Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Mentor Graphics India Pvt. Ltd., ... on 23 May, 2018
1 ITA Nos. 410/Del/2013 & Ors.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'I-1' NEW DELHI
BEFORE SHRI R. S. SYAL, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No. 410/DEL/2013 (A.Y 2008-09)
I.T.A .No. 1484/DEL/2014 (A.Y 2009-10)
Mentor Graphics (India) Pvt. Ltd. Vs DCIT
Building-A, Logix Techno Park, Circle-6(1)
Plot# 5, Sector-127 C. R. Building
Noida New Delhi
AABCM5494Q
(APPELLANT) (RESPONDENT)
I.T.A .No. 1204/DEL/2014 (A.Y 2009-10)
DCIT Vs Mentor Graphics (India) Pvt.
Circle-6(1) Ltd.
C. R. Building B-92, 9th Floor, Himalaya
New Delhi House, 23-K.G. Marg
(APPELLANT) New Delhi
AABCM5494Q
(RESPONDENT)
Appellant by Sh. Himanshu Shekhar
Sinha, Adv & Ms. Vrinda
Tulshan, Adv
Respondent by Sh. Sanjay I Bara, CIT DR
Date of Hearing 11.04.2018
Date of Pronouncement 23.05.2018
ORDER
PER SUCHITRA KAMBLE, JM
These appeals are filed by the assessee and the Revenue against the orders dated 21.11.2012, 03.01.2014 respectively for the A.Ys. 2008-09 and 2 ITA Nos. 410/Del/2013 & Ors. 2009-10 passed by Assessing Officer u/s 144C read with Section 143(3) of the Income Tax Act.
2. For the sake of convenience we are firstly taking up the brief facts for A.Y. 2008-09.
The Assessee company M/s Mentor Graphics (India) Pvt. Ltd. engaged in the business of software development. The assessee company filed its e-return of income for the A.Y. 2008-09 on 29.09.2008 admitting income of Rs.8,10,43,090/-. The case was selected for scrutiny. Notices u/s 143(2) and 142(1) were issued and served on the assessee. In response to the notices issued, Chartered Accountant and Authorized Representatives of the assessee appeared and filed the information called for time to time. Reference u/s 92CA of the Income Tax Act, 1961 was made by the Assessing Offier to the TPO vide reference dated 30.07.2010. The TPO passed order u/s 92CA(3) of the Act vide order dated 28.10.2011. The draft Assessment Order dated 20.12.2011 was passed and forwarded to the assessee as per the provisions of Section 144C(1). The assessee company filed objection with the DRP-I and intimated the Assessing Officer about the same. The DRP-I vide direction dated 26.09.2012 issued u/s 144C(5) of the Income Tax Act, 1961 directed the Transfer Pricing Officer to recalculate the transfer pricing adjustment calculation in the case of the assessee company for the A.Y. 2008-09 under consideration. The Transfer Pricing Officer in compliance to the directions dated 26.09.2012 of the DRP-I, has recalculated the arm's length price adjustments at Rs.8,76,27,396/- vide order dated 22.10.2012. In light of the observations made by the Transfer Pricing Officer in his order dated 22.10.2012 passed as per the directions of the DRP, the adjustment on Arm's Length Price of international transactions was made at Rs.8,76,27,396/- by the Assessing Officer vide order dated 21.11.2012.
3. The Ld. AR submitted that following comparables should have been excluded by the TPO/DRP:
3 ITA Nos. 410/Del/2013 & Ors.1. Infosys Ltd.
2. KALS Information Systems Ltd.
3. Bodhtree Consulting Ltd.
4. Tata Elexi Ltd.
5. Avani Cincom Technologies Ltd.
6. Wipro Ltd.
7. E-Zest Solutions Ltd.
8. Persistent Systems Ltd.
9. Softsol India Ltd.
3.1 Infosys Ltd. :- The Ld. AR submitted that this company was already rejected in assessee's own case for A.Y. 2006-07 by the Tribunal in ITA No. 1565/Hyd./2010 (Del.) order dated 21.09.2016 which was confirmed by the Hon'ble Delhi High Court vide order dated 02.05.2017 (ITA No.318/2017). The Ld. AR further submitted that in subsequent Assessment Year i.e. 2007-08 also this comparable was rejected by the Tribunal in assessee's own case vide order dated 27.09.2017 (ITA No. 2587/DEL/2014). The Ld. AR further submitted that the Financial Analysis Report of the assessee company has not changed over the years as captured by ITAT in its order for A.Y. 2006-07 and A.Y. 2007-
08. 3.2 The Ld. DR relied upon the order of the TPO/AO and DRP.
