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Income Tax Appellate Tribunal, “A” BENCH : BENGALURU
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 2 of 11 O R D E R Per Shri LALIET KUMAR, Judicial Member :
These are two appeals filed by the Revenue and the assessee respectively. The cross objection is filed by the assessee. All the appeals and cross objection are against the order of the ITO, Ward -2(1)(1), Bengaluru, passed u/s.143(3) r.w.s.144C(13) of the Act, dt.29.01.2015, in pursuance to the directions of the Dispute Resolution Panel, for the A. Y. 2010-11. IT(TP)A.256/Bang/2015 – By the Revenue : 2. First we take up the appeal of the revenue. Grounds raised are as under :-
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 3 of 11
The ld. DR of revenue submitted that Grounds 1, 7 & 8 are general and no separate adjudication is called for in respect of these grounds. Regarding remaining grounds, he supported the draft assessment order and he also filed written submissions which mainly say that in T. P. analysis, the comparability cannot be decided on the basis of precedent case as the facts of each case on record needs to be addressed. Learned AR of the assessee supported the order of DRP. He also submitted that the issue involved in Grounds No. 2 & 3 in respect of corporate tax is covered in favour of the assessee by the judgment of Hon’ble Karnataka High Court rendered in the case of Tata Elxsi Ltd. as reported in 349 ITR 98. Regarding remaining grounds on T P aspect, he submitted that in respect of exclusion of various comparables such as 1) Infosys Ltd., 2) Tata Elxsi Ltd. and 3) Kals Information Systems Ltd. being disputed by the revenue as per ground No. 4 & 5, the issue is covered in favour of the assessee by the Tribunal order rendered in the case of Cerner Healthcare Solutions Pvt. Ltd. vs. ITO as reported in 79 Taxmann.com 64 (Bang) copy made available. Regarding Ground No. 6 as per which, the revenue is disputing the exclusion of 4) Persistent Systems & Solutions Ltd., 5)
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 4 of 11 Sasken Communications Tech Ltd. and 6) Persistent Systems Ltd. also, the issue is covered in favour of the assessee by the same Tribunal order. He submitted that the revenue is disputing the exclusion of one more comparable i.e. R S Software India Ltd. As per Ground No. 6 and for this comparable, the ground of revenue may be allowed because the assessee is also aggrieved with the exclusion of this comparable as per Ground No. 15 of the appeal of the assessee.
We have considered the rival submissions. As per Grounds No. 2 & 3, the issue involved is about reduction of the expenses incurred in foreign currency from Total turnover for the purpose of computing the deduction to be allowed u/s 10A because such expenses were reduced by the AO from Export Turnover. As per the judgment of Hon’ble Karnataka High Court rendered in the case of Tata Elxsi Ltd. (Supra), it was held that total turnover is sum total of Domestic Turnover and export Turnover and therefore, if any amount is reduced from Export Turnover than Total turnover also goes down by the same amount automatically. Respectfully following this judgment, this issue is decided in favour of the assessee and accordingly, Grounds 2 & 3 are rejected.
Regarding remaining grounds i.e. grounds 4 to 6 in respect of exclusion of various comparables, the issue regarding exclusion of R S Software India Ltd. Is decided in favour of the revenue in view of this fact that both sides are opposed to exclusion of this comparable.
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 5 of 11 In respect of the remaining 6 comparables i.e. 1) Infosys Ltd., 2) Tata Elxsi Ltd., 3) Kals Information Systems Ltd., 4) Persistent Systems & Solutions Ltd., 5) Sasken Communications Tech Ltd. And 6) Persistent Systems Ltd., we find that the tribunal order rendered in the case of Cerner Healthcare Solutions Pvt. Ltd. Vs. ITO (Supra) supports the case of the assessee. In that case, in Para 2, the tribunal has noted that the assessee is engaged in the business of rendering Software Development services to its AE. In the present case also, the TPO has noted in Para 4 that the assessee company undertakes Software Development services under a Research & Development Agreement with its parent company M/s UbiNetics VPT Ltd., U. K. In our considered opinion, the profile of the present assessee and Cerner Healthcare Solutions Pvt. Ltd. Is similar and therefore, this tribunal order is applicable in the present case and there is no merit in the submissions of the learned DR of the revenue that in T P cases, precedent should not be followed even if the profile of both assesses is similar. Respectfully following this tribunal order, we decline to interfere in the decision of the DRP about exclusion of 6 comparables i.e. 1) Infosys Ltd., 2) Tata Elxsi Ltd., 3) Kals Information Systems Ltd., 4) Persistent Systems & Solutions Ltd., 5) Sasken Communications Tech Ltd. And 6) Persistent Systems Ltd. Because it was held by the tribunal in this case that these are not good comparables for the reasons given by the tribunal in this order and no difference in facts could be pointed out by the learned DR of the IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 6 of 11 revenue. Accordingly, Ground No. 4 & 5 are rejected and Ground No. 6 is partly allowed.
