Income Tax Appellate Tribunal - Bangalore
M/S Cgi Information Systems And ... vs The Deputy Commissioner Of Income Tax, ... on 3 December, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH : BANGALORE
BEFORE SHRI. B.R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
M.P No.89/Bang/2020
(In IT(TP)A No.626/BANG/2016)
Assessment Year : 2011 - 12
CGI Information Systems The Dy. Commissioner of
and Management Income Tax,
Consultants Pvt. Ltd., Circle-2(1)(1),
(Successor-in-interest to Vs. Bengaluru.
Logica Pvt. Ltd.,)
E City Tower 2, 95/1 and
95/2,
Electronic City Phase 1
(West)
Bengaluru-560 100.
PAN - AAACL 3330 M
APPELLANT RESPONDENT
Appellant by : Smt. Tanmayee Rajkumar,
Advocate
Respondent by : Shri Priyadarshi Mishra, JCIT (DR)
Date of Hearing : 16-10-2020
Date of Pronouncement : 04-12-2020
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER
Present miscellaneous petition has been filed by assessee seeking to rectify following mistakes apparent from record in common order passed by this Tribunal dated 30/01/2020.
Page 2 of 8 M.P No.89/Bang/20201. Ld.AR submitted that assessee sought for exclusion of Persistant Systems Ltd., under SWD segment. This Tribunal while considering this comparable wrongly mentioned name as "Persistant Systems and Solutions Ltd." Ld.AR submitted that contents of the comparable pertain to Persistant Systems Ltd. Mistake has crept only in the title of comparable. She thus urged to rectify name of comparable as "Persistant Systems Ltd." 1.1 Ld.Sr.DR did not object for the request advanced by Ld.AR. We have perused submissions advanced by both sides in light of records placed before us.
1.2. We note that submissions of Ld.AR are correct. 1.3. Accordingly the name of comparable appearing at page 18 under para 3.2. stands rectified. Henceforth the name of comparable shall be read as "Persistant Systems Ltd."
2. Next issue alleged by Ld.AR in miscellaneous petition is that that, this Tribunal erred in remanding Sasken Communication Technologies Ltd. to Ld.AO/TPO for verification of segmental data. He submitted that detailed written submission was submitted highlighting the reasons for exclusion of this comparable from the finalist.
2.1. On the contrary, Ld.Sr.DR submitted that, no prejudice is caused to assessee as this comparable has been remanded to Ld.TPO for due verification of segmental details if available. He placed reliance on the observations of this Tribunal in respect of this comparable sought for exclusion.
Page 3 of 8 M.P No.89/Bang/20202.2. We have perused submissions advanced by both sides in light of records placed before us.
We note that Ld.AR at the time of hearing argued for exclusion of this comparable for not having segmental information for purposes of comparing the relevant segment. We also note that Ld.AR had also alleged for exclusion of this comparable for not satisfying turnover filter. However at the time of dictation, we noted that there words segmental information regarding revenue earned by this comparable under various segments because of which this tribunal thought of remanding this comparable to Ld.AO/TPO for verification. This view was taken for the reason that the segmental revenue generated by this comparable did not satisfy the turnover criteria required for exclusion. As Ld.AO/TPO had not verified FAR of this comparable with assessee it was remanded while passing the impugned order. However while arguing the miscellaneous petition, Ld.AR submitted that this comparable only has provided segmental information of revenue without apportioning the expenditure to the relevant segments. Under such circumstances, Ld.AO/TPO considered the entity level figures. He submitted that, in Electronics for Imaging India Pvt. Ltd., vs. DCIT for assessment year 2011-12 reported in [2017] 85 taxmann.com 124, this comparable was excluded by observing that segmental details were available only in respect of revenue whereas segmental information of expenditure has not been provided for in the annual reports of this comparable.
Page 4 of 8 M.P No.89/Bang/20202.3. We have perused the decision relied by Ld.AR and note that the aspect on which this Tribunal remanded this comparable to Ld.AO/TPO, has been considered by this Tribunal in Electronics for Imaging India Pvt. Ltd., vs. DCIT (supra).
2.4. We therefore are of the opinion that mistake has crept in while deciding comparability of Sasken Communication Technologies Ltd., with that of assessee. We therefore decide the comparable in following manner. Following paragraph stands inserted at page 19-20 of impugned order.
"Sasken Communication Technologies Ltd. - Ld.AR submitted that, this company is engaged in development of software products, as it has inventories, intangible assets and also because it has high expenditure on R&D, and is therefore functionally not comparable to the Assessee. Ld.AR placed reliance on decision of this Tribunal in case of Electronics for Imaging India Pvt.Ltd (supra). We find that as per its Annual Report, Sasken derives revenue from software products and, what is more, even launched a new product called Vypaar SEWA during FY 2010-11. Further, as can be seen from its Annual report, R&D constitutes an important part of the operational and functional profile of Sasken.
