TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 454
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....el for the assessee submitted that a decision in the cross appeals for AY 2010-11 would also decide the dispute in the order u/s. 154 of the Act and therefore this appeal viz., IT(TP)A No.595/Bang/2015 infructuous and may be dismissed. Accepting the plea of the ld. counsel for the assessee, this appeal is dismissed as infructuous. 3. Now we will take up for consideration the cross appeals by the assessee and revenue for AY 2010-11. 4. The issue in the revenue's appeal for AY 2010-11 is with regard to determination of Arm's Length Price in respect of international transaction of rendering of Software Development Services by the Assessee to its holding company. In the Assessee's cross appeal being IT(TP) A.No.559/Bang/2015, ground Nos. 1 to 8 are with regard to Transfer pricing issues and can be conveniently decided together with the appeal of the revenue. The grounds of appeal raised by the Revenue in its appeal and the additional grounds of appeal raised by the revenue in its appeal read thus:- Grounds of Appeal "1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the Dispute Resolu....
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....lore was right in not following the judicial decisions passed by different ITAT, including ITAT Bengaluru, where threshold of 25% RPT was accepted. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the DRP in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to add, alter, amend or delete any of the grounds that may be urged at the time of hearing of the appeal. 5. In Assessee's appeal, the grounds pressed for adjudication are Grds.No.3(b) & 4 (other grounds relating to Transfer Pricing were not pressed) and these grounds read as follows:- "3. The learned AO / learned TPO erred in rejecting the TP documentation maintained by the Appellant by invoking provisions of sub-section (3) of 92C of the Act contending that the information or data used in the computation of the ALP is not reliable or correct. The learned AO/ learned TPO has grossly erred therefore in : ........... following company selected as functionally comparable by the learned AO / learned TPO ought to have been rejected: Kals Information Systems Ltd .............
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....nt was as follows:- Comparables selected by the TPO and their arithmetic mean: Sl. No. Name of the Company Unadjusted Margins as per TPO Order Adjusted Margins as per TPO 1 ICRA Techno Analytics Ltd. (seg) 24.94% 25.23% 2 Infosys Ltd. 44.98% 25.25% 3 Kals Information Systems Ltd (Seg) 34.41% 30.98% 4 Larsen & Toubro Infotech Ltd. 19.33% 19.99% 5 Mindtree Ltd. (seg) 14.83% 13.32% 6 Persistent Systems & Solutions Ltd. 15.38% 15.72% 7 Persistent Systems Ltd. 30.35% 28.64% 8 R S Software (India) Ltd. 10.29% 11.03% 9 Sasken Communication Technologies Ltd. 17.36% 16.98% 10 Tata Elxsi Ltd. (seg.) 20.93% 17.77% 11 Thinksoft Global Services Ltd. 17.05% 14.54% AVERAGE MARGIN 22.71% 21.76% The TPO restricted the working capital adjustment to 1.98%. 9. Based on the above average arithmetic mean of profit margin of the comparable companies, the TPO computed the ALP of the international transaction of rendering of SWD services by the Assessee to its holding company as follows:- Computation of arm's length price by the TPO and the adjustment made: Computation of Arm's Length Price Particulars Amount INR Arithmetic Mean PLI....
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....Ors. dated 24.04.2018. In view of the above, we are of the view that the order of AO calls for no interference. 13. We have heard the rival submissions. As far as ground No.4 raised by the Revenue is concerned the question boils down on application of turnover filter in choosing comparable companies. As far as excluding the companies on the basis of turnover is concerned, the issue has been settled in several decisions of the Tribunal and has been elaborately discussed by this Tribunal in the case of Autodesk India Pvt. Ltd. v. DCIT in IT(TP)A No.540 & 541/Bang/2013, order dated 06.07.2018. The Tribunal in this decision after review of entire case laws on the subject, considered the question, whether companies having turnover more than 200 crores upto 500 crores has to be regarded as one category and those companies cannot be regarded as comparables with companies having turnover of less than 200 crores, the Tribunal held as follows:- "17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether c....
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....e a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the....
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....at the threshold limit of RPT filter should be 0%, the Assessee now seeks exclusion of these three companies from the list of comparable companies chosen by the TPO. The ld. DR's objection was that the assessee not having challenged the inclusion of Persistent Systems & Solutions Ltd. and Thinksoft Global Ltd. before the DRP, cannot seek to take advantage of the DRP's direction of RPT filter and seek exclusion of these two companies. As far as ICRA techno analytics Ld., is concerned, the Assessee challenged the inclusion of this company on functional comparability but not on application of RPT filter. As far as application of RPT filter is concerned, this Tribunal has been taking a consistent view that the threshold limit for application of RPT filter should be 15% and in cases where the available samples are less, then the threshold limit can be fixed at 25%. Therefore, we are of the view that the directions of the DRP fixing the threshold limit as 0% for application of RPT filter is not correct. We direct the TPO to adopt the RPT filter @ 15% and decide the comparability of all the companies that remain for comparability as per the directions in this order. Accordingly, the addit....
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.... lease rentals for such fit-outs shall be payable in equal monthly instalments for a period of five years after which the Company shall not be liable to pay any monthly rentals to ITPL on account of fit-out charges. The lease rentals paid to ITPL towards such fit-outs has not been debited to the profit and loss account. Accordingly. the Company has claimed the lease rental paid to ITPL amounting to Rs. 16,445,484 towards such fit-out charges as revenue expenditure in the computation of income. The copies of lease rental agreement are enclosed as Annexure 1." 23. The AO, however, came to the conclusion that the payment was capital in nature and therefore cannot be allowed as a deduction. The same was accordingly added to total income of the assessee. The DRP on this issue held that assessee can claim depreciation on the amount disallowed. The following were the relevant observations:- "16.1 Disallowance of lease rentals claimed as revenue expenditure amounting Rs. 16,445,484 a) The Learned Assessing Officer ("learned A0") has erred in treating the lease rental payments made by the Assessee as capital expenditure, thereby, disallowing an amount of Rs. 16,445,484 being lease ....
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....earned AO / DRP had erred in not appreciating the fact that the Appellant had submitted (vide submission dated 19 March 2014) before the learned AO a copy of ledger extract of contributions made towards gratuity fund duly approved by the Commissioner of Income-tax. iv. The learned AO had erred in not appreciating that the Appellant had submitted before the Honourable DRP bank statement evidencing the remittance of contribution made by the Appellant and copy of the receipt from the approved gratuity fund." 27. In the computation of total income, the assessee claimed a deduction of Rs. 62,31,918 towards gratuity contribution paid during the year. The assessee submitted that the gratuity was a part of approved gratuity fund and contributions were entitled to deduction u/s. 43B of the Act. The AO held that the assessee did not file any documentary evidence regarding proof of payment and therefore disallowed the claim of assessee for deduction. 28. Before the DRP, the assessee submitted that the documentary evidence was filed and the AO's observations were not correct. The DRP directed the AO to verify from the record regarding the claim of assessee that evidence was filed on 19.3.2....