/2012 | 2005-2006
Pronouncement Date: 30-09-2016 | Result: Allowed

Appeal Details

RSA Number 49721114 RSA 2012
Assessee PAN AABCT9826D
Bench Bangalore
Appeal Number ITA 497/BANG/2012
Duration Of Justice 4 year(s) 5 month(s) 18 day(s)
Appellant Telsima Communication Private Limited, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-09-2016
Date Of Final Hearing 27-07-2016
Next Hearing Date 27-07-2016
Assessment Year 2005-2006
Appeal Filed On 11-04-2012
Judgment Text
IT(TP)A.497 & 518/BANG/2012 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A' BENGALURU BEFORE SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER AND SHRI. S. JAYARAMAN ACCOUNTANT MEMBER I.T(TP).A NO.497/BANG/2012 (ASSESSMENT YEAR : 2005-06) M/S. TELSIMA COMMUNICATIONS P. LTD 1 ST FLOOR SALARPURIA TOUCH STONE MARTHAHALLI KADUBEESANAHALLI BENGALURU 560 013 .. APPELLAN T PAN : AABCT9826D V. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 12(4) BENGALURU .. RESPONDENT I.T(TP).A NO.518/BANG/2012 (ASSESSMENT YEAR : 2005-06) (BY THE REVENUE) ASSESSEE BY : SHRI. K. R. VASUDEVAN ADVOCATE REVENUE BY : DR. P. K. SRIHARI ADDL. CIT DR HEARD ON : 27.07.2016 PRONOUNCED ON : 30.09.2016 O R D E R PER S. JAYARAMAN ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY AGAINST THE ORDER OF DCIT CIRCLE -12 (4) BENGALURU DT.12.12.2008 FOR THE A. Y. 2005-06. 02. THE EFFECTIVE GROUNDS TAKEN UP BY THE ASSESSEE BEFORE US ARE EXTRACTED HEREBELOW ISSUEWISE AND DEALT WITH THERE IN : IT(TP)A.497 & 518/BANG/2012 PAGE - 2 1. NON-TP ISSUES : ISSUE NO.1 DISALLOWANCE OF DIMINUTION IN VALUE OF A SSETS AMOUNTING TO RS.59 29 812/- : 02. IN THIS REGARD THE RELEVANT PORTION OF THE ASS ESSMENT ORDER IS EXTRACTED AS UNDER : 8. DIMINUTION IN THE VALUE OF ASSETS 8.1. THE ASSESSEE COMPANY HAS REFLECTED AN AMOUNT O F RS.50 29 812/- AS DIMINUTION IN THE VALUE OF ASSET. ON VERIFICATIO N OF RECORDS IT WAS FOUND THAT THE ASSESSEE COMPANY HAS BOUGHT COMMUNIC ATION EQUIPMENT FOR AN AMOUNT OF RS.83 87 286/- FROM M/S MISTRAL SOLUTIONS PVT LTD OVER A PERIOD OF TIME FROM 24 TH SEPTEMBER 2002 TO 18 TH APRIL 2003 ON WHICH THE ALLOWABLE DEPRECIATION IS R S.50 32 372/-. 82. THE ABOVE EQUIPMENT WERE LEASED TO M/S TAYANA S OFTWARE SOLUTIONS PVT LTD ON WHICH AN INCOME OF RS.35 00 00 /- HAS BEEN RECEIVED AND OFFERED TO TAX FOR AY 2005-06. HOWEVER THE ASSESSEE COMPANY CLAIMS THAT THE ABOVE TRANSACTION IS SALE ON APPROVAL' BASIS TO M/S TAYANA SOFTWARE SOLUTIONS FM LTD AR I D NOT LEASING OF EQUIPMENT. THE ASSESSEE COMPANY FURTHER CLAIMS THAT M/S TAYANA SOFTWARE SOLUTIONS PVT LTD HAS SUBSEQUENTLY RETURNED THE EQUIPMENT. 8.3. THE ASSESSEE COMPANY REVALUED THE ABOVE EQUIPM ENT AT RS.35 57 4741- (ACTUAL VALUE RS.83 87 286/-) THROUG H A CHARTERED ENGINEER MR. C E BHASKAR DATED 6 TH JULY 2005 AND CLAIMED A FURTHER DEPRECIATION OF RS.20 14 484/- ON THE REVALUED AMOU NT OF RS.35 57 474/-. IT(TP)A.497 & 518/BANG/2012 PAGE - 3 8.4. FROM THE ABOVE TRANSACTIONS IT CAN BE PROVED B EYOND REASONABLE DOUBTS THAT THE ASSESSEE COMPANY HAS REVALUED THE C OMMUNICATION EQUIPMENTS WITH AN ACTUAL VALUE RS.83 87 286/- TO R S.35 57 4741- THEREBY WRITING OFF A AMOUNT OF RS.50 29 812/- AND ADDITIONALLY AN EXCESS DEPRECIATION OF RS 20 14 484/- ON THE SAME. 8.5. WHEN THE ABOVE ISSUE WAS BROUGHT TO THE NOTICE OF THE AUTHORISED REPRESENTATIVE THE AUTHORISED REPRESENTATIVE COULD NOT SUBSTANTIATE THE REASON FOR THE SAME. 8.6. THEREFORE THE ASSESSEE COMPANY'S CLAIM OF DEP RECIATION IS LIMITED TO RS 50 32 372/- WHICH IS ALLOWED IN ACCOR DANCE TO INCOME TAX ACT 1961 AND THE ADDITIONAL DEPRECIATION OF RS.20 14 484/CLAIMED BY REVALUING THE ASSET (ON WHICH DEPRECIATION HAS ALRE ADY BEEN CLAIMED) AT RS.35 57 4741- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY THUS THE ADDITION UNDER THIS HEAD IS RS.20 14 484/- 03. ON AN APPEAL THE CIT (A) HELD AS UNDER : 2.2.2 DURING THE APPELLATE PROCEEDINGS THE APPELLANT SUBMITTED THAT THE APPELLANT SOLD A TELECOMMUNICATI ON EQUIPMENT TO M/S. TAYANA SOFTWARE SOLUTIONS PRIVATE LIMITED D URING FY 2002- 03 FOR A TOTAL SUM OF RS 99 00 000/-. THIS WAS ON S ALE ON APPROVAL BASIS. AGAINST THIS TRANSACTION THE CUSTOMER HAD P AID A SUM OF RS 35 00 000/- .WHICH WAS SHOWN AS ADVANCE FROM CUSTOM ERS. THE CUSTOMER USED THIS EQUIPMENT FOR A WHILE AND FINALL Y REJECTED THE EQUIPMENT AND RETURNED THE SAME TO THE APPELLANT. T HE ADVANCE OF RS 35 00 000/- COLLECTED EARLIER FROM THIS CUSTOMER WAS SHOWN AS OTHER INCOME. CONSEQUENT TO THE RETURN OF THIS EQUI PMENT THE APPELLANT DECIDED TO USE THIS EQUIPMENT AS CAPI TAL GOODS FOR THEIR BUSINESS PURPOSE AND GOT A VALUATION OF THIS EQUIPMENT DONE AT RS 33 57 474/- (BUT IT WAS WRONGLY MENTIONED AS RS35 57 474/- IN THE ASSESSMENT ORDER). THUS AS PER THE ACCOUNTI NG STANDARD THE APPELLANT CAPITALIZED THIS ASSET AT RS 33 57 47 4/- AND CLAIMED DEPRECIATION @60.00%. THE LEARNED ASSESSING OFFICER HAS HOWEVER CAME TO THE CONCLUSION THAT DEPRECIATION ON THIS EQUIPMENT IS ALLOWABLE ON THE ORIGINAL COST OF THE ASSET AND HE HAS NOT DISTURBED THE FORFEITURE OF