AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 214
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.... the learned Transfer Pricing Officer in considering certain non-comparable companies as comparable companies. 2 That on the facts of the assessee company's case the learned assessing officer erred in not passing speaking order. 3 That on the facts of the assessee company's case the learned assessing officer erred in using financial information of the comparable companies relating to the financial year ('FY') 2008-09 although such information was not available when the appellant maintained documentation as per the requirement of the act. 4 That on the facts of the assessee company's case the learned assessing officer erred in cherry picking the comparables which is not justified, as the learned assessing officer has not provided the information regarding the date of search and the date of database used. 5. That on facts and in the circumstances of the assessee company's case the Learned Dispute Resolution Panel erred in sustaining the order of the learned Transfer Pricing officer in selecting following companies as comparable companies even when these companies did not meet the comparability criteria with respect to: a) Related Party Transaction Filter - the following com....
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.... the order of the learned Transfer Pricing Officer in computing net margin as required under Transactional Net Margin Method ('TNMM') by considering foreign exchange gain/ loss as non-operating item. 7. That on the facts and in the circumstances of the assessee company's case, the Learned Dispute Resolution Panel erred in sustaining the order of the learned Transfer Pricing officer in not making adjustments to the Arm's Length Price as computed by him so as to take into account the low risks assumed by the assessee company for its international transaction. 8. That on the facts and in the circumstances of the assessee company's case the Learned Dispute Resolution Panel erred in sustaining the order of the learned Transfer Pricing officer in using entirely different set of companies as comparable companies as mentioned in the transfer pricing order dated 23.01.2013 made under section 92CA(3) of the Act when there were ample comparables available as per Transfer Pricing Study conducted by the assessee company. 9. That on the facts and in the circumstances of the assessee company's case the Learned Dispute Resolution Panel erred in sustaining the order of the learned Transfer Pr....
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....es of such companies. 15. That on the facts and in the circumstances of the assessee company's case the learned Dispute Resolution Panel erred by relying upon the action taken by the Transfer Pricing officer without exercising their own judgment and skill. 16. That on the facts and in the circumstances of the assessee company's case the learned Assessing Officer erred in levying interest based on the enhanced taxable income." 3 The factual matrix as emanating from the material on record is that the appellant company was incorporated as 100% export oriented undertaking under the Software Technology Park Scheme of the Government of India. It is a wholly owned subsidiary of M/s. SSP SIRIES Solutions Ltd., UK (SSP (UK)). It is a captive service provider and is engaged in providing support services for development and maintenance of software to SSP (UK). In the instant assessment year, the appellant furnished a return of income on 22.9.2009 declaring Nil income after claiming exemption under section 10A of the Act. As per the Transfer Pricing document furnished by the appellant, the tax payer had entered into an international transaction for provision of software services of the va....
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....foresaid basis, the TPO made an adjustment of Rs. 2,70,87,490/- in the manner as under: S.No. Particulars Amount 1. Price received 18,90,20,954 2. Total cost 16,43,66,021 3. ALP at a margin of 31.48% 21,61,08,444 4. Price received 18,90,20,954 5. Difference 2,70,87,490 6 Pursuant to the directions of DRP out of the set of 12 comparables adopted by the TPO, one of the comparables namely Bodhtree Consulting Ltd. was directed to be excluded and margin was redetermined at 28% on a set of 11 comparables in the manner as under: S.No. Name of comparable As per assessee 1 Info Drive Software Ltd. 40.51 2 Aricent Technologies Limited (Consolidated) 25.76 3 Cat Technologies Limited (Standalone) 34.43 4 KPIT Cummins Infosystem Limited (Consolidated) 21.56 5 Larsen & Turbo Infotech 21.33 6 Mindtree Ltd. 27.36 7 Persistent Systems Ltd. 37.77 8 R.S. Software (I) Ltd. 10.15 9 Tech Mahindra Limited (Consolidated Seg) 35.35 10 Think Soft 16.56 11 Thirdware Solutions Limited 37.27 Average 28.00% 7 Pursuant to the above, TPO passed a final order dated 7.1.2014 originally at an assessed income of Rs. 2,70,87,490/-. Howev....
