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Income Tax Appellate Tribunal, BANGALORE BENCHES “ A ” BENCH: BANGALORE
Before: SHRI A.K. GARODIA & SHRI PAVAN KUMAR GADALE
Date of Hearing : 20.01.2020 Date of Pronouncement : 05.02.2020 O R D E R
PER SHRI PAVAN KUMAR GADALE, JM :
The Revenue has filed an appeal against the order of the Assessing Officer passed under Section 143(3) r.w.s. 144C of the Income Tax Act, 1961 ('the Act')
2 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 passed in pursuance of the directions under Section 144C(5) of the Act of Dispute Resolution Panel (DRP) dt.26.10.2015 and the assessee has filed Cross Objection. 2. At the time of hearing, the learned Authorized Representative of the assessee has not pressed the C.O,and made endorsement in the Memorandum. Accordingly treated as withdrawn and dismissed. 3. The Revenue has raised the following grounds of appeal :
3 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 4 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016
The Brief facts of the case are that the assessee is engaged in IT Enabled Services (ITES) to companies with in group, and filed the Return of Income on 16.11.2011 with total income of Rs.19,05,220 after claiming deduction under Section 10AA, 80G and 80GGA of the Act. Subsequently the case was selected for scrutiny and Notices under Section 143(2) and 142(1) of the Act was issued. In compliance, the learned Authorized Representative of the assessee appeared from time to time and submitted the details. The Assessing Officer observed that the assessee has international transactions as per the provisions of Section 92B of the Act and the matter was referred to TPO. whereas ,The TPO has passed order under Section 92CA of the Act with Transfer Pricing Adjustment of 5 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 Rs.18,23,79,753 by order dt.6.1.2015. Aggrieved by the order, the assessee has filed objections with the DRP. The DRP has considered the objections and passed the order under Section 144C(5) of the Act dt.26.10.2015 nullifying the adjustment of ALP under Section 92CA as NIL against the earlier adjustment of Rs.18,23,79,753. The Assessing Officer considered the adjustments to the export turnover as per the directions of DRP and computed the total income of Rs.21,05,123 and passed the order under Section 143(3) r.w.s. 144C of the Act dt.20.11.2015. Aggrieved by the AO order passed in pursuance to the directions of DRP, the revenue has filed an appeal with the Tribunal.
At the time of hearing, the learned Departmental Representative submitted that the Ground No.1 is general in nature whereas the Ground Nos.2 to 9 are in respect of Transfer Pricing Adjustment and DRP directions and Ground Nos.10 & 11 are in respect of directions of DRP for exclusion of communication expenses and travelling expenses incurred in foreign currency from total turnover for deduction under Section 10A of the Act. The learned Departmental Representative emphasized that DRP has erred in directing the Assessing Officer to exclude the comparables and emphasized that the DRP has erred in nullifying the Transfer Pricing Adjustment. The learned Authorized Representative, in contra has submitted a letter dt.20.01.2020 in respect of acceptance of mutual agreement for MAP under the India-Australia Double Taxation Avoidance Act (DTAA). Further, 6 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 The learned Authorized Representative submitted that the total value of international transactions Rs.3,27,60,61,883. And out of total turnover, the assessee has entered into mutual agreement procedure with Australian entities is 90.53% and the remaining not covered under MAP with non Australian entities is 9.47% and supported with the judicial decisions and prayed that the Tribunal may apply the mark-up of 19.50% as agreed in MAP Resolution with respect to transactions with Australian entities and non-Australian entities. Whereas the learned Departmental Representative submitted that the assessee has accepted the margin for Australian transactions and there may not be distinction between the Australian transactions and non-Australian transactions in TP Study for adopting different margins and prayed that the matter be remanded to decide whether profit and margin under the Australian MAP procedure is applied to non-Australian entities. and relied on co-ordinate bench of this Tribunal in the case of DCIT Vs. Global e-Business Operations Pvt. Ltd. (2017) 86 taxman.com 197. Whereas the learned Authorized Representative relied on the decision of assessee group companies in the case of IT(TP)A No.432, 403 and 483/Bang/2013 dt.8.5.2019 and referred to paras 5 & 6 as under :
7 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 8 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016
Similarly, the learned Authorised Representative also relied on the decision of co-ordinate bench of this Tribunal in the case of Amazon Development Centre Vs. ITO in IT(TP)A Nos.76 & 78/Bang/2014 dt.27.4.2018 at page 7 para 4.3.5 read as under :
9 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 We considering the submissions of ld. DR, in respect of directions of DRP and submissions of the learned Authorized Representative on Map margin applicability to non-entities and the judicial decisions, are of the opinion that the transactions of the assessee with non-Australian entities is 9.47%.Accordingly, we are of the opinion that the matter has to be remanded to the file of TPO to compute margin for non-Australian entities and allow the grounds of appeal of Revenue for statistical purposes.
7. We heard the rival contentions, On the disputed issue of allowing of deduction of travelling expenses incurred in foreign currency from the total turnover, we found the DRP has observed that the assessee has objected before the Assessing Officer for reducing the communication and other foreign expenses only 10 IT(TP)A No.40/Bang/2016 & C.O. No.35/Bang/2016 from the export turnover. The DRP relying on the decision of jurisdictional High Court in the case of Tata Elxsi Limited Vs. CIT reported in 349 ITR 98 directed the Assessing Officer to reduce the expenses from total turnover.The ld. DR could not controvert the observations of DRP. Even though SLP is filed by the Revenue in the Hon'ble Supreme Court, the Tribunal is bound by the decision of jurisdictional High Court. Accordingly, we do not find any merits in the submissions of ld. DR and the grounds of appeal of the revenue are dismissed.
8. In the result, the revenue’s appeal is partly allowed for statistical purposes and C.O. of the assessee is dismissed. Pronounced in the open court on the date mentioned on the caption page.