Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 1434 - ITAT BANGALORETransfer pricing adjustment - international transactions pertaining to provision of Information Technology enabled services ("ITeS") - exclusion of comparables - HELD THAT:- Turnover filter cannot be held to be a good filter unless it affects the profitability of the comparables R System International Ltd. excluded on account of different financial year - AR contended that the data for the relevant financial year i.e., April to March can be derived from the quarterly data available on the website of the company, therefore this comparable should be included in the list of comparables - HELD THAT:- In the instant case, assessee has tried to demonstrate that data for the relevant financial year (April to March) can be derived from the data available on website. Therefore, we are of the opinion that this comparable should be included in the list of comparables and before doing so the AO/TPO will examine the details and if the data for the relevant financial year can be derived from the data available on the website and it stands on other filters, the same can be included in the list of comparables. Credit of risk adjustment - HELD THAT:- Since the Tribunal has repeatedly held that in such circumstances risk adjustment should be given after making necessary verification, we are of the view that in the instant case we should restore the matter to the TPO to consider the contentions of the assessee and after taking into account all relevant facts make the risk adjustment while determining the ALP for international transactions. Excluding provision for doubtful debt from the cost base in the computation of mark up of certain comparable companies - HELD THAT:- Same treatment should be given while excluding/including the provisions for bad and doubtful debts in the case of the assesse company and the comparables. If the provisions of the doubtful debts have been excluded in the case of assessee company, the same be excluded in the case of comparables. Two different types of treatment cannot be given in the case of assessee company and the comparables. Therefore we also restore the issue to the AO/TPO to examine the facts relating to provision for doubtful debts in the assessee company as well as in the case of comparables. Rejecting claim of adjustment on account of accelerated depreciation - HELD THAT:- Wherever rates of depreciation are different in the case of assessee and the comparables, the depreciation adjustment should be allowed. The Tribunal has repeatedly held that adjustment for difference in depreciation rate should be allowed in order to determine the ALP. See EXL SERVICE. COM (INDIA) PVT. LTD. VERSUS ASSTT. CIT CIRCLE-11(1) NEW DELHI. [2014 (12) TMI 894 - ITAT DELHI] Tribunal has taken a consistent view that wherever different rates of depreciation are charged in the case of assessee as well as the comparables, the depreciation adjustment should be allowed. In the instant case, the learned counsel for the assessee has tried to demonstrate that the rate of depreciation charged in the case of assessee and the comparables are different. Therefore we are of the view that let this matter be re-examined by the TPO/AO and if they notice that the rates of depreciation are different in the case of assessee and the comparable companies, the reasonable depreciation adjustment be made in order to determine the ALP for the international transactions. Working capital adjustment should be allowed while determining the ALP without putting any cap thereon. Therefore, we restore this issue to the file of the AO/TPO to allow the working capital adjustment while computing the ALP for international transactions. Deduction u/s 10A - HELD THAT:- This ground is covered by judgment of jurisdictional High Court in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] in which it has been held that whenever any expenditures are to be excluded from the export turnover, the same should also be excluded from the total turnover. We, accordingly, following the same, direct the AO/TPO to exclude the telecommunication charges from the turnover also as it was excluded from the export turnover. Addition u/s 14A r.w.r. 8D - HELD THAT:- Assessee has earned the exempted income and the AO has invoked the provisions of section 14A and applied Rule 8D for determining the disallowances. Since rule 8D takes care of all aspects of interest bearing funds and interest free funds and expenditure incurred in management of portfolios etc., we are of the view, that once it is decided that provisions of section 14A is to be invoked, disallowances are to made as per Rule 8D of the Rules. Accordingly, we find no infirmity in the order of the AO.
|