Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (10) TMI 1816 - AT - Income TaxTP Adjustment - inclusion and exclusion of certain comparables for the purpose of determining the Arm’s Length Price (ALP) of international transactions entered into by the assessee with its Associated Enterprise (AE) - HELD THAT:- Assessee is engaged in providing software development services, thus companies functionally dissimilar with that of assessee need to be deselected. Use of multiple year data for benchmarking the international transactions of the assessee with its AE to be at arm’s length - We find that this issue has already been held against the assessee in its own case by this tribunal for the Asst Year 2010-11 [2017 (11) TMI 1360 - ITAT KOLKATA] TPO having applied the employee cost filter less than 20% turnover to reject the companies, ought to have rejected. Related party transaction with more than 20% of sales - Comparable to be rejected exceeding the limit. Non-adjustment of net margins by considering the working capital differences and functional and risk differences of the comparables with the assesee company while arriving at the arm’s length margins - HELD THAT:- The assessee is directed to furnish the relevant working capital adjustments and adjustments due to risk differences to be made in the final list of comparables as determined pursuant to this tribunal’s order, before the ld TPO. The ld TPO is directed to verify the same and give suitable adjustments in the net margins of the final comparables while arriving at the arm’s length margin. Accordingly, the Ground raised by the assessee are allowed for statistical purposes. Disallowance u/s 14A in the computation of book profits u/s 115JB - HELD THAT:- We hold that the disallowance u/s 14A of the Act should be made based on actual amounts incurred for the purpose of earning exempt income and not by placing reliance on the computation mechanism provided in Rule 8D(2) of the Rules. Therefore, the ld AO shall work out disallowance in terms of the clause (f) to Explanation 1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Accordingly, the Ground raised by the assessee is allowed for statistical purposes. Adding back the disallowance conceived by the ld TPO towards adjustment to ALP in the computation of book profits u/s 115JB - HELD THAT:- This issue is now settled in favour of the assessee by the decision of the co-ordinate bench of Delhi Tribunal in the case of M/s Cash Edge India (Pvt) Ltd [2016 (1) TMI 598 - ITAT DELHI] - thus adjustment made to ALP of international transaction cannot be added back in the computation of book profits u/s 115JB.
|