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2020 (9) TMI 454
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....g/2015. At the time of hearing, the ld. counsel 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....
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....#39;ble DRP, Bangalore has erred in directing the TPO to apply RPT filter of 0%. 3. Whether the Hon'ble DRP, Bangalore 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 : ........... ....
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....us a final set of 11 comparable companies was chosen by the TPO as comparable companies. The arithmetic mean of profit margin of these companies after and before adjustment towards working capital adjustment 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....
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....on u/s.10A of the Act i.e., whatever is removed from the numerator should also be excluded from the denominator while working total turnover and export turnover for allowing deduction u/s.10A of the Act. The aforesaid decision of the jurisdictional High Court has been upheld by the Hon'ble Supreme Court in the case of CIT v. HCL Technologies Ltd. in Civil Appeal No.8489-98490 of 2013 & 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 ....
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....e earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt.Ltd. (supra) are to be regarded as per incurium as these decisions ignore 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 Co....
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....bject to inclusion of Thinksoft Global Services Ltd., & and Persistent Systems & Solutions Ltd., before the TPO and accepted the inclusion of these companies as comparables. The Assessee did not challenge inclusion of those 2 companies before the DRP as well. The assessee did challenge ICRA Techno Analytics Ltd., being included as comparable on the ground of RPT filter before DRP. Because of the direction of the DRP that 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% an....
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....ith regard to the aforesaid deduction as follows:- "I) Deduction on account of lease rentals paid during the year amounting to Rs. 16,445,484 In this regard, the Company would like to submit that it has taken office premises on rent from Information Technology Park Limited (ITPL). The company has entered into a lease agreement with ITPL whereby ITPL has agreed to provide fit-outs to the rented premises as per the requirements of the Company. The 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 acc....
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.... provided the fit-outs. Ground No.10 is accordingly decided. 26. Ground No.11 by the assessee reads as follows:- "11. Disallowance of contribution to approved gratuity fund - Rs. 6,231,918 i. The learned AO / DRP has erred in disallowing an amount of Rs. 6,231,918, being contribution made to an approved gratuity fund. ii. The learned AO has erred in stating that the Appellant has not furnished any verifiable documentary evidence in support of its claim of contribution to an approved gratuity fund. iii. The learned 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 ....
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....f the Act - Rs. 112,978,469 a) The learned AO / DRP has wrongly considered a business income at Rs. 112,978,469 instead of Rs. 90,301,067 while claiming deduction under section 10A of the Act." 31. At the time of hearing, both the parties agreed that the aforesaid incorrect computation requires verification by the AO and for this purpose this has to be sent back to the AO. Accordingly the AO is directed to consider the plea of the assessee and rectify the error in the computation of deduction u/s. 10A of the Act as claimed in ground No.12. 32. Ground No.13 with regard to charging of interest u/s. 234B of the Act is purely consequential and the AO is directed to give consequential relief. ITA 332/Bang/2018 33. This appeal by the assessee is against the order dated 31.10.2017 of the CIT(Appeals)-6, Bengaluru relating to AY 2012-13. 34. Ground Nos.2 & 3 are substantive grounds which read as follows:- "2 Disallowance of lease rentals claimed as revenue expenditure The Ld. M(-A), without taking cognisance of the submissions filed by the Appellant has erred in law and in facts in holding that the Learned Assessing Officer (Id. AO') was justif....