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2014 (11) TMI 716 - AT - Income TaxComputation of deduction u/s 10A/10B - Exclusion of telecommunication charges from export turnover – Expenses incurred in foreign currency – Held that:- CIT (A) rightly directed the AO to recompute the deduction u/s 10A by excluding telecommunication charges from both export turnover in the numerator and total turnover from the denominator while applying the relevant formula – the order of the CIT(A) is upheld – Decided against revenue. Transfer pricing adjustment – Determination of ALP by exclusion of M/s.Eclerx Services Ltd. – Abnormal profits – Held that:- M/s.Eclerx Services Ltd., has an operating profit of 89.36% which is abnormal comparing to the operating profit of other companies - the assessee has also brought out the reasons as to why M/s.Eclerx Services Ltd., enjoy higher profit when compared with the assessee company - TPO has not dealt with these factors in a reasoned manner but rejected the same abruptly - The share holding pattern of the company is a decisive factor to determine the goodwill earned by the company which will directly attribute to the profit of the company - When the majority of the shares are held by Renowned Personalities in the field of business it will definitely influence the profitability of the company. The fact that 80% of the shares of M/s.Eclerx Services Ltd., is held by local business magnets of great prominence is not disputed - the turnover of the company will also determine the strength of the company to earn more profit - when a business entity is totally depended on a single client, the bargaining power of the company will be very limited to secure higher rates for services rendered - The capital infrastructure of the company will also influence the profitability of the company - Higher the capital infrastructure, higher will be the profitability - CIT(A) is justified in deleting the addition made by the AO – Decided against revenue.
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