https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=768071 https://www.taxtmi.com/caselaws?id=768071 TP Adjustment - Comparable selection - whether the assessee is a software product company or provides contract software development services? - HELD THAT:- Infosys Ltd. - As having considered the functions performed, assets employed and risks assumed by both entities, we are of the considered view that being a contract software development service provider, the assessee cannot be compared with the company as giant in its operations as Infosys Ltd. Accordingly, we direct the TPO/AO to exclude Infosys Ltd while benchmarking the international transaction pertaining to "Provision of Software Development Services". Persistent Systems Ltd be excluded while benchmarking the international transaction pertaining to "Provision of Software Development Services" in the absence of relevant segment information of Persistent System Ltd, which is comparable to the assessee's international transaction under consideration. Tata Elexi Ltd. (Segmental) is not functionally comparable to the assessee. Hence, we direct the TPO/AO to exclude Tata Elexi Ltd.(segmental) while benchmarking the international transaction pertaining to "Provision of Software Development Services" Bodhtree Consulting Ltd. company is earning revenue from various streams, therefore, in the absence of relevant segmental information, this company cannot be said to be functionally comparable to the assessee. Further, as regards the submission of the learned DR that the assessee is seeking exclusion of its own comparable, as noted in the foregoing paragraphs, there is no estoppel on the taxpayer from pointing out that a particular company has been wrongly taken as a comparable. Accordingly, we direct the TPO/AO to exclude Bodhtree Consulting Ltd. while benchmarking the international transaction pertaining to "Provision of Software Development Services". TP Adjustment in relation to the international transaction of "Provision of ITeS" - Eclerx Services Ltd be excluded as not functionally comparable. Cosmic Global Ltd. be excluded while benchmarking the international transaction pertaining to "Provision of ITeS". Accentia Technologies Ltd. develops its own software and renders medical transcription services, while the assessee, as noted in the foregoing paragraph, compiles data from various publicly available sources, which is used as an input by the associated enterprises in its various products and databases, which are created, maintained and owned by the associated enterprises. Thus, we direct the TPO/AO to exclude Accentia Technologies Ltd. while benchmarking the international transaction pertaining to "Provision of ITeS". Infosys BPO Ltd be excluded as a comparable on the basis of its high brand value and consequent higher profitability. Denial of deduction claimed u/s 10A in respect of the UB Plaza Unit - Since the year under consideration is the 3rd year of claim of deduction u/s 10A of the Act by the assessee in respect of the UB Plaza Unit, which has been allowed by the coordinate bench in the first year of claim, in absence of any change in facts and law AO is directed to allow the deduction claimed u/s 10A of the Act in respect of the UB Plaza Unit in the year under consideration. As a result, Ground No.9, raised in the assessee appeal, is allowed. Denial of deduction claimed u/s 10A in respect of the Titanium STPI Unit - Since the year under consideration is the second year of the claim of deduction u/s 10A in respect of the Titanuim Unit, Bangalore, therefore respectfully following the decision of the coordinate bench cited supra, AO is directed to allow the deduction claimed by the assessee u/s 10A with respect to the Titanium Unit, Bangalore. Accordingly, Ground raised in assessee's appeal, is allowed. Denial of deduction claimed u/s 10A with respect to the unit acquired from Reuters India Pvt. Ltd.- HELD THAT:- The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal. Accordingly, we direct the AO to allow the deduction claimed under section 10A of the Act with respect to the unit acquired from RIPL. Denial of the claim of depreciation on goodwill - whether the assessee is entitled to claim depreciation on goodwill which arose on account of merger/amalgamation, being the excess amount of consideration over the value of net assets of the entity acquired, came up for consideration before various Courts/Tribunals? - HELD THAT:- As in the present case, it is evident that neither the AO nor the learned DRP considered the details filed by the assessee, as one of the reasons for rejecting the assessee's claim was that the same was made by way of a letter instead of filing the revised return of income by placing reliance on the decision in Goetze India Limited [2006 (3) TMI 75 - SUPREME COURT] We further find that vide letter dated 25/06/2021, the Revenue requested for verification of factual details with respect to the claim of depreciation on goodwill. Therefore, we are of the considered view that this issue be restored to the file of the jurisdictional AO for de novo adjudication, in light of the decisions cited supra, after examining the details filed by the assessee. Since this issue is restored to the AO for consideration afresh, it is needless to mention that the AO can seek any other information from the assessee for complete adjudication of this issue and the assessee can also furnish any other documents in support of its claim. Exclusion of communication expenses and travel expenses from both export turnover as well as the total turnover while computing deduction u/s 10A - HELD THAT:- We find that this issue is now decided in favour of the taxpayer in CIT v/s HCL Technologies Ltd, [2018 (5) TMI 357 - SUPREME COURT] Accordingly, respectfully following the aforesaid decision, we do not find any infirmity in the directions of the learned DRP in excluding the communication expenditure and travel expenditure from the total turnover also to the extent it was excluded from the export turnover. As a result, the impugned final assessment order on this issue is upheld and Grounds No. 2 and 3, raised in Revenue's appeal, are dismissed. Disallowance on software items u/s 40(a)(ia) - HELD THAT:- We find that the learned DRP while issuing the directions to the AO to delete the disallowance of depreciation on computer software made under section 40(a)(ia) of the Act, followed the aforesaid decision of the Hon'ble Karnataka High Court in Tally Solutions Pvt. Ltd. [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] Thus, in the absence of any contradictory decision on this issue being placed on record, we do not find any infirmity in the directions issued by the learned DRP. As a result, the impugned final assessment order on this issue is upheld. Case-Laws Income Tax Tue, 25 Feb 2025 00:00:00 +0530