In the result, the appeal of the revenue is partly allowed.
CO No.71/Bang/2017 – By the assessee : 6. Regarding the C. O. of the assessee, learned AR of the assessee submitted that the C. O. is not pressed and accordingly, the C. O. is dismissed as not pressed. 7. In the result, the C. O. of the assessee is dismissed.
IT(TP)A No.506/Bang/2015 – By the assessee : 8. The assessee has raised as many as 23 grounds but it was submitted by the learned AR of the assessee that only Grounds No. 12, 13, 15, 18.1 and 23 are pressed and remaining grounds are not pressed. Accordingly, these 5 grounds being pressed are reproduced and these grounds will be decided on merit and remaining grounds are rejected as not pressed. These 5 grounds are as under:-
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Regarding Ground No. 12 i.e. Working Capital Adjustment, it was pointed out by the bench that no objection was raised before DRP on this aspect and as per Para 11.1 of the order of TPO, it is stated that the detailed working is annexed to that order as Annexure – C but that annexure has not been annexed with the order of TPO filed with the appeal Memo. In reply, learned AR of the assessee had nothing to say. He could not show that any objection was raised by the assessee on this issue before DRP. He also could not produce Annexure C to the order of TPO. Hence, this ground is rejected because this objection was not raised before DRP and relevant annexure to the order of TPO is not made available to us. Ground No. 12 is rejected.
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 8 of 11 10. Regarding Ground No. 13 i.e. in respect of the assessee’s claim for exclusion of L & T Infotech Ltd., Learned AR of the assessee placed reliance on the same tribunal order rendered in the case of Cerner Healthcare Solutions Pvt. Ltd. vs. ITO (Supra) and in particular, our attention was drawn to Para 13 & 14 of this tribunal order. He pointed out that as per this tribunal order, the tribunal has noted the finding of DRP Hyderabad in the case of Sumtotal Systems India Pvt. Ltd.as per which, the DRP held in that case that L & T Infotech Ltd. should be excluded mainly in view of huge turnover and huge brand value. He submitted that as per this tribunal order, this is not a good comparable. Learned DR of the revenue supported the DRP order in the present case.
We have considered the rival submissions. We have already seen while deciding the appeal of the revenue that this tribunal order is applicable in the present case. Hence, respectfully following this tribunal order, we direct the AO/TPO to exclude L & T Infotech Ltd. from the final list of comparables. Ground No. 13 is allowed.
Ground No. 15 is about inclusion of R S Software (India) Limited. As per Ground No. 6 of the appeal of the revenue also, it is the request of the revenue that this comparable should not be excluded. Since both sides want inclusion of this comparable in the final list of comparable, we have allowed Ground No. 6 of the revenue’s appeal regarding this comparable and we have held that this comparable should not be IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 9 of 11 excluded. Accordingly, Ground No. 15 of the assessee’s appeal is allowed.
Regarding ground No. 18 in respect of not allowing of deduction of Rs. 25,652/- u/s 80G in respect of contribution amounting to Rs. 151,234/- made towards Calamity Relief Fund of Karnataka, Learned AR of the assessee submitted that this deduction was claimed but not allowed. The bench pointed out that there is no discussion on this aspect in the draft assessment order, order of DRP and in Final assessment order and therefore, it is not clear as to whether any such deduction was claimed or not. The bench observed that if such deduction is claimed in the return of income and it is not allowed without any discussion/objection, this claim can be raised u/s 154 because in that situation, it is an apparent mistake. Learned AR of the assessee had nothing to say. We dismiss this ground with the observation that the assessee can raise before the AO this issue u/s 154 as per law.
Regarding Ground No. 23 i.e. in respect of interest u/s 234D of Rs. 158,674/-, learned AR of the assessee submitted that in the present case, refund was not granted but adjusted against old demand and therefore, section 234D is not applicable. Learned DR of the revenue supported the assessment order.
IT (TP) A Nos. 256 & 506/Bang/2015 & C.O. No. 71/Bang/2017 Page 10 of 11 15. We have considered the rival submissions. As per section 234D, where any refund is granted to the assessee under section 143 (1) and no refund is due on regular assessment or refund so granted u/s 143 91) exceeds the refund as per regular assessment, the assessee is liable for interest u/s 234D. In our considered opinion, for applicability of section 234D, issue of refund voucher is not a prerequirement and adjustment of refund against old demand is also granting of refund and section 234D is applicable if such refund is more than the refund allowable on regular assessment. In this view of the matter, Ground No. 23 is rejected.
In the result, the appeal filed by the assessee is partly allowed.