Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 1973 - AT - Income TaxTP Adjustment - Assessee has adopted TNMM as the Most Appropriate Method (MAM) - comparable selection - HELD THAT:- Turnover Filter - Respectfully following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Dell International Services India (P.) Ltd. , [2017 (10) TMI 1376 - ITAT BANGALORE] we uphold the decision of the learned CIT (Appeals) in applying the upper turnover filter and excluding the five companies accordingly. Abnormal Profits - It is now settled principle, upheld in several decisions that companies cannot be excluded from the set of comparables only because of abnormal profits, and the matter of comparability analysis in such cases would require further investigation to ascertain the reasons for unusually high profits in order to establish whether the entities with such high profits can be taken as comparable or not. As observed in the earlier paragraphs, there is no discussion by the learned CIT (Appeals) in the impugned order on the issue of abnormal profits; even though there was a caption to this effect and therefore the comparability or otherwise of these two companies namely, M/s. Exensys Software Solutions Ltd. and M/s. Thirdware Solutions Ltd. has not been discussed at all. It is now settled principle, upheld in several decisions that companies cannot be excluded from the set of comparables only because of abnormal profits, and the matter of comparability analysis in such cases would require further investigation to ascertain the reasons for unusually high profits in order to establish whether the entities with such high profits can be taken as comparable or not. As observed in the earlier paragraphs, there is no discussion by the learned CIT (Appeals) in the impugned order on the issue of abnormal profits; even though there was a caption to this effect and therefore the comparability or otherwise of these two companies namely, M/s. Exensys Software Solutions Ltd. and M/s. Thirdware Solutions Ltd. has not been discussed at all Rejecting the diminishing revenue filter used by the TPO to exclude companies not reflecting the industry trend - On a perusal of the impugned order, we find that none of the comparable companies have been either excluded OR included by the learned CIT (Appeals) due to decision on this filter. Different Accounting Year - Quintegra Solutions Ltd. - In the case on hand, the assessee has not furnished any details of the financial results of the company. It is not known as to whether the quarterly results of the company are available on record. It is also not known whether such results, even if available, are reliable OR not. It is also not known whether from such details, the results can be extrapolated or not. No evidence has been brought on record to substantiate the above. In the absence of any details, we are unable to agree/concur with the assessee's contention. As regards the computation of margin, it is settled principle that only the current financial year's data has to be considered; which has not been followed by the learned CIT (Appeals). No reasons have been adduced by the learned CIT (Appeals) for his direction that the average of two years margin has to be taken as the margin in this case. We do not agree with the decisions of the learned CIT (Appeals) on both disapproving of the different accounting year filter and in adopting the average of two years margin, and consequently set aside the orders of the learned CIT (Appeals) on this issue and restore that of the TPO. Exclusion of Tata Elxsi Ltd. - This company held to be functionally not comparable to the assessee.Bodhtree Consulting Ltd., is engaged in product development, software development and ITES and segmental details are not available. This finding of the learned CIT (Appeals) has not been controverted by the learned Departmental Representative for revenue. Bodhtree Consulting Ltd. is engaged in product development, software development and ITES and segmental details are not available. This finding of the learned CIT (Appeals) has not been controverted by the learned Departmental Representative for revenue. M/s. Geometric Software Solutions Co. Ltd company is engaged in developing and licensing of products and product life cycle management services which are not similar to the functions of the assessee.The revenue break up between products and services is not available and therefore directed exclusion of this company from the set of comparables.. VJIL Consulting Ltd. and Akshay Software Technologies Ltd. are predominantly an exporter of software development services thus need to be included. Computation of Deduction under Section 10A - HELD THAT:- Respectfully following the decision of the Hon'ble Apex Court in the case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] we direct the AO to allow assessee's claim for deduction under Section 10A.
|