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Income Tax Appellate Tribunal, DELHI BENCHES : I-1 : NEW DELHI
Before: SHRI R.S. SYAL & SHRI K. NARASIMHA CHARY
ORDER PER R.S. SYAL, VP: These two cross appeals – one filed by the assessee and the other by the Revenue arise out of the order passed by the CIT(A) on 23.01.2014 in relation to the assessment year 2008-09.
Ground Nos.1 and 3 deal with the denial of deduction claimed by the assessee u/s 10A of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in respect of its eligible unit.
Briefly stated, the facts of the case are that the assessee continued to derive income from the business of development and sale of software products. It was granted STPI registration initially on 28.03.2000, which was extended on 19.03.2005 for further five years. The assessee claimed deduction of Rs.57,79,603/- u/s 10A of the Act in the year under consideration. The Assessing Officer, following his orders for the assessment years 2001-02 onwards, rejected such a claim of deduction. & 2236/Del/2014 The ld. CIT(A) echoed the assessment order on this score, against which the assessee has come up in appeal before the Tribunal.
Having heard both the sides and perused the relevant material on record, it is seen that the orders passed by the ld. CIT(A) in relation to assessment years 2001-02 and 2007-08, dealing with the denial of deduction u/s 10A, came up for consideration before the Tribunal. Vide order dated 03.05.2016, the Tribunal, in and 6387/Del/2012, has accepted the assessee’s claim of deduction in respect of assessment year 2001-02. The assessee filed additional evidence before the Tribunal in support of the eligibility of deduction for the assessment year 2007-08.
Considering such additional evidence, the Tribunal remitted the matter to the file of Assessing Officer for a fresh decision. In view of the fact that the additional evidence filed by the assessee before the Tribunal in the proceedings for the assessment year 2007-08 has bearing on the allowability of deduction u/s 10A for the year under consideration as well, it was prayed on behalf of the assessee that the extant issue may also be sent back to the Assessing Officer for a decision in accordance with the view canvassed for the assessment year 2007-08 after consideration of the 3 & 2236/Del/2014 additional evidence. No objection was taken by the ld. DR to this submission made on behalf of the assessee. Concurring with the rival but common submissions and respectfully following the order passed by the Tribunal for the assessment year 2007-08, we set aside the impugned order on this score and remit the matter to the file of Assessing Officer for deciding it afresh in the light of the decision taken in fresh proceedings for the assessment year 2007-08.
Ground Nos. 2 and 6 were not pressed. The same, therefore, stand dismissed.
The only effective ground which survives in the appeal of the assessee and the solitary ground raised in the Revenue’s appeal relate to the addition on account of transfer pricing adjustment. The facts apropos this issue are that the assessee is a software development company which specializes in development of I.T. solutions and software products. It earned certain revenue from rendering software development services to its associated enterprise. The assessee employed Transactional Net Margin Method (TNMM) as the most appropriate method with Profit level indicator (PLI) & 2236/Del/2014 of Operating Profit/Total Cost (OP/TC). Certain comparables were chosen to demonstrate that the international transaction was at arm’s length price (ALP). The Transfer Pricing Officer (TPO) made certain inclusions/exclusions in/from the list of comparables drawn by the assessee and eventually recommended transfer pricing adjustment amounting to Rs.3,01,93,572/-, for which addition was made by the Assessing Officer.
The assessee assailed the correctness of the assessment order before the ld. CIT(A) who gave certain directions – both for and against the assessee, against which both the assessee as well as the Revenue have respectively come up in appeal before the Tribunal.
Having heard both the sides and perused the relevant material on record, it is observed that the assessee raised a claim that within the overall segment of software development, there are two components, viz., Software development and Software products. The assessee has filed additional evidence in the shape of audited accounts in respect of these two segments.
Since such segment-wise audited accounts were not before the authorities below, it was prayed that the TPO be directed to benchmark the international transaction afresh in the light of the additional evidence. No 5 & 2236/Del/2014 serious objection was taken by the ld. DR. In view of the foregoing facts, we set aside the impugned order on this issue and remit the matter to the file of Assessing Officer/TPO for determining the ALP of the international transaction afresh, as per law, after allowing a reasonable opportunity of being heard to the assessee. Needless to say, the assessee will be at liberty to file any fresh evidence/material before the TPO/A.O in such fresh proceedings. Grievance of the Revenue to the exclusion of certain companies by the ld. CIT(A) will be automatically addressed when the fresh exercise will be undertaken by the authorities below.
In the result, both the appeals are allowed for statistical purposes.
The order pronounced in the open court on 29.08.2018.