Income Tax Appellate Tribunal - Bangalore
M/S Synopsys (India)P Ltd, Bangalore vs Deputy Commissioner Of Income Tax,, ... on 24 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'B', BANGALORE
BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI LALIET KUMAR, JUDICIAL MEMBER
IT (TP) A No.874/B/2013
(Assessment year : 2008 - 09 )
DCIT Circle - 12 (3),
Bangalore Appellant
Vs
M/s Synopsys India Pvt. Ltd.,
RMZ Infinity Tower A, 4th & 5th Floor,
Municipal No. 3, Old madras Road,
Benniganhalli, Bangalore - 16
PAN: AABCS8847D Respondent
& C. O. No. 154/B/2015
in IT(TP) A No. 874/B/2013
(Assessment years : 2008 - 09)
IT (TP) A No.1576(Bang) 2014
(Assessment year : 2009 - 10)
DCIT Circle - 6 (1) (2),
Bangalore Appellant
Vs
M/s Synopsys India Pvt. Ltd.,
RMZ Infinity Tower A, 4th & 5th Floor,
Municipal No. 3, Old madras Road,
Benniganhalli, Bangalore - 16
PAN: AABCS8847D Respondent
& Cross Appeal No.IT (TP) A No. 1622/B/2014
(Assessment years : 2009 - 10)
Assessee by : Shri P. K. Prasad, Advocate
Revenue by : Ms Neera Malhotra, CIT DR
Date of hearing : 22-08-2017
Date of pronouncement : 24-08-2017
ORDER
PER A. K. GARODIA, A. M.:
These two appeals are filed by the revenue and the remaining one appeal and one C. O. are filed by the assessee and these are directed against two separate 2 ITA Nos.874/B/2013, 1576 & 1622/B/2014 & C. O. No. 154(B) 2015 orders of the ld. CIT(A) - IV, Bangalore dated 26-03-2013 for A. Y. 2008 - 09 & dated 20.10.2014 for A. Y. 2009 - 10. All these appeals and C. Os. were heard together and are being disposed of by this common order for the sake of convenience.
2. The revenue has raised several grounds in each year but the grievances of the revenue are only two in A. Y. 2008 - 09. The first grievance is about the direction of the learned CIT (A) to the A.O. that reimbursement of expenses in foreign currency reduced by the A.O. from export Turnover for the purpose of computing the deduction allowable u/s 10A should be reduced from total turnover also. The second grievance is about the direction of the learned CIT (A) to the A.O. that some comparables for computing ALP are to be excluded from the final list of comparables on the basis of size and turnover of these companies and on the basis of high profit margin etc. apart from some other aspects of T P adjustment. In A. Y. 2009 - 10, the revenue has only one grievance to the effect that the direction of CIT (A) to the A.O. that Telecommunication Expenses and expenses incurred in foreign currency reduced by the A.O. from export Turnover for the purpose of computing the deduction allowable u/s 10A should be reduced from total turnover also. This grievance of the revenue is common in both years. The grievances of the assessee in the C.O. filed in one year and appeal filed in A.Y. 2009 - 10 are also on various aspects of T. P. adjustment upheld by CIT 9A).
3. In course of hearing, both sides agreed that the first issue in the appeal of the revenue in A. Y. 2008 - 09 and the only aspect in its appeal for A. Y. 2009 - 10 is covered in favour of the assessee by the judgment of Hon'ble Karnataka High 3 ITA Nos.874/B/2013, 1576 & 1622/B/2014 & C. O. No. 154(B) 2015 Court rendered in the case of Tata Elxsi as reported in 349 ITR 98. Regarding the second issue of T P adjustment in the appeal of the revenue in A. Y. 2008 - 09 and in the C.O. of the assessee in A. Y. 2008 - 09 and the appeal of the assessee in A. Y. 2009 - 10, both sides agreed that the major issue about exclusion of various comparable on the basis of size and turnover of several companies and on the basis of high profit margin in case of some companies has to go back to the file of AO/TPO for a fresh decision in the light of the judgment of Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisors (India0 (P) Ltd. vs. DCIT as reported in 376 ITR 183 wherein it was held that huge profit or huge turnover, ipso facto does not lead to the exclusion of a comparable and the TPO has to be satisfied that such difference do not materially affect the price or cost and secondly an attempt should be made to make reasonable adjustment to eliminate the material effect of such differences. Both sides agreed that when this major issue about T P adjustment has to go back, the entire T P issue may be restored back in both years for a fresh decision.
4. We have considered the rival submissions. First, we deal with the first grievance of the revenue. In the case of Tata Elxsi (Supra), Hon'ble Karnataka High Court has held that total turnover is sum total of domestic turnover and export turnover and therefore, if an amount is reduced from export turnover than the total turnover also gets reduced by the same amount. Respectfully following this judgment, we decline to interfere in the order of CIT (A) on this issue in both years.
5. Regarding the T P issue raised by both sides, in view of the facts discussed above, we feel it proper that the entire T P issue is restored back to the file of 4 ITA Nos.874/B/2013, 1576 & 1622/B/2014 & C. O. No. 154(B) 2015 AO/TPO for a fresh decision in the light of the judgment of Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisors (India) (P) Ltd. vs. DCIT (Supra) after providing adequate opportunity of being heard to the assessee. The other aspects of T P issue for which this judgment of Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisors (India) (P) Ltd. vs. DCIT (Supra is not relevant should also be decided afresh after providing adequate opportunity of being heard to the assessee because before deciding the comparables aspect, various other aspects of T P issue cannot be decided in a proper manner.
6. In the result, the appeal of the revenue for A. Y. 2008 - 09 is partly allowed for statistical purposes and the appeal of the revenue for A. Y. 2009 - 10 is dismissed. The C.O. and appeal of the assessee are allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/-
(LALIET KUMAR) (A.K. GARODIA)
JUDICAL MEMBER ACCOUNTANT MEMBER
Place: Bangalore:
D a t e d : 24.08.2017
*MS
5 ITA Nos.874/B/2013, 1576 &
1622/B/2014 & C. O. No. 154(B) 2015
Copy to :
1 Appellant
2 Respondent
3 CIT(A)-II Bangalore
4 CIT
5 DR, ITAT, Bangalore.
6 Guard file
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.