Tribunal rules in favor of assessee, dismisses Department's appeal, and Cross Objection as infructuous.

The Tribunal allowed the assessee's appeal for statistical purposes, dismissed the Department's appeal, and dismissed the assessee's Cross Objection as infructuous. The Tribunal's order was pronounced on 12/10/2020.

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Issues Involved:
1. Transfer Pricing Adjustment
2. Inclusion/Exclusion of Comparables
3. Working Capital Adjustment
4. Disallowance of Motor Car Expenditure
5. Deduction for Accounting Error
6. Deduction under Section 43B for Service Tax
7. Cross Objection by Assessee

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment:
The assessee challenged the Transfer Pricing Adjustment of INR 3,77,75,992/- made by the TPO/AO/DRP. The TPO had proposed an adjustment due to differences in Arm's Length Price (ALP) for Marketing Support Services and Management Consulting Services. The assessee argued that the adjustment was made without following the principle of consistency and disregarded the economic analysis undertaken by the assessee.

2. Inclusion/Exclusion of Comparables:
The assessee sought the inclusion of R Systems International Limited and Helios & Matheson Information Technology Ltd. as comparables, which were excluded by the TPO on the ground of different financial year endings. The Tribunal agreed with the assessee, citing the Delhi High Court's decision in CIT vs. Mckinsey Knowledge Centre India Pvt. Ltd., and restored these comparables to the TPO for inclusion after verification.

The assessee also sought the exclusion of Sonata Software Limited due to high related party transactions (53.83%). The Tribunal directed the TPO to exclude Sonata Software Limited from the final set of comparables, as it did not pass the related party filter applied by the TPO.

3. Working Capital Adjustment:
The assessee argued for the granting of working capital adjustment, which was denied by the lower authorities. The Tribunal, following the decision in Goldman Sachs Services Pvt. Ltd., directed that working capital adjustment be computed and allowed as per actuals, noting that it had been allowed to the assessee in a previous assessment year.

4. Disallowance of Motor Car Expenditure:
The assessee contested the ad hoc disallowance of INR 2,24,50,124/- for Motor Car running and maintenance expenses. The Tribunal, following its earlier decisions in the assessee's own case, directed the deletion of this disallowance.

5. Deduction for Accounting Error:
The assessee claimed a deduction of INR 2,54,53,475/- due to an accounting error. The Tribunal restored this issue to the AO for verification and allowing relief if the claim was found correct, following its earlier decision in the assessee's own case.

6. Deduction under Section 43B for Service Tax:
The Department's appeal contested the DRP's allowance of a deduction of INR 70 Crores paid as service tax under protest. The Tribunal upheld the DRP's decision, agreeing that the deduction was allowable on a payment basis under Section 43B, and noted that the amount was offered to tax when refunded in AY 2016-17.

7. Cross Objection by Assessee:
The assessee's Cross Objection, which became academic following the dismissal of the Department's appeal, was dismissed as infructuous.

Conclusion:
In the final result, the assessee's appeal was allowed for statistical purposes, the Department's appeal was dismissed, and the assessee's Cross Objection was dismissed as infructuous. The Tribunal's order was pronounced on 12/10/2020.

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