TaxTMI 
TaxTMI 
2017 (4) TMI 1483
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..... The learned CIT(Appeals) has erred in not appreciating that there is no provision in section 10A, which requires the telecommunication expenses reduced from the export turnover as per clause (iv) of Explanation2 to section 10A, to be reduced from the total turnover also. 4. The learned CIT(Appeals) was not justified in allowing relief of Rs. 66,74,232/- out of the adjustment made by the Assessing Officer u/s 92CA of the I.T. Act, 1961 by directing the Assessing Officer to adopt the mean PLI of 21.72% as reduced by 5%, i.e. at 16.72%, without appreciating the facts and circumstances under which the adjustment was made by the Assessing Officer based on the TPO's order. 5. The Learned CIT(Appeals) was not justified in holding that the assessee was entitled to a standard deduction of 5% from the arithmetical mean of the profit margin of the comparables under the proviso to section 92C(2) of the I.T. Act, 1961 while computing the arm's length price (ALP). 6. The Learned CIT(Appeals) has erred in interpreting the second limb of the proviso to section 92C(2) of the I.T. Act, 1961 as it stood prior to the amendment brought about by the Finance (No. 2) Act 2009 ....
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.... that of the assessing officer be restored. 13. The appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the appeal." 2. Ground No. 1 to 3 of the revenue appeal pertains to the deduction u/s. 10A of the Act. It was submitted on behalf of the ld. AR for the assessee that the issue is covered in favour of the assessee by the judgment of Hon'ble High Court of Karnataka in the case of Tata Elexsi Ltd. (349 ITR 98). 3. We have considered the rival submissions. We find that in the present appeal of the revenue, the issues involved (1 to 3) pertains to the quantum of deduction allowable u/s. 10A which has been reduced by the AO by reducing the telecommunication expenses incurred in foreign currency by the Assessee on telecommunication charges. The CIT(A) has held that the action of the AO in re-computing the deduction u/s. 10A by reducing the telecommunication expenses has been in foreign currency only from export turnover and not from the total turnover is not sustainable. 4. We find this issue is no more res integra and is settled by the jurisdictional High Court in Tata Elxsi Ltd. (supra) thereby....
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....nus 5% standard adjustment should be allowed while determining the ALP or the entire amount representing difference between ALP and the declared price should be added where the difference exceeds 5%, has been set to rest by the Finance Act, 2012 with the insertion of sub-section (2A) to section 92C with retrospective effect. With this amendment it has been made clear that where the variation between arithmetical mean and price at which the transaction has actually been undertaken exceeds 5% of arithmetical mean, the assessee shall not be entitled to exercise the option. The learned AR was fair enough to concede that the retrospective amendment by the Finance Act, 2012 has the effect of upholding the opinion taken by the learned CIT (A). In view of this amendment to section 92C, we hold that the learned CIT (A) was justified in not granting standard adjustment of 5%. This ground is not allowed." 24. Even the special bench in the case of IHG IT Services (India) (P.) Ltd. v. ITO [2013] 33 taxmann.com 1/144 ITD 16 (Delhi - Trib.) (SB) held that after the amendment by the Finance (No. 2) Act, 2009 with effect from 1.10.2009, such benefit of 5% tolerance margin was restricted to....
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.... 7. If we look into the order passed by the CIT(A) and the reasons given for excluding the 7 comparables out of 11 comparables selected by the TPO, the reasons given by CIT were that these companies were superprofit companies and therefore relies upon the judgment of SAP Labs Ltd. Excluded these 7 companies. The name of the 7 companies excluded by the CIT(A) was as under. a) Goldstone Technologies Limited b) iPower Solutions India Limited c) Lanco Global Systems Limited d) Larsen & Toubro Infotech e) VJIL Consulting Limited f) VMF Softech Limited g) XcelVision Technologies Limited 8. The ld. Senior Advocate for the AR, has submitted that the case of the assessee is covered by the judgment of SAP Labs Ltd. 9. We have gone through the record and the order passed by the CIT(A). In our view the assessee as well as the TPO had applied the TNMM being the most appropriate method for the purposes of determining the ALP. The TPO for the purposes of determining the ALP had applied various filter namely functional comparability, related party transaction (RPT) etc . Further TPO had also compared the financials of the selec....
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....y. Assessee Appeal 13. The Ground No. 1 of the assessee appeal is with respect to the exclusion of 3 comparables by the AO / CIT(A), M/s. Bangalore Soft Sell Limited, M/s. Essar Information Technology Limited and M/s. Future Software Limited. In this regard, the ld. AR has drawn our attention to para 4.4(2) which we deem it appropriate to reproduce below which provides as under. 4.4(ii) Whether rejection of appellant's comparables is in order. It is worthwhile to mention that the appellant normally prefers for comparison only cases which have declared operating profit less than that of the appellant's OP and the department chooses cases on either side both which have declared lesser OP than that of the appellant's as also which have declared more OP than that of the appellant's. Accordingly, it is held that the rejection of the appellant's comparables is in order." 14. The ld. AR has submitted that the order of the ld. CIT(A) and TPO is without any substantial reasoning. In fact it was pointed out that the reasoning given by the ld. CIT(A) do not fit in the scheme of the Act and the comparables were only rejected by the CIT on pretext that operating profi....
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....st on deposit amounting to Rs. 434,000/- to be excluded while computing 10A deduction:- The Interest earned on deposit is part of the business activities as it is relating to remittance received from abroad and kept temporarily as deposit in the Bank. As the remittances received from abroad forms part of the Business Income and gets accumulated as part of working capital, this working capital cannot be kept idle and needs to be put to revenue earning use. Since bank deposits facility are available for a flexible period of time, the same has been utilized and the remittance received from abroad, which forms part of working capital has been parked as deposits with bank till the need for working capital for business purpose arises. In short as the money parked in deposits are out of remittances received from abroad, the interest earned from the bank deposits forms part of the Business Income. Hence the same needs not be excluded while computing the deduction u/s 10A of the Act. The Copy of the TDS Certificate wherein the interest of Rs. 434,000 is paid to the assessee is enclosed as Annexure- 1. " 20. We have also seen the computation of account filled by the assessee, in ....