2022 (11) TMI 1338 - ITAT BANGALORE

TP Adjustment - appropriate adjustments towards working capital differential existing between the Appellant vis-a-vis independent comparable companies - HELD THAT:- Tribunal consistently granting working capital adjustment to the assessee while computing ALP of international transactions and this view was fortified by the order of the Tribunal in the case of Huawei Technologies India Pvt. Ltd. [2021 (8) TMI 1334 - ITAT BANGALORE] - Thus we direct the AO/TPO to grant working capital adjustment.

Comparable companies – Information Technology Enabled Services (“ITES”) - Microland Limited - As seen from its annual report total ITES revenue is 60%. The AO/TPO included 17% of selling services revenue as part of the revenue from ITES, which is not correct. In our opinion, it does not satisfy the 75% of sales as filter and the income from ITES services is only 60%. Hence, it is directed that Microland Limited is to be excluded from the list of comparables.

Manipal Digital Systems Private Limited is directed to be excluded from the list of comparables.

Datamatics Business Solutions Limited - As contented segmental financials are not available and also TPO has not considered the correct percentage of export revenue in the earlier 3 assessment years and also margin of last 2 assessment years cannot be considered in view of the export revenue filter. In our opinion, these facts are required to be examined by the AO/TPO. Accordingly, we remit this issue to the file of AO/TPO for reconsideration of this comparable and include this comparable i.e. Datamatics Business Solutions Limited in the list of comparables if it satisfies the export revenue filter.

Infosys BPO Limited company is functionally dissimilar and use robotics automation and diversified activities. Therefore, we direct the AO/TPO to exclude this company as comparable for determining ALP.

Incorrect disallowance with respect to expenditure on ESOP under section 37 - HELD THAT:- In assessee’s group case, namely, EIT Services India Pvt. Ltd. v. DCIT (2022 (8) TMI 1309 - ITAT BANGALORE), had held that the ESOP expenditure is to be allowed as a deduction u/s 37 of the I.T.Act. The Tribunal had followed the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Biocon Limited (2013 (8) TMI 629 - ITAT BANGALORE] - Decided in favour of the assessee