3.3 We have heard both the parties and perused all the relevant documents.
The profile and functions of the assessee company have not changed from the previous Assessment Years. It is pertinent to note that the Tribunal in earlier assessment year has categorically held as under:
"5.01. Infosys Limited - The Ld. AR has submitted that the TPO has observed that this Company was functionally similar to the assessee company. However, Infosys is engaged in providing software consulting and products, application design, development, re-engineering and maintenance, system integration, package evaluation and implementation and business process 4 ITA Nos. 410/Del/2013 & Ors. management etc. and, therefore, it was not functionally similar to the assessee company as claimed by the TPO. The Ld. AR has further submitted that Infosys Limited has a significant turnover of Rs.9,028 crores which is approx. 125 times the assessee's turnover of INR 72 crores. It was further submitted that Infosys develops/owns proprietary products like Finacle which is not so in the case of the assessee company. It was further submitted that Infosys's brand value stood at Rs. 22,915 crores, while the assessee has no brand value in India. The Ld. AR has also submitted that Infosys has a significant Advertising/Sales promotion and brand building expenditure of INR 499 crores (i.e. 5.53% of revenue). On the ITA No. 2587/Del/2014 AY:
2007-08 other hand, the assessee does not undertake any AMP expenditure.
5.01.1 It is seen that the ITAT Delhi Bench in Agnity India Technologies P. Ltd. vs. ITO Ward 12(1) in ITA No. 3856/Del/2010 for AY 2006-07 ordered to exclude Infosys from the list of comparables by citing - "It is argued that the case of the assessee is not comparable with Infosys Technologies Ltd., the reason being that the letter is joined in the area of development of software and assumes all risks, leading to higher profit. On the other hand, the assessee is a captive unit of its parent company in the USA and it assumes only limited currency risk. Having considered these points, we are of the view that the case of aforesaid Infosys and the assessee are not comparable at all as seen from the financial data etc. of the two companies mentioned earlier in this order. Therefore, we are of the view that this case is required to be excluded." This decision of the ITAT was confirmed by the Hon'ble High Court of Delhi in ITA No. 1204/2011. It is also seen that Infosys Limited was rejected in assessee's own case by the ITAT in ITA No. 2634/Del/2011 for AY 2005-06 and by the Hon'ble DRP in assessment years 2010- 11 and 2011-12.
Hence, in the light of the above judicial precedent, we order the exclusion of Infosys from the final list of comparables."
It is pertinent to note that Infosys Limited was rejected by the Tribunal in ITA No. 2634/Del/2011 for A.Y. 2005-06 and also by the DRP in A.Y. 2010-11 and 2011-12. Further, the Hon'ble Delhi High Court has confirmed the order of the ITAT for A.Y. 2006-07 in which this comparable was directed to be excluded. Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude Infosys Ltd. from the final list of comparables.
5 ITA Nos. 410/Del/2013 & Ors.3.4 KALS Information Systems Ltd. :- The Ld. AR submitted that this company was already rejected in assessee's own case for A.Y. 2006-07 by the Tribunal in ITA No. 1565/Hyd./2010 (Del.) order dated 21.09.2016 which was confirmed by the Hon'ble Delhi High Court vide order dated 02.05.2017 (ITA No.318/2017). The Ld. AR further submitted that in subsequent Assessment Year i.e. 2007-08 also this comparable was rejected by the Tribunal in assessee's own case vide order dated 27.09.2017 (ITA No. 2587/DEL/2014). The Ld. AR further submitted that the Financial Analysis Report of the assessee company has not changed over the years as captured by ITAT in its order for A.Y. 2006-07 and A.Y. 2007-08.
3.5 The Ld. DR relied upon the order of the TPO/AO and DRP.
3.6 We have heard both the parties and perused all the relevant documents. The profile and functions of the assessee company have not changed from the previous Assessment Years. It is pertinent to note that the Tribunal in earlier assessment year has categorically held as under:
"5.02 KALS Info Systems Limited ("KALS") - The Ld. AR has submitted that this company has been included as a comparable on the ground that it was functionally comparable to the assessee company. It was submitted that this company earns revenue from software products.
5.02.1 The Pune Bench of the ITAT in the case of Bindview India P. Ltd. vs. DCIT in ITA No. 1386/PN/2010 for AY 2006-07 has held that, "Another issue relating to selection of comparables by the TPO is regarding inclusion of KALS Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185 - 186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185 - 186 of the Paper Book from the website of the company ITA No. 2587/Del/2014 AY: 2007-08 to establish that it is engaged in providing of IT enabled Services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to 6 ITA Nos. 410/Del/2013 & Ors. be excluded from the final set of comparables, and thus, on this aspect, assessee succeeds." ITAT Bangalore Bench in Hewlett - Packard (India) Globalsoft P. Ltd. vs. DCIT in IT (TP) No. 1031/Bang/2011 followed the view of the Pune Bench as aforesaid and also excluded this company as a comparable. Taking strength from these judicial precedents and the fact that this company is not functionally comparable to the assessee company, we order exclusion of this company from the final set of comparables."
Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude KALS Information Systems Ltd. from the final list of comparables.
3.7 Bodhtree Consulting Ltd. :- The Ld. AR submitted that this company was already rejected in assessee's own case for A.Y. 2006-07 by the Tribunal in ITA No. 1565/Hyd./2010 (Del.) order dated 21.09.2016 which was confirmed by the Hon'ble Delhi High Court vide order dated 02.05.2017 (ITA No.318/2017). The Ld. AR further submitted that in subsequent Assessment Year i.e. 2007-08 also this comparable was rejected by the Tribunal in assessee's own case vide order dated 27.09.2017 (ITA No. 2587/DEL/2014). The Ld. AR further submitted that the Financial Analysis Report of the assessee company has not changed over the years as captured by ITAT in its order for A.Y. 2006-07 and A.Y. 2007-08.
3.8 The Ld. DR relied upon the order of the TPO/AO and DRP.
3.9 We have heard both the parties and perused all the relevant documents. The profile and functions of the assessee company have not changed from the previous Assessment Years. It is pertinent to note that the Tribunal in earlier assessment year has categorically held as under:
"5.06 Bodhtree Consulting Limited - The Ld. AR has submitted that this company had been included by the TPO by claiming that this company was functionally comparable to the assessee company. The Ld. AR has also submitted that in the case of this company there were fluctuating margins due to peculiar revenue recognition policy. The Ld. AR has submitted that the revenue and expenditure recognition method of this company is unreliable and inaccurate as it does not adhere to the matching principle. He has 7 ITA Nos. 410/Del/2013 & Ors. submitted that based on this fact the ITAT has excluded this comparable in many cases. Since this company does not follow Matching concept, the is a distinct possibility of expenditure in relation to the revenue being booked in earlier year.
5.06.1 This company has been held as not comparable in the following judicial rulings: Support.com India Private Limited [TS- 609-ITAT-2015 (Bang)], Bentley Systems India Pvt. Ltd. [TS-559- ITAT-2015(DEL)], Ness Innovative Business Pvt. Ltd. [TS-177-ITAT- 2014], DE Shaw India Software (P) Ltd. [TS- 19-ITAT-2015(HYD)], Ciena India Private Ltd. vs. ITO (ITA No. 1453 of 2014 & 2948/3324 of 2013). ITAT Delhi Bench in Ciena India Private Ltd. vs. ITO (ITA No. 1453 of 2014 & 2948/3324 of 2013) has held, "when the position of accounts of Bodhtree is such that it does not properly match expenses with Revenue, it loses its credibility for making a logical comparison with a company that accounts for expenses matching with the Revenue. Once it is held that the profits of Bodhtree Consulting Ltd. do not represent fair profitability on year to year basis, this company loses its tag of an effective comparable. We, therefore, order for the exclusion of this company from the final list of comparables. " Drawing support from the above said judicial precedents we direct exclusion of this company from the final set of comparables.
5.07. Ground No. 5 is decided in favour of the assessee in terms of our observations as aforesaid."
Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude Bodhtree Consulting Ltd. from the final list of comparables.
3.10 Tata Elxi Ltd. :- The Ld. AR submitted that this company was already rejected in assessee's own case for A.Y. 2006-07 by the Tribunal in ITA No. 1565/Hyd./2010 (Del.) order dated 21.09.2016 which was confirmed by the Hon'ble Delhi High Court vide order dated 02.05.2017 (ITA No.318/2017). The Ld. AR further submitted that in subsequent Assessment Year i.e. 2007-08 also this comparable was rejected by the Tribunal in assessee's own case vide order dated 27.09.2017 (ITA No. 2587/DEL/2014). The Ld. AR further submitted that the Financial Analysis Report of the assessee company has not changed 8 ITA Nos. 410/Del/2013 & Ors. over the years as captured by ITAT in its order for A.Y. 2006-07 and A.Y. 2007-
08. 3.11 The Ld. DR relied upon the order of the TPO/AO and DRP.
