TaxTMI 
TaxTMI 
2012 (6) TMI 572
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....counsel for the assessee submitted that the AO has excluded communication charges of Rs. 4,68,88,483/- attributable to the delivery of computer software outside India from the export turnover without reducing from the same from the total turnover also for the purpose of deduction u/s 10A of the IT Act. 3. The learned counsel for the assessee submitted that this issue is covered in favour of assessee by the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. v. Dy. CIT [2012] 204 Taxman 321/17 taxmann.com 100 wherein it was held that when certain expenses incurred towards telecommunication charges attributable to the delivery of the computer software outside India are reduced from the export turnover, then they are to be reduced from the total turnover also. Respectfully following the decision of the jurisdictional High Court, this ground of appeal no.4 is allowed. 4. As regards transfer pricing adjustment, the brief facts of the case are that the assessee company is engaged in providing Software Development services and IT enabled services to its associated enterprises outside India. As they were international transactions entered into by the assessee with....
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....are services such as Melstar Information Technologies Ltd., Goldstar Infratech Ltd., on the ground that their revenue was diminishing year after year. According to him, this approach is not correct as the diminishing revenue is not the only factor to be considered for rejecting a comparable. According to him, the companies having diminishing revenue also should be taken into consideration, after taking into consideration the factors which are responsible for such diminishing revenue. He further submitted that the other objections raised by the assessee before the DRP and the Tribunal are covered by the decision of the Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd., v. Dy. CIT [IT Appeal No. 1231(BNG)/2010 and therefore, he prayed that the matter may be remanded to the AO for re-consideration in the light of the guidelines issued by this Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd., (supra). 6. The learned DR however, supported the orders of the authorities below and objected to the remand of the issues to the AO. He submitted that both the TPO as well as DRP have extensively considered the objections raised by the assessee and that t....
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....rison filters should be used for similar the type of activities. The TPO cannot adopt or pick and choose different methodology or different filters for analyzing the transfer pricing adjustment for the same or similar type of activities. Similarly, it cannot also be said that the same set of filters would suffice for another set of activities having different functions, nature and characteristics. However, if the nature of activity is one and the same is having the same functions such as software development & IT enables services the TPO has to adopt the same or similar set of filters and cannot adopt one filter for rejecting some comparables for software development & adopt the same filter for selecting the comparables for IT enabled services. 7. As regards the objection of the assessee regarding the comparables rejected by the TPO on the basis of diminishing revenue is concerned, we feel that if there is any comprarable having diminishing revenue, the reasons for such diminishing in revenue should be taken into account, while rejecting the set of comparables and if the adjustment for those factors can be made to bring them on par with the assessee, then such an effort should be ....
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.... not be an upper limit also. What should be upper limit is another factor to be considered. We agree with the contention of the learned counsel for the assessee that the size matters in business. A big company would be in a position to bargain the price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, the turnover also would come down reducing profit margin. Thus, as held by the various benches of the Tribunal, when companies which are loss making are excluded from comparables, then the super profit making companies should also be excluded. For the purpose of classification of companies on the basis of net sales or turnover, we find that a reasonable classification has to be made. Dun & Bradstreet and NASSCOM have given different ranges. Taking the Indian scenario into consideration, we feel that the classification made by Dun & Bradstreet is more suitable and reasonable. In view of the same, we hold that the turnover filter is very important and the companies having a turnover of Rs. 1.00 core to 200 crores have to be taken as a particular range and t....
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....rences, the TPO has completed the assessment by relying upon replies received to notices u/s 133(6), in preference to the annual reports of the companies which are certified by professionally qualified Chartered Accountants and approved by the Board of Directors. 10.1 The learned counsel for the assessee also submitted that the TPO has relied on segmental information received u/s 133(6) which otherwise does not form part of annual report. The bifurcation and reporting of income and expense into different segments is done by the company and is not audited by a Chartered Accountant and it is possible that the same may not be as per accounting standard-17 issued by the ICAI and hence, either the information is incomplete or unreliable apart from being unverifiable. To demonstrate this point, the learned counsel for the assessee submitted that M/s Sankhya Infotech was selected as comparable in the preceding assessment year 2005-06 on the ground that it is a software development company on the basis of reply received to notice u/s133(6) inspite of the objection of the assessee that this company is a software product company. But during the year under consideration, the same company has....
