2018 (10) TMI 991

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e Revenue has proposed the two re-framed questions and to be treated as substantial questions of law. They read as under:-   "1.Whether, on the facts and in the circumstances of the case and in law, the ITAT was right in upholding the order of Ld. CIT(A) in excluding the expenditure incurred in foreign exchange and communication / internet charges from 'total turnover' for working out the deduction under Section 10A of the Act? 2.Whether on the facts and in the circumstances of the case and in law, the ITAT was right in directing the Transfer Pricing Officer/Assessing Officer to re-work the Arm's Length Price by excluding the 7 comparables out of 16 selected by the Transfer Pricing Officer" In Income Tax Appeal No.273 of....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....on of the Delhi High Court, which this Court quoted with approval. The order passed in the case of M/s. Barclays was followed by this Bench in (Income Tax Appeal No. 522 of 2016 decided on 24th September, 2018 (The Pr. Commissioner of Income Tax-4, Pune v/s M/s. TIBCO Software (India) Pvt Ltd, Pune). Yet, we have been finding the Revenue bringing Appeals after Appeals to this Court raising the issue of exclusion of comparables and upholding only of certain comparables by terming them as relevant and germane. We think that whether one instance or one illustration or one entity is comparable to another in determination of the Arm's Length Price, is essentially a question of fact. There, the relevant factors and tests are applied to the ci....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... to the balance seven companies from Sr. Nos.10 to 16. The Assessee was also objecting to the rejection of two comparables , namely one Birla Technologies Limited and another V. J. I. L. Consulting Limited. These were rejected by the Transfer Pricing Officer on the reason that they are persistent loss making/functionally different companies. 6. After this, the Tribunal referred to each of these seven comparables in great details and then concluded that there is substance in the objection of the Assessee. The Tribunal in paragraphs 8, 9, 10 and 11 concludes as under:- "8. In view of the above, we are of the opinion that there is an extra-ordinary event which resulted in high operating margin of that company and we, therefore, direct the AO....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ecting these companies on extraneous reasons stating that Birla Technologies Limited was incurring persistent losses. It was submitted that company has operating profits for the financial year 2005- 06 and referred to the net margins computation as per annexure-5 filed before the CIT(A). Further, with reference to the VJIL Consulting Limited, it was submitted that payment of VAT does not indicate that assessee is engaged in sale of computer software and unless the same is analysed, rejection of the company just because it paid VAT on sales is not correct." 7. Hence, in paragraph 12, the Tribunal worked out the price after accepting the Assessee's objections and allowed Ground   8. On perusal of these paragraphs very carefully and....