Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (10) TMI 739 - AT - Income TaxTransfer pricing adjustment Selection of comparables Accentia Technologies Limited Eclerx Services Limited Mold-Tek Technologies Limited - Extraordinarily high profit of 117% - High profits because of ex-ordinary events Functionally dissimilar unit - Held that:- Two companies viz., Iridium Technologies and Geosoft Technologies amalgamated with M/s. Accentia Technologies Limited which resulted in a higher profit for the company during the year following the decision in Capital IQ Information Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax (International Taxation) [2014 (3) TMI 626 - ITAT HYDERABAD] - The company was excluded since ex-ordinary events like merger and demerger had taken during the relevant financial year which must have impacted the financial results of the company - That besides the high volume of on-site operation of Accentia Technologies Limited also makes it functionally dissimilar to the assessee - These facts are not considered either by the TPO or by the DRP thus, the matter is to be remitted back to the AO for verification. Accurate Data Convertors Private Ltd. Asit C Mehta financial services Ltd. (Seg). Employee cost filter - Held that:- The assessee was not given any opportunity/ information to examine the comparability of the company - Though the TPO is empowered under the provisions of the Act to obtain information with regard to selection of comparables, however before utilising the information obtained, he has to give fair opportunity to the assessee to have its say in the matter - since the TPO has not given any opportunity to the assessee to raise its objections with regard to the company, the matter is to be remitted back to the AO for considering the objections. Vishal Information Technologies Ltd. Employee cost filter Held that:- Following the decision in Capital IQ Information Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax (International Taxation) [2014 (3) TMI 626 - ITAT HYDERABAD] - The company unlike the assessee has outsourced considerable portion of its business to third party vendor - Hence, it cannot be considered as a comparable. HCL Comnet Systems & Services Limited, Infosys BPO Limited and Wipro Limited Functionally dissimilar unit - Held that:- Following the decision in M/s. Capital IQ Information Systems (India) Pvt. Ltd. Versus Addl. Commissioner of Income-tax [2014 (9) TMI 125 - ITAT HYDERABAD] - These three companies are having huge turnovers like that of assessee during the year - Therefore turnover filter as considered in other cases does not apply here but, the functional profile of companies as such is different - But, if the BPO division is similar to assessee the same can be considered after proper FAR analysis thus, the matter is remitted back to the TPO/AO for re-consideration of the comparables after giving due opportunity to assess and fairly analyzing its objections. Inclusion of reimbursement transactions as part of operational cost Held that:- Reimbursement costs should be excluded as they do not involve any functions to be performed so as to consider it for profitability purposes relying upon M/s. Four Soft Ltd. Hyderabad Versus The Dy. Commissioner of Income-tax, Circle 1(3), Hyderabad [2011 (9) TMI 634 - ITAT, Mumbai] - for computing the net margin of the assessee for the purposes of transfer pricing, only the cost related to the transaction with the Associated Enterprises has to be considered and accordingly, segmental financials is to be considered for the purpose of arriving at the net margin on the international transaction with the assessee's enterprise in respect of software development services - Since the AO had no occasion to verify the veracity of the segmental financials prepared by the assessee company, the matter is remitted back to the AO for determination of ALP Decided in favour of assessee. Computation of deduction u/s 10A - Re-characterisation of foreign exchange gain Held that:- Following the decision in ITO vs Banyan Chemicals P. Ltd. [2008 (12) TMI 296 - ITAT AHMEDABAD] - that foreign exchange gain on account of fluctuation qua exports business is eligible for exemption u/s 10B - since foreign exchange gain is on account of fluctuations of the foreign exchange received for the services rendered by the assessee, has to be treated as business income and it has to be considered as profits of the business for computing the deduction u/s 10A of the Act Decided in favour of assessee. Reduction of communication charges from the export turnover Held that:- Following the decision in CIT vs. Gem Plus Jewellery Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] - the AO is directed to reduce communication charges both from the export turnover as well as the total turnover for computing exemption u/s 10A of the Act Decided in favour of assessee.
|