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....desired nor expected. When the assessee has placed his entire process before the learned TPO and there is no allegation that it was short of or that the material facts have been dodged or that it was incomplete, the same cannot be brushed aside. He thus, prayed that the data available subsequently or obtained through notice u/s 133(6) should be rejected. 11. The learned DR on the other hand, supported the orders of the authorities below and submitted that deals with the manner in which the ALP is to be determined u/s 92C of the Act and sub-rule (4) thereof. Sec.10B provides that the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Thus, he submitted that not only the comparables adopted by the assessee but information relating to other companies which are available in the public domain at the time of determining the ALP also have to be considered by the TPO, while making the TP adjustments. He submitted that the act or Rules do not specify the date, till which only the information available in the public domai....
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....tion and documents in respect thereof and the Board may also prescribe the period for which the information and documents shall be kept and maintained and the AO and the CIT(A) may in the course of any proceedings under the Act, require any person who has entered into an international transaction to furnish any information and documents in respect thereof. Thus, it can be seen that the requirements is only to maintain and keep the information and documents relating to international transactions so that they are available as and when required during any proceedings under the Act. The section does not provides that the information and documents are to be kept and maintained for a period of 8 years. Rule 10-D of sub-sec.1 specifies the documents and information which are to be kept and maintained by the assessee and sub-rule-2 thereof provides that nothing contained in sub-rule-1 shall apply in a case where the aggregate value as recorded in the books of accounts, the international transactions entered into by the assessee does not exceed 1.00 crore rupees. Sub-rule-3 provides the supporting authentic documents which are to be kept and maintained and sub-rule-4 thereof provides that t....
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.... 92CA, the TPO is entrusted with all the powers under clauses (a) to (d) of sub-sec. (1) of sec. (3) or sub-sec. (6) of sec.133 to call for and gather any information as may be required. When he is making the search for a relevant comparable, the TPO can issue notices to the parties whom he considers as relevant to gather requisite information and on being satisfied with regard to relevancy of the material which can be used against the assessee only then the assessee has to be given an opportunity of presenting its objections. Thus, the TPO need not inform the assessee about the process used by him for issuing the notices u/s 133(6) nor is he under any obligation to furnish the entire information to the assessee. The principles of natural justice requires that when any information is sought to be used against the assessee, the assessee shall be given a fair opportunity of hearing on that material. In the case before us the TPO has furnished all the information to the assessee in the form of CD and the assessee after going into the same has submitted a detailed submission along with its objections for taking various companies as comparables. It is another matter, if the TPO has not ....
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....;Abhishek Auto Industries Ltd v. DCIT 2010-TII-54-ITAT-DEL-TP 13.1 The learned DR however, relied on the orders of the authorities and submitted that 5% is not the standard deduction, but it is the range within which if the ALP falls then the ALP of the assessee has to be accepted. 13.2 Having heard both the parties and having considered their rival contention, we find that this issue is already covered by the decision relied upon by the assessee. 13.3 In view of the same, we deem it fit and proper to remand the issue to the file of TPO with the following directions; (a) The operating revenue and the operating cost of the transactions relating to associated enterprises only shall be considered; (b) The comparables having the turnover of more than 1.00 crore but less than 200.00 crores only shall be taken into consideration; (c) All the information relating to comparables which are sought to be used against the assessee shall be furnished to the assessee; (d) The assessee shall be given an opportunity of cross examining the parties whose replies are sought to be used against the assessee if the assessee so desires; (e) To consider the objections....