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04-09-2019, Novell Software Development, Section 194J, 14A, Tribunal Bangalore

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1 week 1 day ago #10719 by amit
Section - 194J, 14A, 92C(3), 40(a)(ia)
Order Date - 04-09-2019
Favouring - Revenue
Court - Tribunal Bangalore
Appellant - DCIT
Respondent - Novell Software Development India Pvt.Ltd.
Justice - J. SUDHAKAR REDDY, AM & BEENA PILLAI, JM
Citation - 919Taxpundit48
Appeal No. - IT(TP)A No.1491(Bang)/2014
Asstt. Year - 2009-10

Order

PER : BEENA PILLAI

Present cross appeals has been filed by revenue as well as assessee against order dated 31/05/13 passed by Ld. CIT (A)-4, Bangalore for assessment year 2009-10 on following revised grounds of appeal:

ITA No.1491/B/2014(Assessment year : 2009-10)

1.The order of the learned CIT(A) is opposed to law and facts of the case.

2.On the facts and in the circumstances of the case the learned CIT(A) erred in holding that size and turnover of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding the comparables Persistent Systems Ltd., Zylog Systems Ltd., Mindtree Ltd, L & T Infotech, Infosys Ltd., in software development segment without appreciating that economies of scale is not relevant in the software industry and turnover criterion is not prescribed in Rule 10B of IT Rules.

3. On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to provide for depreciation adjustment without appreciating the fact that such criterion is not prescribed in Rule 10B of IT Rules.

4.On the facts and in the circumstances of the case the learned CIT(A) erred in law in deleting the disallowance u/s 40(a)(ia) without appreciating the fact that the assessee had purchased software which is in nature of a license paid for usage of the software and the consideration for such licenses wou d fa l within the definition of the royalty defined in Explanation 9(1)(iv) and hence deduction of tax at source under Section 194J should have been done by the assessee.

5. On the facts and in the circumstances of the case the learned CIT(A) erred in law in deleting the disallowance u/s 14A r.w.r. 8D without appreciating the fact that as per provisions of Section 14A there is no differentiation to be made on the basis of the source of investment earning exempt income and in light of Board Circular No.5/2014 dated 11.020.2014, the action of AO is fully justified. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the AO may be restored.

The appellant craves leave to add, alter, amend and or delete any of the grounds mentioned above”. CO No.69/B/2015(Assessment year : 2009-10) Assessment and reference to Transfer Pricing Officer are bad in law

a) The Commissioner of Income Tax (Appeals) Ld. CIT(A)'] erred in confirming the order of the Deputy Commissioner of Income tax - Circle 12(2) [presently, the Deputy Commissioner of Income-Tax, Circle 5(1)(2)] rA01, in so far as the fact that the AO did not issue to Micro Focus Software India Private Limited (Earlier known as Novell Software Development (India) Private Limited) [`the Respondent or `the Company'], a show cause notice as per proviso to section 92C(3) of the Income Tax Act, 1961.

b) The Ld. CIT(A) e red in confirming the actions of the Ld. AO, in making a reference to the Joint Commissioner of Income Tax (Transfer Pricing) — II UTP01, which was not in accordance with law given that, inter alia, the Ld. AO has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case. Accordingly, the Ld. CIT(A) erred in not holding that the order passed by the Ld. TPO is without jurisdiction.

c)The directions issued by the Ld. CIT(A) and the order passed by the Ld. AO is without jurisdiction, inter alia, in so far as it purports to give effect to an invalid order of the Ld.TPO.

d) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the actions of the Ld. AO/ the Ld. TPO who erred in not demonstrating that the motive of the Respondent was to shift profits outside India by manipulating the prices charged in the international transaction, which is a pre

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