TaxTMI 
TaxTMI 
2022 (5) TMI 353
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....) erred in law and on facts, in making an upward adjustment of INR 3,73,66,167 to the total income of the Appellant in relation to the international transactions of provision of software development services ("IT Services"), and provision of Support services in relation to configuration of clinical trial study ("ITeS") by the Appellant to its Associated Enterprise ("AE"), by re-determining the Arm's Length Price ("ALP"). 3. IT service segment 3.1 The Ld. AO and Ld. TPO erred in law and on facts, in rejecting the scientific benchmarking analysis in relation to international transaction of IT services undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ("the Rules"), and erroneously rejecting 10 (ten) out of 16 (sixteen) comparable companies selected by the Appellant. 3.1.1 The Appellant submits that following companies ought to be accepted as comparable companies to the IT Service segment of the Assessee: * Sasken Communication Technologies Limited (Segmental) * Accel Frontline Ltd (Segmental) * Akshay Software Technologies Limited * R Systems International Limited (Segmental) * Sagar Soft India Limited ....
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...., Ld. TPO and Ld. DRP erred in law and on facts, in completely disregarding Appellant's submission of applying "upper turnover filter" as held by the Hon'ble Bangalore ITAT in Appellant's own case for Assessment Years 2011-12 and 2013-14. 6. The Ld. AO and Ld. TPO erred in law and on facts, in rejecting certain additional comparable companies proposed by the Appellant during the course of transfer pricing assessment which are ought to be considered in the final set of comparable companies in relation to international transaction of provision of IT services and ITeS, namely: IT Services: * Agilisys IT Services India Private Limited * Batchmaster Software Private Limited * DCIS Dot Corn Solutions India Private Limited * Isummation Technologies Private Limited ITeS: * Ace BPO Services Private Limited * Crystal Voxx Limited * Microgenetic Systems Limited 7. The Ld. AO and Ld. TPO erred in law and on facts, in not complying with Rule 10B(5) of the Rules relating to use of multiple year data while undertaking fresh benchmarking analysis. 8. The Ld. AO and Ld. TPO erred in law and on facts, by gathering information u/s 133(6) of the Act, which were not ....
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....on and management of clinical studies, based on the studyspecific requirements of its customers. The assessee undertakes two types of activities namely; (a) providing Support Services to Cenduit LLC in configuring the clinical trial study based on the clients requirement: and (b) providing Software Development Services to Cenduit LLC on a contract basis. Provision of Support Services in relation to configuration of clinical trial study: 3. The Project Managers of Cenduit LLC, meet the customers and capture their requirements in the Users Requirement Specifications (URS). The requirements are tonically in terms of number of countries where the study would be conducted, identified hospitals / clinical trial site, patient dosages (which includes criteria such as ratio of placebo to actual drug. timing and quantum of dosage), required patient composition necessary for the trial, etc. Based on the URS. Cenduit LLC provides the requirements of the clinical study to the assessee. 4. The assessee works on the IRT to configure it to capture the client's requirements pertaining to manner of conducting the study. The IRT is a web-based software / platform which is owned by and hos....
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....ment of expenses to AE 95,28,094 Other Outstanding Trade and Other receivables TNMM Outstanding Trade and Other payables 94,55,542 TNMM Total 2,09,49,573 69,57,26,588 71,66,76,161 8. The financials of the assessee in the TP study are as under:- Employee Benefit Expenses 23,63,19,200 4,83,78,757 28,46,97,9571 Particulars Support services in relation to configuration clinical trial study Software Development Services Total as per Transfer Pricing Study Report As per Audited Financial Statements Operating Revenue Revenue from operations 5,067,98,222 8,79,51,560 59,47,49,782 59,47,49,782 Other income 74,05,723 Foreign exchange gain 62,23,701 10,80,083 73,03,784 Total Operating Revenue (A) 51,30,21,923 8,90,31,643 60,20,53,566 60,21,55,505 Operating Expenses Employee Benefit Expenses 23,63,19,200 4,83,78,757 28,46,97,957 28,46,97,957 Other operating Expenses 20,31,57,036 2,81,00,861 23,12.57,897 21,30,56,790 Depreciation 195,20,916 Finance Cost 553.241 Total Operating Expens....
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..... CG-VAK Software & Exports Ltd 16.71% 7. R S Software (India) Ltd 20.87% 8. Nihilent Ltd 26.36% 9. Larsen & Toubro Infotech Ltd 27.12% 10. Inteq Software Pvt Ltd 28.20% 11. Persistent Systems Ltd 30.89% 12. Infobeans Technologies Ltd 32.42% 13. Aspire Systems (India) Pvt Ltd 32.70% 14. Thirdware Solutions Ltd 36.90% 15. Infosys Ltd 38.61% 16. Cybage Software Pvt Ltd 65.84% 35 Percentile 16.71% Median 26.74% 65 Percentile 30.89% 11. Against this, the assessee is in appeal before us. Now the contention of the ld. AR before us by way of above grounds is that the turnover filter is to be applied ranging from 1 to 200 crores in respect of above comparables in ITS as well as ITeS segments. Being so, the companies with 1 to 200 crores turnover has to be included as comparables and other companies excluded. 12. We have heard both the parties and perused the material on record. Admittedly, this issue came up for consideration before this Tribunal in assessee's own case in IT(TP)A No.59/Bang/2016 order dated 24.4.2019 wherein it was held as under:- "10. We shall first take up for consideration Gr.No.2(b) raised by the Assess....
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..... v. Jt. CIT [2020] 117 taxmann.com 96 (Bom.) that the education cess is allowable as deduction. For the sake of convenience, we extract below the decision rendered by Hon'ble Bombay High Court in the case of Sesa Goa Ltd. (supra):- 15. The substantial question of law No. (iii) in Tax Appeal No. 17 of 2013 and the only substantial question of law in Tax Appeal No. 18 of 2013 is one and the same namely, 'whether Education Cess and Higher and Secondary Education Cess, collectively referred to as "cess" is allowable as a deduction in the year of its payment ?' 16. The aforesaid question arises in the context of provisions of Section 40(a)(ii) which inter alia provides that notwithstanding anything to the contrary in sections 30 to 38 of the IT Act, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", - (a) in the case of any assessee - (ia) ........................... (ib) ................................ (ic) ............................... (ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proport....
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.... the law cannot be availed of by the department. [See CIT v. Motors & General Stores 66 ITR 692 (SC)]. 20. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, into the provisions which has not been provided by the legislature [See CIT v. Radhe Developers 341 ITR 403 ]. One can only look fairly at the language used. No tax can be imposed by inference or analogy. It is also not permissible to construe a taxing statute by making assumptions and presumptions [See Goodyear v. State of Haryana 188 ITR 402(SC)]. 21. There are several decisions which lay down rule that the provision for deduction, exemption or relief should be interpreted liberally, reasonably and in favour of the assessee and it should be so construed as to effectuate the object of the legislature and not to defeat it. Further, the interpretation cannot go to the extent of reading something that is not stated in the provision [See AGS Tiber v. CIT 233 ITR 207]. 22. Applying the aforesaid principles, we find that the legislature, in Section 40(a)(ii)....
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....T which reads as follows :- "Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 - Clarification regarding.- "Recently a case has come to the notice of the Board where the Income-tax Officer has disallowed the 'cess' paid by the assessee on the ground that there has been no material change in the provisions of section 10(4) of the Old Act and Section 40(a)(ii) of the new Act.' 2. The view of the Income-tax Officer is not correct. Clause 40(a)(ii) of the Income-tax Bill, 1961 as introduced in the Parliament stood as under:- "(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains". When the matter came up before the Select Committee, it was decided to omit the word 'cess' from the clause. The effect of the omission of the word 'cess' is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the Income-tax Officers so that further litigation on this account may be a....
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....r than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicable, and a deduction should be allowed, where a tax is imposed by a district board on business with reference to 'estimated income' or by a municipality with reference to 'gross income'. Besides, unlike Section 10(4) of the 1922 Act, this sub-clause does not refer to 'cess' and therefore, a 'cess' even if levied upon or calculated on the basis of business profits may be allowed in computing such profits under this Act. 30. The Division Bench of the Rajasthan High Court (Jaipur Bench) in Income-tax Appeal No. 52/2018 decided on 31st July, 2018 (Chambal Fertilisers and Chemicals Ltd. v. CIT Range-2, Kota ), by reference to the aforesaid CBDT Circular dated 18th May, 1967 has held that the ITAT erred in holding that the "education cess" is a disallowable expenditure under section 40(a)(ii) of the IT Act. Ms. Linhares was unable to state whether the Revenue has appealed this decision. Mr. Ramani, learned Senior Advocate submitted that his research did not suggest that any appeal was instituted by the Revenue against this decision, ....
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.... Contingent Duty (NCCD)' on it could be construed as "duty of excise" which was exempted in terms of Notification dated 9th September, 2003 in respect of goods specified in the Notification and cleared from a unit located in the Industrial Growth Centre or other specified areas with the State of Sikkim. The High Court had held that the levy of education cess, higher education cess and NCCD could not be included in the expression "duty of excise" and consequently, the amounts paid towards such cess or NCCD did not qualify for exemption under the exemption Notification. This view of the High Court was upheld by the Apex Court in Unicorn Industries (supra). 36. The aforesaid means that the Supreme Court refused to regard the levy of education cess, higher education cess and NCCD as "duty of excise" when it came to construing exemption Notification. Based upon this, Mr. Ramani contends that similarly amounts paid by the Appellant - Assessee towards the "cess" can never be regarded as the amounts paid towards the "tax" so as to attract provisions of Section 40(a)(ii) of the IT Act. All that we may observe is that the issue involved in Unicorn Industries (supra) was not at all the ....
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....ITR 351 to hold that the Appellate Authorities under the IT Act have very wide powers while considering an appeal which may be filed by the Assessee. The Appellate Authorities may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of the Assessee in accordance with law. 40. The decision in Goetze (supra) upon which reliance is placed by the ITAT also makes it clear that the issue involved in the said case was limited to the power of the assessing authority and does not impinge on the powers of the ITAT under section 254 of the said Act. This means that in Goetze (supra), the Hon'ble Apex Court was not dealing with the extent of the powers of the appellate authorities but the observations were in relation to the powers of the assessing authority. This is the distinction drawn by the division Bench in Pruthvi Brokers (supra) as well and this is the distinction which the ITAT failed to note in the impugned order. 41. Besides, we note that in the present case, though the claim for deduction was not raised in the origi....