IBM India Pvt. Ltd Vs JCIT (ITAT Bangalore)
ITAT Bangalore held that deduction under section 10A/ 10B of the Income Tax Act allowable as the assessee has obtained post facto approval from RBI coupled with the fact that it has also realized the said amounts.
Facts-
In the original DAO, AO had denied relief u/s. 10A of the Act amounting to INR 203,19,41,646. The disallowance was upheld by the DRP in its original directions and accordingly, the original FAO was passed denying such relief.
Aggrieved by the same, the assessee filed the original appeal before the Tribunal. While disposing off the original appeal, the Tribunal set aside the claim for relief of tax holiday with directions to the Ld.AO to allow the claim to the extent of receipt of sale proceeds of computer software exported out of India being brought into India in convertible foreign exchange.
AO granted relief to the extent of INR 175,92,17,915 and disallowed the balance amount of INR 27,27,23,731 by concluding that the balance amount was deposited in an account outside India which was not approved by the Reserve Bank of India (RBI’). Aggrieved by the above, the assessee filed the subject appeal before the Hon’ble ITAT.
Conclusion-
Held that from the letter of RBI dated 28/02/2014, it is been clearly stated that the assessee is granted post facto extension. The assessee company had also subsequently realized the said amount. The assessee has obtained post facto approval from RBI coupled with the fact that it has also realized the said amounts, it is entitled to the deduction u/s. 10A/10B of the Act on the said amounts.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal is filed by the assessee against final assessment order dated 28/10/2019 passed by Ld. JCIT, Special Range-4, Bangalore for AY 2006-07 on following grounds of appeal:
2. Brief facts of the case are as under:
2.1 At the outset, the Ld.AR submitted that the assessee wish to contest the issues raised in Ground Nos. 2, 7 1, 7.3 and 14.
2.2 It is submitted that all other grounds are either general in nature or academic at this stage. Considering the above submission by the Ld.AR, we are adjudicating only Ground nos. 2, 7.1, 7.3 and 14.
2.3 The assessee submits that, the Ld.TPO in the original transfer pricing order dated 28/10/2009 selected certain set of comparables. In the original transfer pricing order, the Ld.TPO did not make any adjustment on account of Advertisement, Marketing and Promotional (‘AMP’) expenses incurred by the assessee. The Ld.TPO granted to assessee of working capital adjustment also in the original proceedings.
2.4 Before the DRP, the only issue contested by the assessee was in respect of the comparables that the assessee sought to exclude. The DRP agreed with exclusion of two comparables i.e. Infosys Ltd. and Megasoft Ltd. out of the several comparable companies argued by the assessee.
2.5 In an appeal filed before this Tribunal in IT(TP)A No. 1461/Bang/2010 vide order dated 28/07/2017 remanded the appeal to the Ld.AO by observing as under:
“3. Regarding the Transfer Pricing issue raised by the assessee as per ground No. 2 reproduced above, it was submitted by learned AR of the assessee that as per the order of DRP, it can be seen that on page No. 4 of the DRP order, 6 specific objections are not properly decided by DRP and the DRP order is very cryptic. He also submitted that this is the first year of DRP and this may be the reason that DRP has passed cryptic order and therefore, the entire transfer pricing matter may go back to the file of AOITPO for fresh decision because the assessment order is passed by the AO as per the directions of DRP. Learned DR of the Revenue also submitted that the transfer pricing issue may be restored back for the file of AO for a fresh decision because as per the directions of DRP also, the decision of DRP is only with regard to 2 comparable companies i.e., Infosys Ltd., and Megasoft Limited and there is no decision of DRP regarding other comparable companies.
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5. From the above Para reproduced, from the directions of the DRP, it is seen that the decision of DRP is with regard to only 2 comparable companies i.e., Infosys Ltd., and Megasoft Ltd., whereas the assessee is objecting to inclusion of several comparable companies such as Kals Information Systems Ltd., Persistent Systems Ltd., Tata Elxsi Ltd., Bodhtree Consulting Ltd., Accel Transmatic Ltd., Flextronics Software Systems Ltd., in addition to Infosys Ltd., and Megasoft Ltd. This is true that in the objections raised by the assessee before the DRP, as reproduced above, no name of any comparable company is mentioned but still the DRP has picked up only 2 names i.e., Infosys Ltd., and Megasoft Ltd., for its entire discussion and decision and therefore, we feel it proper that under these facts, the entire TP matter should go back to the file of AO for a fresh decision by way of speaking and reasoned order. Accordingly, ground No. 2 of the assessee’s appeal is allowed for statistical purpose.”
It is submitted that the assessee took grounds to state that the original directions of the learned DRP was not a speaking and reasoned order. The assessee also raised appropriate grounds on the comparables selected by the Ld.TPO in the original transfer pricing order. The said grounds and the submissions made by the assessee were appreciated by Coordinate Bench and the matter was remanded to the Ld.AO for a fresh decision by way of speaking and reasoned order on the issues that were alleged by the assessee.
2.6 The Ld.AR submitted that pursuant to the order of the Tribunal in the original appeal, the Ld.TPO issued a Show Cause Notice to the assessee on 10/09/2018, that extended the scope and sought additional information in relation to issues that did not form part of the original round of proceedings before this Tribunal. The assessee objected to the SCN issued, vide submission dated 05/10/2018.
2.7 He submitted that assessee filed objection on the new issue that was raised by the Ld.TPO as it was out of the scope of remand proceedings. The Ld.TPO did not take into consideration the objections raised by the assessee, and passed an order dated 31/10/2018 wherein adjustments were made on account of AMP expenses. Further, on the issues of determination of arm’s length price of export of software service segment, fresh search was conducted by the Ld.TPO fresh set of comparables were chosen. The Ld.TPO did not grant any working capital adjustment in the remand proceedings. The Ld.TPO thus proposed total adjustment as under:
