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2014 (6) TMI 924 - AT - Income TaxTransfer pricing adjustment - selection of comparable - Held that:- Avani Cincom Technologies Ltd.,Celestial Biolabs Ltd., KALS Information Systems Ltd., Infosys Technologies Ltd., Wipro Ltd.,Tata Elxsi Ltd., E-Zest Solutions Ltd., Thirdware Solutions Ltd., Lucid Software Ltd., Persistent Systems Ltd., Quintegra Solutions Ltd. and Softsol India Ltd. be excluded from the list of comparable as not functionally comparable to the assessee as assessee offers software development services to its AEs as relying on case of 3DPLM Software Solutions Ltd. v. Dy. CIT [2014 (12) TMI 612 - ITAT BANGALORE] Risk Adjustment - Held that:- As regards risk adjustment, the TPO has not allowed any adjustment by observing that this has been considered and discussed in detail in the order for earlier years. We find that on similar facts, different co-ordinate benches of this Tribunal in the case of Intellinet Technologies India (P.) Ltd. (2012 (6) TMI 237 - ITAT BANGALORE) and Bearing Point Business Consulting (P.) Ltd. (2014 (4) TMI 997 - ITAT BANGALORE ) have held that the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue back to the file of the TPO. Following the decisions in the aforementioned cases of the co-ordinate benches of this Tribunal (supra), we remand the issue of market risk adjustment to the file of the Assessing Officer/TPO for examining the issue in the light of the decisions cited. Reimbursement of Expenses not to be marked up - Held that:- On examination, the receipts are mere recovery of expenses without any service element, then the same should not be added back to the cost base for the purpose of mark-up. Having so decided, we are of the view that it would be in the fitness of things to remit the issue to the file of the Assessing Officer / TPO for detailed examination and verification of the said expenses, as to whether it was incurred on behalf of the AE, as was done in the earlier year. Provision for outstanding forward exchange contracts - Held that:- Admittedly, this issue has not been examined earlier by the TPO or the DRP. Since the DRP, in the subsequent year, has rendered a finding that the foreign exchange loss due to forward contracts is a non-operating expenditure while dealing with the order of the Assessing Officer, we are of the view that it would be in the interest of equity and justice that this additional ground be admitted for adjudication and the issue be remitted back to the file of the Assessing Officer /T.P.O. for consideration in the light of the decision of the DRP in Assessment Year 2009-10 in this regard, after affording the assessee adequate opportunity of being heard and make submissions required. Provision for loss on Mark to Market ('MTM') Valuation of foreign exchange forward contracts - Held that:- DRP, in the assessee's own case in the subsequent year, has allowed the expenses, we are of the opinion that it will be in the fitness of things to remit this issue back to the DRP to examine the issue afresh by considering its findings in the subsequent year. Capital Expenditure-Disallowance of Software Expenses - Held that:- In the proceedings before us, the assessee has not brought on record any material to show that the expenses related to the current year are any different from that of the earlier year, which claim of the assessee, has been disallowed by the aforesaid order of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra). Therefore we uphold the decision of the Assessing Officer in disallowing the expenses on purchase of "software additions", and in allowing depreciation thereon at the rates applicable.
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