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07-06-2019, SanDisk India Device, Section 144C(13), 154, Tribunal Bangalore

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1 week 4 days ago #9680 by amit
Section - 144C(13), 154, 92C(3), 115JAA, 234B, 234C, 234D
Order Date - 07-06-2019
Favouring - Assessee allowed for statistical purposes
Court - Tribunal Bangalore
Appellant - SanDisk India Device Design Centre Private Limited
Respondent - ACIT
Justice - J. SUDHAKAR REDDY AM & BEENA PILLAI JM
Citation - 619Taxpundit96
Appeal No. - IT(TP)A No. 589/Bang/2016
Asstt. Year - 2011-12

Order

PER : BEENA PILLAI

Present appeal has been filed by assessee against final assessment order dated 29/01/16 passed by Ld. ACIT, Circle 6 (1) (1) Bangalore, for assessment year 2011-12 on following grounds of appeal:

“The Appellant submits as under:

1. Order/ Directions bad in law and on facts

1.1 The order passed by the Assistant Commissioner of Income-tax, Circle 6(1)(1) , under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ('the Act') pursuant to the directions issued by the Hon'ble Dispute Resolution Panel , is bad in law and on facts and is in violation of the principles of natural justice. The order passed by the AO, under section 154 of the Act, dated 9 February 2016, is bad in law and on facts.

1.2 Without prejudice to the generality of the above the order issued by the AO is bad in law in so far as the fact that the AO did not issue to SanDisk India Device Design Centre Private Limited ('the Appellant or 'the C mpany'), a show cause notice as per proviso to section 92C(3) of the Act.

1.3 The Ld. Panel erred in law and on facts in not taking cognizance of the objections raised by the Appellant in relation to the transfer pricing matters, while issuing the directions under Section 144C(5)

1.4 On the facts and in the circumstances of the case and in law, the Ld. Panel and AO/ TPO erred in not demonstrating that the motive of the Appellant was to
shift profits outside India by manipulating the prices charged in the international transaction, which is a prerequisite condition to make any adjustment under the provision of Chapter X of the Act.

2. Comparability Analysis adopted by the TPO for determination of arm's length price — Software Development Services

2.1 The Ld. Panel and AO/ TPO erred in rejecting the value of international transactions as recorded in the books of account, as the arm's length price.

2.2 The Ld. Panel and AO/ TPO erred in determining a new arm's length price in substitution of the arm's length price as determined by the Appellant.

2.3 The Ld. Panel and the AO / TPO erred on facts in rejecting the comparable companies arrived at in the Transfer Pricing Study without considering the functional and risk analysis of the Appellant.

2.4 The Ld. Panel and the AO / TPO erred in law in holding the fresh comparability analysis using non contemporaneous data conducted by the TPO and further substituting the Appellant's analysis with fresh benchmarking analysis on his own conjectures and surmises. Thus, the Appellant prays that the fresh benchmarking analysis conducted by the TPO is liable to be quashed.

2.5 The Ld. Panel and the AO / TPO grossly erred on facts in confirming the benchmarking of transactions of software development services of the Appellant with companies operating as full-fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the Appellant vis-a-vis comparable companies.

2.6 The Ld. Panel and the AO/ TPO erred on facts in law by including the foreign exchange loss while calculating the net margins of the Appellant and excluded the same while calculating the margins of the comparable companies.

2.7 The Ld. Panel and the AO / TPO erred in law and on facts in applying arbitrary filters as criterion for rejection of companies identified by the Appellant in the Transfer Pricing Study, such as (i) companies whose data for financial year (‘FY ) 2010-11 was not available, (ii) companies with software development service revenue less than 75% of total operating revenue, (iii) companies with related party transactions greater than 25% of sales (iv) companies with export sales less that 75% of total sales, (v) companies with employee cost less than 25% of total revenues (vi) companies with different financial year ending (i.e other than 31 March 2011) and (vii) companies having persistent losses up to and including financial year 2010-11.

2.8 The AO/ TPO also erred on facts in wrongly computing the margins of certain companies identified as comparable by the TPO.

2.9 The Ld. Panel and the AO/ TPO erred on facts and in law in considering Acropetal Technologies Ltd, e-Zest Solutions Ltd, E-Infochips Ltd, ICRA Techno Analytics Ltd, R S Software (India) Ltd. and Persistent Systems & Solutions Ltd. despite these companies being functionally

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