TIBCO SOFTWARE INDIA PRIVATE LTD.,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, PUNE

PDF · subscribers
ITA 591/PUN/2016Status: DisposedITAT Pune20 November 2019AY 2011-129 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee's own calculations, if accepted, showed its margin falling within the permissible range. The Tribunal set aside the impugned order and restored the matter to the AO/TPO for verification of these calculations.

What were the facts?

The assessee, an Indian subsidiary of TIBCO US, engaged in international transactions related to software R&D, support, and marketing services. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO), who proposed adjustments. The Dispute Resolution Panel (DRP) directed deletions, leading to Revenue's appeal.

What were the issues?

The primary issue was the transfer pricing adjustment for various international transactions. A secondary issue concerned the denial of deduction on interest income under Section 10A.

Which sections of the Income-tax Act were involved?

Section 10A,Section 143(3),Section 144C(13)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE

Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY

For Appellant: Shri Rakesh Gupta
For Respondent: Shri T. Vijaya Bhaskar Reddy

Heard together (3 matters)

ITA No.591/PUN/2016
ITA No.627/PUN/2016
C.O.No.08/PUN/2018

Read from the judgment's own cause title. This page is filed under one of them.

PER R.S.SYAL, VP :

These two cross appeals – one by the assessee and the other

by the Revenue along with one cross objection by the assessee arise

out of the final assessment order dated 29-01-2016 passed by the

Assessing Officer u/s.143(3) r.w.s.144C(13) of the Income-tax Act,

1961 (hereinafter called ‘the Act’) in relation to the assessment year

2011-12.

2.

The Revenue’s appeal is time-barred by 09 days. The

Revenue has filed an affidavit explaining the reasons which led to

the late filing of the appeal. We are satisfied with such reasons.

The delay is condoned and the appeal is admitted for hearing on

merits.

3.

The appeal by the Revenue and cross objection by the assessee

rotate around the transfer pricing adjustment in respect of three sets

of international transactions, namely, Software research and

development segment, Support services segment and Marking

services segment.

3 Tibco Software India Private Limited A.Y. 2011-12

4.

Succinctly, the facts of the case are that the assessee is an

Indian subsidiary of TIBCO, US. The assessee entered into

Software Research and Development Services agreement with

TIBCO, US, for providing Software Research and Development

Services in accordance with the Design, Production orders, Plans,

Process and Specifications and Production Schedules. The assessee

filed its return declaring certain international transactions. The

Assessing Officer (AO) made reference to the Transfer Pricing

Officer (TPO) for determining the Arm’s Length Price (ALP) of the

international transactions. The TPO tinkered with certain

comparables selected by the assessee in all the three segments and

eventually proposed a total transfer pricing adjustment of

Rs.6,70,03,680/- covering Software Development Services

Segment, ITES Segment and Marketing Segment. The assessee

approached the Dispute Resolution Panel (DRP), which gave certain

directions on the inclusion/exclusion of certain comparables in all

the three segments. As a result of such directions, total transfer

pricing adjustment came to be deleted. That is how, the Revenue is

mainly aggrieved by the directions given by the DRP on

inclusion/exclusion on certain companies in the list of comparables

in all the three segments. The assessee in its cross objection is also

Tibco Software India Private Limited A.Y. 2011-12

aggrieved by certain issues concerning the transfer pricing

adjustment.

5.

We have heard the rival submissions and gone through the

relevant material on record. At the outset, the ld. Counsel for the

assessee submitted that even if all the grounds taken by the

Department are accepted still there will not arise any transfer

pricing adjustment because of the assessee’s margin falling within

the permissible range of the average margin of the comparable

companies. The ld. AR filed a segment-wise computation on the

basis of which it has been claimed that no transfer pricing addition

is sustainable even if the Revenue’s grounds are accepted. Such a

submission made by the assessee in respect of all the three segments

is reproduced as under:

Software Development Services Segment Sr.No. Name of company Working Capital Adjusted OP/TC As per TPO report If Dept. Appeal dated 22 Jan 16 allowed 1 Thinksoft Global Services -3.24% -- Ltd. 2 Persistent Systems & 20.52% -- Solutions Ltd. 3 Thirdware Solutions Ltd. -29.20% -29.20% 4 Acropetal Technologies Ltd. 22.06% 22.06% (IT segment) 5 E-Infochips Ltd. 54.90% 54.90% 6 Akshay Software 1.24% 1.24% Technologies Ltd. 7 Goldstone Technologies Ltd. -.0.28% -0.28% 8 L.G. S. Global Ltd. 10.76% 10.76% 9 L&T Infotech Ltd. 17.95% 17.95% 10 Persistent Systems Ltd. 20.83% 20.83%

Tibco Software India Private Limited A.Y. 2011-12

11 Sasken Communication 24.03% 24.03% Technologies Ltd. (Telecom Services Segment) 12 Mindtree Ltd. (IT Services) 10.40 10.40% Average 12.50% 13.27% TIBCO India PLI 12.87% 12.87% Conclusion At ALP At ALP +/-5%

