TaxTMI 
TaxTMI 
2017 (1) TMI 1618
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....s that cover functionalities like fixed assets ,intra-corporate accounting like debit and credit records, vendor payables, fixed asset tracking and non- finance operations like data processing & other IT enabled services, freight cost management and order processing for certain geographies. There is no change in the ownership structure from the preceding year. During the FY 2006-07, Global-e Business Operations Pvt. Ltd, the assessee, provided data processing and other IT enabled services to its AEs located in various parts of the world. It is registered under the Software Technology Parks of India Scheme and is claiming tax holiday benefit in respect of the profits earned by it from the research and development services. It filed its return for ay 2007-08 on 30.10.2007 declaring an income of Rs. 1,84,82,610/-. On a reference, the TPO decided the adjustments to Arms Length Price at Rs. 85,93,91,410/- to its international transactions. On the Corporate Tax front, the AO excluded Rs. 20,51,19,242/, the expenditure incurred in foreign currency on travel, from export turn over for the purpose of computing deduction u/s10A. The AO found that the assessee has debited Rs. 2,62,94,302/ ....
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.... contended that Maple eSolutions Limited and Triton Corp Limited could not be treated as comparable to it on the grounds of functional dissimilarity and the presence of peculiar business circumstances" owing to business restructuring respectively. The AR submitted that several rulings of this Honourable Tribunal, pronounced subsequent to the assessee finalizing its TP study, have rejected the above mentioned companies as not comparable for benchmarking ITeS businesses . It has further been held that both Maple eSolutions Limited and Triton Corporation Limited cannot be considered as comparables due to their financial statements being unreliable owing to their directors' involvement in fraudulent activities and pleaded that these rulings should equally apply to its case as well. The TPO has therefore erred in finalizing the TP Order by retaining them as comparable to the assessee. Thus, the AR submitted that admission of the additional grounds of appeal raised would be necessary to assess the appropriate Arm's Length Price of the international transactions undertaken by it, being the subject matter of appeal and to render substantial justice. We have considered rival c....
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.... B. Peculiar circumstances 1. The company hived off certain businesses without hiving off the revenue stream 2. The company formed another company by name Learnsmart (India) Private Limited and expenditure of Rs. 2.89 crores and Rs. 1.09 crores has been debited to this company which has resulted in growth of Bodhtree profits 3. The revenue of the company grew at 91.63 percent C. Absence of segmental results The company operates in only one segment - software development D. Intangibles The company has incurred trade mark expenses E. Segmental information obtained under 133(6) contrary to the Annual Report F. Fluctuating margins Relied on : 1. Magma Design Automation India P. Ltd [IT(TP)A No.1214/Bang/2011 - A. Y. 2007-08] 2.AOL Online India P. Ltd [IT(TP)A.1036/Bang/2011 - A. Y. 2007-08] 4.eClerx Services Ltd : A. Functionally different 1. The company provides industry specialized services like Data Analytics, Operations Management and Audits & Reconciliation services which cannot be compared to a BPO or an IT offshoring company 2. The company is categorized as a KPO Relied on : 1. Magma Design Automation India P. Ltd [IT(TP)A No.1214/Bang/2....
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....n : 1. Magma Design Automation India P. Ltd [IT(TP)A No.1214/Bang/2011 - A. Y. 2007-08] 2. AOL Online India P. Ltd [IT(TP)A.1036/Bang/2011 - A. Y. 2007-08] 10. Mold-Tek Technologies Ltd (seg) : A. Functionally different 1. The company provides engineering design services for construction of building by using design tools like CAD/CAM, stadd pro by employing highly skilled software engineers B. Abnormal growth Growth of 204 percent in sales over previous year after C. Extraordinary event during the year The company acquired Cross Road Detailing Inc an engineering services KPO in USA Relied on : 1. Magma Design Automation India P. Ltd [IT(TP)A No.1214/Bang/2011 - A. Y. 2007-08] 2. AOL Online India P. Ltd [IT(TP)A.1036/Bang/2011 - A. Y. 2007-08] 11. Spanco Ltd (seg) : A. Functionally different The company is Involved in telecom business, BPO services B. low employee cost The company has a employee to sales ratio of 7.20 percent suggesting outsourcing of services Relied on : 1. Magma Design Automation India P. Ltd [IT(TP)A No.1214/Bang/2011 - A. Y. 2007-08] 2. AOL Online India P. Ltd [IT(TP)A.1036/Bang/2011 - A. Y. 2007-08] 12. Triton Corp Ltd : A....
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.... Design Automation India P. Ltd, supra, except M/s I Services India P Ltd and Accurate Data Converters Ltd, all other comparables are directed to be excluded from the list of comparables. The TPO is directed to obtain the Annual Report of M/s I Services India P Ltd for FY 2006-07 and furnish a copy of it along with the information obtained u/s133(6) to the assessee and after affording due opportunity to the assessee , decide its comparability afresh. With regard to the comparable Accurate Data Converters Ltd, the assessee pleaded exclusion on the ground of employee cost filter. This matter is remitted back to the TPO for fresh decision after affording due opportunity to the assessee. Thus, the corresponding appeal grounds are allowed and treated as allowed for statistical purposes. 08. The next issue is on the adjustments made in respect of computation u/s 10A. The AO excluded Rs. 20,51,19,242/, the expenditure incurred in foreign currency on travel, from export turn over for the purpose of computing deduction u/s.10A . The assessee pleaded that it is rendering BPO Services and ITES. Since it is not engaged in rendering technical services, the expenditure incurred in forei....
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....ing the above decision, the AO is directed to exclude the above expenditure both from ETO and TTO. The assessee's appeal in this regard is allowed. 09. The next issue is that the assessee incurred Rs. 6,83,81,220/- towards leave encashment which remained outstanding as on the last day of the PY. The AO disallowed it u/s 43B(f). Aggrieved, the assessee filed its objections before the DRP. The DRP upheld the additions. 10. Before us, the AR submitted that originally, under section 43B certain payments were held allowable only on actual payment. Section 43B was amended by inserting clause (f) to disallow the liability towards leave encashment on due basis. No reasons for such amendment was disclosed. When a challenge was made before the Hon'ble Calcutta High Court in Exide Industries Ltd and another v. UOI & others, it struck down section 43B(f) being arbitrary, unconscionable and dehors the Apex Court decision in the case of Bharath Earth Movers Ltd (2000) 245 ITR 428 as the amendment did not disclose the reasons which would be consistent with the provisions of the Constitution and the laws of the land and not for the sole object of nullifying the apex Court decision....
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....ave erred in law and on facts in holding that the foreign currency expenditure of Rs 205,119,242 was incurred by Appellant for rendering technical services outside India and thereby excluding such expenditure from the amount of 'export turnover' for the purpose of computation of relief under section 10A of the Act Without prejudice to above grounds, the learned AO and the Honourable DRP have erred in law and on facts in holding that the communication expenses amounting to Rs 6,768,460 and the foreign currency expenses amounting to Rs 205,119,242 should not be reduced from 'total turnover' for the purpose of computation of relief under section 10A of the Act. Others The learned AO and the Honourable DRP have erred in law in disallowing the provision of leave encashment under section 43B of the Act contrary to the explanations provided by the Appellant during the course of the proceedings. Notwithstanding the above, the learned AO has erred in law and facts by not following the directions of the Honourable DRP in disallowing the provision of leave encashment under section 43B of the Act and compute the relief under section 10A of the Act befo....