TaxTMI 
TaxTMI 
2023 (3) TMI 502
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....nt of and without prejudice to one another. Aggrieved by the order passed by the Commissioner of Income-tax (Appeals)-IV, Bengaluru [hereinafter referred to as 'the learned CIT(A)], under section 250 of the Income-tax Act, 1961 (the Act) and based on the facts and circumstances of the case, Tech Mahindra Limited (Tech Mahindra (R&D) Services Limited now merged with Tech Mahindra Limited) (hereinafter referred to as the Appellant], respectfully submits that the learned CIT(A) erred in confirming the additions proposed by the Deputy Commissioner of Income-tax-Range 1214) (hereinafter referred to as "the learned AO'] and the Deputy Commissioner of Income-tax (Transfer Pricing), Range V (hereinafter referred to as "the learned TPO) on the following grounds: Ground No. 1-Transfer Pricing adjustments 1.1 Addition to total income of Rs. 99,509,950. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer (TPO) and the learned Assessing Officer (AO) erred in making and the learned Commissioner of Income-tax (Appeals) - IV. Bangalore ['CIT(A)), erred in upholding the addition of Rs. 99,509,950 to the A....
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....companies carrying out the business of provision of services and with premeditated objective of making an adjust to the income of the appellant. 1.3.3 Incorrect selection of comparables by the learned TPO by not considering the FAR analysis pertaining to the international transaction under consideration. On the facts and in the circumstances of the case and in law, the leased TPO earned in and the learned CIT(A) further erred in upholding confirming the action of TPO in selection of the companies which are functionally not comparable to the appellant‟s business. The appellant prays that aforesaid action of the learned TPO and learned CIT(A) is factually incongruent and against the principles of comparability enshrined in Rule 10B(2) of the Income-tax Rules 1962 ("the Rules") and hence liable to be rejected or alternatively set aside. 1.4 Inconsistency in applicability of principle of impossibility of performance. On the facts and in the circumstances of the case and in law, the learned TPO / AO erred and the learned CIT(A) erred in applying the principle of impossibility of performance. The appellant prays that the learned....
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....e-tax Rules, 1962, as expense incurred in relation to earning of exempt income. 3.2 The leaned CIT(A) further erred in not restricting disallowance under section 14A Act to Rs.4,65.916/-, being direct expense incurred by it. Ground No. 4- Disallowance of foreign exchange loss The learned CIT(A) erred in confirming the action of the learned AO in not allowing deduction of Rs.47,97,489, being foreign exchange loss incurred by Bangalore non-10A Unit on entering into forward contract as "Speculative Transaction" within the meaning of Section 43(5) of the Act." 3. In its appeal, Revenue has raised following grounds: "1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not demonstrated how high turnover comparable companies effect profitability of the assessee company and ignoring the decision of the Hon‟ble Tribunal, Mumbai in the case of Natel Network Pvt. Ltd, and Maersk Global Centuries (I) Pvt. Ltd. dated 07.3.2014, which are in favour of the revenue. 2. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) erred....
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....223;) for determination of arm's length price of the aforesaid international transaction. The TPO vide order dated 31/10/2011 passed under section 92CA(3) of the Act rejected the benchmarking analysis conducted by the assessee. The TPO, inter-alia, treated assessee as the tested party and accordingly benchmark the international transaction by searching Indian comparables. The TPO selected a set of 20 companies as comparable having average margin of 23.65%. After granting working capital adjustment, the arm's length mean margin on sales was arrived at 17.97%. Accordingly, the TPO made an adjustment of Rs. 9,95,09,950 to the aforesaid international transaction. In conformity, the Assessing Officer passed the order under section 143(3) read with section 144C of the Act. In appeal, learned CIT(A) vide impugned order treated assessee as a tested party, by observing as under: "17.1.2. It is evident that the assessee's TP study is based on a database i.e., unavailable to the TPO here in India. Thus in my view, the assessee company's AE cannot be taken as a tested party. Hence I find no infirmity in the TPO‟s action in substituting the assessee company as a tested pa....
