Commissioner Of Income Tax-Ii, Chandigarh v. M/S Quark Systems India Pvt. Ltd

ITA No. 594 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 594 of 2010 Date of Decision: 16.5.2011 Commissioner of Income Tax-II, Chandigarh ....Appellant. Versus M/s Quark Systems India Pvt. Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL,ACTING CHIEF JUSTICE. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 22.10.2009 passed by the Income Tax AppellateTribunal, Chandigarh Special Bench, Chandigarh (hereinafter referredto as “the Tribunal”) in ITA No. 115/Chd/2009, for the assessment year2004-05, claiming the following substantial question of law:- “Whether on facts and circumstances of the case andin law the ITAT's decision was justified in acceptingadditional ground raised by the assessee to excludethe case of M/s. Datamatics Technologies Ltd. whichwas chosen by the assessee itself and whether the ITAT was justified in remanding the issue ofexclusion of M/s. Datamatics Technologies Ltd. alongwith its observation on the facts of the issue, which islikely to have a bearing on the decision of the TPO?” 2.Briefly stated, the facts necessary for disposal as narratedin the appeal are that the assessee is an Indian company, fully ownedsubsidiary of a Switzerland based company known by the name ofQuark Systems SARL, Switzerland (QSSS). During the course ofassessment proceedings, a reference was made to the Transfer PricingOfficer (TPO) for determination of Arm Length Price qua theinternational transactions which the assessee entered into with itsparent company. The TPO noticed that the assessee had employedTransactions Net Margin Method for the purpose of computing ArmLength Price and did not dispute the same. He further noticed that oneof the comparables, out of independent comparable selected by theassessee for the computation of Arms Length Price was M/s ImerciusTechnologies India Pvt. Ltd. which showed a net loss @ 73.48%. TheTPO rejected M/s Imericus Technologies India Pvt. Ltd. as comparableholding that the said company was incorporated in 2002 only and itsnetworth was negative whereas turnover was also less than theturnover of the tested party. Accordingly, the TPO passed an orderunder Section 92CA(3) of the Act on 23.11.2006 determining the ArmsLength Price of remuneration received by the assessee for softwaredevelopment servicesat Rs.15,56,82,397/-asagainstRs.13,06,27,301/-. Thus, an adjustment to the Arms Length Price wasmade at Rs.2,50,55,096/-. Feeling aggrieved, the assessee filed an ITA No. 594 of 2010 appeal before the Commissioner of Income Tax (Appeals) [in short “theCIT(A)”] who vide order dated 28.11.2008 partly allowed the appealgranting the benefit of 5% to the assessee under Section 92C(2) of theAct and dismissed the same with regard to use of multiple years dataand the selection of M/s Imercius Technologies India Pvt. Ltd. ascomparable. Against the order of the CIT(A), the department as well asthe assessee filed appeals before the Tribunal. The Tribunal vide orderdated 22.10.2009 upheld the exclusion of M/s Imercius TechnologiesIndia Pvt. Ltd. as comparable and remanded the issue of 5% relaxationto the Assessing Officer to reconsider the same in view of theamendment in Section 92C(2) of the Act. The Tribunal further acceptedthe additional ground taken by the assessee for exclusion of M/sDatamatics Technologies from the list of comparables for the purposeof determination of Arms Length Price. Hence, the present appeal bythe revenue. 3.We have heard learned counsel for the revenue. 3.We have heard learned counsel for the revenue. 4.The issue involved in this case is whether the Tribunal wasjustified in entertaining the additional ground for exclusion of M/sDatamatics Technologies as comparable and remanding the case to theAssessing Officer whereby it had directed that the assessee shall beentitled to produce all relevant material for determination of proper ArmsLength Price and shall cooperate for expeditious disposal of the matter. 5.On a query being put to the learned counsel for therevenue as to what has happened before the Assessing Officer afterthe remand, she candidly admitted that the order has been passed infavour of the assessee on 11.1.2010 and has produced a copy of the ITA No. 594 of 2010 said order passed under Section 92CA(3) of the Act. 6.In view of the observations of the Tribunal whereby anopportunity was provided to the assessee to produce material beforethe Assessing Officer and the fact that after the remand andconsideration of the material produced by the assessee in terms of theorder of the Tribunal, an order in favour of the assessee has beenpassed, no question of law much less a substantial question of lawarises in this appeal for consideration of this Court. Accordingly, thepresent appeal is dismissed. (AJAY KUMAR MITTAL)JUDGE May 16, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE