TaxTMI 
TaxTMI 
2017 (1) TMI 1623
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....income declaring total taxable income of Rs. 10,77,60,011/-. The assessee had entered into international transactions for providing software development services to its associated enterprises of Rs. 60,29,46,396/-. Accordingly, a reference u/s 92CA was made by the Assessing Officer for determining the arm's length price u/s 92CA(3) of the Act. The assessee had used the Transactional Net Margin Method (TNMM) as the most appropriate method with OP/OC as the Profit Level Indicator (PLI) in Transfer Pricing (TP) Study. The assessee has used itself as tested party. It had earned an Operating Margin of 14.53% on cost as against the weighted average margin of 50 comparables, considered in TP Study, at 12.50%. On the basis of updated margin (current year data), the average margin of comparables was arrived at 11.83% for March, 2006. Ld. TPO rejected the assessee's contention for use of data in respect of comparables for the year 2004-05 and 2005-06 and considered the data for the year 2006-07 only. On this basis 25 comparables were rejected on the basis of related parties transactions and on the ground of persistent loss making. Ld. TPO has also assigned certain other reasons for rejecting....
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....he assessee has also taken following additional grounds of appeal :- "1.10 That on the facts and circumstances of the case, M/s Infosys Technologies Limited, Wipro Limited, KALS Info Systems Limited, Helios & Matheson Information Technology Limited and Tata Consultancy Services Limited may be rejected for the purposes of comparability analysis as these companies are not comparable to the Appellant in terms of functions performed, assets employed and risk assumed. 1.11 That on the facts and circumstances of the case, working capital adjustment as specified under Rule 10B(1)(e)(iii) and Rule 10B(3) of the Income Tax Rules, 1962 may be allowed for the purpose of determination of arm's length price to account for the difference in working capital employed by the Appellant vis-a-vis the comparable companies." 8. First, we consider ground no.1.4 and 1.8. Apropos ground no.1.4, ld. counsel for the assessee submitted that in regard to (i) Cambridge Technology Enterprises Ltd., (ii) Powersoft Global Solutions Ltd., (iii) SIP Technologies & Export Ltd., have to be computed corresponding to assessee's financial year because the accounts are in respect of 15 month in the case of C....
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....at advance pricing agreement dated 24.08.2016, the Department itself has considered the other income as operating income as is evident from clause (f) of APA, which is reproduced hereunder :- "(f) "operating revenue" means the revenue earned by the Applicant in the previous year in relation to the covered transaction during the course of its normal operations including the net foreign exchange difference (if gain) and gain on forward contracts but does not include the following, namely :- (i) income on transfer of assets or investments; (ii) refunds relating to income-tax; (iii) extraordinary incomes; and (iv) other incomes not relating to normal operations of the Applicant. The operating income includes interest received on deposits for Previous Years 2013-2014 and 2014-2015 and roll back years." 11. After hearing both the parties, this issue is restored back to the file of ld. Assessing Officer/TPO for verification of assessee's claim as per page 165 of Paper Book read with the chart filed at the time of hearing, which is reproduced hereunder :- RBS India Development Centre Private Limited Assessment Year 2006-07 Particulars Amount Nature Am....
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....e 11 of the ITAT Rules and admit the above additional grounds of appeals. In this regard, we enclose Form No. 36B, along with the additional grounds, in duplicate. In this context, reliance is also placed on the decision in the case of Jute Corporation of India Ltd. [187 ITR 688 (Hon'ble Supreme Court)]. In this case, the Hon'ble Apex Court, observed as under: "5 .... Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter. " Further, in case of Quark Systems India (P.) Ltd [ITA No. 594/2020], the High Court Of Punjab & Haryana observed as under: "4. The issue involved in this case is whether the Tribunal was justified in entertaining the additional ground for exclusion of M/s. Datamatics Technologies as comparable and remanding the case to the Assessing Offi....
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....x Rules, 1963 noted above, to admit these additional grounds as the same are essential for imparting substantial justice to assessee. The assessee has filed detailed analysis in this regard which Assessing Officer will consider. The matter is restored back to the file of ld. Assessing Officer/TPO to examine the assessee's contentions in this regard. In the result, the additional ground no.1 is allowed for statistical purposes. 15. As regards the additional ground no.2, ld. counsel pointed out that working capital adjustment has been allowed by ld. DRP in assessment year 2007-08 and in the additional ground the assessee has given all details and, therefore, this matter may be restored back to the file of ld. Assessing Officer/TPO for examining the assessee's plea and to allow the working capital adjustments. After hearing both the parties, this additional ground is admitted for examining the assessee's contentions. This ground is also allowed for statistical purposes. 16. In the result, the appeal of the assessee in ITA No.5538/Del/2010 is partly allowed for statistical purposes. ITA No.5443/Del/2011 (A.Y. 2007-08): 17. This appeal filed by the assessee is directed again....
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....fficer/TPO to examine the assessee's contention and if it is found that VMF Soft Tech Ltd. has not outsourced its activity then to include in the list of comparable companies. 22. The next ground no.2.1 pressed at the time of hearing is reproduced hereunder :- "2.1 By making modification to the set of comparable companies identified by the Appellant by rejecting comparables on grounds of functional dissimilarity. In this regard, the Ld. TPO/ DRP have rejected comparable on erroneous basis without following a cogent economic basis." 23. Ld. counsel pointed out that the main contention of assessee is that the following two comparables have wrongly been rejected by TPO : (a) Goldstone Technologies Limited and (b) Computech Information Ltd.. He pointed out that both these comparables have been accepted by ld. TPO and DRP in assessment year 2006-07 as is evident from page 30-31 of the Paper Book. Ld. DRP rejected these comparables observing that functional similarity has to be examined in particular year. 24. We have considered submissions of both the parties. From the TPO's order for the assessment year 2006-07, it is evident that Goldstone Technologies Limited and Computec....