TC(A) 266,572,957 ALP(B) 13.27% AL Revenue 301,944,523 +/-5% range [C=A+(A*B)] computation Revenue (D) 300,870,267 5% higher (D*1.05) 315,913,780 5% higher (D*0.95) 285,826,754

Support Services Segment Sr.No. Name of company Working Capital Adjusted OP/TC As per TPO report If Dept. Appeal dated 22 Jan 16 allowed 1 Caliber Point 9.12% 9.12% 2 Microland Ltd. (ITeS 8.50% -- segment) 3 Accentia Technologies Ltd. 25.86% 25.86% 4 Informed Technologies India 11.60% 11.60% Ltd. 5 Jindal Intellicom pvt. Ltd. 13.79% 13.79% 6 Microgenetics Systems Ltd. 0.97% 0.97%

1 Eclerx Services Ltd. NA 56.34% 2 Cosmic Global Ltd. NA 10.82% Average 11.64% 18.36% TIBCO India PLI 16.18% 16.18% Conclusion At ALP At ALP +/-5%

TC(A) 466,037,961 ALP(B) 18.36% AL Revenue 551,589,215 +/-5% range [C=A(A*B)] computation Revenue (D) 541,426,337 5% higher (D*1.05) 568,497,654 5% higher (D*0.95) 514,355,020

Tibco Software India Private Limited A.Y. 2011-12

Marketing Support Services Segment Sr.No. Name of company Working Capital Adjusted OP/TC As per TPO report If Dept. Appeal dated 22 Jan 16 Allowed 1 IDC (India) Ltd. (MSS 9.88% -- Segment) 2 Quadrant Communications 18.49% 18.49% Ltd. 3 Empire Industries Ltd. 22.63% 22.63% (Trading & Indenting segment) 4 Entertainment Networks 1.35% 1.35% (India) Ltd. (Event Segment) 5 Priya International Ltd. 4.20% 4.20% (Indenting Segment) 6 Asian Business Exhibition & 20.29% 20.29% Conferences Ltd. 7 ICC International Agencies 36.76% 36.76% Ltd. (Commission & Service Activity Segment) Average 16.23% 17.29% TIBCO India PLI 12.84% 12.84% Conclusion At ALP+/-5% At ALP +/-5%

TC(A) 44,731,847 44,731,847 ALP(B) 16.23% 17.29% AL Revenue [C=A+(A*B)] 51,991,187 52,464,492 Revenue (D) 50,475,698 50,475,698 5% higher (D*1.05) 52,999,483 52,999,483 5% higher (D*0.95) 47,951,913 47,951,913

6.

Per contra, the ld. DR submitted that the above calculation has

been placed on record for the first time and hence the Bench should

not rely on the same unless the same is confirmed by the AO/TPO.

We agree with such a justifiable submission made on behalf of the

Revenue. As such, the impugned order is set-aside and the matter is

restored to the file of the AO/TPO for verifying the calculations as

7 Tibco Software India Private Limited A.Y. 2011-12

reproduced above for ascertaining if the submission made on behalf

of the assessee is correct. Needless to say, the assessee will be

allowed a reasonable opportunity of hearing. In the otherwise

scenario, the concerned authority will proceed as per law.

7.

The only issue which is raised in the assessee’s appeal is

against denial of deduction on interest income of Rs.29,23,652/-

u/s.10A of the Act.

8.

We have heard the rival submissions and gone through the

relevant material on record. The AO did not allow deduction

u/s.10A in respect of the interest income. The ld. AR submitted that

similar issue came up for consideration before the Tribunal for the

immediately preceding assessment year. A copy of the order dated

31-01-2017 passed by the Tribunal in ITA No.276/PUN/2015 has

been placed on record, as per which this issue has been restored

with certain directions. The relevant discussion has been made on

page 22 para 34 of the order. The ld. DR could not point out any

distinguishing feature in the facts and relevant law in sofaras the

preceding year vis-à-vis the instant year is concerned. Respectfully

following the precedent, we set-aside the impugned order on this

issue as well and remit the matter to the file of the AO for deciding

8 Tibco Software India Private Limited A.Y. 2011-12

it afresh in accordance with the directions given by the Tribunal in

its order for the preceding year.

9.

In the result, the cross appeals as well as the cross objection

are allowed for statistical purposes.

Order pronounced in the Open Court on 20th November, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 20th November, 2019 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. 2. ��यथ� / The Respondent; 3. The CIT(A)-13, Pune 4. The Pr.CIT-V, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “सी” / DR ‘C’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Tibco Software India Private Limited A.Y. 2011-12

Date 1. Draft dictated on 19-11-2019 Sr.PS 2. Draft placed before author 19-11-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *

More judgments on Section 10A

All 2,147 judgments and leading authorities on Section 10A →

Recent GST High Court judgments

Search GST case law →