Income Tax Appellate Tribunal - Pune
M/S. Carraro Technologies India Pvt. ... vs Income-Tax Officer,, on 30 November, 2016
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी #वकास अव थी, या%यक सद य के सम& ।
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 2189/PN/2013
%नधा(रण वष( / Assessment Year : 2010-11
M/s. Carraro Technologies India Pvt. Ltd.,
B2/2, MIDC, Ranjangaon,
Pune - 412220
PAN : AACCC8571D
.......अपीलाथ / Appellant
बनाम/Vs.
Income Tax Officer,
Ward - 1(1), Pune
......
यथ / Respondent
Assessee by : Shri Kishor Phadke
Revenue by : Shri P.L. Kureel
सन
ु वाई क तार ख / Date of Hearing : 02-11-2016
घोषणा क तार ख / Date of Pronouncement : 30-11-2016
आदे श / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-IT/TP, Pune dated 22-07-2013 for the assessment year 2010-11.
2. The appeal of the assessee has been filed with the delay of 88 days. The assessee has filed a petition for condonation of delay supported by an affidavit citing reasons for delay in filing of the appeal. 2 ITA No. 2189/PN/2013, A.Y. 2010-11 After perusing the same, we are satisfied with the delay in filing of appeal is unintentional and the same is condoned. The appeal of the assessee is admitted to heard and disposed of on merits.
3. The assessee has raised following grounds in the appeal :
1. "The learned CIT(A)-IT/TP erred in law and on facts in confirming the addition of Rs.72,79,939 u/s 92 C of the ITA, 1961 made by learned AO to the taxable income of the appellant.
2. The learned CIT-IT/TP erred in law and on facts in confirming the action of the learned AO in rejecting Onward Technologies Limited, having OPTC of (-) 14.86%, as a valid comparable, on the mere ground that the said party is reporting losses consistently. The I-T authorities erred in not appreciating that there is no any rule of such rejection of public domain data.
3. Alternatively and without prejudice, the learned CIT(A)-IT /TP erred in law and on facts in confirming inclusion of external comparable called TATA Technologies Limited, having higher OPTC of 31.18%, despite removal of Onward Technologies Limited, on the analogy of loss making entity. The learned I-T authorities ought to have resorted to process of filtering of alleged abnormal results companies fairly.
4. Alternatively and without prejudice, the learned CIT(A)-IT/TP and the learned TPO erred in law and on facts in not appreciating that the company, M/s Tata Technologies Limited, was a wrong inclusion in the final array of comparables despite the fact that the said company has substantial Related Party Transactions.
5. The assessee craves leave to add / modify / delete all or any of the grounds of appeal."
4. The brief facts of the case as emanating from records are: The assessee-company is engaged in providing Design Engineering and ITES services to its AEs. To benchmark its international transaction the assessee had adopted Transactional Net Margin Method (TNMM). The assessee selected following four comparables in its TP study : 3 ITA No. 2189/PN/2013, A.Y. 2010-11
Company's Name Adjusted OP/OC
Onward Technologies Ltd. -14.86
Tata technologies Ltd. 31.18
Infotech Enterprise Ltd. (Segmental) 13.24
KGL Systel Ltd. (Segmental) 5.34
Mean 8.72
4.1 During the course of assessment the Assessing Officer excluded Onward Technologies Ltd. from the list of comparables being consistent loss making company. With the execution of Onward Technologies Ltd. the arithmetic mean of remaining comparable companies increased to 16.59% as against the operating margin of assessee at 2.46%. Since, the adjusted operating margin of the comparables was beyond ±5%, the Assessing Officer made adjustment of `72,79,939/- in the international transactions of the assessee.
4.2 Aggrieved by the assessment order dated 31-12-2012, the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the contention of the assessee and upheld the findings of Assessing Officer. Against the order of Commissioner of Income Tax (Appeals), the assessee is in second appeal before the Tribunal.
