TaxTMI 
TaxTMI 
2018 (7) TMI 1468
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....neither necessity nor expediency for such reference to the TPO as there was no attempt on the part of the appellant to understate wilfully the value of its international transactions. l.b The AO has erred in not providing opportunity of being heard to the appellant before referring the transfer pricing issues to the TPO which is in violation of principles of natural justice. 1.c The AO ought to have independently applied his mind to the order of the TPO with due cognizance to the appellant's various rebuttals before accepting mechanically, the conclusions stated in the TPO's order. 1.d The TPO erred in making the TP addition where the tax rate in the country of the AE s is higher than the rate of tax in India and where the establishment of tax avoidance or manipulation of prices or establishment of shifting of profits is not possible. 2. Erred in making the TP addition of Rs. 9,72,84,721/- towards the shortfall of ALP adjustment in respect to the transactions of Software Development Services. 3. Erred in calculating the operating margin of the company i.e. Profit Level Indicator (PLI) (OP /OC) of -0.79% without accepting the assessee's PLI(OP/OC) of 25.44....
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....rs significant idle employee cost. 3.j Erred in not excluding the foreign exchange loss of Rs. 90,93,482j - from the operating cost, as such loss has not been incurred during normal course of business and same cannot be considered as operating in nature. 3.k Erred in not excluding the expenditure of donation of Rs. 10,50,000jfrom the operating cost as same cannot be considered as operating in nature. 4. Erred in rejecting the TP Documentation, Search process, Filters, Comparability Analysis implemented by the assessee in accordance with the provisions of section 92C and Rule 10D of IT, Rules. 5. Erred in eliminating the following company which is not objected by the assessee from the final set of comparables selected by the TPO: 1. Akshay Software Technologies Ltd 5.a Ought to have followed the provisions of section 144C(11) of the Act in providing opportunity of being heard to the assessee before rejecting Akshay Software Technologies Ltd as the comparable to the assessee company. 5.b Ought to have appreciated the fact that Akshay Software Technologies Ltd has been considered as a comparable to the assessee company in earlier years by the TPO as well as by the....
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....ons and risks. 8.c Ought to have appreciated that the Central Board for Direct Taxes, has issued Instruction No. 5/2011 dated 5 March 2011 directing the Tax Authorities to take the opinion of technical experts in cases involving complex technical issues. Hence, the TPO/AO ought to have quantified the risks in consultation of the technical experts. 9. Erred in not giving the benefit of +/-5%, as provided under first proviso to section 92C(2) of the Act. 10. Erred in confirming the disallowance of the claim of assessee company u/ s 80G of the Act amounting to Rs. 1,12,790/-. 11. Erred in confirming the disallowance of the deduction claimed by the assessee company u/ s 10AA of the Act for Rs. 61,644/-. 11.a Ought to have appreciated the fact that profit from SEZ unit is allowable u/ s 10AA of the Act. 11.b Ought to have appreciated that the claim u/s 10AA is being allowed by the department for the earlier years. 12. Erred in initiating penalty proceedings u/ s. 271G and 271(1)(c) of the Income Tax Act. 13. The assessee may add, alter or modify any other point to the Grounds of appeal at any time before or at the time of hearing of the appeal". 2. Thereafter, ....
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....lculation of the operating cost of the assessee company as per the directions of the Hon'ble DRP issued on 29.9.2015 to keep the deferred revenue expenditure and finance cost out of the computation of margin. We find that though the DRP has given a direction, the AO has not calculated the margin in accordance with the directions of the DRP. We therefore, remand this issue to the file of the AO with a direction to re-compute the operating cost of the assessee in accordance with the directions of the DRP. Ground No.3.a is accordingly treated as allowed for statistical purposes. 6. As far as Ground No.3h is concerned, it is the case of the assessee that the employee cost of the assessee is 76% as compared to the employee cost of the 3 comparables retained by the DRP being 58% of the turnover. He submitted that the comparable companies did not bear any idle cost in terms of excess staff, whereas the assessee company has borne significant idle employee cost. Therefore, he prayed that for the purpose of computing the ALP, the disparity in the employees cost margin should be taken note of and proper adjustments should be made. 7. The learned DR was also heard. 8. On going through t....