TaxTMI 
TaxTMI 
2018 (10) TMI 1350
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.... year 2011-2012 on 29.11.2011 declaring total income of Rs. 5,07,700 after claiming deduction u/s 10B of the I.T.Act amounting to Rs. 1,85,34,036. During the course of assessment proceedings, the case was referred to the Transfer Pricing Officer (TPO) for determination of Arms Length Price (ALP) of the IT enabled transactions undertaken by the assessee with its AE. The TPO vide its order dated 28.01.2015 had made a transfer pricing adjustment of Rs. 4,12,31,390. On receipt of the TPO's order, draft assessment order u/s 144C of the I.T.Act was passed on 26.02.2015. In the draft assessment order, the taxable income was re-computed at Rs. 6,02,73,126 by making the following additions:- (i) Transfer pricing adjustment of Rs. 4,12,31,390 as per TPO's order; and (ii) Disallowance of deduction u/s 10B of the I.T.Act amounting to Rs. 1,85,34,036. 3. Against the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP) u/s 144C(2B) of the I.T.Act. The DRP vide its directions dated 23.11.2015 disposed off the assessee's application / objections filed before it. The DRP confirmed the disallowance u/s 10B of the I.T.Act and the arm's l....
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....Act in the previous assessment year and for the purpose of consistency deduction u/s 10B of the I.T,Act ought to have been granted. Alternatively it was submitted that the assessee was entitled to deduction u/s 10A of the I.T.Act, which is pari materia with section 10B of the I.T.Act. The DRP, however, rejected the objections of the assessee on this issue. 5.2 Before us the assessee submitted that similar issue was adjudicated by the Tribunal in assessee's own case for assessment year 2010-2011 in ITA No.146/Coch/2015 (order dated 07.09.2018). The learned AR submitted that the Tribunal restored the alternative claim of the assessee u/s 10A of the I.T.Act to the A.O. for fresh consideration. It was stated by the learned AR that the Tribunal for assessment year 2010-2011 (supra) has restored the issue to the A.O. after giving specific direction and same direction may be given in this assessment year also. 5.3 The learned Departmental Representative, on the other hand, relied on the assessment order and the directions of the DRP. 5.4 We have heard the rival submissions and perused the material on record. In the following judicial pronouncements, it was held that section 10A o....
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.... the operating margin of the assessee (Transfer Pricing). 6. Brief facts in relation to the above issue is while computing the operating margin of the assessee, the AO / TPO excluded the forward premium from the operating profits of the assessee. 6.1 The assessee submitted detailed objections before the DRP vide submissions dated 20.11.2015 as to why forward premium amounting to Rs. 19,07,688 should be considered as operating in nature. The DRP, however, failed to consider the contention of the assessee and did not give any direction in respect of consideration of forward contract premium as operating in nature. 6.2 Aggrieved, the assessee has raised this issue before the Tribunal. The contentions raised before the Tribunal are as follows:- (i) The assessee is a captive unit earning foreign exchange revenue only from its parent entity; (ii) In order to protect the company from foreign exchange fluctuations, the company has opted for a forward contract and hedges a part of its receivables against losses arising due to foreign exchange fluctuation; (iii) The difference between spot rate (rate of foreign currency on the date on which the assessee ha....
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....essee, in the interest of justice and equity, the matter needs to be considered by the TPO. The assessee is directed to place necessary evidence before the TPO to claim that premium on forward exchange contract is earned in the normal course of the business to hedge against fluctuations in foreign currency exchange rate and gains from such contract has to be considered while computing the PLI in the international transaction with the AE. It is ordered accordingly. 6.2 In the result, the additional ground raised is allowed for statistical purposes." 6.5 In view of the above order of the Tribunal in assessee's own case, we deem it appropriate to restore this issue to the files of the TPO. The TPO shall adhere to the directions issued by the Tribunal in assessee's own case for assessment year 2010-2011, in this case also. It is ordered accordingly. 6.6 In the result, ground No.4.9 is allowed for statistical purposes. (iii) AO / TPO has erroneously taken the following companies as comparable, viz., ICRA Online Limited, Acropetal Technologies, Accentia Technologies Limited, and Jeevan Scientific Technologies Limited. 7. The TPO had included the above four comp....
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.... comparison which is completely a Knowledge Process Outsourcing (KPO) and accordingly cannot be considered as a company comparable to the assessee. Health segment (comparable segment) of Acropetal fails lower turnover filter. Accentia Technologies Limited (a) Functionally not comparable: In addition to the provision of IT enabled services, Accentia is also engaged in software development services. Based on the annual report, during FY 2010-11, the management decided to develop their own EMR software and also has invested large amounts of funds for the development of EMR Software and the Saas Model and one acquisition has taken place during the year. (b) Non availability of segmental accounts: Assessee further submits that it would be incorrect to compare itself with Accentia, which is a company rendering diversified services and the Company does not disclose segmented financial for the diversified activities undertaken by it. (c) Presence of Intangibles: (41.24% of total fixed assets). Jeevan Scientific Technology Limited (a) Fails IT enabled services Revenue filter of INR 1 crore applied by TPO (revenue from BPO Rs. 79,21,000) 7.3 The learned Department....