TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 1139
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....ting 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 reference was made to TPO, New Delhi for determining the a....
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....- 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 have carefully considered the facts and the detailed submissions of Revenue a....
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.... 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 outsourced by Parent Company is not based on facts and has been rightly stated by the ld CIT(A). Since the Parent company outsources one hundred percent of its work it secur....
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.... (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 being low, the assessee had to retain skilled technical manpower. Also there were fixed cost on rentals, electricity, depreciation on computers and infrastructure, which had to be incurred. This resulted in idle time costs. Under utilization....
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....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 of the TPO as regards improper Transfer Pricing and that the parent company had passed on part of its losses to the assessee is not based on proper evaluation of facts. A perusal of the table represents the Parent's revenue for seven years starting March 2000: TABLE 7: REVENUES (figures in Rs. million) Year March 200....
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....bsidiaries 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 parent company had suffered a total loss of USD (5,165,000), which included loss from content segment of USD (2,996,900)and loss from system and training segment of USD (2,169,000). So, it is an incorrect observation of the TPO that the reasons for the loss of the parent company are on account of segments and not the content segment. In view of the precedents cited in the impugned order, we find that the ld CIT(A) rig....