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2021 (9) TMI 350
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....IT(A) erred in allowing the assessee's claim of deduction of telecom charges of Rs. 6,24,40,116/- and expenditure incurred in foreign currency of Rs. 111,35,86,587/- from the total turnover. 3. In the facts and circumstances of the case, the learned CIT(A) erred in holding that M/s. KALS Information Systems Ltd cannot be taken as comparable as the company carries inventories. 4. In the facts and circumstances of the case, the Learned CIT(A) erred in holding that M/s. Bodhtree Consulting Ltd. being functionally different, cannot be taken as comparables ignoring the fact that it contracting his own finding that the services offered are in the nature of the ITES services and relying on the website information without giving any finding from the annual report. 5. Software Segment: The Learned CIT(A) erred in holding that the size and turnover & RPT of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding the comparables, M/s. Flextronics Ltd., IGate Global Solutions Ltd., SaskenCommunication Technologies Ltd., Tata Elxsi Limited and Wipro Limited in Software development segment on similar issue the departme....
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.... (iv) of Explanation 2 to sec.10A is applicable only to export turnover from providing technical services outside India and does not apply to export of computer software by the assessee. The Ld CIT(A) noticed that an identical issue is pending before the Tribunal as well as in High Court in the assessee's own case. He also noticed that his predecessor has decided this issue against the assessee in Asst. Year 2007-08. However, he decided this issue in favour of the assessee on the reasoning that the decision of ITAT as on date is in favour of the assessee. The revenue is aggrieved by this decision. 4.2 We notice that an identical issue has been restored to the file of Ld CIT(A) by the co-ordinate bench in the assessee's own case in AY 2009-10 in ITA No.1688/Bang/2017 order dated 28-06-2021. For the sake of convenience, we extract below the discussions made by the co-ordinate bench in Assessment Year 2009-10:- "10. We heard the parties on this issue and perused the record. We notice that the issue whether the expenditure incurred in foreign currency is required to be excluded from the export turnover or not when the assessee is exporting only software, was examined by the....
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.... the CIT(A) and remand the issue to him with a direction to decide the issue with regard to Gr.No.2 and 3 raised by the Assessee before him. We accordingly allow the appeal of the assessee for statistical purpose." 11. In assessment year 2004-05 also, the coordinate bench restored the issue to the file of the Ld. CIT(A) for examining this issue in the light of decision rendered by Hon'ble jurisdictional High Court in the case of Infosys Ltd. (supra). Consistent with the view taken in the above said two years in the assessee's own case, we set aside the order passed by Ld. CIT(A) on this issue and restore the same to his file for examining it afresh on similar lines." 4.3 Consistent with the view taken by the Tribunal in Asst. Year 2007-08 and 2009-10, we restore this issue to the file of Ld CIT(A) for examining it afresh. 4.4 The second ground relate to exclusion of telecommunication charges from export turnover and total turnover while computing deduction u/s 10A of the Act. The Ld CIT(A), after deciding the issue relating to "expenditure incurred in foreign currency" in favour of the assessee, has held that the telecommunication charges and expenditure incurred in ....
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....tion of the assessee. Since the turnover of the assessee in Software development segment was Rs. 606.03 crores, following the study of Dun & Brads Street, he held that the companies having turnover in the range of 200 crores to 2000 crores alone can be considered as comparable with the assessee. 5.3 The TPO had applied the Related party transaction filter (RPT filter) of 25% and above and accordingly the TPO had rejected the companies with RPT in excess of 25% of operating revenues. The assessee contended before the Ld CIT(A) that the RPT filter may be fixed at 10%. In this regard, the assessee had placed its reliance on the decision rendered by Delhi bench of Tribunal in the case of Sony India Pvt Ltd vs. DCIT (ITA No.1189/Del/2005 and 819 & 820/Del/2007), wherein RPT was range was fixed between 10% to 15%. However, the Ld CIT(A) fixed RPT filter @ 1% of sales. 5.4 Accordingly, applying both Turnover filter and RPT filter, the ld CIT(A) directed exclusion of following companies:- Turnover (Rs in cr) RPT (% of sales) ITS Segment Flextronics Software 954.42 5.24% (failed) I-gate Global Solutions Ltd. 781.56 4.44% (-do-) Infosys Technolog....
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....anies by Ld CIT(A) is upheld:- (i) KALS Information Systems Ltd - 2.05 crores (i) Infosys Technologies Ltd - 15,672 crores (ii) Wipro Ltd (seg) - 11,955.60 crores Hence the ground of the revenue in respect of these three companies is liable to be rejected. (d) The assessee is objecting to the decision of Ld CIT(A) in adopting RPT filter of 1%. We have noticed earlier that the TPO had adopted RPT filter of 25% and the assessee had pleaded before the Ld CIT(A) to adopt 10%. However, the Ld CIT(A) has adopted RPT filter of 1% of sales, which was not the prayer of anyone. In any case, co-ordinate benches have determined the RPT filter @ 15% in many cases. Accordingly, we modify the order of Ld CIT(A) and determine the RPT filter @ 15% of sales. In that case, following companies are liable to be included as comparable companies:- (i) Flextronics Software (ii) iGate Global Solutions Ltd (iii) Persistent Systems Ltd (iv) Sasken Communication Technologies Ltd Hence the decision rendered by Ld CIT(A) in respect of these four companies is liable to be reversed. The Ld A.R, however, submitted that the Ld....
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....nfosys BPO Ltd 19.66 14 IServices India Pvt Ltd 10.77 15 Jindal Intellicom Pvt Ltd -10.29 16 Mold-Tek Technologies Ltd 96.66 17 R Systems International Ltd (Seg.) 4.30 18 Spanco Ltd. (Seg) (Earlier known as SpancoTelesystems& Solutions Ltd.) 8.81 19 Wipro Ltd. (Seg) 30.05 20 Allsec Technologies Limited - 13.29 AVERAGE 24.75 After making working capital adjustment, the TPO made transfer pricing adjustment of Rs. 7.28 crores in ITES segment. 6.2 Before Ld CIT(A), the assessee insisted for application of turnover filter. In this regard, the assessee placed its reliance on the decision rendered by the Tribunal in the case of Genisys Integrated System (India) P Ltd vs. DCIT (ITA No.1231/Bang/2010). The Ld CIT(A) accepted this contention of the assessee. Since the turnover of the assessee in Software development segment was Rs. 53.59 crores, following the study of Dun & Brads Street, he held that the companies having turnover in the range of 1 crore to 200 crores alone can be considered as comparable with the assessee. 6.3 The TPO had applied the Related party transaction filter (RPT filter) of 25%....
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....ating issue in respect of Software development segment, we have upheld the adoption of turnover filter and further we have held that the RPT filter should be taken as 15%. We direct to follow the same for ITES segment also. 6.7 (a) Out of the fourteen companies, M/s Accentia Technologies Ltd and M/s Genesys International Corporation Ltd have been retained by Ld CIT(A). Hence the ground of the revenue on these two comparable companies is liable to be deleted. (b) On applying turnover criteria, companies having turnover exceeding Rs. 200 crores is liable to rejected. The turnover of M/s Infosys BPO Ltd and M/s Wipro Ltd exceeds Rs. 200 crores. Accordingly the decision of Ld CIT(A) in directing exclusion of these two companies is upheld. (c) In respect of M/s I service India P Ltd, the Ld CIT(A) has not rendered any decision. Accordingly, the ground of the revenue in respect of this company is liable to be rejected. (d) The percentage of RPT on sales exceeds the limit of 15% in respect of following companies:- (i) Asit C Mehta Financial Services Ltd (19.69%) (ii) Calibre Point Business Solutions Ltd (19.69%) (iii) Jindal Intelec....
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....ad vide its Master Circular No/o9/2007-08 dated July 2, 2007, applicable for the period AY 2008-09, permitted STP Units to realise and repatriate the full value of export proceeds within a period of 12 months from the date of export. b) The Learned CIT (A) - LTU erred in confirming the order of the AO in reducing from the export turnover the SUM of Rs. 7,15,89,738 and Rs. 2,14,69,416 as unrealised export turnover. c) The Learned CIT (A) - LTU erred in confirming the order of the AO in making a disallowance of an amount of Rs. 29,04,760 u/s 14A as expenditure attributable to earning exempt income. d) The Learned CIT (A) - LTU erred in holding that a sum of Rs. 10,992 incurred towards language training cost of spouses of employees of the Appellant as not a business expenditure and hence not allowing the said amount'' e) The Learned CIT (A) - LTU ought to have directed the AO to grant TDS credit of a sum of Rs. 1,98,67,264 as claimed by the Appellant as against a sum of Rs. 1,97,61,981 as granted by the AO. Transfer Pricing related 1. That the learned CIT (A) - LTU erred in upholding the rejection of Transfer Pricing ('....
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....l." 8. Ground (a) and (b) urged under the heading "corporate tax matters" relate to rejection of deduction u/s 10A in respect of sale proceeds which have not been realised within a period of six months. 8.1 The AO noticed that the assessee has not realised export proceeds within six months to the extent of Rs. 7.15 crores and Rs. 2.14 crores in respect of Bangalore and Coimbatore units respectively. Since the assessee did not furnish any certificate from RBI for extension of period for realisation of export proceeds, the AO reduced the above said amounts while computing deduction u/s 10A of the Act. The Ld CIT(A) also confirmed the same. 8.2 In this regard, the Ld. A.R. invited our attention to Master Circular No.9/2007-08 dated 2nd July, 2007 issued by RBI. The Ld. A.R. submitted that the RBI has granted "general permission" to realize the export proceeds within a period of 12 months from the date of export on or after 1st September, 2004. Accordingly, he submitted that the period of realisation should be taken as 12 months and not six months. The Ld D.R, on the contrary, submitted that the extension has to be given by the competent authority, which is RBI. 8.3 We find....