Tribunal rules in favor of Assessee on TP, deductions; L&T Infotech excluded, RS Software included

The Tribunal ruled in favor of the Assessee in various issues, including TP analysis comparability based on precedent cases, the reduction of foreign currency expenses for deduction u/s 10A, and the exclusion of certain comparables. Working Capital Adjustment was rejected due to lack of objection and documentation. L & T Infotech Ltd. was directed to be excluded from comparables, while R S Software (India) Limited was included. The claim for deduction u/s 80G was dismissed for lack of discussion in assessment orders. The Assessee's claim for interest u/s 234D was partly rejected, resulting in partial allowance of the Assessee's appeal.

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Issues:
- Appeal filed by Revenue and Assessee against order of ITO, Ward -2(1)(1), Bengaluru for A.Y. 2010-11
- TP analysis comparability based on precedent case
- Reduction of foreign currency expenses from Total turnover for deduction u/s 10A
- Exclusion of comparables like Infosys Ltd., Tata Elxsi Ltd., Kals Information Systems Ltd., etc.
- Working Capital Adjustment
- Claim for exclusion of L & T Infotech Ltd.
- Inclusion of R S Software (India) Limited
- Deduction u/s 80G for contribution to Calamity Relief Fund of Karnataka
- Interest u/s 234D

Analysis:
1. The first issue concerns the TP analysis comparability based on precedent cases. The Tribunal held that each case's facts need to be addressed for comparability, rejecting the Revenue's appeal and supporting the Assessee's position based on the judgment of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd.

2. The second issue relates to the reduction of foreign currency expenses from Total turnover for deduction u/s 10A. The Tribunal followed the judgment in the Tata Elxsi Ltd. case, holding that if expenses are reduced from Export Turnover, Total turnover automatically decreases by the same amount. Consequently, the Tribunal decided in favor of the Assessee regarding this issue.

3. The third issue revolves around the exclusion of comparables like Infosys Ltd., Tata Elxsi Ltd., Kals Information Systems Ltd., etc. The Tribunal upheld the exclusion of these comparables, citing a tribunal order supporting the Assessee's case due to the similarity in business profiles, rejecting the Revenue's arguments against following precedents in TP cases.

4. The next issue concerns the Working Capital Adjustment, where the Tribunal rejected the ground raised by the Assessee as no objection was raised before the DRP, and relevant documentation was not provided.

5. The issue of the claim for exclusion of L & T Infotech Ltd. was considered, and the Tribunal directed the AO/TPO to exclude it from the final list of comparables based on the applicable tribunal order.

6. Regarding the inclusion of R S Software (India) Limited, the Tribunal allowed its inclusion as both parties desired it, leading to the allowance of the Assessee's appeal on this ground.

7. The issue of deduction u/s 80G for contribution to the Calamity Relief Fund of Karnataka was dismissed due to lack of discussion in the assessment orders, with the Tribunal advising the Assessee to raise the claim under section 154 before the AO.

8. Lastly, the issue of interest u/s 234D was discussed, with the Tribunal rejecting the Assessee's claim as section 234D applies even if a refund is adjusted against an old demand, emphasizing that the adjustment constitutes granting a refund. The appeal filed by the Assessee was partly allowed in the combined result.

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