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Gameloft Software Private Limited Versus Deputy Commissioner of Income Tax, Hyderabad

2017 (11) TMI 716 - ITAT HYDERABAD

TPA - selection of comparable - Held that:- Exercise of selection of comparables has to be done specifically keeping in mind the special nature of assessee’s business in developing gaming software. The AO is directed to keep the detailed orders of the Coordinate Bench in AYs. 2008-09 & 2010-11 and can reexamine the issue of TP adjustment afresh after giving due opportunity to assessee. For these reasons, the issues on merits are considered allowed and the order of the TPO/AO with reference to TP .....

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el [DRP]. Assessee has raised as many as ten grounds running to eight pages which included detailed submissions also. 2. Ground Nos. 1 & 2 are on the issue that the DRP has rejected the objections raised by assessee belatedly and accordingly, the order passed by the Assessing Officer (AO) is time barred. Further, the DRP has not given any directions in view of non-admission of objections and therefore, the final order is void ab-initio and not sustainable. In addition to the issue of legal g .....

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er passed by the AO, wherein the DRP has not given any directions for completion of assessment in a particular manner is not correct. 4. Initially, Ld. Counsel relied on the Co-ordinate Bench decision in the case of M/s. Planet Online Private Limited Vs. ACIT in ITA No. 519/Hyd/2015 dt. 04-09-2015 [65 taxmann.com 46 (Hyderabad-Trib)]. However, it has been brought to the notice of the Bench that assessee has filed a letter with the AO that he has filed objections before the DRP on 05-04-2016 i.e. .....

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39;). Assessee company is engaged in provision of gaming software development to its AE. It is also a distributor of the digital software games developed by its parent, Gameloft SA . It operates from two units i.e. Hyderabad unit and Noida unit. The Hyderabad unit is engaged in the development of software for games and the Noida unit is engaged in distribution of software to domestic users. The international transactions of assessee-company with AEs (Associated Enterprise) during the year are as .....

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butes software games developed by its AE to domestic unrelated third parties. In this regard, assessee remits royalty to its AE based on a revenue sharing agreement between the parties. As per the intercompany software licensing agreement between the AE and assessee, the holding company has granted the Indian subsidiary right to distribute and market the games published by the parent company. 4.2. For the AY 2012-13, assessee filed its return of income on 30th November 2012 disclosing a total in .....

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the ALP for provision of software development services at 19.17% after a working capital adjustment of 0.88% and charged a notional interest on receivables at 14.75%. Accordingly, the TPO made a TP adjustment of ₹ 3,17,55,047/-. 4.3. The AO completed the draft assessment order on 19th February, 2016 and the assessee was supposed to file the objections within thirty days i.e., on or before 23-03-2016. It seems that assessee has couriered the objections in Form 35A to an address in Nrupatun .....

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y as well as further delay due to postal rejection of the couriered letter. The DRP, however, did not condone the delay and rejected the objections filed by assessee vide its directions dt. 8th November 2016. The AO passed final assessment order dt. 30-12- 2016 and determined the total adjustment at ₹ 3,17,55,047/-. 5. As stated earlier in Ground Nos. 1 & 2, assessee is contesting that the final order is void ab-initio and un-sustainable. Ld. Counsel submitted that the final order pass .....

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ver, gave a judgment against the assessee and in favour of Revenue on similar facts. 6. Ld.DR, however, in reply submitted that assessee has filed a letter with the AO that he has filed objections in time and therefore, AO was made to believe that assessee s objections are valid. AO could not have completed the final order once it was intimated to him that objections were filed. Even though the DRP ultimately rejected the objections on the issue of delay, it was his submission that order passed .....

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also the time limits for completion of final order by AO, if no objections were filed against the draft order. On those facts, since the objections filed by assessee were rejected by the DRP, the Bench was of the opinion that AO should have passed the order within further period as provided, as if no objections were received. However, in the present case, assessee not only intimated the AO that it has filed objections but also filed the objections with a condonation petition within the time lim .....

