TaxTMI 
TaxTMI 
2018 (4) TMI 1599
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....ing Officer ("learned TPO") issued under Section 92CA of the Act are not in accordance with the law, made in violation of the principles of equity and natural justice and are contrary to the facts and circumstances of the present case. 2. Transfer pricing adjustment of INR 73,919,904 The Hon'ble DRP and learned AO / TPO have erred in law and on facts in making Transfer Pricing ("TP") adjustment of INR 73,919,904 to the returned income of the Appellant and in holding that the international transactions between the Appellant and its associated enterprises ("AEs") were not at arm's length. 3. Rejection of transfer pricing documentation of the Appellant 3.1 The Hon'ble DRP and the learned AO / TPO have erred in law and on facts in rejecting the TP documentation which had been prepared by the Appellant, in the manner contemplated under the relevant provisions of the Act and the Income-tax Rules, 1962 ("the Rules"). 3.2 The Hon'ble DRP has erred in law and facts in upholding the learned TPO's finding that the information or data used in computation of arm's length price is "unreliable or incorrect", under Section 92C(3)....
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....out prejudice to the above, while adjudicating on Persistent Systems Limited, theHon'ble DRP did not take cognizance of the order of Hon'ble Bangalore ITAT for AY 2007-08 in Appellant's own case [IT(TP)A No. 536/Bang/2015] wherein Persistent Systems Limited was rejected. 6.5 The Hon'ble DRP and the learned AO / TPO have erred in law and on facts in rejecting the following Appellant's TP documentation companies which are comparable to the Appellant: • Helios & Matheson Information Technologies Limited • R Systems International Limited • Bells Softech Limited 6.6 The Hon'ble DRP and the learned AO / TPO have erred in law and on facts in rejecting the following additional comparable companies proposed by the Appellant during the course of TP proceedings, without considering the detailed submissions of the Appellant: • Evoke Technologies Limited • Spry Resources India Private Limited 7. Information gathered under Section 133(6) of the Act is inappropriate for the purposes of disturbing the TP documentation undertaken by the Appellant ....
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.... or amend the above grounds, at any time before or at the time of hearing of the appeal. Each of the above objections is independent and without prejudice to the other grounds preferred by the appellant." 3. At the very outset, it was submitted by ld. AR of the assessee that only ground nos. 5 and 6 are to be decided and the remaining grounds are not pressed. Accordingly all grounds except ground nos. 5 and 6 are rejected as not pressed. 4. Regarding ground no. 5, the ld. AR of assessee placed reliance on a Tribunal order rendered in the case of Sony India (P.) Ltd. Vs. DCIT as reported in 114 ITD 448 (Delhi), copy available on pages 291 to 344 of paper book. He also placed reliance on another Tribunal order rendered in the case of Kenexa Technologies Pvt. Ltd. Vs. DCIT as reported in 51 taxmann.com 282 (Hyderabad), copy available on pages 345 to 357 of paper book. The ld. DR of revenue submitted that these two Tribunal orders are not applicable in the present case. He supported the assessment order and DRP order. 5. We have considered the rival submissions. First of all, we examine the applicability of Tribunal order rendered in the case of Sony India (P.) Ltd. Vs. DCIT (....
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....se it is not so shown the taxpayer can be subjected to a penal action under Indian regulations. In this connection, we can refer to decision of Supreme Court in the case of CIT v. Teja Singh 35 ITR 408. Having regard to statutory provisions, it cannot be said that provisions or writing back of liability is not part of operating profit or would not be taken into consideration for computing the same. The aspect of liabilities written off was ignored without considering nature and character of such liabilities. It would have been different if a finding was recorded that provision written back did not relate to business operations of the taxpayer. There is no suggestion on the above lines. Further it is not the case of the revenue that liabilities written back were wrongly provided for. It is a settled and well-accepted proposition that adjustment can be made only on account of differences. It is not possible to believe that other comparable entities taken into consideration are not making and writing back provision of liabilities no more required. There is no material nor there is any finding to support action of the revenue authorities. We can therefore make a general observation tha....
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....stimate basis and now the exact amount of sales is known and therefore, the excess amount of debts created in earlier year on estimate basis is to be reduced now to make at par with actual debt. In the present case, actual sales were accounted for in earlier years and debts were created in earlier years on the basis of actual sales and invoices and now, the provision is made when it is seen that the recovery of such debt is doubtful. We would like to observe that the whole purpose of TP study and TP exercise is to compare the price charged by the assessee for its income or prices paid by the assessee for its expenses from or to its AE and for that purpose, we use various methods including TNMM as per which, the profits of tested party and uncontrolled comparables are compared to come to conclusion that prices are at arms length or not. If the sale is made in an earlier year and provision for doubtful debts is made in a later year and in such a later year, such provision for doubtful debts made is reduced from the profit of the tested party or of the comparables, such provision for doubtful debts cannot be considered for reduction from the profit because for the purpose of transf....
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....on also, the numerator will increase i.e. the profit but not the denominator i.e. the turnover because the turnover was considered in the earlier year. In this Tribunal order, there is no discussion on this aspect of the matter and therefore, for the purpose of deciding this aspect, this Tribunal order is also not applicable and the assessee does not get any help from this Tribunal order. This ground is rejected. 8. Regarding ground no. 6 which is regarding the assessee's request for exclusion of four comparables i.e. 1) Persistent Systems Ltd., 2) Larsen & Toubro Infotech Ltd., 3) Tech Mahindra Limited and 4) CG-VAK Software & Exports Limited and inclusion of 3 comparables i.e. 1) R Systems International Ltd., 2) Evoke Technologies Ltd. and 3) Spry Resources India Pvt. Ltd., the ld. AR of assessee has submitted a chart as per which this is the submission of the ld. AR of assessee that out of 7 comparables for which the assessee is requesting for exclusion, 5 comparables are to be excluded because of turnover filter. It was submitted that the assessee company's turnover is Rs. 93.59 Crores and therefore, any comparable company having turnover in excess of Rs. 935.91 Crores or le....