TaxTMI 
TaxTMI 
2023 (5) TMI 701
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....ssee. Since the assessee had international transactions with its associated enterprise, a reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order wherein an adjustment of Rs.6,70,16,931/- was proposed. The Assessing Officer passed a draft assessment order incorporating the transfer pricing adjustment. Besides, the Assessing Officer also treated the interest income as not eligible for deduction claimed under section 10AA and according made the addition to the income. Aggrieved, the assessee raised its objections before the Ld.Dispute Resolution Panel(DRP). The Ld.DRP sustained the TP adjustments as well as the additions made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal. 3. The assessee raised 9 grounds contesting the transfer pricing adjustment as well as treatment of interest income as not eligible for deduction u/s.10A and other consequential issues. TP Adjustment(Grounds 1 to 3) 4. As per the Transfer Pricing Study, the assessee has entered into the following international transactions:- Sr.No. Transaction Amount Method 1 Provision o administrative support and back office services 1,13,1....
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.... Single year margin for FY 2012-13 (OP/TC) 1 e4e Healthcare Business Services Private Limited 19.49% 2 eClerx Services Limited 59.08% 3 ICRA Online Limited (Segmental) 25.53% 4 Cheers Interactive (India) Private Limited -3.27% 5 IRIS Business Services Limited 27.06% Average Margin 25.58% 9. Accordingly, the TP arrived at the Transfer Pricing adjustment as under : Operating Cost 95,41,77,252 Arms length Margin 25.58% Arms Length Price @125.58% of operating cost 1,19,82,55,793 Actual receipt 1,13,12,38,862 Shortfall being adjustment u/s 92CA 6,70,16,931 10. The Ld.DRP confirmed the Pricing adjustment. 11. During the course of hearing, the Ld.AR submitted that if the exclusion of one comparable, viz. R Systems International Ltd by the TPO is adjudicated in favour of the assessee, then the other comparables/contentions raised by the assessee with regard to TP adjustment would become academic. Accordingly, we will first proceed to adjudicate the inclusion of R Systems International Ltd to the list of comparables. 12. The TPO has excluded R Systems International Ltd from the list of ....
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....nue of M/s. R. Systems International was derived from their respective BPO related business activities, whereas the bulk of the activities of both these concerns were software services and therefore there were rightly categorized by the lower authorities as functionally different. He invited our attention to the findings of the Ld. DRP wherein it was noted that, the business structure of both these concerns would be geared for their primary activity. According to the DRP, the segmental accounts wherein the financials relatable to the BPO segments are typically derived, using allocation keys, are from the overall revenues and relatable expenses of the entire business. Such derived BPO segmental results of concerns primarily engaged in software service like the two presently under consideration would not be comparable to an entity like the assessee which is wholly or predominantly operating in the back office support segment. He also referred to the findings given by the Ld. DRP accepting M/s Acropetal Technologies Ltd and M/s Infosys BPO Ltd as suitable comparables. The Ld. Sr. DR thus supported the orders of the lower authorities and claimed that it does not call for any interferen....
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....ibunal recorded that inasmuch as this company has not been rejected on the ground of functionality, if the quarterly results are available in the public domain wherein the figures for the relevant quarter are also available, there cannot be any difficulty to work out the proportionate margin. While placing reliance on the decision of this Tribunal in the case of Cadence Design Systems India Ltd., the Tribunal directed the TPO to consider the quarterly results and work out the proportionate margin results. 31. We have gone through the order and also the facts involved in this matter. The rejection of this comparable is not on the ground of functional dissimilarity, but only because of a different accounting period. Facts being similar, we are of the considered opinion that it is a fit case to direct the ld. AO to consider the quarterly results and work out the proportionate profit margin for this purpose, we remand the matter to the file of the ld. TPO/AO for compliance of our direction. 32. **** 33. ***** 34. **** 8. Respectfully following the decision of the Tribunal (supra), we direct the TPO/AO to consider these two entities for bench....
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.... assessee and upheld the Assessing Officer's order by stating that the term "derived from" should be construed narrowly and that the Revenue did not file appeal against the earlier order of DRP for the reason of low tax effect and, therefore, that contention cannot be accepted. 20. Before us, the Ld.AR submitted that the issue is covered by the of the Hon'ble Karnataka High Court in the case of CIT vs Hewlett Packard Global Soft Ltd (2017) 87 taxmann.com 182 where it has been held that all profits and gains of 100% EOU including incidental income by way of interest on bank deposits or soft loans would be entitled to 100% exemption or deduction under section 10A / 10B. The Ld.DR relied on the order of the lower authority. 21. We heard the parties and perused the materials on record. We notice that the Hon'ble Karnataka High Court while considering the issue of interest on deposits being treated as income eligible for deduction under section 10A / 10B has held that - "34. We are of the considered opinion that the above referred decisions relied upon by the learned counsel for the Revenue, Mr. Aravind do not cover the cases under Sections 10-A and 10-B of the Act which ....
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....e consideration of various Deductions under Chapter VI-A in Section 80HH etc. comes into picture. Therefore analogy of Chapter VI Deductions cannot be telescoped or imported in Section 10-A or 10-B oft Act. The words 'derived by an Undertaking' in Section 10-A or 10-B are different from 'derived from employed in Section 80-HH etc. Therefore all Profits and Gains of the Undertaking including the incidental income by way of interest on Bank Deposits or Staff loans would be entitled to 100% exemption or deduction under Section 10-A and 10-B of the Act. Such interest income arises in the ordinary course of export business of the Undertaking even though not as a direct result of export but from the Bank Deposits etc., and therefore eligible for 100% deduction. 36. We have to take a purposive interpretation of the Scheme of the Act for the exemption under Section 1 A/10-B of the Act and for the object of granting such incentive to the special class of assessees selected the Parliament, the play-in-the-joints is allowed to the Legislature and the liberal interpretation of t exemption provisions to make a purposive interpretation, was also propounded by Hon'ble Sup....
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.... has the affirmative responsibility. T courts have only the power to destroy, not to reconstruct. When these are added to the complexity economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and t number of times the judges have been overruled by events - self-limitation can be seen to be the path judicial wisdom and institutional prestige and stability." The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that la are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of remedy are not always possible" and that "judgment is largely a prophecy based on meagre and uninterpreted experience". Every legislation particularly economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimen....