Income Tax Appellate Tribunal - Bangalore
Robert Bosch Engineering And Business ... vs Dcit, Bangalore on 13 September, 2017
IT(TP)A.1519 & 1687/Bang/2013 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'B', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIT KUMAR, JUDICIAL MEMBER
I.T(TP).A No.1519/Bang/2013
(Assessment Years : 2005-06)
Robert Bosch Engineering and Business Solutions Ltd,
(Formerly Robert Bosch India Ltd,
Hosur Road, Koramangala, Bengaluru .. Appellant
PAN : AAACR7108R
v.
Deputy Commissioner of Income-tax,
LTU, Bengaluru .. Respondent
I.T(TP).A No.1687/Bang/2013
(Assessment Years : 2005-06)
(By the Revenue)
Assessee by : Shri. Percy Pardiwala, Senior Counsel
Revenue by : Smt. Neera Malhotra, CIT - DR
Heard on : 02.08.2017
Pronounced on :13 .09.2017
ORDER
PER LALIT KUMAR, JUDICIAL MEMBER :
These are cross appeals filed by the assessee and the Revenue against the order of the CIT (A) - LTU, Bengaluru, dt.29.08.2013, for the assessment year 2005-06.
IT(TP)A.1519 & 1687/Bang/2013 Page - 2
02. The grounds of appeal raised by the assessee are as under :
IT(TP)A.1519 & 1687/Bang/2013 Page - 3
03. The assessee has also raised additional grounds and the facts leading to filing of the additional grounds, which is reproduced hereunder :
IT(TP)A.1519 & 1687/Bang/2013 Page - 4
04. In its cross appeal, the Revenue has raised the following grounds of appeal before us :
05. The assessee company is in the business of development of software for exports and domestic sales, dealing in components including fuel injection systems. The assessee filed its original return of income declaring total income of Rs.14,98,05,810/-. The case of the assessee was selected for scrutiny. The AO referred the case to the TPO for computation of ALP. After elaborate discussions in his order u/s.92CA, the TPO determined the ALP at Rs.35,86,13,736/-. Aggrieved by the order of the TPO, the assessee went in appeal before the CIT (A). The CIT (A) had partly granted the relief to assessee, therefore both the parties are before us.
IT(TP)A.1519 & 1687/Bang/2013 Page - 5
07. Now the assessee is in appeal before us aggrieved by the order passed by the AO in pursuance to the order of the CIT (A), by making the following additions :
i) Computation of deduction u/s.10A .. Rs.11,18,97,312
ii) Transfer pricing .. Rs.35,86,13,736 TP grounds of the Revenue as well as the Assessee :
08. At the out set, the bench has pointed out that the Tribunal is restoring the matter back to the file to the AO / TPO for fresh adjudication in those cases where the claim of the assessee or of the Revenue pertains to application of turnover filter, high profit filter or abnormal margins in the light of the judgment of the Hon'ble Delhi High Court rendered in the matter of ChrysCapital Investment Advisors India P. Ltd v. DCIT [82 taxmann.com 167]. In the said judgment, huge turnover / abnormal margin, etc., ipso facto does not lead to the conclusion that a company which is otherwise comparable on FAR analysis can be excluded. It was observed by the Hon'ble High Court that the TPO tried to iron-out the effect of such events on IT(TP)A.1519 & 1687/Bang/2013 Page - 6 the profitability margin and price of the comparable which are otherwise functionally similar to the assessee. Further the bench also pointed out that the Tribunal is now adopting the 25% RPT filter and 15% RPT filter depending upon the availability of comparables, following the decision of the Tribunal in the matter of DCIT v. ACI Worldwide Solutions P. Ltd [IT(TP)A.262/Bang/2015, dt.26.07.2017]. On account of application of 25% RPT filter, several comparables will be available which were earlier deleted on account of 0% RPT filter. These comparables are required to be examined on the FAR analysis and therefore, in our view, the entire TP issue is required to be remitted back to the file of the TPO. On this, the Ld. AR had agreed. However, the Ld. DR has submitted that the other issue of inclusion / exclusion of Flextronics Software Systems Ltd, is also required to be considered.
09. We have heard the rival submissions and perused the material. In our view, the issue of TP is required to be restored back to the CIT (A) with a direction that he should decide the issue afresh by applying the RPT filter of 25% or 15% as the case may be and examine the aspect of high-profit margin and high turnover in the light of the IT(TP)A.1519 & 1687/Bang/2013 Page - 7 judgment of the Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisers India P. Ltd (supra).
10. In the result, grounds of assessee as well as the Revenue with respect of transfer pricing are allowed for statistical purpose.
11. With respect to ground nos.14 and 15, the matter is sent back to the file of the CIT (A), in view of the direction issued by the Tribunal in the case of the assessee, in ITA Nos.344 & 336/Bang/2014, dt.21.04.2017, for AY 2004-05, wherein at para 28, it was held as under :
28. The ld. Counsel for the assessee has contended in this regard that assessee is engaged in the business of export of computer software and the AO has also made an observation in this regard. Software development agreement with appellant's customer, Robert Bosch GmbH is filed. The ld. Counsel for the assessee further contended that the Hon'ble jurisdictional High Court in the case of Infosys vide ITA No,2972, 2973, 2974 and 3015/2015, dated 13.02.2013 has held that expenditure in foreign currency need not be excluded from the export proceeds from the export of computer software. Therefore, in the light of this judgment, the foreign currency expenses should not be excluded from the export proceeds.
12. The assessee has not pressed ground no.16. Hence the same is dismissed as not pressed.
IT(TP)A.1519 & 1687/Bang/2013 Page - 8 Revenue's appeal - IT(TP)A.1687/Bang/2013 :
Ground no.1 is general in nature.
13. Ground nos.2 and 3 pertain to exclusion of insurance charges incurred in foreign currency, from export turnover for providing services outside India. In this regard, the Ld. AR has drawn our attention to page 352 of the paper book, wherein the amount for insurance coverage for group insurance is Rs.12,52,830/- whereas in the order of the CIT (A), insurance amount has been mentioned as Rs.11,40,000/-.
14. In view of Section 10A, freight charges, telecommunication charges and insurance charges which are attributable to export of computer software are not required to be taken into account for export turnover. Since the assessee has not been able to demonstrate that the entire insurance cover is relatable to export turnover for computer software, therefore, we deem it appropriate to remand this issue back to the file of the CIT (A) for fresh examination on this aspect of insurance charges i.e how much of insurance charges were attributable to export of computer software. The CIT (A) is directed to adjudicate IT(TP)A.1519 & 1687/Bang/2013 Page - 9 this issue afresh after affording opportunity of hearing to the assessee as well as the AO. This ground is allowed for statistical purposes.
15. Ground no.4 of the Revenue pertains to CIT (A)'s direction to exclude Flextronics Software Systems Ltd. The Tribunal vide its order for A. Y. 2003-04 (supra), has restored back the entire TP issue to the file of the CIT (A). Further, the issue of inclusion / exclusion of Flextronics Software Systems Ltd, is also a subject matter of TP issue. Therefore, ground no.4 of the Revenue is allowed for statistical purpose, being a part and parcel of TP issue.
16. Appeal of the Revenue is partly allowed for statistical purpose.
17. To summarise the result, Assessee and Revenue's appeal are partly allowed for statistical purpose.
Order pronounced in the open court on 13th day of September, 2017.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 13.09.2017
MCN*
IT(TP)A.1519 & 1687/Bang/2013 Page - 10
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By Order
SENIOR PRIVATE SECRETARY