TaxTMI 
TaxTMI 
2017 (2) TMI 1383
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1) ['the AO'] under section 143(3) read with section 144C of the Income-tax Act, 1961 ('the Act'), pursuant to the directions issued by the Hon'ble Dispute Resolution Panel ['DRP' / Ld. Panel], is bad in law and on facts and is in violation of the principles of natural justice. (b) Without prejudice to the generality of the above, the order issued by the AO is bad in law in so far as the fact that the AO did not issue to Airvana networks India Private Limited ('the Appellant or 'the Company'), a show cause notice as per proviso to Section 92C(3) of the Act. (c) The Ld. Panel erred in law and on facts in not taking cognizance of the objections raised by the Appellant in relation to the transfer pricing matters, while issuing the directions under Section 144C(5). (d) The Ld. Panel erred in law and on facts in arbitrarily rejecting Evoke Technologies Private Limited ('Evoke'), R S Software (India) Limited ('R S Software') and Mindtree Limited suo moto, without issuing a show-cause notice for rejecting the aforesaid comparables. (e) On the facts and in the circumstances of the case and in law, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isk undertaken by the Appellant vis-a-vis comparable companies. (e) The Ld. Panel and the AO / TPO erred on facts in rejecting the comparable companies arrived at in the Transfer Pricing Study without considering the functional and risk analysis of the Appellant. (f) The Ld. Panel and the AO / TPO erred in law and on facts in applying arbitrary filters as criterion for rejection of companies identified by the Appellant in the Transfer Pricing Study, such as (i) companies whose data for financial year ('FY') 20 I 0-11 was not available, (ii) companies with software development service revenue less than 75% of total operating revenue, (iii) companies with software development service revenue less than INR 1 crore, (iv) companies with related party transactions greater than 25% of sales (v) companies with export sales less that 75% of total sales, (v) companies with employee cost less than 25% of total revenues, (vi) companies with different financial year ending (i.e. other than 31 March 20 II) and (vii) companies having persistent losses up to and including financial year 20 I 0-11. (g) The Ld. Panel and the AO / TPO erred on facts and in law in considering....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenditure incurred in foreign currency amounting to Rs. 8,826,999 from the export turnover while computing the deduction under section 1OA of the Act irrespective of the fact that the same was not attributable to delivery of computer software outside India. (b) On the facts and circumstances of the case, the Ld. DRP erred in confirming the action of the ld. AO. 8. Directions issued by the Hon'ble DRP The ld. Panel has erred in law and on facts in not taking cognizance of the objections filed by the appellant in relation to the draft assessment order issued by the AO/TPO order and confirming the draft order of the AO. 9. Penalty proceedings The appellant submits that based on the facts and circumstances of the case, there was no basis for the AO to initiate proceedings under section 274 read with section 271 of the Act. 10. Relief The appellant craves leave to add or to or alter, by deletion, substitution, modification or otherwise, the above grounds of appeal, either before or during the hearing of the appeal. The appellant submits that the above grounds are independent and without prejudicial to one another". 3. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... developing software solutions in those and other verticals. The company's business of analysis of statistical data of its clients before providing software solutions does not render the services to be functionally uncomparable. 8.The DRP erred in directing to exclude M/s. EZest Solutions Ltd., from the list of comparables holding it to be functionally uncomparable, thereby seeking exact comparability by imposing condition beyond law whereas requirement of law is to acknowledge only those differences that are likely to materially affect the margin. The DRP ought to have appreciated that the comparable qualified all the qualitative and quantitative filters applied by the TPO and in a computer software services, if considered as a sector of business, the different lines prevailing in the business cannot be considered functionally different from each other. 9.The DRP erred in directing exclusion of M/s. Infosys Ltd., from the list of comparables holding it to be functionally uncomparable, without appreciating that the primary source of income of the comparable is from provision of software development services. Also, the DRP erred in imposing a condition beyond l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the explanation to section 1OA provides that such expenses are to be reduced only from the export turnover. 16. The DRP erred in not appreciating the fact that the jurisdictional High Court's decision in the case of Tata Elxsi Limited 349 ITR 98 has not been accepted by the department and an appeal has been filed before the Hon'ble Supreme Court. 17. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the DRP be reversed and that of the Assessing Officer be restored. 18. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal". 4. Learned DR of the revenue supported the order of the A.O./T.P.O. Learned AR of the assessee submitted that the grounds raised in the appeal of the revenue on Corporate Tax issue as per Grounds No. 15 to 17 are covered in favour of the assessee by the judgment of Hon'ble Karnataka High Court rendered in the case of Tata Elxsi Ltd. as reported in 349 ITR 98. Regarding the TP issues as per the remaining grounds in the appeal of the revenue and the appeal of the assessee, he subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idered to compute the profit margin of the assessee for the current year. In our considered opinion it cannot be considered if it arises in respect of the turnover of an earlier year because we are concerned with the operating profit of the current year for working out assessee's margin of profit to compare with the margin of profit of the comparables and since the related turnover is not included in the turnover taken in the denominator, if the Exchange Fluctuation Gain is not excluded from the numerator, it will result in absurd result. We therefore restore this matter to AO/TPO for a fresh decision with the direction that if the related turnover from which the Exchange Fluctuation Gain has arisen is the turnover of the current year then the Exchange Fluctuation Gain should be considered as operating profit of the current year for working out the percentage of profit of the assessee for current year to compare it with rate of profit of the comparables but if it is in respect of the turnover of an earlier year, then such Exchange Fluctuation Gain should be excluded from operating profit of the current year for working out the percentage of profit of the assessee for current year. ....