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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR
O R D E R Per Bench Out of this bunch, there are cross appeal of assessee and revenue for Assessment Year 2007-08 and one appeal of revenue and C.O. of IT(TP)A Nos.432 & 403/Bang/2012, 483/Bang/2013 & C.O. No. 130/Bang/2015 Page 2 of 6 assessee for Assessment Year 2008-09. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
It was submitted by ld. AR of assessee that for similar issue, the cross appeals of assessee and revenue for Assessment Year 2009-10 in IT(TP)A Nos. 328 & 342/Bang/2014 was heard by the Tribunal on 08.04.2019 and it was heard by the bench consisting of the present AM and one other Judicial Member. It was submitted that regarding TP grounds in that year also, it was argued that there is MAP resolution which is accepted by the assessee for transactions with Australian entities and therefore, the grounds to that extent were withdrawn and it was submitted that for the transactions of the assessee with other AE entities which are non-Australian entities, the same rate as per MAP resolution with Australian entities should be adopted. He submitted that in the present two years also, the facts are similar because in Assessment Year 2007-08, the percentage of total transactions covered under MAP with Australian entities is 98.67% and similarly, the percentage of total transactions covered under MAP with Australian entities in Assessment Year 2008-09 is 98.74%. It is submitted that in Assessment Year 2009-10, the appeal of which is already heard by the Tribunal, the percentage of such transactions with Australian entities was 99.65%. It was submitted that in the present two years also, the TP issue should be decided in the same line i.e. the grounds to the extent of transactions with Australian entities should be rejected and for non-Australian entities, it should be held that the same percentage should be applied by the TPO for non-Australian entities. He submitted that the tribunal order for A. Y. 2009 – 10 will submitted by him after its pronouncement or the bench may obtain a copy thereof and decide the present appeals on similar line. It was submitted that in the appeal of the revenue for Assessment Year 2007-08, apart from TP grounds, there is one ground in respect of corporate tax in respect of computation of deduction allowable u/s. 10A of IT Act. It was agreed by both sides that this issue is now covered in favour of the assessee by the judgment of Hon’ble Karnataka High Court rendered in the IT(TP)A Nos.432 & 403/Bang/2012, 483/Bang/2013 & C.O. No. 130/Bang/2015 Page 3 of 6 case of CIT Vs. Tata Elxsi Ltd. as reported in 349 ITR 98 and the judgment of Hon’ble Apex Court rendered in the case of CIT vs. HCL Technologies Ltd. as reported in 302 CTR 191 and there is no other ground.
Regarding Assessment Year 2008-09, it was submitted that in this appeal of the revenue also, there is one more ground regarding corporate tax issue as per ground no. 2 in respect of computation of deduction allowable u/s. 10A of IT Act which is similar to the ground raised
in Assessment Year 2007-08 and other grounds are TP grounds regarding exclusion of various comparables and the same do not survive because of the MAP resolution.
4. In respect of the CO of assessee for Assessment Year 2008-09, it was submitted that only TP issue is involved and therefore, it should be decided on the same basis that the grounds in respect of transactions with Australian entities should be rejected and the grounds in respect of non- Australian entities should be allowed in part and the TPO should be directed to adopt the same percentage of profit as has been admitted in MAP resolution regarding Australian entities.
We have considered the rival submissions. We find that the appeal of the assessee and revenue for Assessment Year 2009-10 in IT (TP) A Nos. 328 & 342/Bang/2014 had been decided by the tribunal by pronouncing the order on 25.04.2019. Para nos. 6 to 9 of this Tribunal order are relevant and hence, the same are reproduced hereinbelow for ready reference. “6. We have considered the rival submissions. First of all, we decide the TP issue which is raised by the assessee in its appeal. We find that out of TP adjustment made by the AO, the major adjustment of 99.65% for software development segment and 98.52% in for ITES segment is in respect of transactions with Australian entities and the assessee has already accepted the MAP resolution in respect of Australian entities and withdrawn the grounds of its appeal in respect of TP adjustment in respect of Australian entities. Hence to that extent, the grounds of the assessee’s appeal are rejected as not pressed / withdrawn. In respect of TP adjustment, on account of transaction with non-Australian entities, it was submitted by ld. AR of assessee before us that the same should be quantified on the basis of MAP resolution in respect of transactions with Australian entities. The Tribunal order rendered in the case of Textron India Pvt. Ltd. Vs.
IT(TP)A Nos.432 & 403/Bang/2012, 483/Bang/2013 & C.O. No. 130/Bang/2015 Page 4 of 6 DCIT (supra) has been relied upon before us and we reproduce the relevant para of this Tribunal order i.e. para 12 which reads as under. “12. We, having considered MAP proceedings and resolutions and the judicial decision and working procedure are in agreement with the submissions made by the learned AR on this issue for applicability of some margin be applied for remaining 16% of the transactions of the assessee and accordingly this ground of appeal of the assessee is allowed for statistical purposes. We direct the TPO accordingly.”
7. Respectfully following this Tribunal order, we hold that in respect of transaction with non-Australian entities, the same basis should be adopted as have been agreed by assessee in the MAP resolution for transaction with Australian entities. As per the chart submitted by ld. AR of assessee, it is submitted that the agreed rate for software development segment in respect of Australian entities is 18.50% whereas agreed rate for ITES segment is 19.50%. The OP/OC rate for software development sector declared by the assessee is shown at 10.03% whereas the same for ITES sector is shown at 15.26% and therefore, the adjustment called for in software development segment is 8.47% i.e. 18.50% (-) 10.03% and for ITES segment, the adjustment called for is 4.24% i.e. 19.50% (-) 15.26%. We direct the AO to examine these contentions raised before us and restrict the TP adjustment as per MAP resolution in respect of Australian entities for both the segments in respect of transactions with Australian entities as well as transactions with non-Australian entities.
8. In the result, the appeal of the assessee stands partly allowed in the terms indicated above.
9. Now we take up the appeal of the revenue. The only issue involved in this appeal is regarding exclusion of telecommunication expenses from total turnover also for computing the deduction allowable to assessee u/s. 10A. This issue is now squarely covered in favour of the assessee by the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Tata Elxsi Ltd. (supra) and also the judgment of Hon’ble Apex Court rendered in the case of CIT vs. HCL Technologies Ltd. and hence, we decline to interfere in the order of CIT(A) on this issue.”
6. Since no difference in facts could be pointed out in present two years, we decide the issues in present the present two years also on similar line and hold that in respect of transactions with Australian entities, the TP issue raised by the assessee and revenue in the respective appeals do not survive and hence rejected. Regarding the grounds raised in the cross
IT(TP)A Nos.432 & 403/Bang/2012, 483/Bang/2013 & C.O. No. 130/Bang/2015 Page 5 of 6 appeals of assessee and revenue in these two years for non-Australian entities, we hold that the same rate should be adopted for non-Australian entities also as has been agreed in MAP in respect of Australian entities in these two years. Since the grounds of revenue’s appeal on TP issues is regrading comparables only, these grounds are rejected whereas for the grounds of assessee’s appeal in Assessment Year 2007-08 and assessee’s C.O. for Assessment Year 2008-09, it is held that the TP grounds regarding Australian entities are rejected. Regarding non-Australian entities, it is directed to the AO/TPO that the same rate should be adopted for determining the amount of TP adjustment as has been agreed as per MAP resolution in respect of Australian entities.
Regarding the corporate tax issue raised by the revenue in both years in respect of computation of deduction allowable u/s. 10A of IT Act, we decline to interfere in the order of CIT(A) on this issue in both the years by respectfully following the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Tata Elxsi Ltd. (supra) and the judgment of Hon’ble Apex Court rendered in the case of CIT vs. HCL Technologies Ltd. (supra).
In the result, both the appeals of the revenue are dismissed whereas the appeal of the assessee for Assessment Year 2007-08 and C.O. of the assessee for Assessment Year 2008-09 are partly allowed in the terms indicated above. Order pronounced in the open court on the date mentioned on the caption page.