Appeal partially allowed, directs TP adjustments, overturns Section 10A, instructs recalculation, deems interest consequential.

The Tribunal partly allowed the appeal, directing the Transfer Pricing Officer to exclude certain comparables and re-adjudicate others. The adjustment under Section 10A was overturned, with the Assessing Officer instructed to recalculate the deduction. The interest under Section 234B was deemed consequential to the primary issues.

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Issues Involved:
1. Transfer Pricing Adjustment
2. Adjustments under Section 10A of the Act
3. Consequential Grounds

Detailed Analysis:

1. Transfer Pricing Adjustment

Grounds of Appeal:
The assessee contested the adjustment of INR 136,642,740 to the Arm's Length Price (ALP) of its international transactions, arguing that the internal Transactional Net Margin Method (TNMM) should be accepted, as it had been in previous years.

Tribunal's Findings:
The Tribunal noted that the internal TNMM had been upheld in previous assessment years (2007-08, 2008-09, and 2009-10). However, for the assessment year 2011-12, the Managed Service business, primarily catering to Non-AE business, was sold effective February 8, 2011, making internal TNMM comparison unfeasible. Hence, the grounds of appeal related to internal TNMM were dismissed.

Comparables Rejected:
- Accentia Technologies Ltd: Rejected due to functional dissimilarity, presence of goodwill, brands, IPRs, and extraordinary events like mergers.
- Acropetal Technologies Ltd: Rejected for being functionally different (engaged in engineering design services), failing onsite cost and employee cost filters, and being previously rejected in similar cases.
- Infosys BPO Ltd: Rejected due to functional dissimilarity, high turnover, and significant brand value impacting pricing and margins.

Other Comparables:
- ICRA Online Ltd (Seg): The issue was set aside for re-adjudication by the TPO due to lack of profile information.
- Jeevan Scientific Technology Ltd: The issue was set aside for re-adjudication by the TPO due to failing the TPO's own filter and low employee cost.
- iGate Global Solutions Ltd: The issue was set aside for re-adjudication by the TPO due to functional differences, extraordinary events, presence of intangibles, and high turnover.

2. Adjustments under Section 10A of the Act

Grounds of Appeal:
The assessee argued against the exclusion of telecommunication and foreign travel expenses from the export turnover for the purpose of computing relief under Section 10A.

Tribunal's Findings:
The Tribunal relied on its own decision in the assessee's case for AY 2010-11, where it was held that such expenses should not be excluded from both export turnover and total turnover as they were not incurred towards rendering technical services outside India. The Tribunal directed the AO to re-compute the deduction under Section 10A accordingly.

3. Consequential Grounds

Interest under Section 234B:
The assessee contested the interest computed under Section 234B. The Tribunal's decision on the primary issues would impact the computation of interest, hence this ground was treated as consequential.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the TPO to exclude certain comparables and re-adjudicate others. The adjustment under Section 10A was quashed, and the AO was directed to re-compute the deduction. The interest under Section 234B was treated as consequential to the primary issues.

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