ADVANCE OF RS.35 LA KHS ACCOUNTED AS OTHER INCOME. IT IS SUBMITTED THAT THE LEARNED A O OUGHT TO HAVE REDUCED THE ADVANCE FORFEITED FROM THE COST OF THE ASSET AND ALLOWED THE DEPRECIATION ON SUCH REDUCED VALUE. THUS HE OUGHT TO HAVE REDUCED THE INCOME BY RS.35 LAKHS ON ACCOUNT OF INCLUSION OF THIS AMOUNT IN THE OTHER INCOME AND TH EREAFTER HE IT(TP)A.497 & 518/BANG/2012 PAGE - 4 OUGHT TO HAVE REDUCED THE ORIGINAL COST OF THE ASSE T BY THIS AMOUNT AND ALLOWED THE DEPRECIATION. THIS IS IN LIN E WITH EVEN PROVISIONS OF SECTION 51 OF THE INCOME TAX ACT WHER E ANY ADVANCE FORFEITED CAN ONLY BE REDUCED FROM THE COST OF THE ASSET. EVEN U/S 43 OF THE IT ACT THE DEFINITION OF 'ACTUAL ASS ET' EXCLUDES ANY COST MET BY ANYBODY ELSE AND THEREFORE THE SUM FOR FEITED HAS TO BE EXCLUDED FROM THE ACTUAL COST OF THE ASSET. THER E ARE SEVERAL CASE LAWS HOLDING THAT IN THE CASE OF FIXED ASSETS DEPRECIATION CAN BE CLAIMED ONLY ON THE VALUE OF THE ASSET AFTER REDUCING THE AMOUNT IF ANY WHICH IS RECEIVED TOWARDS THE SAME. THUS THE LEARNED AO OUGHT TO HAVE PROCEEDED AS UNDER: A. HE OUGHT TO HAVE EXCLUDED A SUM OF RS.35 LAKHS BEIN G THE AMOUNT FORFEITED AND CREDITED TO OTHER INCOME BY TH E APPELLANT; B. THEREAFTER HE OUGHT TO HAVE REDUCED THIS AMOUNT FR OM THE ORIGINAL COST OF THE ASSET OF RS. 83 87 286 AND THU S ALLOWED THE DEPRECIATION ON SUCH REDUCED AMOUNT. 2.2.3 HAVING HEARD THE CONTENTION OF THE APPELLANT THE UNDERSIGNED OBTAINED THE PROFIT & LOSS A/C AND THE STATEMENT OF THE TOTAL INCOME FROM THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR IN RESPECT OF HYDERABAD UNIT IT IS NOTICED FROM THE PROFIT & LOS S A/C THAT THE APPELLANT HAS SHOWN THE INCOME UNDER THE HEAD 'OTHE R INCOME' OF RS. 35 IAKHS FROM THE CUSTOMER AND ALSO THE 'OTH ER INCOME' WHICH IS INTEREST RECEIVED OF RS. 10 495/- AGAINST WHICH THE ASSESSEE DEBITED AN AMOUNT OF RS.50 29 812/- ON DIMINISHING VALUE OF THE ASSET AND ALSO AN AMOUNT OF RS. 22 72 741/- AS LOSS ON DI SPOSAL OF THE FIXED ASSET. AS THE ABOVE LOSS PERTAINS TO THE CAPI TAL ASSET HENCE NOT ALLOWABLE AS DEDUCTION EITHER UNDER SECTION 37( 1) OR UNDER SECTION 57(3) OF THE INCOME TAX ACT. HOWEVER THE A PPELLANT EVEN THOUGH ADDED LOSS ON SALE OF ASSET OF RS. 22 72 741 /- BUT DID NOT ADD RS. 50 29 812/- TO THE TOTAL INCOME AND THEREFO RE A NOTICE U/S.251(2) OF THE INCOME TAX ACT WAS ISSUED TO THE APPELLANT ON 11.1.2012 IN WHICH THE ASSESSEE WAS ASKED TO EXPLAI N AS TO WHY THE INCOME SHOULD NOT BE ENHANCED BY RS. 50 29 812/- I N RESPONSE TO WHICH THE APPELLANT ADMITTED THAT THE AMOUNT OF RS. 50 29 812/- ON ACCOUNT OF REVALUATION DIFFERENCE HAS BEEN CHARG ED TO THE PROFIT & LOSS A/C. FURTHER IT IS EVIDENT FROM THE RECORD THAT THE ASSET WAS PUT TO USE FOR THE PURPOSE OF THE BUSINES S OF THE APPELLANT FROM WHICH THE INCOME OF RS.35 LAKHS HAS BEEN SHOWN AS 'OTHER INCOMES. ONCE RS. 35 00 000/- IS OFFERED A S INCOME THE SAME HAS TO BE ASSESSED BY THE ASSESSING OFFICER. F URTHER THE APPELLANT HAS CLAIMED THE DEPRECIATION AS PER THE P ROVISIONS OF THE IT ACT AT RS. 22 81 244/- IN THE COMPUTATION OF INC OME ACCORDING TO THE AUDIT REPORT FILED IN FORM 3 CD ON THE ABOVE ASSET. HENCE THE QUESTION OF ALLOWANCE OF ANY FURTHER DEPRECIATI ON DOES NOT ARISE. ACCORDINGLY THE ADDITION MADE BY THE ASSESS ING OFFICER AT RS.20 14 484/- IS ENHANCED TO RS. 50 29 812/-. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO GIVE EFFECT TO T HE ENHANCEMENT OF THE INCOME. IT(TP)A.497 & 518/BANG/2012 PAGE - 5 04. WE HEARD THE RIVAL SUBMISSIONS. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE USED THE COMMUNICATION EQUIPMENT IN ITS BU SINESS FROM 24.09.2002 TO 18.04.2003. THEREAFTER IT GAVE TO M /S. TAYANA SOFTWARE SOLUTIONS P. LTD RECEIVED BACK AND THEN CLAIMED TO HAVE USED FOR ITS BUSINESS. THERE IS NO CLEAR FINDING AS TO WHETHER THE EQUIPMENT WAS SOLD OR LEASED TO M/S. TAYANA SOFTWARE SOLUTIONS P. LTD AND ITS RELATED FINANCIAL ASPECTS. FURTHER THE DEPRECIATION CLAIM APPARENTL Y FALLS WITHIN THE SCOPE OF SECTION 43 OF THE ACT. HOWEVER ITS SCOPE HAS NOT BEEN EXAMINED. IN VIEW OF THAT THIS ISSUE IS REMITTED BACK TO THE AO. TH E AO SHALL EXAMINE THE ABOVE ISSUES AND AFTER FURNISHING ADEQUATE OPPORTUN ITY TO THE ASSESSEE PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW. ISSUE NO.2 : SET OFF OF CURRENT YEAR LOSS OF NON-ST P UNIT FROM INCOME OF STP UNIT ELIGIBLE BEFORE COMPUTATION OF DEDUCTIO N U/S.10A : THIS ISSUE IS NEITHER DEALT WITH BY THE ACIT CIRC LE -12(4) BENGALURU IN HIS ORDER DT.12.12.2008 NOR BY THE CIT (A)-IV B ENGALURU IN HIS ORDER DT.13.12.2012. IN VIEW OF THE SAME IT IS NOT DEL IBERATED UPON BY US. IT(TP)A.497 & 518/BANG/2012 PAGE - 6 TRANSFER PRICING ISSUES : 5. THE ASSESSEE TELSIMA COMMUNICATIONS P. LTD IS A SUBSIDIARY OF TELSIMA CORPORATION USA WHICH WAS INCORPORATED ON 17.5.2000. ASSESSEE IS A PROVIDER OF SOFTWARE DEVELOPMENT SERVICES ONLY TO ITS AE TELSIMA-US. DURING THE TRANSFER PRICING ASSESSMENT PROCEEDINGS THE TPO REJECTED THE TP DOCUMENTATION OF THE ASSESSEE AND APPLIED TNMM A S THE MOST APPROPRIATE METHOD WHILE DETERMINING ARMS LENGTH P RICE. ACCORDINGLY THE TPO DETERMINED THE ARMS LENGTH ADJUSTED MARGIN AT 22.98% AND HENCE PROPOSED THE TRANSFER PRICING ADJUSTMENT OF RS.70 8 2 720/-. 