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.... the order as under: "3.1 The operating profit margin (OP/OC) computed by the assessee is as below. Particulars Amount (Rs.) Income from services rendered 18,90,20,954 Other Revenue (foreign exchange) 24,495 Total Operating Income 18,90,45,449 Expenditure: Personnel Expenses 9,02,91,690 Operating & Other Expenses 6,93,56,048 Depreciation 47,18,283 Total operating cost 16,43,66,021 Operating Profit 2,46,79,428 OP/OC 13.05%" 11 The contention of the appellant on the basis of the aforesaid tabulation is limited in as much as it is stated that OP/OC margin is 15.01% and not 13.05%. The figures as stated are not disputed i.e. operating profit at Rs. 2,46,79,428/- and operating cost at Rs. 16,43,66,021/-. According to the appellant, if the ratio of the aforesaid figures is done then the OP/OC margin would be 15.01%. Thus, from the aforesaid, it is evident that all the facts to determine additional ground of appeal are on record. The Hon'ble Supreme Court in the case of NTPC India Ltd. 229 ITR 383 has held as under: "But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessm....
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.... 4447/Del/2007 in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business'. When we read the ratio of the case of Sutlej Cotton (SC)(supra) in juxtaposition to that of the Special Bench in case of Prakash I Shah (supra), there remains no doubt that forex gain or loss from a trading transaction is not only an item of revenue nature, but is, in fact, a part of the price of import or value of export transaction, as the case may be. Operating expense is ordinarily an expense that a business incurs as a result of performing its normal business operations. As the business of 'Assembly' done by the assessee under this segment is not possible without purchases and forex gain is in relation to such purchase transactions, we have no hesitation in holding that it is an item of operating cost." 15 The learned DR during the course of arguments, supported the action of the authorities below only on the ground that DRP has rejected the contention of the ....
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..... It was therefore, submitted that such comparable be excluded. The learned special counsel opposed the contention of the appellant on the ground that such comparable has been adopted by the assessee in its initial list of comparables. The learned counsel in the rejoinder submitted that the said contention is not maintainable in view of the decision of the Special Bench in the case of DCIT vs. Quark Systems India (P) Ltd. 132 TTJ 1 (Chd) (SB). Reliance was also placed on the judgment of the Delhi High Court in the case of Chryscapital Investment Advisors (india) (P) Ltd. vs. DCIT 56 taxmann.com 417. 19 We have considered the rival submissions and perused the material on record. We find that TPO at pages 44 to 45 of the order has held that filter for selection of comparables should include a filter of employees cost less than 25% of total cost. The TPO has observed as under: "7.3 The assessee has objected to the use of filter of employee cost less than 25% of total cost:- 7.3.1 The assessee has objected to applying a filter of employees cost less than 25% of total cost. The assessee has objected to the use of the employee cost filter. The assessee believes that there is no rati....
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....his regard, this Court relies on the Supreme Court's decision in CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661, where the Court noted: "Whether the respondent is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which it might take of its rights, and consequently, if the whole of the commission is under the law liable to be deducted against the Indian profits, the respondent cannot be estopped from claiming the benefit of such deduction, by reason of the fact that it erroneously allocated a part of it towards the profits earned in Karachi. What has therefore to be determined is whether, notwithstanding the apportionment made by the respondent in the profit and loss statements, the deduction is admissible under the law." Further, a Division Bench of this Court in CIT v. Bharat General Reinsurance [1971] 81 ITR 303 has also held that there is no estoppel against law under the Act. The Court therein held as follows: "It is true that the assessee itself had included that dividend income in its return for the year in question but there is no estoppel in the Income tax Act and the assessee having itself ch....
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....repared to make good faith showing that their transfer pricing is consistent with the arm's length principle regardless of where the burden of proof lies." 36. The aforesaid decisions and guidelines may not be exactly on identical facts before us but they emphatically show that taxpayer is not estopped from pointing out a mistake in the assessment though such mistake is the result of evidence adduced by the taxpayer. 37. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. For the other side cannot claim to have a vested right in injustice being done due to some mistakes on its part. 38. Accordingly, on facts and circumstances of the case, we hold that taxpayer is not estopped from pointing out that Datamatics has wrongly been taken as comparable. While admitting additional ground of appeal raised by the assessee to require us to consider whether or not Datamatics should be included in the comparable, we make no comments on merit except observing that assessee from record has shown its prima facie case. Further claim may be examined by the Assessing Officer. This course we adopt as obje....