TMI Blog2017 (4) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP as by applying the filter of 10 multiples all these six companies are required to be excluded from the set of comparables. Risk adjustment allowed by the DRP - HELD THAT:- When the assessee has not given any details and computation for risk adjustment then the claim of the assessee is purely hypothetical in nature. The co-ordinate bench of this Tribunal in the case of Zyme Solutions Pvt. Ltd. Vs. ITO [ 2016 (1) TMI 1436 - ITAT BANGALORE] has considered an identical issue. When the assessee has not made any attempt to quantify the risk or furnish the details for computation of risk adjustment then by following the decision of the co-ordinate bench, we decide this issue in favour of the revenue and set aside the directions of the DRP. Deduction under section 10A - Exclusion of expenditure incurred towards telecommunications, insurance and travel in foreign currency both from export turnover and total turnover - HELD THAT:- Respectfully following the aforementioned decision of the Hon ble High Court of Karnataka in the case of Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] we uphold the directions of DRP in directing the Assessing Officer to reduce the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case, the Disputes Resolution Panel erred in excluding uncontrolled comparables having turnover more than ₹ 200 crores in the absence of Turnover criterion prescribed in Rule 10B of Income Tax Rules and also there being no correlation between turnover and profit margin. 4. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in stating that there is no reliable method to make adjustment on account of risk level and has erred in directing to give 1% risk adjustment to the average margin. 5. On the facts and in the circumstances of the case, the Dispute Resolution Panel erred in directing the AO to reduce the expenditure incurred towards telecommunication, insurance and travel expenses incurred in foreign currency both from the Export Turnover and as well from Total Turnover for the purpose of computation of deduction u/s IOA of the Income tax Act without appreciating the fact that the statute allows exclusion of such expenditure only from the Export Turnover by way of specific definition of export turnover as envisaged by sub clause (4) of explanation 2 below sub section 8 of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing more than ₹ 171 Crores of turnover are required to be excluded. In view of the fact that the DRP has excluded the companies which are having more than ₹ 200 Crores turnover which is more than the filter to be applied at 10 times of the assessee's turnover which comes to ₹ 171 Crores, we do not find any reason to interfere with the impugned order and directions of the DRP as by applying the filter of 10 multiples all these six companies are required to be excluded from the set of comparables. 6. Ground No.4 is regarding risk adjustment allowed by the DRP. 7. The learned Departmental Representative has submitted that the assessee has not furnished any computation or details as to how the risk adjustment has to be calculated therefore the directions of the DRP are not sustainable. In support of his contention, he has relied upon the decision of coordinate bench of this Tribunal dt.22.1.2016 in the case of Zyme Solutions Pvt. Ltd. Vs. ITO in IT(TP)A No.465/Bang/2015. 8. On the other hand, the learned Authorised Representative has not disputed this fact that the assessee did not furnish any detail in respect of risk adjustment clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record and the judicial decision cited. On perusal thereof we find that the issue before us for adjudication i.e. if expenditure incurred towards telecommunications, insurance and travel in foreign currency attributable to the delivery of computer software abroad is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10A of the Act, is covered in favour of the assessee by the decision of the Hon ble Karnataka High Court in the case of Tata Elxsi Ltd. (supra). In this order, the Hon ble Court held The Bombay High Court had an occasion to consider the earning of the word total turnover in the context of section 10A, in the case of CIT Vs. Gem Plus Jewellery India Ltd. (2011) [330 ITR P. 175 (Bom)] (2010-TIOL-456-HC-MUM-IT). Interpreting sub-section (4) of section 10A, it is held as under : Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined. The definition of export turnover excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression export turnover cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. export turnover would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from export turnover for the purposes of the numerator would be brought in as part of the export turnover when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. The Special Bench of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator and the denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover cannot be different. Therefore, though there is no definition of the term total turnover in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the above objections (raised in ground no 1.1) the learned AO has further erred in considering an incorect figure for foreign exchange losses in order to compute the deduction under section 10A of the Act. 2. Incorrect computation of demand to be payable by the Appellant. 2.1 The learned AO has erred in facts and in law in not correctly determining the tax demand payable by the Appellant. 2.2 Consequently, the learned AO has erred in levying interest IL's. 234D of on the purported excess retUnd been granted to the Appellant. The appellant craves leave to add, alter and modify the above grounds during the course of the appeal. 12. Ground No.1 is regarding restricting the deduction under Section 10A by reducing the foreign exchange loss from the export turnover. 13. The assessee has contended that the Assessing Officer has not given appropriate opportunity to make the submissions against the said rejection of export turnover. Further the figure taken by the Assessing Officer is not a correct amount in respect of foreign exchange loses while computing the deduction under Section 10A. Thus the learned Author ..... X X X X Extracts X X X X X X X X Extracts X X X X
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