3.12 We have heard both the parties and perused all the relevant documents. The profile and functions of the assessee company have not changed from the previous Assessment Years. It is pertinent to note that the Tribunal in earlier assessment year has categorically held as under:
"5.04.1 It is seen that this company was excluded as a comparable on the ground that it was engaged in the development of specialized/niche products in the following rulings: JDA Software India (P) Ltd. Vs. ITO ([2016] 66 taxmann.com 327) (AY 2006-07), Yodlee Infotech P. Ltd. Vs. ITO [TS-63-ITAT- 2013(Bang)-TP] (AY 2006-07), HCL EAI Services Ltd. Vs. DCIT [TS-133-ITAT- 2013(bang)-TP], Goldman Sachs Services Private Limited [TS-435-ITAT- 2015(Bang)-TP] (AY 2006-07), Novell Software Development (India) P. Ltd. [TS- 257-ITAT-2016 (Bang)] (AY 2007-08), Telecordia Technologies India P. Ltd. [TS-325-ITAT- 2012(Mum)] (AY 2007-08), Virtusa (India) Pvt. Ltd. Vs. DCIT [TS- 253-ITAT-2013(HYD)-TP] (AY 2007-08). In Virtusa (India) Pvt. Ltd. Vs. DCIT [TS-253-ITAT-2013(HYD)-TP] the Hyderabad Bench of the ITAT in ITA No. 1962/Hyd/2011 followed the decision of the Mumbai Bench rendered in the case of Telcordia Technologies India P. Ltd. in ITA No. 7821/Mum/2011, wherein the Mumbai Bench had held that, "From the facts and material on record and submissions made by the Ld. AR, it is seen that Tata Elxsi is engaged in development of niche product and development services, which is entirely different from the assessee company. We agree with the contention of the Ld. AR that the nature of the product developed and services provided by this company are different from the assessee as have been narrated above. Even the segmental details for Revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded from the list of comparable parties." Following the aforesaid decisions, this company cannot be considered as comparable with the assessee and we direct exclusion of the aforesaid company from the final list of comparables while determining ALP."9 ITA Nos. 410/Del/2013 & Ors.
Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude Tata Elexi Ltd. from the final list of comparables.
3.13 Avani Cincom Technologies Ltd. :- The Ld. AR submitted that this comparable company is dealing in both software products and services and segmental data is also not available. The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows:
i. Global Logic India (P) Ltd. vs. DCIT (TS-274-ITAT-2015(DEL)-TP) A.Y. 2008-09 ii. Headstrong Services India (P.) Ltd. vs. DCIT (TS-45-ITAT-2016(DEL)-TP) A.Y. 2008-09 iii. 3DPLM Software Solutions Ltd. (TS-359-ITAT-2013(Bang)-TP) A.Y. 2008- 09 iv. Hewlett-Packard (India) Globalsoft Operation P. Ltd. (TS-446-ITAT- 2015(Bang)-TP) A.Y. 2007-08 v. Novell Software Development (India) P. Ltd. (TS-257-ITAT- 2016(Bang))A.Y. 2007-08 3.14 The Ld. DR relied upon the order of the TPO/AO as well as DRP.
3.15 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company deals in both software products and services. There is no segmental data available. This company cannot be held as comparable company as there is no segmental data available for the present assessment year. Therefore, we direct the TPO/AO to exclude Avani Cincom Technologies Ltd. from the final list of the comparables.
3.15 Wipro Ltd. :- The Ld. AR submitted that there is diversified operations of this comparable company. There is no segmental data available for revenue from sale of product and services of this comparable Company. The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows:10 ITA Nos. 410/Del/2013 & Ors.
i. Global Logic India (P) Ltd. vs. DCIT (TS-274-ITAT-2015(DEL)-TP) A.Y. 2008-09 ii. Ciena India (P.) Ltd. v. DCIT (TS-171-ITAT-2015(DEL)-TP) A.Y. 2008-09 iii. Headstrong Services India (P.) Ltd. vs. DCIT (TS-45-ITAT-2016(DEL)-TP) A.Y. 2008-09 iv. 3DPLM Software Solutions Ltd. (TS-359-ITAT-2013(Bang)-TP) A.Y. 2008- 09 v. Hewlett-Packard (India) Globalsoft Operation P. Ltd. (TS-446-ITAT- 2015(Bang)-TP) A.Y. 2007-08 vi. Novell Software Development (India) P. Ltd. (TS-257-ITAT- 2016(Bang))A.Y. 2007-08 3.14 The Ld. DR relied upon the order of the TPO/AO as well as DRP.
3.15 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company deals in both software products and services. There is no segmental data available. This company cannot be held as comparable company as there is no segmental data available for the present assessment year. Therefore, we direct the TPO/AO to exclude Wipro Ltd. from the final list of the comparables.
3.16 E-zest Solutions Ltd. :- The Ld. AR submitted that this company deals in product development services and high end technical services which fall under KPO services. The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows:
i. 3DPLM Software Solutions Ltd. (TS-359-ITAT-2013(Bang)-TP) A.Y. 2008- 09 ii. Hewlett-Packard (India) Globalsoft Operation P. Ltd. (TS-446-ITAT- 2015(Bang)-TP) A.Y. 2007-08 iii. Novell Software Development (India) P. Ltd. (TS-257-ITAT- 2016(Bang))A.Y. 2007-08 11 ITA Nos. 410/Del/2013 & Ors. iv. Barclays Technology Private Limited vs. ACIT (TS-91-ITAT-2016(PUN)-TP) A.Y. 2008-09 iv. Softbrands India Pvt. Ltd. vs. DCIT (TS-693-ITAT-2016(Bang)-TP) v. Emptoris Technologies India Pvt. Ltd. vs. DCIT (TS-91-ITAT-2016(PUN)- TP) 3.17 The Ld. DR relied upon the order of the TPO/AO as well as DRP.
3.18 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company deals in software products development services and high end technical services which falls under KPO services. This company cannot be held as comparable company as the assessee company is not a KPO service. Thus, functional profile is different of this comparable to that of the assessee company. Therefore, we direct the TPO/AO to exclude E-Zest Solutions Ltd. from the final list of the comparables.
3.19 Persistent Systems Ltd. :- The Ld. AR submitted that there is diversified operations of this comparable company. There is no segmental data available for revenue from sale of product and services of this comparable Company. The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows:
i. Global Logic India (P) Ltd. vs. DCIT (TS-274-ITAT-2015(DEL)-TP) A.Y. 2008-09 ii. Ciena India (P.) Ltd. v. DCIT (TS-171-ITAT-2015(DEL)-TP) A.Y. 2008-09 iii. Headstrong Services India (P.) Ltd. vs. DCIT (TS-45-ITAT-2016(DEL)-TP) A.Y. 2008-09 iv. 3DPLM Software Solutions Ltd. (TS-359-ITAT-2013(Bang)-TP) A.Y. 2008- 09 v. Hewlett-Packard (India) Globalsoft Operation P. Ltd. (TS-446-ITAT- 2015(Bang)-TP) A.Y. 2007-08 12 ITA Nos. 410/Del/2013 & Ors. vi. Novell Software Development (India) P. Ltd. (TS-257-ITAT- 2016(Bang))A.Y. 2007-08 3.20 The Ld. DR relied upon the order of the TPO/AO as well as DRP.
3.21 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company deals in both software products and services. There is no segmental data available. This company cannot be held as comparable company as there is no segmental data available for the present assessment year. Therefore, we direct the TPO/AO to exclude Persistent Systems Ltd. from the final list of the comparables.
3.22 Softsol Ltd. :- The Ld. AR submitted that this comparable Company's margin includes the expenses related to rental income which should have been excluded by the TPO and therefore, the Ld. AR further submitted that the margin of this comparable company be re-computed. The Ld. AR relied upon the decision of the Tribunal which is as follows:
i. Tata Mcgraw Hill Education (TS-230-ITAT-(DEL)-TP) A.Y. 2008-09 3.14 The Ld. DR relied upon the order of the TPO/AO as well as DRP.
3.15 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company was considered for the same A.Y. 2008-09 in case of Tata Mcgraw Hill Education (supra) wherein it is held that "....the JCIT has not given any basis for attribution of expenses to the earning of rental income and the figure of depreciation also has not been correctly adopted". Therefore, the Tribunal further held as under:
35. Under such circumstances, in our opinion, only the direct expenses attributable to the earning of rental income viz. 23,37,991/- is to be excluded and the margins to be recomputed. ............. We, accordingly, direct the ld.
