TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 567
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....rvices and related services to its Associated Enterprises ('AE' for short). In its return of income for AY 2011-12, the Assessee claimed a deduction under Section 10A of the Act of Rs. 3,36,51,428/-, being the profits of business of its Hyderabad unit. In computing the said deduction, the Assessee had not reduced telecommunication charges to the extent of Rs. 68,91,773/- from its export turnover as the said charges were not attributable to the delivery of computer software outside India. Further, the Assessee had also not reduced travel expenses to the extent of Rs. 58,29,169/- incurred in foreign currency from its export turnover as it was not engaged in the provision of technical services outside India which alone would have warranted reduction of such charges from its export turnover. 3. It is not in dispute that the Assessee is eligible for deduction u/s.10A of the Income Tax Act, 1961 (Act) on profits and gains as are derived from the export of computer software. Sec.10A(4) provides the methodology of computation of deduction u/s.10A of the Act and it lays down that the profits derived from export of articles or things or computer software shall be the amount which bears to t....
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....from the total turnover. As a result, the deduction as claimed by the Assessee u/s.10A of the Act stood allowed. Aggrieved by the relief allowed by the DRP, the revenue has preferred Ground No.1 in its appeal before the Tribunal. 7. We have heard the ld. counsel for the assessee who relied on the order of the DRP and the ld. DR who relied on the order of the CIT(A). Taking into consideration the decision rendered by the Hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn), we are of the view that the order of the CIT(A) directing the Assessing Officer to exclude communication charges and travelling and conveyance expenses both from export turnover and total turnover, is just and proper and calls for no interference. The only grievance of the Revenue is that the decision of Hon'ble High Court of Karnataka in Tata Elxsi (supra) has not attained finality and a SLP by the department is pending before the Hon'ble Supreme Court. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. We therefore hold that the order of DRP does not call for any i....
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....The TPO identified 11 other companies as comparable companies and arrived at a set of 13 comparable companies with that of the Assessee and arrived at arithmetic mean of the profit margin of those 13 companies at 24.82% before working capital adjustment and 21.35% after working capital adjustment. The following chart will show the list of 13 comparable companies ultimately chose by the TPO and the arithmetic mean of the profit margin of those companies. Name of the Company Mark-up on total Costs (WC-unadj) Mark-up on Total Costs (WC-adj) (in %) Acropetal Technologies Ltd. (seg) 31.98 26.15 Zest Solutions Ltd. 21.03 16.61 E-Infochips Ltd. 56.44 53.06 Evoke Technologies Pvt. Ltd. 8.11 5.82 ICRA Techno Analytics Ltd. 20.37 Infosys Ltd. 43.39 0.63 Larsen & Toubro Infotech Ltd. 19.83 17.44 Mindtree Ltd.(seg) 10.66 7.06 Persistent Systems & Solutions 22.12 18.76 Persistent Systems Ltd. 22.84 &n....
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....t, it accepted the contentions of the Assessee that the same needs to be allowed without any putting any restrictions. List of Comparables post the DRP's Directions: On giving effect to the above directions issued by the DRP, the final list of comparables is as follows: Sl. No. Name of the Company 1. e-Zest Solutions Limited 2 P e 2rs. istent Sys Persistent Systems & Solutions Ltd. 3 Persistent Sys Persistent Systems Ltd. 4. Sasken Communication Technologies Ltd. 15. Pursuant to the directions of the DRP, as the arithmetical mean of the working capital adjusted margins of the above comparables was within the +/-5% range of the Assessee's NCP mark-up for provision of SWD services, the TP adjustment made towards the said international transaction came to be deleted in the final assessment order. 16. Aggrieved by the directions of the DRP which were incorporated by the AO in the final order of assessment, the Revenue has preferred appeal before the Tribunal. Briefly, the grounds in Revenue's appeal are as follows: (i) That the DRP erred in directing the exclusion of RS Software (India). Ltd., Acropetal Technologies Ltd. and L&T Infotech Ltd. despite the said compan....
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....e. In the absence of segmental information, it was not possible to ascertain as to whether this company passes the test adopted by the TPO himself for comparison. The learned DR submitted that the required data can be culled out from the information available in the public domain or by resorting to a process of calling for information from this company u/s.133(6) of the Act. The learned counsel for the Assessee in this regard pointed out that the Hon'ble Delhi High Court rejected a similar argument by the Revenue in the case of Prl.CIT Vs. Saxo India Pvt. Ltd. ITA 682/16 order dated 28.9.2016. In the circumstances, this company was rightly held by the DRP to be not comparable. We are of the view that once a company becomes not comparable for the reason that segmental information to apply filters, we need not consider any other aspect of comparability. The learned counsel for the Assessee made submissions before us that this company was rightly directed to be excluded by the DRP on the above basis and further contended that even otherwise, this company is not functionally comparable to the Assessee. As already stated, we do not wish to go into this aspect as this company goes out of....
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....Pvt. Ltd. v. ITO [TS-161-ITAT-2017(Bang)-TP at para 9 on pages 16-17] where the exclusion of the said company from the list of comparables in similar circumstances was upheld by this Hon'ble Tribunal. We therefore do not find any grounds to interfere with the directions of the DRP on exclusion of this company. 21. As for RS Software (India) Ltd., it wasrejected by the DRP solely on the basis that it was allegedly predominantly engaged in the onsite development of software in FY 2010-11. In this regard, it is seen that this company was selected by the TPO and accepted by the Assessee as a comparable, and it was accordingly included by the TPO in the list of comparables. In the proceedings before the DRP, the Assessee did not object to its inclusion in the list of comparables. However, despite the above, the DRP on its own directed its exclusion. We are of the view that since the revenue as well as the Assessee wants to retain this company as a comparable company, this company should be regarded as comparable company. 22. As far as Ground No. 3 in the Revenue's appeal is concerned, the revenue in this ground has challenged the order of the DRP on the ground that the DRP suo moto in....