TaxTMI 
TaxTMI 
2017 (4) TMI 1480
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....s for treating a company as a comparable and accordingly erred in excluding M/S. Tata Elxsi Limited, Sasken Communication Technologies Ltd., Persistent Systems Ltd., Mindtree Ltd., L & T Infotech and Infosys Technologies Ltd. as comparables. 3. On the facts and in the circumstances of the case, the Disputes Resolution Panel erred in excluding uncontrolled comparables having turnover more than Rs. 200 crores in the absence of Turnover criterion prescribed in Rule 10B of Income Tax Rules and also there being no correlation between turnover and profit margin. 4. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in stating that there is no reliable method to make adjustment on account of risk level and has erred in directing to give 1% risk adjustment to the average margin. 5. On the facts and in the circumstances of the case, the Dispute Resolution Panel erred in directing the AO to reduce the expenditure incurred towards telecommunication, insurance and travel expenses incurred in foreign currency both from the Export Turnover and as well from Total Turnover for the purpose of computation of deduction u/s IOA of the Income....
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.... applied at 10 times of the assessee's turnover which comes to Rs. 171 Crores, we do not find any reason to interfere with the impugned order and directions of the DRP as by applying the filter of 10 multiples all these six companies are required to be excluded from the set of comparables. 6. Ground No.4 is regarding risk adjustment allowed by the DRP. 7. The learned Departmental Representative has submitted that the assessee has not furnished any computation or details as to how the risk adjustment has to be calculated therefore the directions of the DRP are not sustainable. In support of his contention, he has relied upon the decision of coordinate bench of this Tribunal dt.22.1.2016 in the case of Zyme Solutions Pvt. Ltd. Vs. ITO in IT(TP)A No.465/Bang/2015. 8. On the other hand, the learned Authorised Representative has not disputed this fact that the assessee did not furnish any detail in respect of risk adjustment claim. 9. Having considered the rival submissions and relevant material on record, when the assessee has not given any details and computation for risk adjustment then the claim of the assessee is purely hypothetical in nature. The co-ordinate bench of t....
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....over an equal amount should also be reduced from total turnover while computing the deduction under section 10A of the Act, is covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. (supra). In this order, the Hon'ble Court held - " The Bombay High Court had an occasion to consider the earning of the word 'total turnover' in the context of section 10A, in the case of CIT Vs. Gem Plus Jewellery India Ltd. (2011) [330 ITR P. 175 (Bom)] (2010-TIOL-456-HC-MUM-IT). Interpreting sub-section (4) of section 10A, it is held as under : "Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits of the business of the undertaking in computing the profits derived from export. In other words the profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and divided by the total turnov....
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....hich has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. 'export turnover' would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from 'export turnover' for the purposes of the numerator would be brought in as part of the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided." The Special Bench of the Tribunal, in the case of ITO Vs. Sak Soft Ltd. (2009) 313 ITR (AT) 353 (Chennai) (SB) (2009-TIOL- 187-ITAT-MAD-SB) also had an occasion to consider the meaning of the word 'total turnover'. After referring to the various judgments of the High Court as well as the Supreme Court held as under : "53. For the above reasons, we hold that for the purpose of applying the formula under sub-section (4) of section 10-B, the freight, telecom cha....
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....efinition of the term 'total turnover' in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover mea....