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TMI Blog2023 (4) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year under consideration. Activities carried on by the assessee in the investment portfolio, we are of the view that an adhoc disallowance of Rs. 30,000/- may be made under section 14A of the Act and, in our view, the same would meet the requirement of section 14A . Appeal filed by the assessee is partly allowed. - I.T.A. No. 8377/Mum/2010 - - - Dated:- 25-1-2023 - Shri B.R. Baskaran (AM) Shri Rahul Chaudhary (JM) For the Assessee : Ms. Chandni Shah Shri Amol Mahajan For the Department : Shri Manoj Kumar Shri Samuel Pitta ORDER Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 29.9.2010 passed by the Assessing Officer under section 143(3) read with section 144C of the Act in pursuance of direction given by learned Dispute Resolution Panel (DRP) for A.Y. 2006-07. 2. At the time of hearing, learned AR did not press additional grounds raised by the assessee by making necessary endorsement in the file. Accordingly all the additional grounds are dismissed as not pressed. The main grounds urged by the assessee relate to the following two issues : a) Transfer pricing adjustment of Rs. 2.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies have been found to be not good comparable companies for companies providing backend processing services for the very same assessment year A.Y. 2006-07 by the Tribunal in the case of M/s. Deutsche Networking Services Private Limited Vs. DCIT (ITA No. 8972/Mum/2010). Accordingly, the learned AR prayed for exclusion of the above said three companies. 7. Learned DR, on the contrary, supported the order passed by learned DRP. 8. We have heard rival contentions and perused the record. We noticed that the Coordinate Bench in the case of M/s. Deutsche Networking Services Private Limited (supra) has held that the above said 3 companies are not good comparable companies for a company providing back-end processing services. For the sake of convenience we extract below the relevant portion of the order passed by the Tribunal in the above said case :- (IV). GOLDSTONE INFOTECH LTD . (Formerly known as: Goldstone Tele Services Ltd):- 15. The ld. A.R submitted that the TPO had rejected the comparables selected by the assessee by applying the export filter and had excluded the companies which had an export sale of less than 25%. The ld. A.R in order to fortify his aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total turnover of Rs.30,89,44,530/- the export turnover of the said company was only to the extent of Rs.2,29,721/-. We find that the TPO while analysing the comparables which were selected by the assessee had applied the export filter and rejected two of the comparables which were selected by the assessee viz. (i) M/s Ask Me Info Hubs Ltd; and (ii) M/s CMC Ltd., for the reason that their respective export sales were found to be less than 25% of their total sales. We are of the considered view that in the backdrop of the aforesaid fact that the export sales of the aforesaid company viz. M/s Goldstone Infotech Ltd. is found to be substantially less than 25% of its total sales, thus a different basis for selection of the same as a comparable by the TPO in disregard of the export filter which was applied by him while rejecting the comparables selected by the assessee company would not be permissible. We thus, being of the considered view that as the export turnover of the aforementioned company viz. M/s Goldstone Infratech Ltd. is found to be substantially less than 25% of its total sales, therefore, the same as per the export filter applied by the TPO for analysing the functional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was the contention of the ld. A.R that the aforesaid company viz. M/s Maple eSolutions Limited be excluded from the final list of comparables. Per contra, the ld. D.R relied on the order of the AO/TPO and submitted that merely for the reason that the directors of the company had been indicted in certain criminal cases, the aforesaid company which was otherwise found to be functionally comparable could not be excluded from the final list of comparables. It was the contention of the ld. D.R that as the aforementioned company viz. M/s Maple eSolutions Ltd. was functionally comparable to the assessee, thus it was rightly selected by the TPO as comparable for benchmarking the international transactions of the assessee with its AE s. 18. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record in context of the issue pertaining to selection of the aforementioned company viz. M/s Maple eSolutions Ltd. as a comparable by the TPO. We find from a perusal of the order passed by the TPO under Sec. 92CA(3) in the case of the assessee for A.Y 2008-09 that the aforementioned company viz. M/s Maple eS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very ground of RPT of more than 25% the Tribunal in the case of Stream International Services Pvt. Ltd. Vs. ADIT (International Taxation)-7(2), Mumbai [ITA 8997/Mum/2010; dated 11.01.2013] for AY 2006-07, had excluded the aforementioned company from the final list of comparables. The ld. A.R in order to fortify his aforesaid contention took us through the order of the Tribunal at Page 1079 of the APB . It was the contention of the ld. A.R that now when the TPO had applied the RPT filter while analysing the comparables selected by the assessee, therefore, in the backdrop of the fact that the aforementioned company viz. M/s Datamatics Financial Services Limited had a RPT of more than 25%, the same was liable to be excluded from the final list of comparables. Per contra, the ld. D.R relied on the orders passed by the A.O/TPO and submitted that no infirmity did emerge from selection of the aforementioned company which after necessary deliberations was found to be functionally comparable with the assessee. 20. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record in context of selec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed AR submitted that the Assessing Officer was wrong in applying provisions of Rule 8D for the year under consideration as it is contrary to the decision rendered by Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing Co. Ltd. Vs. DCIT (2017) 394 ITR 449, wherein it was held that Rule 8D will apply prospectively from A.Y. 2008-09 onwards. The said view of Hon'ble Bombay High Court has since been upheld by Hon'ble Supreme Court in the case of CIT Vs. Essar Teleholdings Ltd. (2018) 401 ITR 445. 10. The Learned DR, on the contrary, submitted that the assessee has earned exempt income and hence disallowance is required to be made under section 14A of the Act. He submitted that the disallowance of Rs.4.03 lakhs would meet the requirements of Sec. 14A of the Act. 11. In the rejoinder, the Ld A.R submitted that the assessee has received only dividend income from mutual funds and hence the disallowance of Rs.4.03 lakhs will be very much on the higher side. 12. We have heard the rival contentions on this issue and perused the record. We agree with the contention of learned AR that the provisions of Rule 8D cannot be applied during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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