M/s. CA COMPUTER ASSOCIATES INDIA P. LTD., MUMBAI v. DCIT - 6(2), MUMBAI

ITA 5420/MUM/2006 | 2002-2003
Pronouncement Date: 06-01-2010 | Result: Allowed

Appeal Details

RSA Number 542019914 RSA 2006
Assessee PAN AAACC4971D
Bench Mumbai
Appeal Number ITA 5420/MUM/2006
Duration Of Justice 3 year(s) 2 month(s) 21 day(s)
Appellant M/s. CA COMPUTER ASSOCIATES INDIA P. LTD., MUMBAI
Respondent DCIT - 6(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted L
Tribunal Order Date 06-01-2010
Assessment Year 2002-2003
Appeal Filed On 16-10-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH: MUMBAI BEFORE SHRI J. S. REDDY ACCOUNTANT MEMBER AND SHRI R. S. PADVEKAR JUDICIAL MEMBER ITA NO.5420 AND 5421/MUM/2006 (ASSESSMENT YEARS: 2002-03 AND 2003-04) CA COMPUTER ASSOCIATES PVT. LTD. B-1 2ND FLOOR NATIONAL STOCK EXCHANGE PLAZA BANDRA KURLA COMPLEX BANDRA(E) MUMBAI -400 020 PAN: AAACC 4971 D VS DCIT -6(2) MUMBAI-400 020 APPELLANT RESPONDENT APPELLANT BY: SHRI RAJAN R V ORA & MRS RITIKA SACHADE RESPONDENT BY: SHRI S S RANA O R D E R PER R. S. PADVEKAR JM THE ASSESSEE HAS FILED THESE APPEALS CHALLENGING TH E RESPECTIVE ORDERS OF LEARNED CIT (A)-VI MUMBAI FOR THE ASSESSMENT YEA RS 2002-03 AND 2003- 04. AS THE ISSUE AS WELL AS FACTS ARE IDENTICAL HE NCE BOTH THESE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. 2. THE FIRST COMMON ISSUE IN RESPECT OF DISALLOWANC E OF ROYALTY PAID BY THE ASSESSEE TO C A MANAGEMENT INC USA (IN SHORT C AMI) FOR DISTRIBUTION OF THE SOFTWARE PRODUCTS IN INDIA. 3. THE FACTS WHICH REVEALS FROM THE RECORD ARE AS UNDER. THE ASSESSEE- COMPANY IS A 100% SUBSIDIARY COMPANY INCORPORATED I N 1998 UNDER THE INDIAN COMPANIES ACT WHICH IS ONE OF THE SUBSIDIAR IES OF COMPUTER ASSOCIATES INTERNATIONAL INC USA. THE ASSESSEE IS PRIMARILY ENGAGED IN THE CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 2 BUSINESS OF LICENSING MAINFRAME AND MIDRANGE AND SY STEM INFRASTRUCTURE SOFTWARE PRODUCTS OF CA MANAGEMENT INC. OF USA. TH E ASSESSEE HAS SET-UP A TECHNICAL SUPPORT CENTRE IN CHENNAI TO PROVIDE SU PPORT SERVICES TO END USERS OF THE SOFTWARE PRODUCTS ON BEHALF OF THE CA MANAGEMENT INC. THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY SUMMARIL Y CAN BE PUT AS UNDER:- (I) LICENSING MAINFRAME MIDRANGE AND SYSTEM INFRASTRUCT URE SOFTWARE PRODUCTS OF CA INC; (II) SOFTWARE THAT CAN BE GENERALLY DEPLOYED OUT OF BOX OR WITH CUSTOMER/ INDUSTRY SPECIFIED ADAPTATIONS; (III) DEVELOPMENT SOFTWARE THAT CAN ALLOWS TECHNOLOGIES A ND PROGRAMMES TO WRITE CUSTOM APPLICATIONS AND CREATE NEW CATEGORIES OF PACKAGED APPLICATIONS. THE ASSESSEE-COMPANY FILES THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 DECLARING TOTAL LOSS OF RS 14 55 99 340/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY. IT WAS SEEN BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD CERTAIN INTERNATIONAL TRANSACTIONS WITH ASSOCIATE