MOOG CONTROLS INDIA PRIVATE LIMITED,BANGALORE vs. ACIT, BANGALORE

The assessee has filed this appeal against the order of the ACIT, Circle-12(1), Bengaluru, dt.21.09.2012, passed u/s.143(3) r.w.s.144C(13) of the IT Act, 1961, in pursuance to the directions of the DRP.

Brief facts of the case are that the assessee company filed return of income for the assessment year 2008-09 declaring total income of Rs.1,15,54,520/- and thereafter filed a revised return on 02.07.2009 declaring income of Rs.1,60,79,170/-. The case was selected for scrutiny and was referred to the TPO for bench marking the international transactions u/s.92 of the IT Act.

The assessee filed the TP study before the TPO wherein the following 18 comparables were selected :

Feeling aggrieved, assessee filed an appeal before the DRP. However, the assessee was not successful in getting the relief before the DRP. Feeling aggrieved, assessee is in appeal before this Tribunal. The grounds of appeal under the broad heads are following :

It was submitted on behalf of the assessee that these two comparables though were selected by the TPO, the assessee has not raised objection against the inclusion of these two comparables as the specific details of the financials were not available in the public domain. After filing of the appeal before the Tribunal, the assessee noticed that the details of these two comparables are available in the public domain and on the basis of said details and also in accordance of the Tribunal decisions , it was held that these two comparables are not functionally similar to that of the assessee as these comparables are also involved into product development whereas the assessee is into soft-ware development.

On the other hand, the Ld. DR has submitted that this Tribunal should not permit to raise these grounds as the assessee is now estopped from raising these objections before the Tribunal, once the assessee has accepted the inclusion of these two comparables before the lower authorities.

We have heard the rival contentions and perused the material on record. As the inclusion and exclusion of these two comparables are required to be examined by applying the test of functional dissimilarity with that of the assessee.

As we have allowed the raising of the additional ground nos.11 and 12 for exclusion of Lucid Software Ltd and Bodhtree Consulting Ltd, we deem it appropriate to remand the matter back to the file of the TPO with a direction to examine afresh on the basis of the objections now raised by the assessee. Accordingly, the two additional grounds 11-12 are allowed for statistical purpose.

The assessee has raised grounds 1 to 9 which pertain to TP adjustment. It has been submitted that the other 11 companies, are required to be excluded as those companies are not similar functionally to that of the assessee. It was also pointed out that the Tribunal in the case of Infineon Technology India P. Ltd (supra), had examined the functional similarity of these comparables and thereafter had excluded these comparables from the list of comparables.

On the other hand, the Ld. DR has submitted that as this Tribunal is remanding the matter back in respect of two comparables, namely, Lucid Software Ltd and Bodhtree Consulting Ltd, in the interest of justice the IT(TP)A.1519/Bang/2012 Page - 9 other aspects of the TP study may also be remanded back to the file of the TPO.

We have heard the rival contentions and perused the materials on record. Accepting the contention of the Ld. DR, we hereby direct the TPO to examine afresh the entire TP issue by applying the correct filters and following the judgments laid down by the Hon’ble High Courts and the decisions of the Tribunal on this aspect.

The next ground no.II, is in respect of Interest on ECB loan. No arguments were addressed on this issue by the Ld. AR for the assessee during the course of hearing. Therefore, it is presumed that the Ld. AR is not interested in pressing this ground. Accordingly this ground is rejected as not pressed.

Ground no.III pertains to corporate tax issue. Grievance raised by assessee is that the DRP erred in upholding the action of the AO in restricting the quantum of deduction u/s.10B in respect of communication charges and travelling expenses, in violation of the judgment of jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd (349 ITR 98). As held by the Hon’ble High Court in Tata Elxsi Ltd (supra), expenses IT(TP)A.1519/Bang/2012 Page - 10 excluded from export turnover had to be excluded from the total turnover also while working out the eligible deduction. We direct the AO/TPO to follow the judgment of the Hon’ble jurisdictional High Court in Tata Elxsi Ltd (supra) and exclude the expenses incurred in foreign currency both from the total turnover as well as the export turnover while computing the deduction u/s.10B. Ground no.III of the assessee is allowed.

The next ground no.IV is with respect to short credit of taxes paid as self-assessment tax. The Ld. AR has submitted that the AO has not granted full credit for self-assessment tax paid by the assessee and has restricted it to the credit of self-assessment tax to Rs.40 lakhs instead of Rs.45,22,357/-. In our view, the AO is duty bound to give the adjustment of the credit of the self-assessment tax paid by the assessee. Accordingly, we direct the AO to give credit for the full amount deposited by the assessee under the self-assessment tax. If the AO is not agreeable to grant the credit for an amount of Rs.45,22,357/-, then the AO is directed to give cogent reason for not giving credit for the same. This ground is allowed.

Ground no.V is in respect of levy of interest u/s.234B of the Act, which is only consequential in nature and hence not being adjudicated.

In the result, the appeal of the assessee is allowed for statistical purpose.