2023 (5) TMI 1236 - AT - Income Tax

Tribunal Excludes Companies for Incorrect Income Inclusion, Partially Allows Appeal, and Remands for Further Examination

The Tribunal directed the exclusion of Jeevan Scientific Technologies Ltd. for AY 2011-12 due to incorrect inclusion of income from the ERP segment. For ... TP Adjustment - Comparable selection - inclusion of Jeevan Scientific Technologies Ltd. in the list of comparable for determining the ALP of international transactions - HELD THAT:- As seen from the financial of M/s. Jeevan Scientific Technologies Ltd. for the assessment year 2011-12, the total income from BPO operations was only Rs.79.21 lakhs., thus this company M/s. Jeevan Scientific Technologies Ltd. cannot be included as comparable to determine the ALP of international transactions. Accordingly, we direct the AO/TPO to exclude M/s. Jeevan Scientific Technologies Ltd. from the list of comparables and directed accordingly. M/s. Universal Print Systems Ltd. - Contention of ld. A.R. is that the total RPT transactions in this case is more than 25%, as such this company cannot be included as a comparable - We direct the AO/TPO to pass the consequent order in conformity with the Tribunal order extracted herein above. This ground of assessee is partly allowed for statistical purposes. M/s. Universal Print Systems Ltd. - As the required information u/s 133(6) of the Act is not made available to the TPO, in such circumstances, T.P. adjustment on this count cannot be made reasonable or accurately made in this regard. Accordingly, this company is to be excluded from the list of comparable companies as reliance placed by this Tribunal while deciding this issue in assessee’s own case on the decision of Zyme Solutions Pvt. Ltd. [2018 (11) TMI 1793 - ITAT BENGALURU]. Accordingly, we direct the AO/TPO to exclude this company. Issues Involved:1. Inclusion of Jeevan Scientific Technologies Ltd. as a comparable for determining the ALP of international transactions for AY 2011-12.2. Inclusion of Universal Print Systems Ltd. as a comparable for determining the ALP of international transactions for AY 2012-13.3. Inclusion of BNR Udyog Ltd. as a comparable for determining the ALP of international transactions for AY 2012-13.Summary:Issue 1: Inclusion of Jeevan Scientific Technologies Ltd. for AY 2011-12The assessee contested the inclusion of Jeevan Scientific Technologies Ltd. in the list of comparables by the AO/TPO, arguing that the income from BPO operations was less than Rs.1 crore, and thus it should be excluded as per the Tribunal's earlier directions. The Tribunal found that the AO/TPO had wrongly included income from ERP segment along with BPO operations, which was inappropriate. The Tribunal directed the AO/TPO to exclude Jeevan Scientific Technologies Ltd. from the list of comparables, as the income from BPO operations was only Rs.79.21 lakhs.Issue 2: Inclusion of Universal Print Systems Ltd. for AY 2012-13The assessee argued against the inclusion of Universal Print Systems Ltd. due to the absence of sufficient information to determine segmental margins and functional dissimilarity. The Tribunal had previously remanded the issue to the TPO for fresh consideration. The TPO issued a notice under section 133(6) but did not receive the required information. The Tribunal held that without the necessary information, the TPO could not reasonably or accurately make adjustments. Consequently, the Tribunal directed the AO/TPO to exclude Universal Print Systems Ltd. from the list of comparables.Issue 3: Inclusion of BNR Udyog Ltd. for AY 2012-13The assessee challenged the inclusion of BNR Udyog Ltd., citing related party transactions exceeding 25% and functional dissimilarity. The Tribunal noted that the AO/TPO had not properly examined the issue as per the Tribunal's earlier directions. The Tribunal directed the AO/TPO to follow the earlier directions and reconsider the inclusion of BNR Udyog Ltd. The Tribunal also noted that the AO/TPO should verify the related party transactions and functional comparability properly.Conclusion:The Tribunal allowed the appeal for AY 2011-12, directing the exclusion of Jeevan Scientific Technologies Ltd. from the list of comparables. For AY 2012-13, the Tribunal partly allowed the appeal for statistical purposes, directing the exclusion of Universal Print Systems Ltd. and remanding the issue of BNR Udyog Ltd. for fresh consideration by the AO/TPO.