ENTERPRISES / CONCERNS (AE). SO FAR AS THE ISSUE B EFORE US IS CONCERNED IT IS IN RESPECT OF ROYALTY PAYABLE TO CA MANAGEMENT INC USA. ASSESSING OFFICER THEREFORE REFERRED THE MATTER TO THE TRANSFER PRI CING OFFICER (IN SHORT TPO) U/S 92A(1) OF THE ACT FOR DETERMINING ARMS LENGTH P RICE (IN SHORT ALP). THE ASSESSEE HAD VALUED THE SAID TRANSACTION TREATING I T AS ALP AT RS 7 43 22 376/- AS AGAINST THAT TPO DETERMINED THE AL P AT RS 5 85 30 774/-. THE ASSESSEE HAS WRITTEN OFF THE BAD DEBT TO THE EX TENT OF RS 13 33 44 452 /-. SO FAR AS THE DETERMINATION OF THE ALP FOR ROYALTY IS CONCERNED THE ASSESSEE HAS USED COMPARABLE UN-CONTROLLED PRICE METHOD OF T RANSITIONS. THE CORE ISSUE BEFORE US IS NOT METHOD WHICH HAS BEEN ADOPTE D FOR DETERMINING THE ALP BUT WAY IT IS DETERMINED BY THE TPO. THE ASSES SEE HAS ENTERED INTO AN AGREEMENT WITH C A MANAGEMENT INC OF USA AND AS PER THE SAID AGREEMENT THE ASSESSEE WAS APPOINTED AS SOLE DISTRIBUTOR OF T HE PRODUCTS OF CAMI IN INDIA. THE TPO HAS GIVEN THE DETAILS OF THE AGREEM ENT BETWEEN THE ASSESSEE AND CAMI IN THE ORDER PASS U/S 92CA(3) OF THE INCOM E TAX ACT DATED CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 3 25.2.2005. IT APPEARS THAT FOR DETERMINING ALP TH E TPO HAS ONLY CONSIDERED BAD DEBTS WRITTEN OFF DURING THE FINANCIAL YEAR 200 1-02 WHICH WERE TO THE EXTENT OF RS 13 33 44 452/-. THE TPO HAS NOTED THA T AS PER THE DETAILS GIVEN BY THE ASSESSEE IN RESPECT OF THE BAD DEBTS WRITTEN OFF THE SAME WERE IN RESPECT OF THE AMOUNT INVOICE DURING THE YEAR. THE TPO WAS OF THE VIEW THAT WHY NOT THE ALP OF ROYALTY PAYABLE OF RS 47 09 755/ - TO THE EXTENT OF BAD DEBTS WRITTEN OFF BE COMPUTED AT NIL. THE ASSESS EE TRIED TO JUSTIFY THE BAD DEBTS WRITTEN OFF WHICH SUMMARY IS GIVEN IN THE TPO S ORDER. 4. THE TPO DID NOT AGREE WITH THE CONTENTION OF TH E ASSESSEE AND SO FAR AS ROYALTY PAYMENT TO CAMI USA WAS CONCERNED THE SA ME WAS DETERMINED AT NIL AS AGAINST THE ALP OF THE TRANSACTION WAS DET ERMINED BY THE ASSESSEE AT RS 47 09 755/-. THE REASONS GIVEN BY THE TPO ARE A S UNDER:- THE CONTENTION OF THE COMPANY ARE CONSIDERED HOWE VER THE SAME ARE NOT ACCEPTABLE FOR THE FOLLOWING REASONS: (I) THE INVOICES WERE RAISED DURING FY 2001-02 THE DEC ISION OF WRITE OFF WAS TAKEN IN ALL THE CASES IN THE MEETIN G OF BOARD OF DIRECTORS OF THE COMPANY HELD ON 07.03.2002 AT PHUK ET THAILAND. (II) AS MENTIONED IN THE AGREEMENT BETWEEN THE COMPANY A ND CAMGT THE COMPANY WAS TO SUBMIT A MONTHLY REPORT R EGARDING ALL THE PRODUCT LICENSES CONSUMMATED BY THE DISTRIB UTOR AND THE PAYMENTS COLLECTED. THIS MEANS THAT IN RESPECT OF INVOICES RAISED THE COMPANY SHOULD BE INTIMATING THE COLLEC TION POSITION WITH REGARD TO INVOICES. DUE TO THIS THE INTIMATI ON REGARDING UNCOLLECTED INVOICE WAS AVAILABLE WITH THE LICENSOR ON MONTHLY BASIS. (III) ONCE THE DECISION OF WRITE OFF OF BAD DEBTS FOR THE INVOICES RAISED