TPO to recomputed the margin of this comparable and determine the average margins accordingly."
13 ITA Nos. 410/Del/2013 & Ors.In the present assessee's case also the TPO has not taken into account the correct margin of the comparable company therefore, we direct the TPO/AO to recomputed the margin of Softsol India Ltd. and determine the average margins accordingly. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.
4. In result, appeal being ITA No. 410/DEL/2013 for A.Y. 2008-09 filed by the assessee is partly allowed for statistical purpose.
5. Now we are taking up the appeals for A.Y. 2009-10 filed by the Assessee as well as the Revenue being ITA No. 1484/DEL/2014 (by assessee) and ITA No. 1204/DEL/2014 (by Revenue).
6. The Ld. AR submitted that in A.Y. 2009-10, the TPO/AO as well as DRP has included Bodhtree Consulting Limited, KALS Information Systems Limited and Infosys Technologies Limited. The Assessee submitted that these comparable companies are not at all comparable to the assessee company as the same was excluded in preceding Assessment Years by the Tribunal. The Ld. AR submitted that the contentions taken for A.Y. 2008-09 will be applicable in the present Assessment Year as well as the assessee company profile and functions were not changed in this year.
7. The Ld. DR relied upon the order of the TPO/AO as well as the directions of the DRP.
8. We have heard both the parties and perused all the records. In previous A.Y. 2008-09 we have excluded these three comparables on the ground that the functional profile and functions of the assessee company has not changed in the that Assessment Year which is applicable in this Assessment Year i.e. 2009-10. In A.Y. 2006-07, also these comparables have been excluded by the Tribunal which is confirmed by the Hon'ble Delhi High Court. Thus, the reasoning given by us for A.Y. 2008-09 are applicable in the present case. Accordingly in light of the above judicial precedent, we direct the TPO/AO to 14 ITA Nos. 410/Del/2013 & Ors. exclude Bodhtree Consulting Limited, KALS Information Systems Limited and Infosys Technologies Limited from the final list of comparables.
9. As regards Ground No. 18 of the assessee's appeal for A.Y. 2009-10, the Ld. AR submitted that the AO/DRP erred in making/upholding, disallowance of Rs. 6,67,62,386/- in respect of the 'severance cost' incurred by the assessee during the Financial Year 2008-09. The Ld. AR further submitted that the AO erred in holding that the expenditure towards severance cost accrued in the Financial year 2009-08 instead of Financial Year 2008-09 (A.Y. 2009-10). The Ld. AR submitted that the expenses got crystallized in Financial Year 2008-09 only and the assessee has maintained its books of accounts on accrual basis.
10. The Ld. DR relied upon the order of the Assessing Officer and the direction of the DRP.
11. We have heard both the parties and perused all the relevant documents. It is pertinent to note that the assessee company made payment of the severance cost during the Financial Year 2008-09. However, as per the letter dated 06.03.2009 produced by the Assessee it was seen that the employee's were to be relieved from service on 30.04.2009. Therefore, the liability to pay the severance/notice pay etc. accrued to the assessee company in A.Y. 2010-11 as per the version of the Assessing Officer. From the records and from the Assessment Order it is not clear as to when the severance cost has been crystallized. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground No. 18 of assessee's appeal for A.Y. 2009-10 is partly allowed for statistical purpose.
12. In respect of the Revenue's appeal for A.Y. 2009-10, the same is regarding inclusion of the Bodhtree Consulting Limited. For that we have already given the findings while dealing the said comparable in Assessee's appeal. Therefore, the Appeal of the Revenue is dismissed.
15 ITA Nos. 410/Del/2013 & Ors.13. In result, Appeals being ITA No. 410/DEL/2013 (A.Y. 2008-09) and ITA No. 1484/DEL/2014 (A.Y. 2009-10) filed by the assessee are partly allowed for statistical purpose and appeal being ITA No. 1204/DEL/2014 (A.Y. 2009-10) filed by the Revenue is dismissed.
Order pronounced in the Open Court on 23th May, 2018.
Sd/- Sd/-
(R. S. SYAL) (SUCHITRA KAMBLE)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 23/05/2018
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
16 ITA Nos. 410/Del/2013 & Ors.
Date
1. Draft dictated on 11/04/2018 PS
2. Draft placed before author 11/04/2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS
6. Kept for pronouncement on PS
23.05.2018
7. File sent to the Bench Clerk PS
23.05.2018
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.
17 ITA Nos. 410/Del/2013 & Ors.