Tribunal directs re-examination of comparables and adjustments in tax appeal.

The appeal of the assessee was treated as allowed for statistical purposes. The Tribunal directed the AO/TPO to re-examine certain comparables and issues, and to verify and adjust the disallowances and credits as per the directions provided.

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Issues Involved:
1. Transfer Pricing adjustment made in respect of Software Development section.
2. Transfer Pricing adjustment made in respect of I.T. enabled services.
3. Disallowance made u/s 14A of the Act.
4. Non set off of entire brought forward losses.
5. Non grant of MAT credit.
6. Short grant of TDS credit.
7. Interest charged u/s 234B & 234D of the Act.

Detailed Analysis:

1. Transfer Pricing Adjustment - Software Development Section:
The assessee adopted the TNMM method and selected 8 comparable companies with an arithmetic mean of 12.42%. The PLI of the assessee was 10.03%. However, the TPO rejected this study and selected 10 different comparable companies, resulting in an adjustment of Rs.10.15 crores. The DRP confirmed this order. The assessee sought exclusion of six companies: Genesys International Corpn. Ltd., ICRA Techno Analytics Ltd., Infosys Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems Ltd., and Spry Resources India Pvt. Ltd., citing various reasons such as functional dissimilarities and lack of segmental information.

2. Transfer Pricing Adjustment - I.T. Enabled Services:
The assessee selected 5 comparable companies with an arithmetic mean of 11.91%. The TPO rejected this and selected 10 different companies, resulting in an adjustment of Rs.1.04 crores. The DRP excluded two companies and retained 8. The assessee sought exclusion of five companies: Universal Print Systems Ltd. (Seg)(BPO), Infosys BPO Ltd., TCS E-Serve Ltd., BNR Udyog Ltd. (Seg)(Medical Transcription), and Excel Infoways Ltd. (Seg)(IT/BPO), and inclusion of Informed Technologies India Ltd. The Tribunal restored Universal Print Systems Ltd. to the AO/TPO for fresh examination and directed the exclusion of Infosys BPO Ltd., TCS E-Serve Ltd., Excel Infoways Ltd., and BNR Udyog Ltd. Informed Technologies India Ltd. was directed to be included.

3. Disallowance u/s 14A of the Act:
The AO disallowed Rs.8,24,996/- u/s 14A. The assessee contended that no exempt income was earned during the year, relying on the decision of the Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT. The Tribunal agreed with the assessee and directed the AO to delete the disallowance after verification.

4. Non Set-Off of Entire Brought Forward Losses:
The assessee raised this issue, which requires verification by the AO. The Tribunal restored this issue to the AO for verification.

5. Non Grant of MAT Credit:
The assessee raised this issue, which requires verification by the AO. The Tribunal restored this issue to the AO for verification.

6. Short Grant of TDS Credit:
The assessee raised this issue, which requires verification by the AO. The Tribunal restored this issue to the AO for verification.

7. Interest Charged u/s 234B & 234D of the Act:
These issues are consequential in nature and do not require adjudication. The grounds relating to initiation of penalty proceedings are premature and do not require adjudication.

Conclusion:
The appeal of the assessee was treated as allowed for statistical purposes. The Tribunal directed the AO/TPO to re-examine certain comparables and issues, and to verify and adjust the disallowances and credits as per the directions provided.

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