DURING THE CURRENT YEAR WAS TAKEN ON 07.03.2 002. THIS AMOUNT WOULD GET REFLECTED AS AMOUNT NON-RECEIVABLE IN THE MONTHLY REPORTS WHICH WOULD BE AVAILABLE WITH THE LICENSOR. IF SUCH REPORTS WERE AVAILABLE WITH THE LICENSOR FOR T HE AMOUNT OF INVOICES RAISED DURING THE YEAR AND WRITTEN OFF DUR ING THE YEAR THE LICENSOR SHOULD NOT HAVE CLAIMED ROYALTY ON SUC H AMOUNTS WRITTEN OFF IN THE DEBIT NOTE RAISED ON 31.03.2002 . CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 4 (IV) FROM THE DOCUMENTS FILED BY THE COMPANY SUBSTANTIAT ING ITS CLAIM OF WRITE OFF FOR THE BAD DEBTS IT IS SEEN TH AT ONE THE CUSTOMER GLOBAL E-SECURE VIDE THEIR LETTER DATED 27 .03.2002 ADDRESSED TO THE COMPANY COMPLAINED REGARDING THE N ON- WORKING OF THE SOFTWARE IN THEIR ENVIRONMENT AND IT CONTESTED THAT AS PER THE IMPLIED CONDITION OF THE AGREEMENT THE SOFTWARE WAS TO WORK ANY ENVIRONMENT. THIS INDICATED THAT IN SOME CASES THERE HAVE BEEN PROBLEM WITH THE WORKING OF SOFTWARE IN CERTAIN ENVIRONMENTS. (V) THE INVOICES WERE RAISED IN THE SAME YEAR AND WRITT EN OFF DURING THE SAME YEAR AND HENCE NO ROYALTY AMOUNTS WERE PAY ABLE ANNUALLY. (VI) THE COMPANY HAS INFORMED THAT IT DOES NOT HAVE ANY DOCUMENT SEEKING THE WAIVER /WRITE OFF OF ROYALTY ON AMOUNTS INVOICED AND WRITTEN OFF DURING FY 2001-02. ANY INDEPENDENT ENT ITY ACTING AS A SOLE DISTRIBUTOR OF THE OFF THE SHELF PRODUCT OF A LICENSOR WOULD HAVE SOUGHT FOR A WAIVER OF ROYALTY PAYABLE CONSIDERING THE HUGE AMOUNT OF NON-RECEIVABLES WHICH ULTIMATELY IT IS FORCED TO WRITE OFF AS BAD DEBTS. (VII) CA INDIA DID NOT ACTUALLY PAID THE ROYALTY AMOUNTS CORRESPONDING TO FY 1998-99 TO FY 2001-02 AND AS ON 31.03.2002 THE AMOUNTS PAYABLE WAS RS 237 765 819/ - THE COMPANY PAID A ROYALTY OF RS 158 946 324/- DURING F Y 2002-03. AS THE COMPANY HAD WRITTEN OFF HUGE BAD DEBTS THE COMPANY SHOULD HAVE ASKED FOR A WAIVER OF ROYALTY CORRESPON DING TO SUCH WRITE OFF ANY INDEPENDENT ENTITY WHO IS JUST DIST RIBUTOR OF THE PRODUCTS COULD HAVE ASKED FOR SUCH WAIVER IRRESPE CTIVE OF THE AGREEMENT PROVISIONS. W HEN THE COMPANY COULD NOT REALISE THE AMOUNTS FROM THE CLIENTS FOR THE PRODUCTS DISTRIBU TED BELONGING TO CA MANAGEMENT INC HOW COULD A ROYALTY CAN BE CO NSIDERED AS PAYABLE. THE INDEPENDENT ENTITIES ACTING INDEPE NDENT OF EACH OTHER WOULD CERTAINLY ENTER INTO AGREEMENT FO R PAYMENT OF ROYALTY ON THE BASIS OF ACTUAL COLLECTIONS MADE AN D NOT ON THE BASIS OF JUST INVOICING. (VIII) THE CONTENTION OF THE COMPANY THAT IT PAID ROYALTY AT A LESSER RATE THAN PAID IN COMPARABLE UNCONTROLLED TRANSACTI ONS. THIS CONTENTION IS NOT RELEVANT IN THE PRESENT ISSUE BE CAUSE REGARDING THE RATE OF ROYALTY THERE IS NO DISPUTE OF BEING AT ARMS LENGTH BUT ISSUE AT HAND DEALS WITH THE SPECI FIC ISSUE OF ROYALTY ON WRITE OFF OF THE INVOICED AMOUNT DURING THE YEAR ITSELF. (IX) THE AGREEMENTS ENTERED INTO BY THE CA INDIA WITH TH E CLIENTS ARE