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× Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India

These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

10-01-2020, Rambus Chip Technologies, Section 144C(3), 250, Tribunal Bangalore

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2 weeks 1 day ago #12039 by amit
Section - 144C(3), 250, 115JB, 92CE, 92D, 92CA, 10A
Order Date - 10-01-2020
Favouring - Revenue Partly allowed for statistical purposes
Court - Tribunal Bangalore
Appellant - Rambus Chip Technologies (India) Pvt. Ltd.
Respondent - ACIT
Justice - A.K. GARODIA AM & PAVAN KUMAR GADALE JM
Citation - 120Taxpundit103
Appeal No. - ITA No.978/Bang/2017
Asstt. Year - 2011-12

Order

PER : PAVAN KUMAR GADALE, JM :

These are the cross appeals filed by the assessee and revenue against the order of Commissioner of Income Tax (Appeals)-5, Bangalore passed under Section

The TPO has passed order under Section 92CA of the Act dt.28.01.2015. The Assessing officer subsequently passed the Draft assessment order with Transfer Pricing Adjustment under Section 92CA of Rs.3,76,57,899 and other additions of foreign exchange loss, and restricting the claim under Section 10A of the Act and Assessed the total income at Rs.3,94,85,126 and passed under Section 143(3) r.w.s. 144C(1) Dt.9.3.2015. Subsequently, the final assessment order was passed under Section 143(3) r.w.s. 144C(3) dt.17.4.2015. Aggrieved by the assessment order, the assessee has filed an appeal with the learned CIT(Appeals) .whereas the learned CIT(Appeals) dealt on the grounds of appeal, findings of the Ao and the submissions of the assessee and has granted partial relief on and partly allowed appeal of the assessee. Aggrieved by the Cit(A) order, the assessee has filed an appeal with the Tribunal.

4. At the time of hearing, the learned Authorised Representative has argued for exclusion of four comparables and inclusion of comparable and restricted his arguments to the extent of comparables only and filed chart and Paper Book to support the submissions. Contra, the learned Departmental Representative supported the orders of learned CIT(Appeals) and filed written submissions.

5. We heard the rival contentions and perused the material on record. Prima facie, the learned Authorized Representative has argued only on the exclusion and inclusion of the comparables and filed chart and relied on the judicial decisions. The learned Authorised Representative argued for Exclusion of four comparables which are functionally dissimilar.

(i) Acropetal Technologies Ltd. has a margin of 27.89% and functionally dissimilar and employee cost is more than 25% and failed the employee cost filter. The TPO has considered the cost towards the technical sub-contractor as e-expenses in the computation of employee cost. The company follows different modules and sub-contracts majority of it works to third party vendor.Further fails the revenue filter of 75% applied by the ld. TPO as the income from Software Development Services is Rs.81.40 Crores out of the total revenue of Rs.141 Crores. The ld. AR relied on the co-ordinate bench decision in the case of Finastra Software Solutions (India) Pvt. Ltd. Vs. ACIT ( IT(TP)A No.529/Bang/2016 dt.2.5.2018), Sales Force.com India Pvt. Ltd. Vs. DCIT in IT(TP)A No.697/Bang/2016 A Y 2011-12 dt.21.12.2018). Zynga Game Network India Pvt. Ltd. Vs. ACIT in IT(TP)A No.360/Bang/2016 Dt.12.07.2017 Assessment Year 2011-12). AT & T Global
Business Service India Pvt. Ltd. Vs. ACIT in IT(TP)A No.171/Bang/2016 and Commonscope Networks (India) Pvt. Ltd. Vs. ITO in IT(TP)A No.166/Bang/2016 dt.22.02.2017; Capital IQ India Ltd. Vs. DCIT in IT(TP)A No.196/Hyd./2011 dt.23.11.2012. We find though the learned Authorised Representative has relied on catena of judicial decisions, we Support our view relying on the decision of Finastra Software Solutions (India) Pvt. Ltd. Vs. ACIT (supra) . The Hon'ble Tribunal has observed at page 8 para 15 and excluded the comparable read as under :

“ 15. We will first deal with the plea of the Assessee for exclusion of comparable companies chosen by the TPO. The first company which the Assessee seeks exclusion is Accropetal Technologies Ltd. On exclusion of this company, we have heard the rival submissions. We find that the TPO has himself applied a filter for exclusion of companies for the purpose of comparison, viz., revenue from software development service should be more than 75% of the total operating revenue. The admitted factual position is that revenue from software development service of this company was 81.40 Crores out of the total operating revenue of Rs.141 Crores. Thus the revenue from software development is admittedly less than 75% of the total operating revenue of this company. Therefore his company has to be excluded from the list of comparable companies. It was also brought to our notice that the ITAT Bangalore in the case of Applied Materials Pvt.Ltd., in IT (TP) A.No.17 & 39/Bang/2016 for AY 2011-12 order dated 21.9.2016 noticing the aforesaid facts excluded this company from the list of comparable companies in the case of a software development service provider such as the Assessee. We therefore hold that this company should be excluded from the list of comparable companies.” (ii) Icra Technologies ltd.

(iii) Persistent Systems Ltd. and

(iv) Sasken Communication Technologies Ltd. have been excluded by the Tribunal in the decision of Finastra Software Solutions (India) Pvt. Ltd. Vs. ACIT (supra). The Hon'ble Tribunal has dealt and observed at page 9 para 17 which is read as under :

“17. The following 7 companies were excluded by the Tribunal ITAT Bangalore in the case of Applied Materials Pvt.Ltd., a company which is also engaged in providing software development services in IT (TP) A.No.17 & 39/Bang/2016 for AY 2011-12 order dated 21.9.2016. Following the said decision the ITAT Bangalore in the case of Commonscope Networks (India) Pvt.Ltd. IT (TP) A.No.166 and 181/Bang/2016 for AY 2011-12 order dated 22.02.2017 (vide Paragraph 9 of the said order). The seven companies so excluded were EInforchips Ltd., ICRA Technonogies Ltd., Infosys Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems Ltd., Sasken Communication Technologies Ltd., and Tata Elxsi Ltd. Respectfully following the said decisions, we direct exclusion of these 7 companies from the list of comparable companies.

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