5.1. AGGRIEVED BY THE ORDER OF TPO ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). THE CIT (A) GRANTED THE FOLLOWING RELIEF TO THE ASSESSEE : I) TURNOVER FILTER OF RS.1CRORE TO RS.200 CRORE WAS UPHELD II) RELATED PARTY TRANSACTION FILTER OF 0% WAS UPHE LD AND III) DIRECTED THAT EXENSYS SOFTWARE SOLUTIONS LTD SHOULD BE REJECTED AS A COMPARABLE ON THE GROUND THAT IT HAS EXTRAORDINARY PROFIT OF 70.67% DURING THE F. Y. 200 4-05. 5.2. THE GIST OF REASONS GIVEN BY THE CIT (A) FOR R EJECTION OF COMPARABLE IS EXTRACTED AS UNDER : SL NO COMPANY NAME REASON FOR REJECTION/ACCEPTANCE 1 BODHTREE CONSULTING LTD ACCEPT 2 LANCO GLOBAL SYSTEMS LTD ACCEPT 3 EXENSYS SOFTWARE SOLUTIONS LTD REJECT PRESENCE OF EXTRAORDINARY EVENT IT(TP)A.497 & 518/BANG/2012 PAGE - 7 4 SANKHYA INFOTECH LTD ACCEPT 5 SASKEN NETWORKS SYSTEMS LTD REJECT RPT 0% 6 FOUR SOFT LTD REJECT RPT 0% 7 THIRDWARE SOLUTIONS LTD REJECT RPT 0% 8 R S SOFTWARE (INDIA) LTD ACCEPT 9 GEOMETRIC SOFTWARE SOLUTIONS LTD REJECT RPT 0% 10 TATA ELXSI LTD (SEG) REJECT RPT 0% 11 VISUALSOFT TECHNOLOGIES LTD (SEG) ACCEPT 12 SASKEN COMMUNICATIONS LTD (SEG) REJECT RPT 0% 13 IGATE GLOBAL SOLUTIONS LTD (SEG) REJECT RPT 0% TURNOVER 200 CRORES 14 FLEXTRONICS SOFTWARE SYSTEMS LTD (SEG) REJECT RPT 0% TURNOVER 200 CRORES 15 LARSIN & TOUBRO INFOTECH LTD REJECT RPT 0% TURNOVER 200 CRORES 16 SATYAM COMPUTER SERVICES LTD REJECT RPT 0% TURNOVER 200 CRORES 17 INFOSYS TECHNOLOGIES LTD REJECT RPT 0% TURNOVER 200 CRORES 5.3. BASED ON THE ABOVE REASONS THE FINAL LIST OF COMPARABLE COMPANIES ACCEPTED BY THE CIT (A) ARE AS UNDER : SL NO NAME OF THE COMPANY MARGIN ON COST (2006) 1 BODHTREE CONSULTING LTD 24.86% 2 LANCO GLOBAL SYSTEMS LTD 13.65% 3 SANKHYA INFOTECH LTD 27.39% 4 VISUALSOFT TECHNOLOGIES LTD (SEG) 23.52% ARITHMETIC MEAN 22.35% LESS : WORKING CAPITAL ADJUSTMENT 4.95% ADJUSTED ARITHMETIC MEAN 17.41% IT(TP)A.497 & 518/BANG/2012 PAGE - 8 06. ASSESSEES EFFECTIVE GROUNDS OF APPEAL ARE EXTR ACTED AS UNDER : 07. ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITION AL GROUNDS NUMBERED 9 TO 11: IT(TP)A.497 & 518/BANG/2012 PAGE - 9 IT(TP)A.497 & 518/BANG/2012 PAGE - 10 IT(TP)A.497 & 518/BANG/2012 PAGE - 11 08. THE GIST OF LD. ARS SUBMISSIONS IS EXTRACTED A S UNDER : SL NO COMPANY NAME ADJUSTED OP/TC (2005) GIST OF ARS PLEA RELIANCE PLACED ON 1 BODHTREE CONSULTING LTD 21.56% I)FUNCTIONALLY NOT COMPARABLE HYDERABAD ITAT ORDER IN CORDYS SOFTWARE INDIA P. LTD (ITA.1451/HYD/2010) II) FAILS RPT FILTER 2 LANCO GLOBAL SYSTEMS LTD 8.48% ACCEPTED BY BOTH ASSESSEE AND TPO -- 3 EXENSYS SOFTWARE SOLUTIONS LTD 62.84% REJECTED BY CIT (A) -- 4 SANKHYA INFOTECH LTD 20.32% I) FUNCTIONALLY DIFFERENT DEVELOPMENT OF SOFTWARE PRODUCTS DIRECTORS REPORT FOR F. Y. 2004-05 P.13 AND BENGALURU ITAT ORDER IN M/S. MCAFEE SOFTWARE (INDIA) P. LTD[IT(TP)A NO.04/BANG/2012 II) R & D ACTIVITIES ANNUAL REPORT FOR FY 2004 - 05 P.32 III) FAILS EMPLOYEE COST TO SALES FILTER EMPLOYEE COST TO SALES LESS THAN 25% ANNUAL REPORT IT(TP)A.497 & 518/BANG/2012 PAGE - 12 IV) SELLING AND MARKETING ACTIVITIES ANNUAL REPORT FOR F. Y. 2004 - 05 & BENGALURU TRIBUNAL ORDER IN DCIT V. TOSHIBA EMBEDDED SOFTWARE (I) P.LTD [IT(TP)A.1/BANG/2012] 5 SASKEN NETWORKS SYSTEMS LTD 13.07% FUNCTIONALLY DIFFERENT SUBSTANTIAL SELLING AND MARKETING EXPENSES ANNUAL REPORT FOR FY 2004 - 05 6 R S SOFTWARE (INDIA) LTD 5.70% FAILS TURNOVER FILTER -- 7 FOUR SOFT LTD 20.54% I) FUNCTIONALLY DIFFERENT DEVELOPMENT OF SOFTWARE PRODUCTS DIRECTORS REPORT FOR FY.2004 - 05 P.12 TO 14 & MANAGEMENT DECISION FOR FY 2004-05 P.25 30 ETC. II) FAILS RELATED PARTY TRANSACTIONS TO SALES FILTER RPT TO SALES GREATER THAN 15% BENGALURU TRIBUNAL ORDER IN DCIT V. TOSHIBA EMBEDDED SOFTWARE (I) P.LTD [IT(TP)A.1/BANG/2012] 8 THIRDWARE SOLUTIONS LTD 63.99% FUNCTIONALLY DIFFERENT PURCHASE AND SALE OF LICENSES SCHEDULE 13 OF ANNUAL REPORT FOR FY 2004-05 9 GEOMETRIC SOFTWARE SOLUTIONS LTD 16.87% I) FUNCTIONALLY DIFFERENT PRODUCT DEVELOPMENT AND ENGINEERING SERVICES DIRECTORS REPORT FOR FY 2004 - 05 P.4 II) FAILS RPT TO SALES FILTER RPT TO SALES GREATER THAN 15% -- 10 TATA ELXSI LTD (SEG) 21.98% I ) FUNCTIONALLY DIFFERENT PRODUCT ENGINEERING AND DESIGN ANNUAL REPORT FOR F. Y. 2004 - 05 P.2 AND 18. IT(TP)A.497 & 518/BANG/2012 PAGE - 13 SERVICES II) FAILS TURNOVER FILTER -- 11 VISUALSOFT TECHNOLOGIES LTD (SEG) 19.27% ACCEPTED BY BOTH ASSESSEE AND THE TPO -- 12 SASKEN COMMUNICATION S LTD (SEG) 12.27% I) FAILS TURNOVER FILTER ANNUAL REPORT FOR F Y 2004 - 05 P.12 38 & 79 II) FUNCTIONALLY DIFFERENT DEVELOPMENT OF SOFTWARE PRODUCTS -- III) OWNS INTANGIBLES IN FORM OF PATENTS -- 13 FLEXTRONICS SOFTWARE SYSTEMS LTD (SEG) 28.77% I) FAILS TURNOVER FILTER ANNUAL REPORT FOR F. Y. 2004 - 05 P.42 II) FUNCTIONALLY DIFFERENT SOFTWARE PRODUCT (HARDWARE AND SOFTWARE SOLUTIONS) FOR TELECOM INDUSTRY -- 