AI Drafter 
TaxTMI 
TaxTMI 
2015 (4) TMI 1139
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....ad as under:- "The Ld. CIT(A) erred in deleting the addition of Rs. 4,34,12,348/- made to the price to the international transaction." 3. Apropos ground No.1 is of deletion of the addition of Rs. 4,34,12,348/- made of the price of the international transaction. 4. Facts, in brief are that the assessee company is engaged in the business of providing content related services such as data conversion, composition editorial services and indexing etc. to its parent company Innodata US. The Return of income has been filed by the assessee on 28.11.2003 declaring a loss of Rs. 1,25,40,010/-. The return was processed u/s. 143(1) of the Income Tax Act, 1961 (herein after 'the Act') on 19.03.2004. The case was selected for scrutiny. A re....
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....5. In view of above, the difference amounting to Rs. 4,34,12,348/- between arm's length operating profit and adjusted operating profit is added to the income of the assessee company by the AO vide his order dated 20-3-2006. 6. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide her Order dated 30.9.2010 has allowed the appeal of the assessee by deleting the addition. 7. Now the Revenue is in appeal before us. 8. Ld. DR relied upon the order of the Assessing Officer and TPO. 9. On the contrary, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A) and does not want us to interfere in the same. 10. We have heard both the parties and perused the records. We ha....
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....Fixed Employee Cost as a % of Revenue. 5% 9% 13% 10% 8% 12. As shown above, variable costs as a percentage of revenues have fluctuated from as low as 37% to as high as 46%, ignoring March 2001 because of abnormal profits. (The TPO excluded this year for comparative purposes.) Fixed labour costs (in absolute terms) have remained more or less constant. It is this fixed cost which creates idle capacity/manpower. Thus the TPO's argument that the employee cost does not show much variation is not based on facts. 13. We find that Parent company has no content manufacturing capacity in the United States. So the observations of the TPO that the assessee's lower capacity utilization is because of lower/volume of work outs....
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....0 people), fixed costs like portion of management salaries and general and administrative staff did not get reduced. The assessee has attached a table/chart to demonstrate that the fixed employee cost (in absolute numbers) is fairly constant (supra). However, as a percentage of sales it fluctuates. This fluctuation according to assessee was on account of fluctuation in revenues (chart supra). Neither the parent company nor the assessee had any control over the global melt down which was happening especially at US. The fluctuation in percentages went to show that in the year when it is high, there is under absorption of the fixed costs, which results in excess capacities and idle fixed costs including manpower. Further, despite the revenues ....
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....p 5.95 26.71 10.26 1.42 6.22 Total Fixed asset additions 25.10 100.15 65.72 8.71 8.93 Revenue 331.50 282.80 202.70 249.40 290.10 10.10 As shown above, the assessee made significant capital additions in March 2002. But, the revenue in the same year declined as compared to March 2001 of the prior year. Revenue of the Group further declined in March 2003 as compared to the prior year and so did the appellant's revenues. Due to the reduction in revenues, the assessee curtailed fixed asset additions in March 2003. Albeit, the revenue went up in 2004 and 2005, the assessee further curtailed its fixed assets procurement due to its already existing capacity. 17. The observations....
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....(A), the assessee had filed a copy of the, transfer pricing audit conducted by the Internal Revenue Service, Department of the Treasury US. The assessee was audited by Internal Revenue Service - International Division US for the calendar years 2003, 2004 and 2005. The examination carried out by the international division of the Internal Revenue Service, indicated a downward adjustment to income of one its foreign subsidiaries in Sri Lanka, resulting in an increase of income in the U.S. No adjustments were carried out to any transaction between the assessee India Co. and the parent company. 21. TPO is of the opinion that reason of loss are on other segments and not the content segment which is not correct because in the calendar 2002 the ....