Eurofins IT Solutions India Pvt. Ltd. Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that interest under section 234A cannot be levied when the return of income is filed within the time stipulated in section 139(1) of the Income Tax Act.
Facts-
Other than inclusion/ exclusion of comparable, the assessee has contested levy of interest under section 234A and 234B of the Income Tax Act. It is alleged by the assessee that AO has erred in in levying interest under section 234A of the Act amounting to INR 3,10,896 without considering the fact that the Appellant had filed its original return of income within the time limit prescribed under section 139(1) of the Act. Further, it is also alleged that AO has erred, in law and facts, by levying interest under section 234B of the Act amounting to INR 1,80,31,968. The levy of interest is consequential in nature.
Conclusion-
Held that the assessee filed return of income on 30.11.2017 within the time stipulated in section 139(1) of the Act and as such there was no delay in filing the return of income. The levy of interest u/s 234A of the Act is bad in law. In our opinion, this requires to be verified at the end of the AO if the return has been filed within the due date prescribed u/s 139(1) of the Act, there cannot be any levy of interest u/s 234A of the Act. With regard to levy of interest u/s234B of the Act, which is consequential and mandatory in nature and to be computed accordingly.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is directed against final assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income-tax Act,1961 [‘the Act’ for short] by the CIT(A), NFAC Delhi dated 24.1.2022 for the AY 2017-18. The assessee has following grounds of appeal:-
Grounds of appeal relating to transfer pricing matter
i. Grounds of appeal applicable to both Software Development Services Transaction and IT enabled Services transaction:
1. The learned Transfer Pricing Officer (“TPO”)/ learned AO/ have erred, in law and in facts, in not appreciating the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 (“Rules”), conducting a fresh economic analysis for the determination of the arm’s length price (“ALP”) in connection with the impugned international transaction and holding that the Appellant’s international transaction is not at arm’s length;
2. The learned TPO/ learned AO have erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant using the foreign earnings less than 75% of the Net sales as comparability criterion.
3. The learned TPO/ learned AO have erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant using the employee cost greater than 25% of the sales as comparability criterion.
4. The learned TPO/learned AO have erred, in law and in facts, by rejecting certain comparable companies identified by the appellant using the related party transactions more than 25% of the sales as a comparability criterion.
5. The learned TPO/ learned AO have erred, in law and in facts, by rejecting certain comparable companies using income from core services (i.e., SWD and ITeS) of less than 75% of the sales as comparability criterion;
6. The learned TPO/ learned AO have erred, in law and in facts, by not applying a higher threshold while applying turnover filter;
7. The learned TPO/ learned AO have erred, in law and in facts, by selecting the comparable companies only if the data pertaining to FY 2016-17 is available in the public database, which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements;
8. The learned TPO/ learned AO have erred, in law and in facts, by applying the filter of companies having different accounting year for rejecting the comparable companies (i.e., companies having different accounting year other than March 31 or companies whose financial statements were for a period other than 12 months);
The learned TPO/ learned AO have erred, in law and in facts, by rejecting the filter adopted by the Appellant for rejecting companies owning significant intellectual property or developing proprietary products;
10. The learned TPO/ learned AO have erred, in law and in facts, by rejecting the filter adopted by the Appellant for rejecting companies who have reported extra ordinary events like mergers and acquisitions, in its financial statements;
11. The learned TPO/learned AO have erred in law and in facts, by accepting/rejecting certain companies based on unreasonable comparability criteria;
12. The learned TPO/ learned AO have erred, in law and in facts, by not making suitable adjustments to account for differences in the risk profile of the Appellant vis-a-vis the comparables.
13. The learned TPO/ learned AO have erred, in law and in facts, ‘by not making an adjustments to account the difference in working capital of the Appellant vis-a-vis the cornparables.
Grounds specifically for IT enabled Services Segment
14. The learned TPO/ learned AO have erred, in law and in facts, by accepting certain companies based on unreasonable comparability criteria listed glow:
Microland Limited
> Datamatics Business Solutions Limited
> Infosys BPM Services Private Limited’
> Vitae International Accounting Services Private Limited
> Manipal Digital Systems Private Limited
> CES Limited
> SPI Technologies India Private Limited
> Inteq BP0 Services Private Limited
> Tech Mahindra Business Services Limited
15. The learned TPO/ learned AO have erred, in law and in facts, by rejecting certain companies based on unreasonable comparability criteria listed below:
Allsec Technologies Limited
Cosmic Global Limited
iii. Grounds specifically for Software Development Services Segment
16. The learned TPO/ learned AO have erred, in law and in facts, by accepting certain companies based on unreasonable comparability criteria listed below:
> Larsen and Toubro Infotech Limited
> Great Software Laboratory Private Limited
> Persistent Systems Limited
> Tata Elxsi Limited
> Infobeans Technologies Limited
> Aptus Software Labs Private Limited
> Nihilent Limited
> Cygnet Infotech Private Limited
> Infosys Limited
> Cybage Software Private Limited
> Consilient Technlogies Private Limited
> Threesixty Logica Testing Services Private Limited
> OFS Technologies Limited
> Mindtree Limited
> R Systems International Limited
17. The learned TPO/ learned AO have erred, in law and in facts, by rejecting certain companies based on unreasonable comparability criteria listed below:
Evoke Technologies Private Limited
Sasken Technologies Limited
B. Other Grounds
18. The learned AO has erred. in law and on facts, in levying interest under section 234A of the Act amounting to INR 3,10,896 without considering the fact that the Appellant had filed its original return of income within the time limit prescribed under section 139(1) of the Act:
19. The learned AO has erred, in law and facts, by levying interest under section 234B of the Act amounting to INR 1,80,31,968. The levy of interest is consequential in nature:
2. At the time of hearing, the assessee has pressed only ground Nos.14, 16, 18 & 19 of the grounds of appeal and other grounds are not pressed. Accordingly, we confine to the adjudication of ground Nos.14, 16, 18 & 19 only. Other grounds are dismissed as not pressed.
IT Enabled Services Segment:
3. At the time of hearing, the assessee confined for exclusion of following 3 comparables in ground No.14 on the basis of turnover filter. Accordingly, other comparables are not considered for adjudication.