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....oftware Development for Telecom Network Elements. • Signal Transfer Point (STP) development for Telecom Signaling Network. 11. On the other hand, services provided by associated enterprise could be classified broadly into following service lines: (a) Offshore Business - In respect of offshore services, assessee essentially executes the work in its offshore delivery centres located in India. The role of associated enterprise is limited to performing customer relationships for assessee. For its USA business, assessee directly enters into a contract with the US clients for execution of offshore work in India. All contracts entered into by the assessee directly with the US clients. Assessee also maintains close involvement in all activities and decisions relating to the contract. The assessee later compensates associated enterprise on a cost plus basis for the support services. The associated enterprise also facilitates communication between the assessee and the US clients regarding inquiries, orders, delivery schedules, quality, service, administrative and other matters. (b) On-site business - Assessee has appointed associated enterprise as a contract....
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....and fixtures etc., for the purpose of business. 13. It is pertinent to note that Revenue has not disputed any of the aforesaid aspects while rejecting the transfer pricing analysis conducted by the assessee by treating associated enterprise as the tested party. The learned CIT(A) has upheld the benchmarking done by the TPO, by considering assessee as a tested party, on the basis that transfer pricing study is based on database which is unavailable here in India. In this regard, assessee has submitted that comparables were selected using COMPUSTAT database, which is available in public domain on subscription basis just like PROWESS and CAPITALINE as used by the TPO. The assessee further submitted that the database is based on financials filed with USA SEC, and therefore is as reliable as PROWESS and CAPITALINE for selecting comparable to the assessee. 14. It is settled that tested party is the one to which the transfer pricing method can be applied in the most reliable manner and for which most reliable comparables can be found, i.e., it will most often be the one that has the less complex functional analysis. In this regard, it is relevant to note the following observations o....
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....ject coordination fee'. We also direct the assessee to provide all the data as may be required by the TPO for conducting the aforesaid exercise. In view of the above directions, the transfer pricing adjustment made by the TPO and upheld by the learned CIT(A) is set aside. We order accordingly. As a result, ground No. 1 raised in assessee's appeal is allowed for statistical purpose. 16. As, we have directed the TPO to conduct fresh benchmarking analysis with the above directions, the grounds raised in Revenue's appeal pertaining to selection of comparables by treating assessee as a tested party, have become infructuous and are accordingly dismissed. 17. The issue arising in ground No. 2, raised in assessee's appeal, is pertaining to disallowance of custom duty paid. 18. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee company has reflected an amount of Rs. 11,78,884 towards custom duty. During the course of assessment proceedings, details of same were sought by the Assessing Officer. In reply, assessee submitted that the custom duty is towards debonding and shifting assets and is in the nature of revenue expenditure. The ....
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....he Assessing Officer that assessee has not considered any expenditure for earning the aforesaid exempt income. Accordingly, the Assessing Officer vide order passed under section 143(3) read with section 144C of the Act disallowed Rs. 8,78,823 as expenditure under section 14A read with Rule 8D of the Income Tax Rules, 1962 ('the Rules'). In appeal, learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on this issue and upheld the disallowance made by the Assessing Officer under section 14A read with Rule 8D. Being aggrieved, assessee is in appeal before us. 23. During the course of hearing, learned AR submitted that for making any disallowance under section 14A of the Act only the investment which yields exempt income should be considered. On the other hand, learned DR vehemently relied upon the orders passed by the lower authorities. 24. We have considered the rival submissions and perused the material available on record. The Assessing Officer computed the disallowance under section 14A read with Rule 8D, as under: a. Expenditure directly relating to income which does not form part of Total Income Nil b. Expenditure incurred by way of i....
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....bited as foreign exchange loss. It was found that the said amount is towards the loss on forward contract. The Assessing Officer vide order passed under section 143(3) read with section 144C of the Act treated loss on forward contract as a speculative transaction under section 43(5) of the Act and disallowed the same. The Assessing Officer also noted that the contract entered into by the assessee is not in respect of raw material or merchandise in the course of its manufacturing or merchandising business to guard against loss through future price fluctuation in respect of its contract for actual delivery of goods manufactured or merchandise sold by it. In appeal, learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on this issue. Being aggrieved, assessee is in appeal before us. 29. During the course of hearing, learned AR submitted that the assessee uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions and therefore loss arising on account of forward contract is allowable. On the other hand, learned DR vehemently relied upon the orders pass....