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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI A.K.GARODIA, ACCOUNANT MEMBER
against the order of the ld.CIT(A)-IV, Bangalore dated 24-07-2013 for assessment years : 2005-06.
At the very outset, it was submitted by the ld.
AR of the assessee that ground no.7 to 10 raised by the assessee in its 2 IT(TP)A Nos.1393 & 1364 (Bang)2013 appeal should be decided first because as per the same, the main issue regarding the action of the AO/TPO in rejecting the companies by applying different quantitative and qualitative filters was not decided by the ld. CIT(A) and hence, if it is held that the issue is required to be restored back to the file of the ld. CIT(A) for a decision on this issue then the entire matter should be restored back to his file for fresh decision and in that eventuality, no adjudication will be required on all the remaining grounds raised by the assessee or the grounds raised by the revenue in its appeal. Ground no.7 to 10 raised by the assessee are as under; “7. The ld. CIT(A) has erred in not adjudicating the action of the AO/TPO in rejecting companies which was not available in public domain by exercising powers u/s 133(6) of the Act and relying on the information for comparability analysis. a) Applying onsite revenues greater than 75% of the export revenues filter as comparability criterion in the search strategy to identify comparable companies; b) Applying the turnover filter of less than Rs.1 Crore as a comparability criterion in the search strategy to identify comparable companies.
The ld. CIT(A) has erred in not adjudicating the action of the AO/TPO in accepting certain companies as comparable using unreasonable comparability criteria.
The ld. CIT(A) has erred in not adjudicating the action of the AO/TPO in not considering the foreign exchange fluctuation gain/(loss) in computing the 3 IT(TP)A Nos.1393 & 1364 (Bang)2013
operating margin of the appellant as well as the comparable companies. 10. The ld. CIT(A) has erred in not adjudicating the action of the AO/TPO in not making suitable adjustments on account of differences in the risk profile of the appellant vis-a-vis the comparables, while conducting comparability analysis.
The ld. AR of the assessee submitted a copy of the Tribunal order rendered in the assessee’s own case in IT(TP)A No.1336(Bang)/2012 dated 16-03-2016.
The ld. DR of the revenue supported the order of the ld.CIT(A) on the aspects which are raised by the assessee in its appeal.
We have considered the rival submissions. We find that in assessment year 2008-09, the issue before the Tribunal was regarding the selection of MAM. On this issue, it was held by the Tribunal that TNMM is the most appropriate method. In para-6 of the Tribunal order in the assessee’s own case for assessment year 2008-09, it was noted by the Tribunal in para-6 of the Tribunal order that having decided the most appropriate method, the other contention of the assessee was applicability and working operative margin and risk adjustment required for adjudication. Thereafter, it was noted by the Tribunal that the assessee
4 IT(TP)A Nos.1393 & 1364 (Bang)2013 has objected to this companies listed in sl.no.1 to 11 of the chart in para- 6.1 of the Tribunal order. The eleven companies are as under;
Name of company Net Margins as per TPO order (before WCA) Avani Cincom Technologies 25.62% Celestial Biolabs 87.94% Kals Information Systems Ltd. (Seg) 31.29% Lucid Software Ltd. 16.50% Tata Elxsi (Seg) 18.97% ys Technologies Ltd. 40.37% Wipro Ltd. (Seg) 28.45% Bodhtree Consulting Ltd. 18.72% Thirdware Solution Ltd. 19.35% Softsol India Ltd. 17.89% Zest Solutions Ltd. 29.81% Thereafter, on page-26 of the Tribunal order, it was held by the Tribunal that the assessee is directed to exclude these companies from the list of comparables. In the present year, the facts and circumstances are same or not is not known because there is no decision of the ld. CIT(A) or of the AO/TPO on his aspect and therefore, we feel it proper that this issue also should go back to the file of the AO/TPO in the light of the tribunal decision in assessee’s own case for the assessment year 2008-09.
5 IT(TP)A Nos.1393 & 1364 (Bang)2013
In addition to this, there was one more issue before the Tribunal in that year being the issue regarding re-imbursement costs included in the working and on this issue, the matter was restored back by the Tribunal to the file of the TPO for fresh decision. Considering this factual position and in view of our above discussion, we hold that all the issues raised by the assessee in its appeal are restored back to the file of the AO/TPO or fresh decision in the light of the Tribunal order in assessee’s own case for assessment year 2008-09.
Regarding revenue’s appeal, we find that ground no.1 is general and ground no.2 & 3 are regarding computation of deduction u/s 10A of the IT Act which is covered in favour of the assessee by the judgment of the Hon’ble Karnataka High Court rendered in the case of M/s Tata Elxsi Ltd., as reported in 349 ITR 98 and respectfully following the same, this issue is decided in favour of the assessee and against the revenue and accordingly, ground no.2 & 3 of the revenue’s appeal are rejected.
Ground no.4 of the revenue’s appeal is regarding MAM and we have seen that it is held by the Tribunal in assessee’s own case for the assessment year 2008-09 that TNMM is the most appropriate method and therefore, we allow this ground of the revenue and hold that the order of the ld.CIT(A) in directing the AO to reconsider as to whether the CUP method is the most appropriate method to determine the ALP instead of TNMM as per the TPO is not sustainable. We hold that in the present case, the TNMM is the most appropriate method. Accordingly, ground bno.4 of the revenue is allowed.
6 IT(TP)A Nos.1393 & 1364 (Bang)2013
In the result, the appeal of the assessee is allowed for statistical purposes whereas the appeal of the revenue is partly allowed.
Order pronounced in the open court on the date mentioned on the caption page.