TaxTMI 
TaxTMI 
2021 (9) TMI 1379
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....d expenses to be reduced from the Total turnover? 3. The Hon'ble DRP erred in holding that foreign exchange loss or gain is a part of operating expense or operating income, as the case may be, when the TPO has excluded this data from that of the comparables. 4. Whether the DRP is correct in foreign exchange fluctuation as operating in nature, while treating foreign exchange fluctuation non-operating in nature as applied by the TPO. 5. Whether the DRP is correct in holding that the foreign exchange transaction are to be considered as operating in nature, when the Rule 10B(2)(d) stipulates that the net profit margin realized by the taxpayer in the international transactions shall alone be computed for comparability analysis under TNMM. 6. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 3. The assessee in its appeal has raised several grounds, but at the time of hearing, the ld. counsel for the assessee prayed that ground No.1(e)(i) and 1(i) (i) of the revised grounds of appeal alone be adjudicated and other grounds were not pressed. The relevant grounds read as follows:- e) The learned AO/ TPO and the learned DRP....
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....International Inc., USA which in turn is a subsidiary of Novelleus Systems Inc., USA. During the previous year relevant to the assessment year 2011-12, two of the international transactions that took place between the Assessee and its AEs were the provision of software development ("SWD") services by the Assessee at a price of Rs.15,21,40,773/- and the provision of IT enabled Services ("ITeS") by the Assessee at a price of Rs. 10,25,41,366. In terms of the provisions of Sec.92-A of the Act, the Assessee and its wholly owned holding company were Associated Enterprises ("AEs"). In terms of Sec.92B(1) of the Act, the transaction of providing SWD Services and ITeS "international transaction" i.e., a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, ....
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.... Less: Working Capital Adjustment 0.17% Adjusted mean mark-up of the comparables 24.65% Operating Cost 133,456,818 Arm's Length Price - 127.03% of Operating Cost 166,353,924 Price Received 152,140,773 Shortfall being adjustment u/s. 92CA 14,213,151 8. The AO incorporated the addition to the total income by way of shortfall being adjustment u/s.92CA of the Act, in his draft order of Assessment. Against the said addition in the draft assessment order, the Assessee filed objections u/s.144C of the Act before the DRP. The DRP accepted some of the contentions of the Assessee. 9. Aggrieved by the order of DRP not accepting some of the contentions raised by the Assessee for exclusion of 5 comparable companies, the Assessee has raised Grd.No.1(e) (i) before the Tribunal. 10. As far as exclusion of Acropetal Technologies Ltd. from the list of comparable companies is concerned, after hearing the rival submission for exclusion of Acropetal from the list of comparable companies, we find that plea for exclusion of this company from the list of comparable companies should be upheld because this company fails the employee cost filter of employee cost being equal to atleast 25% of t....
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....DCIT [(2017) 85 taxmann.com 124 (Bangalore-Trib) para 9 at pages 1726-1727]; Saxo India Pvt. Ltd. v. ACIT [2016] 67 taxmann.com 155 (Delhi - Trib.) (paras 10.1 and 10.2 at pages 1656-1657)] (which came to be upheld by the Hon'ble Delhi High Court); Finastra Software Solutions (India) (P.) Ltd. v. ACIT [[2018] 93 taxmann.com 460 (Bangalore - Trib.) at para 17 at page 1744]; Cypress Semi-conductor Technology India Pvt. Ltd. v. DCIT [IT(TP)A No.356/Bang/2016 at paras 19-20 at pages 1773-1775]; and Commscope Networks (I) Pvt. Ltd. v. ITO [TS-161-ITAT-2017(Bang)-TP at para 9 on pages 1639-1640] held that this company ought to be excluded from list of comparable companies in the case of companies rendering SWD services similar to that of the Assessee. Consequently, for the above reasons, we direct exclusion of E-Infochips Ltd. is upheld and the ground is dismissed. 12. As far as ICRA Techno Analytics Ltd., this company ought to have been rejected by the DRP for the reason that the entire revenue of the company has been reported under one segment, and in the absence of segmental information regarding the same, the company could not be held as a comparable to the Assessee. We find that th....
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....Act. It is not in dispute before us that the Hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn) has held that charges/expenses relating to telecommunication, and expenses in connection with rendering technical services outside India, should be excluded both from export turnover and total turnover while computing deduction 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 telecommunication charges should be excluded both from the export turnover as well as total turnover while computing deduction u/s.10A of the Act. The order of the DRP is therefore upheld. 16. As far as Gr.No.3 to 5 raised by the Revenue is concerned, the Revenue has challenged the action of the DRP in directing the AO to consider the gains/loss arising from fluctuation ....
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.... 5 ICRA Online Ltd. (seg.) 34.21 6 Jeevan Scientific Technology Ltd. 70.66 7 Infosys BPO Ltd. 17.89 8 Jindal Intellicom Pvt. Ltd. 11.13 9 Mindtree Ltd. (seg.) 10.76 10 iGate Global Solutions Ltd. 25.07 AVERAGE MARK-UP 24.77 Computation of arm's length price by the TPO and the adjustment made: Arm's Length Mean Mark-up 24.77% Less: Working Capital Adjustment -0.21% Adjusted mean mark-up of the comparables 24.98% Operating Cost ('OC') 86,899,463 Arm's Length Price ('ALP') = 127.16% of OC 108,606,949 Price Received 102,541,366 Shortfall being adjustment u/S. 92CA 6,065,583 19. The AO incorporated the addition to the total income by way of shortfall being adjustment u/s.92CA of the Act, in his draft order of Assessment. Against the said addition in the draft assessment order, the Assessee filed objections u/s.144C of the Act before the DRP. Aggrieved by the directions of the DRP which were incorporated in the final order of Assessment, the Assessee has raised Grd.No.1(i)(i) in its appeal seeking exclusion of 4 comparable companies. 20. We have heard the rival submissions of the parties. The Assessee is seeking the exclusion of Acropetal Tech....
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....termined. In any event, Accentia is engaged in providing high end services in the nature of Knowledge Process Outsourcing ('KPO') which is evident from its annual report, whereas, the assessee is engaged in rendering routine low end information technology enabled services. Further, the said company not only does medical transcriptions, but has also ventured into healthcare receivables cycle management and high end consultancy to start-ups requiring field experts. As can be seen from the annual report, coding income is contributing 15% of the total income which activities are akin to software development activity while the assessee is a mere provider of IT enabled services. The company has invested huge sums in the development of EMR software. Segmental details of its various activities are unavailable. The company further owns significant intangibles. This Tribunal in the case of Swiss Re Shared India Pvt. Ltd. v. ACIT [TS-598- ITAT-2016(Bang)-TP at paras 9-20 on pages 7-21] where, in similar circumstances and for the same assessment year, this Hon'ble Tribunal directed the exclusion of this company from the list of comparables. Accentia Technologies Ltd. is, therefore, not compara....