COMMISSIONER OF IT-II, CHD vs. QUARK SYSTEM LTD. A-45 , IA, MOHALI

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 22.10.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Special Bench, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 115/Chd/2009, for the assessment year 2004-05, claiming the following substantial question of law:- “Whether on facts and circumstances of the case and in law the ITAT's decision was justified in accepting additional ground raised by the assessee to exclude the case of M/s. Datamatics Technologies Ltd. which was chosen by the assessee itself and whether the -2- ITAT was justified in remanding the issue of exclusion of M/s. Datamatics Technologies Ltd. along with its observation on the facts of the issue, which is likely to have a bearing on the decision of the TPO?”

Briefly stated, the facts necessary for disposal as narrated in the appeal are that the assessee is an Indian company, fully owned subsidiary of a Switzerland based company known by the name of Quark Systems SARL, Switzerland (QSSS). During the course of assessment proceedings, a reference was made to the Transfer Pricing Officer (TPO) for determination of Arm Length Price qua the international transactions which the assessee entered into with its parent company. The TPO noticed that the assessee had employed Transactions Net Margin Method for the purpose of computing Arm Length Price and did not dispute the same. He further noticed that one of the comparables, out of independent comparable selected by the assessee for the computation of Arms Length Price was M/s Imercius Technologies India Pvt. Ltd. which showed a net loss @ 73.48%. The TPO rejected M/s Imericus Technologies India Pvt. Ltd. as comparable holding that the said company was incorporated in 2002 only and its networth was negative whereas turnover was also less than the turnover of the tested party. Accordingly, the TPO passed an order under Section 92CA(3) of the Act on 23.11.2006 determining the Arms Length Price of remuneration received by the assessee for software development services

We have heard learned counsel for the revenue.

The issue involved in this case is whether the Tribunal was justified in entertaining the additional ground for exclusion of M/s Datamatics Technologies as comparable and remanding the case to the Assessing Officer whereby it had directed that the assessee shall be entitled to produce all relevant material for determination of proper Arms Length Price and shall cooperate for expeditious disposal of the matter.

On a query being put to the learned counsel for the revenue as to what has happened before the Assessing Officer after the remand, she candidly admitted that the order has been passed in favour of the assessee on 11.1.2010 and has produced a copy of the -4- said order passed under Section 92CA(3) of the Act.

In view of the observations of the Tribunal whereby an opportunity was provided to the assessee to produce material before the Assessing Officer and the fact that after the remand and consideration of the material produced by the assessee in terms of the order of the Tribunal, an order in favour of the assessee has been passed, no question of law much less a substantial question of law arises in this appeal for consideration of this Court. Accordingly, the present appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE May 16, 2011 (ADARSH KUMAR GOEL) gbs ACTING CHIEF JUSTICE