IN STANDARD AGREEMENTS AS REFERRED IN THE DIST RIBUTOR CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 5 AGREEMENT. AS PER THE SOFTWARE LICENSE AGREEMENT E NTERED INTO BY CA INDIA WITH CLIENTS IT IS MENTIONED THAT THE LICENSED PROGRAMME BELONGS TO COMPUTER ASSOCIATES INTERNATIO NAL INC. HAD THE COMPUTER ASSOCIATES LICENSED THE PRODUCTS D IRECTLY TO THE CLIENTS IT COULD HAVE SUFFERED THAT BAD DEBTS AS THE COMPANY HAS SUFFERED. (X) IN VIEW OF THE FACT THAT THE CA INDIA WAS ONLY ACTI NG AS A DISTRIBUTOR THE PRODUCTS BELONGED TO THE LICENSOR THESE WERE THE INITIAL YEARS OF THE BUSINESS OF CA INDIA IN T HE COUNTRY THE BAD DEBTS RISKS WERE LIKELY TO BE THERE THESE FACT S WOULD CERTAINLY BE CONSIDERED BY THE INDEPENDENT PARTIES WHILE ENTERING INTO DISTRIBUTOR AGREEMENT AND NON PAYMENT OF ROYALTY ON NON REALISATION OF THE PROCEEDS WOULD CERTAINLY BE A CONDITION IN AGREEMENT ENTERED AT ARMS LENGTH. IN VIEW OF THE ABOVE THE ARMS LENGTH PRICE OF ROY ALTY CORRESPONDING TO INVOICES RAISED AND WRITTEN OFF DU RING THE YEAR IS COMPUTED AT NIL AS AGAINST TRANSACTION VALUE REP ORTED OF RS 4 709 755/-. 5. FOLLOWING THE TPOS ORDER THE ASSESSING OFFICER MADE THE ADJUSTMENT TO THE ALP TO THE INTERNATIONAL TRANSACTIONS BY RED UCING THE VALUE OF THE ROYALTY PAYMENT/PAYABLE WHICH WAS OF RS 47 09 755/- . THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED CIT (A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES. THE LEARNED COUNSEL VEHEMENTLY ARGUED THAT THE JURISDICTION OF TPO IS RESTRICTED TO DETERMINE THE ALP OF ANY INTERNATIONAL TRANSACTION IN VIEW OF THE POWER VESTED IN HIM U/S 92CA(3) OF THE ACT. THE LEARNED COUNSEL TOOK US THOROUGH THE TPOS ORDER PASSED U/S 92CA(3) AND ARGUED THAT WRITE OFF OF THE BAD DEBTS CANNOT BE THE SUBJECT MATTER FOR DETERMINING THE ALP SO AS TO POWER OF THE TPO IS CONCERNED. MERELY BECAUSE ROYALTY PAYME NTS WERE RELATING TO THE PRODUCT SOLD BY THE ASSESSEE TO ITS CLIENT WHICH PA YMENTS COULD NOT BE RECOVERED CANNOT BE THE CONSIDERATION BEFORE THE TP O FOR DETERRING ALP OF ANY INTERNATIONAL TRANSACTION. IT IS ARGUED THAT S PECIFIC METHODS HAVE BEEN PRESCRIBED IN THE ACT AND THE I. T. RULES AND THE T .P.O. IS BOUND TO DETERMINE CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 6 ALP OF ANY INTERNATIONAL TRANSACTION WITHIN THE F RAMEWORK OF THE METHOD PRESCRIBED BY STATUTE. HE ALSO REFERRED TO THE ASS ESSMENT ORDER AND ARGUED AND SUBMITTED THAT THE ASSESSING OFFICER WAS BOUND TO FOLLOW THE ORDER OF THE TPO THE ALP IN RESPECT OF THE ROYALTY PAYMENT TO CA MI USA WAS DETERMINED AT NIL. HE THEREFORE PLEADED THAT THERE IS NO BASE SO FAR AS THE ALP DETERMINED IN RESPECT OF THE ROYALTY PAYABLE TO CAM I USA. WE HAVE ALSO HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE WHO M AINLY RELIED ON THE ORDER OF THE T.P.O. 7. WE FIND FORCE IN THE ARGUMENT OF LEARNED COUNSEL FOR THE ASSESSEE. THE METHOD OF COMPUTATION OF ARMS LENGTH PRICE (IN SHORT ALP) HAS BEEN GIVEN IN SECTION 92C OF THE ACT WHICH READS AS UND ER:- COMPUTATION OF ARMS LENGTH PRICE . 