TaxTMI 
TaxTMI 
2024 (7) TMI 126
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....r. Assessee's appeal for the A.Y.2012-13: 2. Brief facts of the case as culled out from the records are that the assessee M/s. AppLabs Technologies Private Limited, (Now merged with Computer Sciences Corporation India Private Limited) was a company, engaged in software development. For the AY. 2012-13, the assessee filed its return of income on 29/11/2012, declaring loss at Rs. 10,66,78,673/- under the normal provisions and declared book profits at (-)Rs. 17,67,52,300/- u/s 115JB of the Income Tax Act, 1961 (for short "the Act"). The case of the assessee was selected for scrutiny and accordingly notices were issued to the assessee. The Learned Asessing Officer ("Ld. AO") completed the assessment under section 143(3) of the Income Tax Act, 1961 (for short "the Act") by order dated 02/05/2016, determining the total income under the normal provision at Rs. 10,93,28,344/- and book profit at (-) Rs. 13,35,44,319/- after considering the order dated 30/01/2016 passed by the learned transfer price officer ("Ld. TPO"). However, the assessee filed rectification application before the Ld. TPO on 01/03/2016 and consequently the Ld. TPO revised his order on 27/01/2017. On the basis of sai....
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.... Employee Stock Option Plan (ESOP) 6.1. During the appeal proceedings, the appellant submitted that they filed rectification petition u/s.154 before the Assessing Officer. They have received the order and hence the issue is not being pressed before the first Appeal. In this light, the grounds are dismissed." 4.2. The Ld. AR also submitted that the assessee had raised three issues which are related to i.e. a) Employees Stock Option Plan (ESOP), b) Professional fees and c) forex exchange loss before the Ld. CIT(A) through the aforesaid grounds No. 4 to 6. After filing the said appeal before the Ld. CIT(A), the assessee had filed a rectification application before the Ld.TPO on the issue related to Professional fees only. However the Ld. CIT(A) adjudicated the ground No. 4 to 6 on the misconception that the assessee had filed the rectification application before the Ld. TPO on the issues of ESOP and dismiss the grounds on all the three issues which are related to i.e. a) ESOP, b) Professional fees and c) forex exchange loss. Thus, the Ld. AR argued that the Ld. CIT(A) did not consider the grounds raised by the assessee properly, before passing the order. Hence, Ld. AR requ....
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....e of margins of comparable companies. 10. The learned TPO and the learned AO have erred, in law and facts, by making erroneous computation with respect to operating margins of comparable companies Computation of TP adjustment 11. The learned TPO and the learned AO have erred, in law and facts, by not restricting the value of adjustments to the global profits earned by the Appellant from the international transactions. 12. The learned TPO and the learned AO have erred, in not considering the rectification petition filed by the Appellant in relation to mistake apparent from record in considering the professional fees incurred pursuant to acquisition expenses as non-operating in nature. Corporate Guarantee 13. The learned TPO and the learned AO have erred, in law, facts and circumstances of the case in making a TP addition to the transactions relating to provision of corporate guarantee, without appreciating the fact that the said transactions is not covered under the definition of international transaction uls.928 of the Act and that the explanation to section 928 would not apply to the facts of the case. Others ....
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....ligence, business process quality, engineering and product lifecycle management, and infrastructure services. iii. Spent sizable amount towards R&D in e-Iearning space and other areas iv. Significant intangible assets - 92% of total fixed assets TPO's contention: i. As per annual report, CTIL is in the' business of information technology Services Company. It is only its subsidiary companies engaged in infrastructure, BPO services, e-governance, information technology and the company development and not CTIL itself. So there is no requirement of CTIL to have separate segments. ii. No document which contradicts has been placed on record for non-accepting the CTIL as a comparable before the TPO. Decision : I accept the view of the TPO and uphold the view that this is a valid comparable. 3) Igate Global Solutions Limited Appellant's contention: i. Fails related party transactions filter (RPT = 83% of sales) ii. Information technology and IT enabled services iii. Segmental information is not available. iv. Extra-ordinary event - Acquisition of equity share cap....
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....d comparable. 6) M/s.Zylog Systems Limited Appellant's contention: i. Earns revenue from export of software services, products & solutions. However, segmental information is not available. ii. The company specifically owns research, analysis and development wing namely "IDEA". iii. Intangible assets contribute 45.81 % of total fixed assets TPO's contention: i. The company is predominantly into software development. ii. Brand value doesn't have any impact on profitability of the company. Decision: I accept the view of the TPO and uphold the view that this is a valid comparable. 7) M/s.Spry Resources Limited Appellant's contention: i. Company substantially undertakes the central and state government projects ii. The company is mainly into software product development iii. Exceptional year of operations iv. High Working capital loan (percentage of interest to EBITDA47.21 % and percentage of borrowings to fixed assets 105.71 %). TPO's contention: The company is mainly engaged in software development service....
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....lant's contention: i. The company satisfies all the filters applied by the TPO and is functionally comparable. ii. The company is engaged in software testing, which is part of software development life cycle and therefore, the company is in business of software development. TPO's contention: i. The company provides both onsite and offsite services. ii. Also, the company is only into software testing and validation work only. Decision: I accept the view of the TPO and uphold the view that this is an invalid comparable. D) M/s. CG-Vak Software & Exports limited Appellant's contention: i. Majorly engaged in software development activities ii. TPO has incorrectly not considered, as its persistent loss making, however the company has made profit for FY 2010-11 TPO's contention: The company is incurring loss in software segment based on annual report of the company. Decision: I accept the view of the TPO and uphold the view that this is an invalid comparable. E) M/s. R Systems International Limited Appellant's contention: ....
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....nd no. 15) before the Ld. CIT(A) through the aforesaid ground no. 7 to 15 . However the Ld. CIT(A) without appreciating the facts properly adjudicated the ground no.7 to 15 on the basis of only single issue i.e. "whether the comparables are valid or not" and dismiss the grounds on all the different issues with considering the merits. Thus, the Ld. AR argued that the Ld. CIT(A) did not consider the grounds raised by the assessee properly, before passing the order. Hence, Ld. AR requested the Bench to set aside the impugned order and restore the issue to the file of Ld.CIT(A) for fresh consideration of the matter. 6. The Ld. DR, accepted the contention of the Ld. AR and did not raise any objection on the request of the assessee in setting aside the issues and restore the same to the file of Ld.CIT(A). 7. We have heard the rival submissions and also gone through the record in the light of the submissions made by either side. It is not in dispute that the assessee had raised many issues i.e. selection of comparables ( grounds No. 7 to 9), erroneous computation of income of margins of comparable companies ( ground No. 10), computation of TP adjustments ( ground No. 11 & 12), corpo....
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....oreign dividend income. Finally, learned DR prayed to delete the allowance made by the Ld.CIT(A). 11. Per contra, learned AR while placing heavy reliance on the impugned order, reiterated that the order of the Ld.CIT(A) is a well-reasoned order and, therefore, there are no grounds required to interfere with such well-considered order. Hence, prayed the Bench to sustain the impugned order. 12. We have heard the rival submissions and also gone through the record in the light of the submissions made on either side. The facts whether the dividend received by the assessee covered u/s 115BB of the Act and whether any expenditure have been incurred for earning those dividend are required to be verified from the records of the assessee. The Ld.CIT(A) has not elaborately dealt with the issue in his order. Hence we think it proper to remit back the issue to the file of the Ld.CIT(A) with the direction to denovo verify the issue and decide as per the provision of the Act. It is need less to say that before deciding the same an opportunity of being heard should be given to the assessee. Accordingly the issue raised by the revenue is decided. 13. In the result, the appeal of the Revenu....
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....ting aside the issues and restore the same to the file of Ld.CIT(A). 19. We have heard the rival submissions and also gone through the record in the light of the submissions made on either side. As far as the ground no.8 and ground no.9 related to "disallowance u/s 14A" and "disallowance u/s 14A for the purpose of MAT" respectively is concerned, the contention of the assessee is correct. The order of the Ld.CIT(A) is very cryptic and did not deal with the submission made by the assessee. Hence considering the principle of natural justice to decide the issue on merits, we think it proper to set aside the impugned order and restore the issue to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. Grounds are accordingly treated as allowed for statistical purposes. 20. However, the contention of the assessee with regards to other ground are also concerned, the contention of the assessee is correct. Ld. AR brought our attention to page No. 5 to the page No. 154 of the paper books filed by the assessee on 28/10/2020 and submitted that the same were filed before the Ld. CIT(A). ....