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2013 (4) TMI 700 - AT - Income TaxTransfer pricing adjustment - Computation of arm's length price in relation to international transactions - Disallowance of employees contribution to provident fund paid after due date - Treatment of telecommunication charges from export turnover while computing deduction under section 10B of the Act - Held that:- The first ground is with respect to exclusion of telecommunication charges from export turnover while computing deduction under section 10B of the Act. The assessee has claimed an amount of ₹ 6,46,123 towards telecommunication charges. The assessee had excluded the said amount from export turnover in computation of deduction under section 10B of the Act. The assessee has conceded before the Commissioner of Income-tax (Appeals) that it is not in a position to furnish break-up of expenses incurred for domestic and exports. The Commissioner of Income- tax (Appeals) made estimation of telecommunication charges to the tune of ₹ 5 lakhs as attributable towards export of software. It is an admitted fact that the assessee is in the business of export of design, development and testing of hardware and software and it was also maintaining the smart card and bio-metric products developed by the third parties. Therefore, it must have incurred a substantial amount of expenditure towards telecommunication and internet charges. The Commissioner of Income-tax (Appeals) has made fair estimation of the same. Since the Revenue has not been able to produce any cogent evidence to controvert the findings of the Commissioner of Income-tax (Appeals), we do not deem it appropriate to interfere with the same. The Revenue has also assailed the order of the Commissioner of Income-tax (Appeals) with regard to exclusion of the telecommunication charges from the export turnover as well as total turnover. We find that the Special Bench of the Tribunal in the case of Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D] has held that while applying the formula prescribed under section 10B(4) of the Act, where the freight, telecommunication charges or insurance attributable to the delivery of articles or things or computer software outside India, the expenses that are to be excluded from the export turnover, should also be excluded from the total turnover as well. In view of the well-settled law, this ground of appeal of the Revenue is dismissed. The second ground of appeal of the Revenue relates to disallowance of employees contribution towards provident fund beyond due date. It is an admitted fact that the assessee has made contribution towards employees provident fund beyond the due date prescribed under the Provident Fund Act, but the same has been made before the due date for filing of the tax return. The Tribunal in the case of Atlas Cycles (Haryana) Ltd. [2010 (2) TMI 879 - ITAT, New Delhi] has held that employee's contribution which has been remitted belatedly beyond the due date prescribed in the Provident Fund Act but before the due date for filing of tax return of income is allowable as deduction. Respectfully following the decision of the Tribunal, this ground of appeal of the Revenue is dismissed. The third and the last ground of appeal of the Revenue relates to transfer pricing adjustment.The objection of the Departmental representative is with regard to the method adopted by the assessee in determining the arm's length price. We are of the considered opinion that the Transfer Pricing Officer has not conducted the pricing study as required under the statute. The Transfer Pricing Officer has not independently determined the arm's length price by taking candid transactions of unrelated parties. The Transfer Pricing Officer has erred in simply accepting the percentage of profit indicated in the service agreement between the assessee and the permanent establishment. The Transfer Pricing Officer ought to have conducted detailed study for determining the arm's length price between unrelated enterprises by applying the most appropriate method as provided under section 92C of the Act. Matter remitted back to the Transfer Pricing Officer. - In the result, the appeal of the Revenue is partly allowed for statistical purposes and the cross-objection of the assessee is allowed for statistical purposes.
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