92C. (1) THE ARMS LENGTH PRICE IN RELATION TO AN INTERN ATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS BEING THE MOST APPROPRIATE METHOD HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION OR CLASS OF ASSOCIATED PERSONS OR FUNCT IONS PERFORMED BY SUCH PERSONS OR SUCH OTHER RELEVANT FACTORS AS THE BOARD MAY PRESCRIBE NAMELY: (A) COMPARABLE UNCONTROLLED PRICE METHOD; (B) RESALE PRICE METHOD; (C) COST PLUS METHOD; (D) PROFIT SPLIT METHOD; (E) TRANSACTIONAL NET MARGIN METHOD; (F) SUCH OTHER METHOD AS MAY BE PRESCRIBED BY THE BOARD. (2) THE MOST APPROPRIATE METHOD REFERRED TO IN SUB- SECTION (1) SHALL BE APPLIED FOR DETERMINATION OF ARMS LENGTH PRICE I N THE MANNER AS MAY BE PRESCRIBED: [ PROVIDED THAT WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD THE ARMS LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES OR AT THE OPTION OF THE ASSESSEE A PRICE WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMO UNT NOT EXCEEDING FIVE PER CENT OF SUCH ARITHMETICAL MEAN.] (3) WHERE DURING THE COURSE OF ANY PROCEEDING FOR T HE ASSESSMENT OF INCOME THE ASSESSING OFFICER IS ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT IN HIS POSSESSION OF THE OPINION THAT CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 7 (A) THE PRICE CHARGED OR PAID IN AN INTERNATIONAL TRANSACTION HAS NOT BEEN DETERMINED IN ACCORDANCE WITH SUB-SECTIONS (1) AND (2); OR (B) ANY INFORMATION AND DOCUMENT RELATING TO AN IN TERNATIONAL TRANSACTION HAVE NOT BEEN KEPT AND MAINTAINED BY TH E ASSESSEE IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SUB-SEC TION (1) OF SECTION 92D AND THE RULES MADE IN THIS BEHALF; OR (C) THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARMS LENGTH PRICE IS NOT RELIABLE OR CORRECT; OR (D) THE ASSESSEE HAS FAILED TO FURNISH WITHIN THE SPECIFIED TIME ANY INFORMATION OR DOCUMENT WHICH HE WAS REQUIRED TO FU RNISH BY A NOTICE ISSUED UNDER SUB-SECTION (3) OF SECTION 92D THE ASSESSING OFFICER MAY PROCEED TO DETERMINE THE ARMS LENGTH PRICE IN RELATION TO THE SAID INTERNATIONAL TRANSACTION IN A CCORDANCE WITH SUB-SECTIONS (1) AND (2) ON THE BASIS OF SUCH MATERIAL OR INFOR MATION OR DOCUMENT AVAILABLE WITH HIM: PROVIDED THAT AN OPPORTUNITY SHALL BE GIVEN BY THE ASSESSIN G OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW CAUSE ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE WHY THE ARMS LENGTH PRICE SHOULD NOT BE SO DETERMINED ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT IN THE POSSESSION OF THE ASSESSING OFFICER. (4) WHERE AN ARMS LENGTH PRICE IS DETERMINED BY TH E ASSESSING OFFICER UNDER SUB-SECTION (3) THE ASSESSING OFFICER MAY COMPUTE THE TOTAL INCOME OF THE ASSESSEE HAVING REGARD TO THE ARMS LENGTH PRICE SO DETERMINED: PROVIDED THAT NO DEDUCTION UNDER SECTION 10A OR SECTION 10B OR UNDER CHAPTER VI-A SHALL BE ALLOWED IN RESPECT OF THE AMO UNT OF INCOME BY WHICH THE TOTAL INCOME OF THE ASSESSEE IS ENHANCED AFTER COMPUTATION OF INCOME UNDER THIS SUB-SECTION: PROVIDED FURTHER THAT WHERE THE TOTAL INCOME OF AN ASSOCIATED ENTER PRISE IS COMPUTED UNDER THIS SUB-SECTION ON DETERMINATION OF THE ARMS LENGTH PRICE PAID TO ANOTHER ASSOCIATED ENTERPRISE FROM WHICH TA X HAS BEEN DEDUCTED 20 [OR WAS DEDUCTIBLE] UNDER THE PROVISIONS OF CHAPTER XVIIB THE INCOME O F THE OTHER ASSOCIATED ENTERPRISE SHALL NOT BE RECOMPUTED BY REASON OF SUCH DETERMINATION OF ARMS LENGTH PRICE IN THE CASE OF THE FIRST MENTIONED ENTERPRISE. 8. THE MANNER IN WHICH THE A.L.P IS TO BE DETERMINE D BY ANY OF THE METHOD PRESCRIBED IN SEC. 92C IN PROVIDED IN RULE 1 0B OF THE I. T. RULES 1962. AFTER EXAMINING THE PARAMETERS PRESCRIBED IN RULE 10B IT CAN BE SEEN THAT BAD DEBTS WRITTEN OFF CANNOT BE FACTOR TO DETE RMINED THE ARMS LENGTH PRICE OF ANY INTERNATIONAL TRANSACTION. IN OUR OPI NION THE TPO HAS EXCEEDED HIS LIMITATION BY FOLLOWING THE METHOD WHICH IS NO T AUTHORISED UNDER THE ACT OR RULES. WE THEREFORE HOLD THAT THE ARMS LENGTH PRICE DETERMINED BY THE CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 8 TPO AND ADOPTED BY THE ASSESSING OFFICER TO THE EXT ENT OF ROYALTY PAYABLE TO THE CA INC MANAGEMENT USA IS NOT AS PER THE PROCED URE PRESCRIBED AND SAME CANNOT BE SUSTAINED. WE THEREFORE DIRECT TH E ASSESSING OFFICER TO ADOPT THE ARMS LENGTH PRICE OF THE ROYALTY PAYABLE TO CA INC MANAGEMENT USA AS DECLARED BY THE ASSESSEE IN BOTH THE YEARS. 9. THE NEXT ISSUE FOR ASSESSMENT YEAR 2003-04 IS WI TH REGARDS TO THE LEVY OF INTEREST U/S 234D. WE HAVE HEARD THE PARTIES. THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN THE CA SE OF EKATA PROMOTERS REPORTED IN 113 ITD 719 (DEL)(SB). AS ADMITTEDLY THE ASSESSMENT YEAR INVOLVED IS 2003-04 AND SECTION 234D IS BROUGHT UND ER STATUE BOOK FROM ASSESSMENT YEAR 2004-05. WE THEREFORE DIRECT THE ASSESSING OFFICER NOT TO LEVY THE INTEREST U/S 234D IN RESPECT OF THE REFUND GRANTED FOR ASSESSMENT YEAR 2003-04. ACCORDINGLY THIS ISSUE IS DECIDED I N FAVOUR OF THE ASSESSEE AND GROUND 6 FOR ASSESSMENT YEAR 2003-04 IS ALLOWED . 10. IN THE RESULT BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED ON 28TH DAY OF JANUARY 2010. SD/- (J. S. REDDY) ACCOUNTANT MEMBER SD/- (R. S. PADVEKAR) JUDICIAL MEMBER MUMBAI DATE: 28TH JANUARY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) II THANE. 4) THE CIT -IV THANE. 5) THE D.R. L BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR *CHAVAN I.T.A.T. MUMBAI CA COMPUTER ASSOCIATES PRIVATE LIMITED ITA 5420 & 5421/M/2006 9 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 21.01.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 22.01.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER