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Issues: (i) whether the transfer pricing adjustment required exclusion of Infosys BPO Ltd. and TCS E-Serve Ltd. and inclusion of R. Systems International Ltd., CG Vak Software Exports Ltd., Informed Technologies Ltd. and Caliber Point as comparables; (ii) whether a separate adjustment for interest on receivables was warranted when working capital adjustment had been taken into account; (iii) whether deduction under section 10A was allowable in respect of the assessee's AEGSC(STP) unit; (iv) whether disallowance under section 40(a)(i) in respect of relocation expenses required fresh examination, and whether TDS credit was to be granted as per law.
Issue (i): whether the transfer pricing adjustment required exclusion of Infosys BPO Ltd. and TCS E-Serve Ltd. and inclusion of R. Systems International Ltd., CG Vak Software Exports Ltd., Informed Technologies Ltd. and Caliber Point as comparables.
Analysis: The comparability exercise was guided by the earlier year's co-ordinate bench decision in the assessee's own case. Infosys BPO Ltd. and TCS E-Serve Ltd. were held to be not good comparables in view of extraordinary events affecting their comparability. On the other hand, R. Systems International Ltd., CG Vak Software Exports Ltd., Informed Technologies Ltd. and Caliber Point were considered fit for inclusion, and turnover alone was not treated as a disqualifying factor where functional comparability was otherwise established. The same factual matrix prevailed in the year under consideration.
Conclusion: The exclusion of Infosys BPO Ltd. and TCS E-Serve Ltd. was upheld, and the Assessing Officer/TPO was directed to consider inclusion of R. Systems International Ltd., CG Vak Software Exports Ltd., Informed Technologies Ltd. and Caliber Point.
Issue (ii): whether a separate adjustment for interest on receivables was warranted when working capital adjustment had been taken into account.
Analysis: The issue had already been decided in the assessee's own case for the earlier assessment year. The principle applied was that where working capital adjustment is granted, a separate adjustment for interest on receivables is not required. The same approach was followed for the year under consideration.
Conclusion: No separate adjustment for interest on receivables was warranted.
Issue (iii): whether deduction under section 10A was allowable in respect of the assessee's AEGSC(STP) unit.
Analysis: The claim was covered by the Tribunal's earlier decisions in the assessee's own case, where deduction under section 10A had been allowed for the same unit on similar facts. Following that consistent view, the deduction could not be denied for the year under appeal.
Conclusion: Deduction under section 10A was allowable.
Issue (iv): whether disallowance under section 40(a)(i) in respect of relocation expenses required fresh examination, and whether TDS credit was to be granted as per law.
Analysis: The relocation expenses were said to relate largely to employees' travel and salary-related outgo, but the record required verification of the exact nature of payments and whether they were made to the assessee's own employees. The matter was therefore restored to the Assessing Officer for factual examination and fresh adjudication after affording opportunity of hearing. In respect of TDS credit, the direction was to grant credit in accordance with law.
Conclusion: The disallowance issue was remanded for verification, and TDS credit was directed to be granted as per law.
Final Conclusion: The assessee obtained relief on the transfer pricing comparables, the receivables adjustment, and the section 10A claim, while the relocation-expense disallowance was sent back for verification, resulting in a partial allowance of the appeal.
Ratio Decidendi: Where earlier-year decisions on identical facts exist in the assessee's own case, they should be followed for comparables and deduction claims; additionally, once working capital adjustment is granted, a separate receivables adjustment is ordinarily unwarranted.
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