5. Shri Kishor Phadke appearing on behalf of the assessee submitted that the Commissioner of Income Tax (Appeals) has erred in upholding the exclusion of Onward Technologies Ltd. from the list of comparables on the ground that it is a consistent loss making company. The ld. AR referred to profit and loss account of Onward 4 ITA No. 2189/PN/2013, A.Y. 2010-11 Technologies Ltd. from the financial years 2006-07 to 2011-12 placed on record at pages 78 to 80 of the paper book. The ld. AR submitted that a company is said to be consistent loss making company if it has incurred losses in three consecutive financial years. In the present case Onward Technologies Ltd. has profit in financial year 2006-07. The company has incurred losses in financial years 2007-08, 2008-09 and 2009-10. Again in the financial years 2010-11 and 2011-12 the company has earned profits. The relevant financial year to be considered for determining whether the company is a consistent loss making company or not are financial years 2006-07, 2007-08 and 2008-09. The ld. AR in support of his contentions placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of M/s. SunGard Solutions (India) Pvt. Ltd. Vs. Assistant Director of Income Tax in ITA No. 370/PN/2013 for assessment year 2005-06 decided on 18-01-2016 and in the case of Principal Global Services Pvt. Ltd. Vs. Dy. Commissioner of Income Tax in ITA No. 280/PN/2014 for assessment year 2009-10 decided on 10-04-2015.
6. On the other hand Shri P.L. Kureel representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in rejecting Onward Technologies Ltd. as comparable.
7. Both sides heard. Orders of the authorities below perused. In appeal the assessee has made two alternate submissions. The first submission of the assessee is that Onward Technologies Ltd. has been wrongly excluded from the list of comparable, therefore, the same should included in the list of comparables. In an alternate prayer the ld. AR prayed for excluding from the list of comparables Tata 5 ITA No. 2189/PN/2013, A.Y. 2010-11 Technologies Ltd. having operating margin of 31.18% on the ground of high profit making company.
8. There is no dispute in respect of settled position that the consistent loss making company has to be excluded from the list of comparables. A company is said to be consistent loss making when the company has incurred losses in the three consecutive financial years including the financial year in which the international transactions have been made. In the instant case Financial Year 2009-10 is relevant to the assessment year under appeal. Thus, the financial years to be considered for determining whether the company is consistent loss making are financial years 2007-08, 2008-09 and 2009-10. A perusal of the profit and loss account of Onward Technologies Ltd. placed on record shows that the said company has suffered losses in financial years 2007-08, 2008-09 and 2009-10. The profits/(losses) before tax of the company in the relevant three financial years are as under :
Financial Year Profit/(Loss) before tax
(in `)
2007-08 (1,65,87,281)
2008-09 (8,89,22,096)
2009-10 (5,18,75,427)
Thus, it is evident from the perusal of the financial results of Onward Technologies Ltd. that Onward Technologies Ltd. is consistent loss making company, therefore, the said company cannot be considered as a good comparable.
9. In so far as exclusion of Tata Technologies Ltd., the ld. AR has not substantiated as to how the said company has abnormal profits. 6 ITA No. 2189/PN/2013, A.Y. 2010-11 We do not find any merit in the appeal of the assessee and the same is dismissed.
10. In the result, the appeal of the assessee is dismissed.
Order pronounced on Wednesday, the 30th day of November, 2016.
Sd/- Sd/-
(आर. के. पांडा / R.K. Panda) (!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER $या%यक सद"य / JUDICIAL MEMBER
पुणे / Pune; &दनांक / Dated : 30th November, 2016 RK आदे श क+ ,%त.ल#प अ/े#षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. आयकर आय' ु त (अपील) / The CIT(A)-IT/TP, Pune
4. आयकर आय' ु त / The CIT-I, Pune
5. !वभागीय %त%न,ध, आयकर अपील य अ,धकरण, "बी" ब/च, पुणे / DR, ITAT, "B" Bench, Pune.
6. गाड1 फ़ाइल / Guard File.
//स या!पत %त // True Copy// आदे शानुसार / BY ORDER, %नजी स,चव / Private Secretary, आयकर अपील य अ,धकरण, पण ु े / ITAT, Pune