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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR
M/s. Fair Issac India Software Pvt. Ltd., The Assistant Commissioner Titanium Bldg., of Income Tax, vs. 135 Airport Road, Circle – 3 (1) (1), Kodihalli, Bangalore. Bangalore – 560 017. PAN: AABCF7670G APPELLANT RESPONDENT Appellant by : Ms. Neera Malhotra, CIT (DR) Respondent by : Ms. Priyam Singhania, CA Date of hearing : 19.11.2018 Date of Pronouncement : 29.11.2018 O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the revenue and the same is directed against the assessment order passed by the AO on 30.10.2015 u/s. 143(3) r.w.s. 144C of IT Act as per the directions of DRP for Assessment Year 2011-12.
The grounds raised
by the revenue are as under. “1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case.
2. In the facts and in the circumstances of the case, whether the Hon'ble Dispute Resolution Panel is correct in holding that M/s E-zest Solutions Ltd., M/s Infosys Technologies Ltd., M/s Tata Elxsi Ltd., and M/s ICRA Techno Analytics Ltd., cannot be taken as a comparable being functionally different when it satisfies all the qualitative and quantitative filters applied by the TPO.
3. Whether a comparable may be considered as engaged in Software Product business merely because it has developed software product by following software development process without having legal ownership on such software product.
4. Whether the Hon'ble DRP Bangalore instead of relying on the decision of the ITAT ought to have decided the comparability of these companies on the basis of specific facts brought on record by the TPO in the case of the assessee.
5. Whether the Hon'ble DRP was right in seeking exact comparability while searching for comparable companies of the assessee under IT(TP)A No. 1503/Bang/2015 Page 2 of 3 TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies.
6. Whether on the facts and circumstances of the case, the Hon'ble DRP is right in holding that M/s R.S.Software Pvt Ltd., M/s Acropetal Technologies Ltd., M/s Mindtree Ltd., and M/s L&T Infotech Ltd., M/s Evoke Technologies Ltd., cannot be taken as a comparable when it satisfies all the qualitative and quantitative filters adopted by the TPO.
Whether while seeking the exact comparability as mentioned above the DRP was right in fact and in law in imposing condition beyond law where the requirement of law is to acknowledge only those differences that are likely to materially affect the margin.
Whether the Hon'ble DRP erred in fact and law by holding that the company M/s ICC International Agencies as functionally dissimilar without analyzing the facts of the company.
Whether the Hon'ble DRP erred in fact and law by considering the comparable as functionally dissimilar based on the grounds that there is a lack of clarity in the segment report without analysing the facts in depth.
Whether the Hon'ble DRP was right in holding that foreign exchange transaction is to be considered as operating in nature, ignoring provisions of the Rule 10B(2)(d) that the net profit margin realized by the tax payer in the international transaction shall alone be computed under the TNMM method 12. Whether on the facts and circumstances of the case, the DRP was right in following the ratio laid down by the Hon'ble High Court in the case of M/s Tata Elxsi Ltd., in 349 ITR 98.
Whether on the facts and in the circumstances of the case the Dispute Resolution Panel was right in holding that expenses reduced from Export Turnover has to be reduced from Total turnover also, since no provision u/s 10A provides for exclusion of such expenses.
For these and other grounds that may be urged at the time of hearing, it is prayed that the directions of the Dispute Resolution Panel in so far as it relates to the above grounds may be reversed.
The appellant craves leave to add, alter, amend and /or delete any of the grounds mentioned above.”
The ld. DR of revenue submitted a letter from the AO dated 15.11.2018 and he submitted that the grounds pertaining to transfer pricing issues are withdrawn because the assessee has signed APA on 31.08.2017. She submitted that in view of this, the grounds raised by the revenue on TP issues being ground nos. 1 to 11 may be rejected as withdrawn. Regarding ground nos. 12 and 13, she fairly conceded that this issue is squarely covered in favour of the assessee by the judgement of Hon'ble Karnataka High Court rendered in the case of CIT vs. Tata Elxsi Ltd., 349 ITR 98 and also submitted that this judgement of Hon'ble Karnataka High Court has IT(TP)A No. 1503/Bang/2015 Page 3 of 3 been confirmed by Hon’ble Apex Court also as per its recent judgement dated 24.04.2018 in CIT vs. HCL Technologies Ltd. in Civil Appeal Nos. 8489-8490/2013.The ld. AR of assessee also supported the order of CIT(A).
We have considered the rival submissions and in view of this letter of the AO dated 15.11.2018, ground nos. 1 to 11 of the revenue’s appeal are rejected as withdrawn because the same are withdrawn in view of APA signed by the assessee on 31.08.2017.
Regarding the remaining grounds i.e. ground nos. 12 & 13, we find that this issue was decided by ld. CIT(A) in favour of the assessee by following the judgement of Hon'ble Karnataka High Court rendered in the case of CIT vs. Tata Elxsi Ltd. (supra) in which it was held that total turnover is sum total of export turnover and domestic turnover and therefore, if an amount is reduced from export turnover then the total turnover also goes down by the same amount automatically. This issue is decided in favour of the assessee by the judgement of Hon’ble Apex Court also as per the subsequent judgement rendered in the case ofCIT vs. HCL Technologies Ltd. (supra). In view of this, we decline to interfere in the order of CIT(A) on this issue. Ground nos. 12 and 13 are rejected.
In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on the date mentioned on the caption page.