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Adobe Software India Private Ltd. (Now merged with Adobe Systems India Private Ltd.) Versus Additional Commissioner of Income-tax, Noida Range, Noida (U. P).

2010 (12) TMI 1276 - ITAT DELHI

ITA No. 4061(Del)/2010 - Dated:- 27-12-2010 - C. L. Sethi (Judicial Member) And K. G. Bansal (Accountant Member) For the Appellant : Salil Kapoor & Sanat Kapoor, Advocates For the Respondent : Ashok Pandey, CIT, DR ORDER K. G. Bansal (Accountant Member) This appeal emanates from the order of the Assessing Officer passed on 12.07.2010 under the provisions of section 143(3) read with section 144C of the Income-tax Act, 1961, relating to assessment year 2006-07. 1.1 The assessee has raised the .....

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independent of each other. That on the facts and circumstances of the case and in law, 1. The AO/DRP has erred in confirming the order passed u/s 92CA(3) of the Act making an addition of ₹ 3,00,45,367/- to the total income of the appellant on account of adjustment in the arm s length price of the international transaction entered by the appellant with its associated enterprises. 2. The DRP has erred in concurring with findings of the AO/TPO and disregarding the economic analysis undertake .....

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action is not at arm s length. 4. The TPO/AO has erred in determining the arm s length margin/price using only financial year 2005-06 data which was not available to the assessee at the time of complying with the TP documentation requirements. 5. The TPO/AO has erred in rejecting certain comparable companies identified by the assessee where consolidated results had been used for analysis. The assessee had considered the consolidated results in only those case where the software related income of .....

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fied by the assessee as having different accounting year (i.e., companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months). 9. The TPO/AO has erred by rejecting certain comparable companies identified by the assessee using employee cost greater than 25 percent of the total revenues as a comparability criterion. 10. The TPO/AO has erred by rejecting certain comparable companies identified by the assessee using onsite revenu .....

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back in computing the operating margins of the comparable companies. 14. The TPO/AO has erred by not making suitable adjustments to account for differences in the risk profile of the assessee vis-à-vis the comparables. 15. The TPO/AO has erred in not providing the benefit of the arm s length range as provided under proviso to section92C of the Act for purposes of computing the arm s length price under section 92F of the Act. 16. The AO has erred in not allowing set-off of unabsorbed depr .....

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the same is liable to be quashed. 1.3 It may be mentioned that the assessee had moved an application for stay of demand on 03.09.2010. This application was disposed off on 23.09.2010 by making the following interim order:- 5. We have gone through the record and having regard to the order of the DRP and the TPO, we are convinced that there is a prima facie case of the assessee before the Tribunal. We, therefore, restrain the department from enforcing the recovery of demand for this assessment yea .....

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The aforesaid interim order ceases to have force on passing the final order on the appeal. 2. The facts of the case are that the assessee filed its return on 23.11.2006 declaring nil income. The assessee had computed the business income at ₹ 7,33,01,097/-, which was claimed to be not includible in the total income under the provisions of section 10A of the Income-tax Act, 1961. The return was processed u/s 143(1) and refund of ₹ 434,560/- was granted to the assessee. Thereafter, the .....

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ted, Macromedia Neitherland BV and its subsidiaries, all being associated concerns. In the course of assessment proceedings, it was found that the assessee entered into international transactions with the associated concerns and the aggregate value of such transactions was declared at ₹ 37,12,95,276/-. The valuation of these transactions was referred to the Transfer Pricing Officer, who determined the arm s length price at ₹ 40,13,40,643/-, resulting in adjustment of ₹ 3,00,45, .....

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ns, the DRP disposed off the matter by way of cryptic order upholding the adjustment proposed by the AO and disallowing the brought forward losses. For the sake of ready reference, paragraph no.6 of the order is reproduced below:- 6. Assessee has furnished detailed submission in support of grounds of objections. However, after going through the order of Assessing Officer, submission of the assessee and material available on record, we are of the opinion that the TP adjustment made by the TPO is .....

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under which the merger took place with effect from 01.04.2006. Therefore, the company as assessed ceased to exist on 01.04.2006. The assessment order was passed on 12.07.2010, much after this date of merger. It was submitted that all facts relating to merger are on record and, therefore, the ground may be admitted as it raises merely a pure question of law. For the admission of the ground, reliance has been placed on the decision of Hon ble Supreme Court in the case of National Thermal Power Co .....

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issue is purely an issue of law. Therefore, additional ground no. 2 is admitted, which is sufficient to deal with the controversy raised in both the grounds. 4. After considering the grounds raised initially and in additional grounds, two main questions remain for decision, whether on the facts and in the circumstances of the case, -(i) the order of assessment is bad in law as it has been framed on a non-existing entity; (ii) the AO was right in making adjustment of ₹ 3,00,45,367/- on acco .....

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