TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 2376
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....Ltd., Tata Elxsi Ltd., from the list of comparables, holding that they are functionally different without appreciating that the comparables satisfy all the qualitative and quantitative filters applied by the TPO and that selection of comparables in a case depends on assessee specific FAR analysis ? 3. Whether the Tribunal was correct in considering the comparables as engaged in software products business, merely because it has developed software products by following software development process, without having legal ownership on such software products ? 4. Whether the Tribunal was correct in not appreciating the acceptance of the enterprise level financials of Megasoft Ltd as proper uncontrolled comparable when the enterprise level financials were adopted after a detailed analysis supplemented by information obtained u/s.133(6) of the Act ? 5. Whether the Tribunal was correct in directing the AO to recomputed the deduction u/s 10A after reducing telecommunication expenses from the total turnover also, without appreciating that there is no provision in section 10A to the effect that such expenses should also be reduced form the total turnover, as clause (iv) of the Explanatio....
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....the intention of the legislature. 20. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well". 4. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: REGARDING SUBSTANTIAL QUESTION No. 1 : "(1). Turnover Filter: 11. The ld. Counsel for the assessee submitted that the TPO has applied a lower turnover filter of Rs.1 Crore, but has not chosen to apply any upper turnover limit. In this regard, it was submitted by him that under rule 10B(3) to the Income Tax Rules, it was necessary for comparing an uncontrolled transaction with an international transaction that there should not be any difference between the transaction compared or the enterprises entering into such transaction, which are likely to materially affect the price or cost charged or paid or profit....
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.... cases: xxxxx 16. It was finally submitted that companies having turnover more than Rs.200 crores ought to be rejected as not comparable with the Assessee. 17. The ld. DR, on the other hand pointed out that even the assessee in its own TP study has taken companies having turnover of more than Rs.200 crores as comparables. In these circumstances, it was submitted by him that the assessee cannot have any grievance in this regard. 18. We have considered the rival submissions. The provisions of the Act and the Rules that are relevant for deciding the issue have to be first seen. Sec.92 of the Act provides that any income arising from an international transaction shall be computed having regard to the arm's length price Sec.92-B provides that "international transaction" means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, 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 ap....
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....er: 11. Improper selection of comparables: It was submitted by the learned counsel for the Assesse that the following 2 companies are not functionally comparable with that of the Assessee. a) KALS Information Systems Limited b) Accel Transmission Limited In this regard our attention was drawn to the decision of the Hon'ble ITAT Bangalore Bench in the case of Triology E-Business Software India Pvt. Ltd. (supra) wherein these companies were held to be not functionally comparable with that of a pure software developer like the Assessee. 12. The following were the relevant observations of the Tribunal on the aforesaid comparable companies in the case of Triology E-Business Software India Pvt. Ltd. (supra). (d) KALS Information Systems Ltd. xxxxx We have given a careful consideration to the submission made on behalf of the Assessee. We find that the TPO has drawn conclusion on the basis of information obtained by issue of notice u/s.133(6) of the Act. This information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company an highlighted by the Assessee in its letter dated 21.6.20....
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....ases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law. 56. We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals fi....