Tribunal's Decision: Exclusion of Companies, Inclusion of Others, Education Cess Deduction

The Tribunal partly allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. It directed the exclusion of Infobeans Systems Private Limited and Saven Technologies Limited from the final set of comparables, inclusion of Lucid Software Limited and Evoke Technologies Private Limited, and allowed the deduction for Education Cess. The challenge to penalty proceedings was dismissed as premature.

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Issues Involved:

1. Exclusion of Infobeans Systems Private Limited from the final set of comparable companies.
2. Initiation of penalty proceedings under sections 234B, 234C, and 271(1)(c) of the Income Tax Act.
3. Exclusion of Thirdware Solutions Limited from the list of comparable companies.
4. Deduction of Education Cess while computing taxable income.
5. Inclusion of Lucid Software Limited and Evoke Technologies Private Limited in the list of comparable companies.
6. Exclusion of Harbinger Software Limited and Saven Technologies Limited from the list of comparable companies.

Detailed Analysis:

1. Exclusion of Infobeans Systems Private Limited:
The assessee contended that Infobeans Systems Private Limited should not be included in the final set of comparable companies due to the lack of detailed business description and the occurrence of an extraordinary event, i.e., the demerger of the software business. The Tribunal noted that Infobeans did not provide segmental details and was involved in a demerger, making it incomparable. The Tribunal referred to its decision in the assessee's own case for A.Y. 2012-13, where Infobeans was excluded for similar reasons. Consequently, the Tribunal directed the AO/TPO to exclude Infobeans from the final set of comparables.

2. Initiation of Penalty Proceedings:
The assessee challenged the initiation of penalty proceedings under sections 234B, 234C, and 271(1)(c) of the Income Tax Act. The Tribunal held that such a challenge at this stage was premature and dismissed the ground.

3. Exclusion of Thirdware Solutions Limited:
The assessee raised an additional ground for the exclusion of Thirdware Solutions Limited, arguing that it was involved in trading activities without segmental data. The Tribunal noted that the issue was similar to the one in the assessee's case for A.Y. 2012-13, where the AO/TPO was directed to verify the nature and scope of functions of Thirdware Solutions Limited. The Tribunal remanded the issue to the AO/TPO for fresh verification.

4. Deduction of Education Cess:
The assessee sought a deduction for Education Cess while computing taxable income. The Tribunal referred to the decision of the Hon'ble Bombay High Court in the case of Sesa Goa Ltd., which held that Education Cess is an allowable expenditure under the Income Tax Act. The Tribunal directed the AO to allow the deduction for Education Cess.

5. Inclusion of Lucid Software Limited and Evoke Technologies Private Limited:
The Revenue challenged the CIT(A)'s direction to include Lucid Software Limited and Evoke Technologies Private Limited in the list of comparable companies. The Tribunal noted that the CIT(A) had examined the annual reports and found both companies functionally comparable to the assessee. The TPO had accepted these companies as comparables in the assessee's case for A.Y. 2012-13. The Tribunal upheld the CIT(A)'s direction to include these companies in the final list of comparables.

6. Exclusion of Harbinger Software Limited and Saven Technologies Limited:
The Revenue challenged the CIT(A)'s exclusion of Harbinger Software Limited and Saven Technologies Limited from the list of comparable companies. The Tribunal noted that the assessee had mistakenly challenged the inclusion of Harbinger Software Limited before the CIT(A), and thus, it should remain as a comparable company. Regarding Saven Technologies Limited, the Tribunal agreed with the CIT(A) that it should be excluded due to its 100% Related Party Transactions, which made it incomparable. The Tribunal affirmed the CIT(A)'s decision to exclude Saven Technologies Limited.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, and the appeal by the Revenue was dismissed. The Tribunal directed the AO/TPO to exclude Infobeans Systems Private Limited and Saven Technologies Limited from the final set of comparables, include Lucid Software Limited and Evoke Technologies Private Limited, and allow the deduction for Education Cess. The challenge to penalty proceedings was dismissed as premature.

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