PER GEORGE GEORGE K : This Stay Petition is filed by the assessee, seeking stay against the recovery of outstanding tax arrears amounting to Rs.74,40,722/-.
2. Brief facts of the case are as follows:- The assessee is an Indian Company engaged in the business of rendering software development services and call centre Page 2 of 5 S.P. No.141/Bang/2011 services. During the year under consideration, the assessee had two STPI units. Unit I was engaged in development and export of software. The profits of this unit were not eligible for deduction u/s 10A. Unit I suffered a loss of Rs.77,58,532/-. Unit 2, which was engaged in IT Enabled Services, had an income of Rs.61,39,512/-. The assessee claimed deduction u/s 10A, in respect of profits earned from this unit. The return of income for the year under consideration was filed on 31.10.2007 declaring a loss of Rs.77,58,534/-. The return was taken up for scrutiny. The case was referred to the TPO u/s 92CA for determination of arms length price. During the year under consideration the assessee had provided software development services to its AEs as well as overseas third parties. The assessee selected Transactional Net Margin Method (TNMM) as the most appropriate method. According to assessee, since adequate data was available so as to enable the assessee to compute the net margins for services rendered to AE as well as Non-AE, it compared the net margin earned from services rendered to AE and Non-AE (internal TNMM). Based on the comparison of net margins earned from AE and Non-AE (internal TNMM), the assessee had concluded that its transactions are at arms length. However, the TPO rejected internal TNMM in the order passed u/s 92CA and selected external TNMM as the most appropriate method. After selecting 26 companies as comparables, the TPO determined the TP adjustment at Rs.1,79,47,930/-. In accordance with the provisions of section 144C, Page 3 of 5 S.P. No.141/Bang/2011 the AO passed a draft assessment order. In the draft assessment order, the AO held that deduction u/s 10A is to be allowed from the total income computed after setting off of the loss of other unit. After making all the above adjustment, the total income has been computed at Rs.1,79,47,930/-. While computing total income, the current year loss of Rs.16,19,020/- remaining after set off of profit of 10A eligible unit was ignored by the AO. Tax payable has been determined at Rs.74,40,722/-. 2.1 The assessee filed detailed objection before the Dispute Resolution Panel. The Dispute Resolution Panel however rejected the objection raised and has upheld the addition proposed by the AO in the Draft assessment order. Based on the directions of the Panel, the AO has retained the TP adjustment at Rs.1,79,47,930/-. The total income has also been computed at Rs.1,79,47,930/-. Tax and interest has been accordingly computed. Total amount demanded is Rs.74,40,722/-.
3. Aggrieved by the assessment so passed, the assessee carried the matter in appeal before us (ITA No.908/Bang/2011) and also filed Stay Petition (S.P.No.141/Bang/2011).
4. When the stay petition was taken up for hearing today the 4th November, 2011, the learned AR submitted that on identical facts, the Tribunal for preceding year had decided the matter and if the same yardstick is taken up for this asst. year, the outstanding tax Page 4 of 5 S.P. No.141/Bang/2011 arrears would be reduced to only Rs.35 lakhs. Further it was submitted that the TRO had included comparable cases of two companies, i.e. Avani Cimcon Technologies Ltd. and Celestial Labs Ltd. are having high operating margin of 52.59% and 58.35% respectively. It was submitted that these companies are not to be included as comparable companies and if such exclusion is done for arriving at the ALP, the tax liability would still be reduced further.
5. The learned DR on the other hand strongly opposed the grant of stay.
6. We have heard the rival submissions and perused the material on record. The assessee has made a prima facie case for grant of conditional stay against recovery of outstanding tax arrears. The Tribunal in assessees own case for the preceding asst. year had decided the issue, which is essentially more or less similar on facts of this case. Therefore, we are of the view that a conditional stay is to be granted on facts of this case. The assessee is directed to pay a total sum of Rs.15 lakhs in two equal monthly installments. The first installment of Rs.7.5 lakhs is to be paid on or before 15th November, 2011 and the balance amount is to be paid on or before 15th December, 2011. The stay shall be in force for a period of 180 days or till the appeal is disposed of whichever is earlier. The Registry is directed to fix the appeal for hearing on 20.12.2011. Page 5 of 5 S.P. No.141/Bang/2011
7. In the result, the Stay Petition filed by the assessee is partly allowed as indicated above. Sd/- Sd/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore, Dt. 04/11/2011 Copy to : 1. The Revenue 2. The Assessee 3. The CIT concerned.
4. The CIT(A) concerned. 5. DR 6. GF MSP/ By order Asst. Registrar, ITAT, Bangalore.
Comments