Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (3) TMI 414 - ITAT BANGALORETP Adjustment - determination of Arm’s Length Price (ALP) in respect of an international transaction between the Assessee and it’s Associated Enterprise of rendering Software Development Services (SWD Services) - HELD THAT:- Assessee company is engaged in providing SWD services to its affiliates, for which it received a consideration during the previous year relevant to the assessment year 2010-11. Since the transaction of provision of Software service by the Assessee was an international transaction, income from such international transaction has to be determined having regard to Arm’s Length Price (ALP) thus companies functionally dissimilar with that of assessee need to be deselected. Computation of operating cost and operating margin - HELD THAT:- We are of the view that foreign exchange gain/loss are operating in nature in case of export business. The Assessing Officer is directed to include the same as cost/income in case of assessee as well as comparables. Other items are extra-ordinory items and hence non-operating in nature. The other income, if not related to business operations, but interest on FDs etc, has rightly been excluded by the TPO from operating revenue. IT is directed accordingly. Operating profit margin in its TP study at 10.27% - TPO has considered employee’s stock compensation and provision for service tax as non-operating cost. At the same time, the DRP has also given a direction that these items of expenditure are non-operating in nature. In the given facts and circumstances of the case, we are of the view that it would be just appropriate to set aside to remand the question of determination of operating profit margin of the assessee to the TPO for fresh consideration after analysis of the operating expenditure considered by the assessee while working out its operating profit margins in the TP analysis. Deduction under Section 10A - DRP is correct and is in accordance with the decisions of the Hon'ble High Court of Karnataka in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] which has since been affirmed by the Hon'ble Supreme Court in C/T v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT]. Direct the AO to grant the MAT credit to the extent available.
|