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2014 (8) TMI 870 - AT - Income TaxTransfer pricing adjustment – selection of comparables – Functionally different company - enormity of turnover – employee cost filter – Segmental turnover - Held that:- The company cannot be considered as comparable to the assessee due to various factors such as its size, turnover, brand value, scale of operation, diversified activities and owning of intangibles - the turnovers of Infosys Technologies Limited during the year under consideration are ₹ 13,149 crores as against ₹ 42 crores of the assessee - the assessee in the TP documentation, has selected Infosys Technologies Ltd. as comparable but that cannot prevent the assessee from objecting to the aforesaid company being selected as comparable, if there are valid reasons for doing so - considering the enormity of turnover of the company as well as other relevant factors, the company cannot be treated as comparable to the assessee in any manner - the company was functionally different from the assessee company as it was engaged in the services in the form of ACCEL IT and ACCEL animation services for 2D and 3D animation and therefore assessee's claim that this company was functionally different was accepted - It directed the Assessing Officer to exclude ACCEL Transmatic Ltd. from the final list of comparables for the purpose of determining TNMM margin - the Assessing Officer /TPO is directed to exclude this while computing ALP – Decided in favor of assessee. Rejection of comparables – Held that:- Proper case was not made out for inclusion of the comparables - once TPO and DRP forms that these comparables are not functionally similar to the assessee on the basis of various filters adopted by the TPO, it would be better if the matter is left like that rather than ordering fresh enquiry - these companies have related party transactions and therefore, may not justify on various filters adopted - When specific 133(6) notice was issued, that assessee has not to responded and therefore, TPO was not in a position to include the above case in the absence of segmental data - there was a specific finding that after enquiry being conducted, it was found that company was taken up by one Kelton Sector P. Ltd. and inspite of being called, the company was failed to produce its cash book ledger particulars of salary paid etc. - genuineness of the company and its activities are doubted – the company has been rightly rejected as comparable - there is no need to consider any of the comparables, already rejected by the TPO/DRO – Decided against Assessee. Risk Adjustment – Held that:- the assessee reserves the right to conduct risk adjustment in future during the time of assessment - this issue is to be examined by the TPO afresh - Assessee admits that it is having a single customer risk, whereas, other comparable companies has market risk – thus, the matter is to be remitted back to the TPO for fresh adjudication – Decided in favour of assessee. Computation of deduction u/s 10A – Communication charges registered from export turnover - Held that:- Following the decision in The Commissioner of Income Tax Versus M/s. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] - communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should be reduced from the total turnover as well while computing the deduction under section 10A - the AO is directed to reduce the amount from the export turnover as well as total turnover while computing the deduction u/s 10A – Decided in favour of assessee.
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