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2014 (2) TMI 312 - AT - Income TaxCommunication and circuit charges - TDS u/s 194J - Held that:- Relying upon the decision in ASSTT COMMISSIONER OF INCOME TAX Versus HUGHES SOFTWARE SYSTEMS LTD [2013 (5) TMI 557 - ITAT DELHI] - Where payments are made to the service provider for providing space for transmission of data for carriage of voice and for availing service of intercommunication, port access which do not require any human intervention it cannot come within the category of fees for technical services - Expenditure incurred towards communication and circuit charges cannot be treated as fees for technical services requiring deduction of tax at source u/s 194J of the Act - Decided in favour of assessee. Selection of certain comparables by the TPO - Held that:- Maple E Solutions Ltd. - Various Benches of the ITAT including Hyderabad Benches have held that the aforesaid company cannot be treated as comparable as its financial results are not reliable - The AO/TPO is directed not to consider this company as a comparable. Nucleus Netsoft and GIS India Ltd. - Relying upon the decision in HSBC Electronic Data Processing India Pvt. Ltd [2013 (9) TMI 485 - ITAT HYDERABAD] - the company outsourced its work and has held that the company cannot be selected as a comparable on account of its low employee cost - The AO/TPO is directed not to consider this company as a comparable. WIPRO BPO Solutions Ltd - Relying upon the decision in Capital IQ Information Systems India Pvt. Ltd. [2012 (9) TMI 85 - ITAT, HYDERABAD] - WIPRO BPO is a big company owning intangibles and having substantial brand value - It had generated considerable goodwill, reputation and brand value in the market - It earns substantial revenue from products which are sold at a premium unlike the assessee which is only a contract service provider to its AE - The AO/TPO is directed not to consider this company as a comparable. Adjustment in respect of depreciation charged and there level of infrastructural costs incurred - Held that:- All factors which impact the financial result of comparable companies should be taken into account and reasonable accurate adjustment should be made for the same - The rates of depreciation adopted by the assessee are significantly different from (straight line as compared with WTP; higher rate than that prescribed in schedule VI) those adopted by the comparable companies suitable adjustment for the different has to be made or the profit before depreciation may be considered - The issue has been restored for fresh adjudication. Pre-operative expenses - Held that:- Relying upon the decision in case of DCIT V/s. Convergys Information Management India Pvt. Ltd. [2011 (1) TMI 1245 - ITAT HYDERABAD] - In absence of any material to prove that the assessee has recovered the pre-operative expenses from its AE, the conclusion arrived at by the departmental authorities is merely on presumption and surmises - The agreement, between the assessee and its AE was entered on 1st September, 2004 - It cannot be conceived that the AE will bear cost of expenses prior to the date of agreement - When the assessee has denied of having been reimbursed the pre-operative expenses then the onus is on the department to prove the contrary by bringing cogent material on record - Decided in favour of assessee.
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