TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 877
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....in (2012) 349 ITR 98 (Kar), without appreciating the fact that there is no provision in Section 10A that such expenses should be reduced from the 'total turnover' also, as clause (iv) of the Explanation 2 to Section 10A provides that such expenses are to be reduced only from the 'export turnover'. (ii) The Ld. CIT(A) erred in not appreciating the fact that the jurisdictional High Court's decision in the case of Tata Elxsi Limited (2012) 349 ITR 98 (Kar) has not been accepted by the department and an appeal has been filed before the Hon'ble Supreme Court, hence not reached finality. ALP Adjustment: (3) SWD Segment: (a) M/s. Infosys Technologies Limited: (I) In the facts and circumstances of the case, the Ld. CIT(A) erred in holding that M/s. Infosys Technologies Ltd., cannot be taken as comparable, being functionally different, when it satisfies all the qualitative and quantitative filters applied by the TPO. (ii) The Ld. CIT(A) erred in fact and in law in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the I.T. Act. (iii) The Ld. CIT(A) erred in fact and in law in demanding that....
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....rged or the profits accruing to such enterprises. 5. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT(A) be reversed and that of the Assessing Officer be restored. 6. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal." CO 91/B/2017 "1. That the order passed by the learned Commissioner of Income Tax (Appeals) - I, Bangalore ['learned CIT(A)], to the extent prejudicial to the Respondent, is bad in law and liable to be quashed. Transfer Pricing 2. That on the facts and circumstances of the case, the learned CIT(A) erred in not providing any specific direction and upholding the approach of the Additional Commissioner of Income-tax, Transfer Pricing -I ("learned TPO") in rejecting the Transfer Pricing ('TP') documentation maintained by the Respondent on invoking provisions of sub-section 3 of 92C of the Income-tax Act, 1961 ('the Act') contending that the information or data used in the computation of the arm's length price is not reliable or correct. 3. That the learned CIT(A) has erred in not....
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....providing IT solutions, engineering and business process outsourcing services which is functionally not comparable to the Respondent. 10. That the learned CIT(A) erred in not providing any direction to the contentions of the Respondent, thereby upholding the learned TPO's approach of including Persistent Systems Limited in the final list of comparable companies even though it is engaged in product development and has made various acquisitions during the relevant year which is functionally not comparable to the Respondent. 11. That the learned CIT(A) erred in not providing any direction to the contentions of the Respondent, thereby upholding the learned TPO's approach of excluding Akshay Software Technologies Limited and CAT Technologies Limited from the final list of comparable companies even though the details of related party transaction were available in the financial statements and the companies are functionally comparable to the Respondent. 12. That the learned CIT(A) erred in not providing any direction to the contentions of the Respondent, thereby upholding the learned TPO's approach of excluding LGS Global from the final list of comparable companies even t....
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....ka in the case of Tata Elxsi Limited in (2012) 349 ITR 98 (Kar). 21. That the Respondent craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal." Brief facts of the case are as under 2. Assessee is a company and filed its return of income for year under consideration on 27/09/2010 declaring total income of Rs. 1,98,654/-. Assessee is also claimed deduction under section 10A amounting to Rs. 11,04,58,970/-. The return was processed under section 143(1) of the Act and subsequently the case was selected for scrutiny. Notices under section 143 (2) and 142 (1) were issued in response to which representative of assessee appeared from time to time and submitted details as called for. 3. The Ld. AO observed that assessee has entered into international transactions exceeding Rs. 15 crores and accordingly the case was referred to Transfer Pricing officer for determining the arm's length price of the international transactions entered into by assessee. 4. Upon receipt of reference under section 92CA, the Ld. TPO allowed upon assessee to furnish economic details of internatio....
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....t 1. Markup on Total Cost Services Without Adis % A 0 K In-I louse BPO Services Ltd 13%- 2. Aditya Birla Minacs Worldwide Ltd 8% 3. Cameo Corporate Services Ltd 10% 4. Cosmic Global Ltd 34% 5. Delta Services (I) Pvt Ltd 7% 6. Informed Technologies India Ltd .12% 7. Infosys B P 0 Ltd 24% 8. K N M Services Pvt Ltd 14% 9. Optimus Global Services Ltd -2% 10. Sparsh B P 0 Services Ltd 6% 11. Crossdomain Solutions Pvt Ltd 28% 12. Omega Healthcare Management services 9%. 13. B N R Udyog Ltd 38% 14. In House Productions Ltd 4% 15. Timex Group India Pvt. Ltd. 8% Mean 14% 8. Dissatisfied with the comparability analysis in the trans-apprising study by assessee, the Ld. TPO adopted following filters to reject most of the comparables selected by assessee: √ Companies whose current year data is not available were excluded. 1 Companies whose Software Development/IT Enabled Service revenue ‹ Rs. 1 Crore were excluded. 1 Companies whose Software Development Service/IT Enabled revenue is less than 75% of the total operating revenues were excluded I Companies who have more than 25% related party transactions of the o....
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.... deduction under section 10A of the Act at Rs. 10,79,79,913/- as against Rs. 11,04,58,970/- claimed by assessee, by reducing the expenses in foreign currency and communication charges from the export turnover. 12. Aggrieved by the order passed by Ld. AO, assessee preferred appeal before Ld. CIT(A) Ld. CIT(A) allowed the claim of assessee under section 10A of the Act by following the decision of Hon'ble Karnataka High Court in case of Tata Elxsi Ltd., reported in (2012) 349 ITR 98. 13. In regards to the transfer pricing adjustment, the Ld. CIT(A) directed the Ld. AO/TPO to exclude Infosys Technologies Ltd., Kals Information Systems Ltd. and Tata Elxsi Ltd., from the final list of comparable under software development service segment. Under ITES segment Eclerx services Ltd. and Infosys BPO Ltd. were directed to be excluded. These comparables were excluded for functional dissimilarities observed by Ld. CIT(A). Other comparables were upheld by the Ld. CIT(A). 14. Against order passed by the Ld. CIT(A) revenue is in appeal before us now. Assessee has filed cross objection in the appeal filed by revenue. We shall 1st take up the appeal filed by revenue. Before carrying on the co....
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.... these comparables have high turnover of more than 200 crores. 15.4. The Ld. AR placed reliance on the decision of coordinate bench of this Tribunal in case of DCIT vs Northern operating services reported in (2019) 108 taxmann.com 451 in support of its contention. He submitted that for the same year under consideration this Tribunals excluded following comparables for having high turnover. He submitted that this coordinate bench of this Tribunal in case of Genesis Integrating systems vs. DCIT reported in (2012) 20 taxmann.com 715, suggested guideline in the matter of turnover filter and the categorisation of software companies in the Dunn and Bradstreet study to be adopted as a method of classification of companies by size. It was submitted that the 3 categories of firms were identified, that is small with turnover less than 200 crore, medium with turnover Rs. 200 to 2000 crore and large with turnover greater than 2000 crore. The Ld. AR further submitted that ITAT Mumbai Tribunal in case of Capgemini India Pvt. Ltd. vs ACIT reported in (2015) 58 taxmann.com 175 has held that the concept of economic upscale cannot be applied to service delivering companies and that there is no empi....
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....rts the plea of the learned counsel for the Assessee. The decisions rendered in the case of 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 incuriam. 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 issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the cas....