TaxTMI 
TaxTMI 
2015 (11) TMI 1279
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....rvices in Asia, Australia and the south Pacific. Being a captive service provider, Autodesk India assumes less than normal risks and all significant business and entrepreneurial risks are borne by the overseas affiliates. 2. During the financial year 2006-07 relevant to the assessment year 2007-08, software development (technical support) and marketing support were the only services rendered by Autodesk to its Associated Enterprises (AEs). 3. The TP issue in the present appeal pertains to the aforesaid two international transactions towards which a total adjustment of Rs. 6,53,62,861/- was made by the TPO. Also, for the A.Y. 2007-08, the assessee claimed a deduction of Rs. 80,73,695/- on account of advances written off which was debited to the Profit and Loss Account. The AO has made a disallowance of the said amount on the ground that it was a capital expenditure not allowable under Section 37 of the Act. 4. Originally, a draft assessment order was passed on 23.11.2010 challenging which, the assessee filed its objections before the Dispute Resolution Panel (DRP). 5. The DRP upheld the order passed by the AO. Consequently, the AO passed the final order dated 24.08.2011.....
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....on of this Tribunal in the case of NXP Semiconductors India P. Ltd. (supra) [paras 24 to 26], as also applying the upper limit of Rs. 200 crores to the turnover as held in Trilogy E-Business Software India Pvt. Ltd. (supra). Ishir Infotech Ltd. at Sl.No.11 fails the TPO's own filter of 25% employee cost as held in NXP Semiconductors India P. Ltd. (supra) [paras 20 to 21] as also in view of its RPT exceeding 15% of sales as held in 24/7 Customer Com Pvt. Ltd. (supra). Hence the assessee submitted that remaining 7 comparables would be as follows:- 12. It was further submitted that NCP margin of assessee of 10% would be within the +/- 5% range of arithmetic mean and hence TP adjustment made by the TPO has to be set aside. The assessee also submitted a chart of +/- 5% o the net margin of the assessee for software development services as follows:- 13. From the chart, we find on acceptance of the 7 comparables selected by the assessee, arithmetic mean of 10.37% would place the assessee in a situation where the TP adjustment would become NIL. Since we find that the comparables worked out by the assessee are acceptable and the rejection of comparables made by the assessee from out of....
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....lhi for a lease period of 3 years extendable by 3+3 years by mutual consent. The objective of taking the premises on lease was to set-up and operate an office in Delhi. Subsequently in September 2006, the assessee entered into an agreement with M/s. Space Matrix Design Consultants P. Ltd., an interior designing firm, for designing the office layout and implementation of the same. As per the agreement, Space Matrix was to provide the following services to Autodesk: a. Plan preliminary space at the premises b. Develop design concepts and prepare drawings c. Construct envisaged concepts at the premises. 19. During the financial year 2006-07, based on the work done in the premises, Space Matrix had raised several invoices aggregating to Rs. 80,73,695/- which was duly paid by the assessee. Pending completion of the work, the assessee had recorded the payments as 'advances paid to Space Matrix'. In November 2006, before the work could be completed by Space Matrix, the premises in question was sealed by the Government pursuant to the Order of the Hon'ble Delhi High Court as the premises was not in conformity with the applicable land-use laws. Accordingly, even though the Space....
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...., then the same ought to stand excluded from the cost base while computing the profit margin of the assessee for transfer pricing purposes. 23. The ld. counsel for the assessee further relied on the decision of Hon'ble High Court of Karnataka in the case of CIT v. Infosys Technologies Ltd. (No.2),, 349 ITR 588 (Karn) and pointed out that the lease is only for three years with no certainty of further extension and the assessee did not occupy the premises for the expenditure to be treated as revenue expenditure. The ld. counsel for the assessee also relied on the decision of this Tribunal in the case of Asera Software (India) Pvt. Ltd., ITA No. 1179/Bang/2009. He gave a note of the details of payments made by the assessee to M/s. Space Matrix Design Consultants P. Ltd., which contained the date of invoices for the services provided. 24. The ld. DR vehemently opposed the claim of expenditure as revenue expenditure and stated that the number of years were totally 9 years and the very nature of expenditure is capital and therefore it could only be treated as capital loss. 25. In the rejoinder, the ld. counsel for the assessee pointed out to the lease deed at page 934 of the Pap....
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....on more efficiently or more profitability while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. (iii) What is an outgoing of capital and what is outgoing an account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency." 28. In the result, the appeal is partly allowed for statistical purposes. Pronounced in the open court on this 30th day of September, 2015. ============= Document 1 Sl. No. Name of the Company 1 Akshay Software Technologies Ltd. Weighted Average (%) 7.36 2 ASM Technologies Ltd. 3 Aztecsoft Ltd. 4 Blue Star Infotech Ltd. 5 Bodhtree Consulting Ltd. 6 7....
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....5 54.75 4. Datamatics Ltd 1.38 -0.21 5. e-Zest Solutions Ltd 36.12 36.51 6. Flextronics Software SystemsLtd (Seg) 25.31 25.49 7. Geometric Ltd (Seg) 10.71 10.04 8. Helios & Matheson 36.63 34.89 9. | Gate Global Solutions Ltd 7.49 6.03 10. Infosys Technologies Ltd 40.30 39.43 11. Ishir Infotech Ltd 30.12 30.86 12. KALS Information Systems Ltd (Seg) 30.55 23.86 13. LGS Global Ltd 15.75 15.59 14. Lucid Software Ltd 19.37 17.48 15. Mediasoft Solutions Ltd 3.66 1.99 16. Megasoft Ltd 60.23 51.80 17. Mindtree Ltd 16.90 15.79 18. Persistent Systems Ltd 24.52 23.87 19. Quintegra Solutions Ltd 12.56 9.65 20. RS Software (India) Ltd 13.47 13.56 21. R Systems International Ltd (Seg) 15.07 13.67 22. Sasken Communication Technologies Ltd (Seg) 22.17 21.52 23. SIP Technologies & Exports Ltd 13.90 11.13 24. Tata Elxsi Ltd (Seg) 26.51 26.62 25. Thirdware Solutions Ltd 25.12 21.96 26. Wipro Ltd (Seg) 33.65 34.95 Document 4 SI. No. Name of the Company Mark up ....