TaxTMI 
TaxTMI 
2015 (5) TMI 780
X X X X Extracts X X X X
X X X X Extracts X X X X
....e under section14A r.w. Rule 8D of the Income Tax Rules, 1962 and Ground Nos. 12 and 13 relate to levy of interest u/s 234B and 234C of the Act. 2.1 Briefly stated the facts of the case are that the assessee is in the business of Information Technology support operations and back end operations. The return of income for the year under consideration was filed by the assessee on 29.9.2009 declaring the total income of Rs. 15,87,533/-. The assessee company is registered under the Software Technology Parks of India Scheme. The assessee company is a captive unit of the Paternoster Group in India and performs a broad range of back end operations for Paternoster UK, which includes actuarial finance and information technology support operation. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3.54%. The assessee was asked to submit margins of the comparables using the data of FY 2008-09. The assessee submitted single year data. The average mean of comparables given at 14.93%. As the assessee has shown 17.11%. It was claimed by the assessee that its international transactions with its AE is at ALP. 3. The TPO conducted his own search. The search result gave the set of 24 companies. The arithmetic mean of these companies came at 29.77%. The TPO issued a show cause notice to the assessee asking the assessee to explain as to why the arithmetic mean of 29.77% should not be used for computing the arm's length margin. The assessee filed a detailed reply dated 24.12.2012 objecting the inclusion of the companies in the list of compara....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp; Arithmetic mean 31.8 4. Taking the arithmetic mean at 31.58% the TPO made an adjustment of Rs. 2,92,13,537/-.The assessee made strong objections before the Dispute Resolution Panel (DRP). The main objection was (i) the TPO used single year data, the TPO ought to have used multiple year data; (ii) the choice of comparables used by the TPO are not in line with judicial pronouncements in respect of which the companies selected by the TPO; (iii) that the TPO erred in rejecting outright companies used as comparable by the assessee. The DRP after considering the objections raised by the assessee vis-a-vis the order of the TPO did not find any merit in the objections of the assessee in so far as they related to the adjustmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on ground of extremely high profit or loss and in case companies satisfy comparability criteria, and do not involve any abnormal business conditions, same cannot be rejected only on ground of loss or high profit". 7. Keeping in mind these two judicial decisions mentioned herein above, let us see, whether Excel Infosys Ltd. satisfies other comparability criterion. On perusal of the profit and loss account of Excel Infoways Ltd. for the financial year 2008-09 shows that the total receipts from the BPO/ITS is at Rs. 18,60,40,738/-., the employees costs is shown at Rs. 16,04,07,392/- which makes the employees costs to sales ratio at 8.81%. In our considered opinion, in this line of business the employees costs form major costs basis. The low....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... +/-5% range as per the provisions of law. The international transactions made by the assessee is directed to be treated as at ALP. As we have decided this issue only by excluding Excel Infoways Ltd from the final list of comparables, we do not find it necessary to decide the other issues in this regard raised by the assessee. Grounds No.1 to 6 of the appeal are allowed. 8. Ground No.7 of the appeal relates to non-grant of exemption u/s 10(35) of the Act. We find that this issue has been considered by the DRP vide para 4, sub-para 4.2.2 at page 14 of his order in which the DRP has given clear direction that a deduction of Rs. 5,98,957/- must be allowed while determining the taxable income of the assessee. We find that the AO has not foll....