Also, as Sasken has significant intangibles and inventories, the Assessee submits that it ought to be rejected as a comparable. Thus, Sasken has diverse functions and segmental details are not given separately for the varied activities it is engaged in. It is thus submitted that this comparable ought to be excluded from the final list.
Page 5 of 8 M.P No.89/Bang/2020We refer to and rely on the observations of this tribunal in case of Electronics for Imaging India Pvt.Ltd (supra) as under:
" (vi) Sasken Communications Technologies Ltd.
15.1 The TPO included this company in the set of comparables despite the assessee's objection that it was functionally different and also had Product portfolio.
15.2 After considering the rival submissions, we find from page 58 of the TPO's order that he has recognized sale of software products to the tune of Rs. 37 crore and odd. Though the break-up of revenue from software services and software products is available, but, the break-up of operating costs and net operating revenues from these two segments have not been given. It is further observed that the TPO has taken entity level figures for the purposes of making comparison. Since such entity level figures contain revenue from both software services and software products, as against the assessee only providing software services, we are disinclined to treat this company as comparable. The assessee's contention is accepted on this issue."
We further note that the Hon'ble High Court vide its decision dt.28.09.2016 has confirmed the decision of the Delhi Bench of ITAT. We are aware that the co-ordinate bench of this Tribunal in the case of Applied Materials India( P)Ltd. (supra) has remitted the issue of functional comparability of Sasken Communication Technologies Ltd. that in the said case the DRP did not adjudicate the objections of the assessee. Therefore in view of the decision of the Delhi Bench of the Tribunal in the case of SaxIndia ( P.)Ltd. (Supra) which has been confirmed by the Hon'ble Delhi High Court, we direct the TPO/AO to exclude these two companies from the set of comparables."
We also find that this Tribunal in Finastra Software Solutions (India) (P.) Ltd. v. ACIT in (2018) 93 taxmann.com 460 (para
17); Cypress Semi-conductor Technology IndiaPvt. Ltd. v. DCIT in IT(TP)ANo.356/Bang/2016(para8); and Commscope Networks (India) Pvt. Ltd. v. ITO in IT(TP)A Nos.166 and 181/Bang/2016 (para 9) directed exclusion of this company in the list of comparable companies.
Based on the above discussion and analysis, we are of the view that, this comparable cannot be compared with a contract service Page 6 of 8 M.P No.89/Bang/2020 provider like assessee and accordingly direct Ld. AO/TPO to exclude this company from finalist.
Accordingly this comparable stands excluded."
3. Next issue raised by Ld.AR in the miscellaneous petition is regarding non-adjudicating one comparable under ITeS Segment. She submitted that, at page 15 of impugned order, this Tribunal records comparables was sought for exclusion by assessee under ITes Segment. However Acropetal Technologies Pvt.Ltd was not adjudicated.
3.1. Ld.Sr.DR did not object to the submission of Ld.AR.
3.2. We have perused our records and note that submission by Ld.AR is correct.
3.3. Accordingly we recall order passed by this Tribunal dated 30/01/2020 for adjudicating Acropetal Technologies Pvt.Ltd. 3.4. We direct registry to fix assessee's appeal for hearing for limited purposes of adjudicating Acropetal Technologies Pvt.Ltd in IT(TP)A No.626/Bang/2016 for assessment year 2011-12.
In the result, we allow miscellaneous petition filed by assessee.
Order pronounced in the open court on 4th Dec, 2020 Sd/- Sd/-
(B.R BASKARAN) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 4th Dec, 2020. /Vms/ Page 7 of 8 M.P No.89/Bang/2020 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore 6. Guard file By order Assistant Registrar, ITAT, Bangalore Page 8 of 8 M.P No.89/Bang/2020 Date Initial 1. Draft dictated on On Dragon Sr.PS 2. Draft placed before -12-2020 Sr.PS author 3. Draft proposed & placed -13-2020 JM/AM before the second member 4. Draft discussed/approved -12-2020 JM/AM by Second Member. 5. Approved Draft comes to -12-2020 Sr.PS/PS the Sr.PS/PS 6. Kept for pronouncement -12-2020 Sr.PS on 7. Date of uploading the -12-2020 Sr.PS order on Website 8. If not uploaded, furnish -- Sr.PS the reason 9. File sent to the Bench -12-2020 Sr.PS Clerk 10. Date on which file goes to the AR 11. Date on which file goes to the Head Clerk. 12. Date of dispatch of Order. 13. Draft dictation sheets are No Sr.PS attached