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n dispute that the petitioner has filed their objection before the 1st respondent only on 29.04.2016 by specifically indicating as though the draft order of assessment was served on them only on 31.03.2016. Thus, it is evident that the petitioner made the 1st respondent to believe that the objections were filed in time. However, when it was pointed out by the 2nd respondent to the 1st respondent, through communication dated 25.07.2016, that the draft assessment order was served on the assessee o .....

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29.03.2016. Learned counsel for the petitioner also admitted that the draft assessment order was served on the petitioner on 29.03.2016. Thus, it is evident that the petitioner, having received the draft assessment order on 29.03.2016, has deliberately and intentionally misled the 1st respondent as though it was served on them only on 31.03.2016, so as to bring the filing of the objections within the period of limitation. 10. Therefore, it is not in dispute that the petitioner has filed the obje .....

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Chennai-24 Madam, Sub: Appeal for IT Assessment order for Assessment year 2012-13 Ref: Your order dated 29-03-2016 PAN-AACC11592A (Inno estates Private Limited) Please find attached the entire set of documents filed before the Dispute Redressal Panel. We request you to keep the demand in abeyance till the disposal of the appeal. Thanking you, For Inno Estates Private Limited Director. 11. In the above said letter, apart from making the 2nd respondent to believe as though the objection was filed .....

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er. Only when no objections are received within the period specified under Sub- Section 2, the Assessing Officer shall complete the assessment on the basis of the draft order, as contemplated under Section 144(C)(3) of the said Act. In this case, by communication dated 27.04.2016, the petitioner, by attaching the entire set of documents filed before the 1st respondent, asserted and made the Assessing Officer to believe that the objection was filed in time. Therefore, the 2nd respondent is justif .....

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ide the matter as provided under Section 144C(5)& (6)of the said Act. Therefore, the Assessing Officer cannot proceed to pass the final order till the Dispute Resolution Panel passes an order as stated supra. Once the objection is filed within the period of limitation, consideration of the same is vested only with the Dispute Resolution Panel as provided under Section 144C(5),(6),(7) & (8) of the said Act and as such the Assessing Officer cannot decide such objection. Therefore, filing o .....

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not think the learned counsel for the petitioner is justified in making such contention in view of sub-section 8 of Section 144C which reads as follows: (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order (Explanation - For the removal of doubts, it is hereby declared that the po .....

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n dispute that the 1st respondent rejected the objection filed by the petitioner on 10.11.2016, of course, on the ground that it is barred by limitation. Still it is an order rejecting the objections. Once, the 1st respondent has chosen to reject the objections either on merits or on the ground of delay, it goes without saying that resultant position of such rejection is nothing but confirmation of the draft order passed by the 2nd respondent, as contemplated under Section 144C(8) of the said Ac .....

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order dated 10.11.2016. In my considered view, the dismissal or rejection of the objections filed by the petitioner, on whatever the ground may be, itself is a direction to the Assessing Officer to complete the assessment in accordance with draft order as contemplated under Section 144C(5) which reads as follows: (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Offi .....

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(13) of the said Act. 16. The next question that would arise for consideration is as to what is the remedy available to the petitioner as against the order passed under Section 144C(13) of the said Act. I have already found that the final order passed by the 2nd respondent dated 18.11.2016 is the one passed under Section 144C(13) of the said Act. I have also found that the said order was passed well within the period of limitation. In such a situation, the petitioner is entitled to file an appea .....

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rs, parties should not be permitted to resort to the remedy under Article 226 of the Constitution of India. The reliance placed on by the learned counsel for the petitioner in the decisions reported in 2016(75) taxmann.com (Rain Cements Ltd. v. Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad) and 2013(31) taxmann.com 396 (Intimate fashions (India) (P,) Ltd. vs. Assistant commissioner of Income-tax, Company CircleII(3), Chennai) is not helping the petitioner in any manner as the facts a .....

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ssessee is in the specified business and the comparable companies are not at all comparable. This issue was discussed by the Co-ordinate Bench in assessee s own case for the AYs. 2008-09 and 2010-11. The decision of the Co-ordinate Bench of ITAT, Hyderabad in para 17 onwards is as under: 17. Ground no. 9 is with regard to comparables selected under section 133(6) of the Income Tax Act, 1961. Ld. AR submitted that at the time of TP study assessee had no access to such data therefore such data can .....

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