14 LARSEN & TOUBRO INFOTECH LTD 7.50% I) FAILS TURNOVER FILTER A NNUAL REPORT FOR A. Y. 2004 - 05 P.18 II) LEVERAGES ON THE BRAND NAME OF LARSEN & TOUBRO GROUP -- III)FUNCTIONALLY DIFFERENT -- 15 SATYAM COMPUTER SERVICES LTD 26.24% I) FAILS TURNOVER FILTER ANNUAL REPORT FOR A. Y. 2004 - 05 P.16 24 29 54 ETC II) UNRELIABLE FINANCIAL STATEMENTS -- III) OWNS BRAND -- IT(TP)A.497 & 518/BANG/2012 PAGE - 14 16 INFOSYS TECHNOLOGIES LTD 40.53% I) FAILS TURNOVER FILTER -- II) OWNS BRAND (RS.14 153 CRORES) -- 17 IGATE GLOBAL SOLUTIONS LTD (SEG) 0.71% I) FAILS TURNOVER FILTER ANNUAL REPORT FOR F Y 2004 - 05 P.40 70 ETC. II) FUNCTIONALLY DIFFERENT 09. THUS THE LD. AR SUBMITTED IN HIS SUMMARY OF AR GUMENTS IN 36 PAGES THAT THE LD. CIT (A) WHILE EXCLUDING THE ELEVEN CO MPANIES MENTIONED IN PARA 5.3 (SUPRA) ON THE GROUND OF RELATED PARTY TR ANSACTIONS FILTER HAS FAILED TO ADJUDICATE ON THE FUNCTIONAL DISSIMILARIT Y AND HENCE BASED ON THIS TRIBUNALS DECISIONS REPORTED IN IT(TA)A NO.1/BANG/ 2012 & IT(TP)A NO.04/BANG/2012 ETC. PLEADED TO REJECT THEM AS THE Y ARE FUNCTIONALLY NOT COMPARABLE. 10. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR. SINCE THE LD. CIT (A) HAS NOT CONSIDERED THE ABOVE ISSUE WE REMIT THE MA TTER BACK TO THE TPO FOR EXAMINING THEM IN THE LIGHT OF THE MATERIAL FUR NISHED BY THE LD. AR AND ON THE DECISIONS RELIED UPON BY THE LD. AR AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW. RELYING ON THE SPECIAL BENCH DECISION OF THE ITAT CHANDIGARH BENCH IN DCIT V. QUARK SYSTEMS P. LTD. [(2010) 42 DTR 414] THE ADDITIONAL GROUNDS ARE ALSO SET ASIDE TO THE TP O FOR ADJUDICATION. IT(TP)A.497 & 518/BANG/2012 PAGE - 15 IT(TP)A NO.518/BANG/2012 DEPARTMENTAL APPEAL : 11. THE GROUNDS OF APPEAL RAISED BY THE DEPARTMENT ARE EXTRACTED AS UNDER : 12. WE HEARD THE RIVAL SUBMISSIONS. SINCE THE ISSU E IS REMITTED BACK TO THE TPO / AO IN THE ASSESSEES APPEAL IN IT(TP)A.49 7/BANG/2012 (SUPRA) HERE ALSO WE HOLD ACCORDINGLY. 13. IN RESPECT OF GROUND NO.4 WE UPHOLD THAT THE D ECISION OF THE CIT (A) IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR STANDA RD DEDUCTION OF 5% FROM THE ALP UNDER THE PROVISO TO SECTION 92C(2) OF THE ACT. IT(TP)A.497 & 518/BANG/2012 PAGE - 16 14. IN THE RESULT THE BOTH THE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF SEPTEMBER 2016. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (S. JA YARAMAN) JUDICIAL MEMBER ACCOU NTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF ITAT BENGALURU BY ORDER ASSISTANT REGISTRAR