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2013 (5) TMI 834 - AT - Income TaxComputing deduction u/s 10A - Held that:- The expenditure on foreign travel and telecommunication should be reduced both from the export turnover and the total turnover of the assessee. Determining the Arm’s Length Price (ALP) of international transaction of software development service by making upward transfer pricing adjustment - Held that:- Lower authorities were not justified in not excluding profit or loss in respect of domestic transactions for determining the profit declared by the assessee in respect of AE transactions. They were not justified in adopting the profit level achieved by the assessee in respect of all its transactions including domestic transactions as the profit level declared in respect of AE transactions. Further, we find that the assessee had furnished separately its working of the profit declared by it in respect of its AE transactions before the TPO as well as before the DRP. The lower authorities could not point out any specific defect in the said working of the assessee. As per the said working of the assessee, the assessee claimed to have earned a profit level of 34.17% of the cost in respect of AE transactions. Before us also, the ld. CIT/DR could not point out any specific defect in this working of the assessee. There is no legal requirement that the segmentwise working submitted before the TPO should be audited by the assessee’s CA. Moreover, it is not open to the Revenue to reject the working prepared by the assessee without pointing out any error therein. In absence of any error being pointed out in the working shown by the assessee wherein it has claimed that it has achieved a profit level of 34.17% of the cost in respect of transactions with AE, we have no option but to accept the same. the rate of profit achieved in other comparable cases are to be compared with profit level declared by the assessee in respect of its AE transactions after excluding domestic transactions. Therefore, on comparing the same, we find that the profit level declared by the assessee in respect of its AE transactions is more than the profit level in respect of comparable cases found by the TPO. In the above circumstances, in our considered view, the lower authorities were not justified in making addition to the income of the assessee. the rate of profit achieved in other comparable cases are to be compared with profit level declared by the assessee in respect of its AE transactions after excluding domestic transactions. Therefore, on comparing the same, we find that the profit level declared by the assessee in respect of its AE transactions is more than the profit level in respect of comparable cases found by the TPO. In the above circumstances, in our considered view, the lower authorities were not justified in making addition to the income of the assessee.
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