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2016 (3) TMI 1126 - AT - Income TaxTransfer pricing adjustment - comparable selection - Held that:- 12 companies out of 13 sought by the assessee are required to be excluded from the list of comparables where as the company Bodhtree Consulting Ltd. is accepted as a good comparable of software development services provided by the assessee. Accordingly, we direct the TPO/A.O to exclude 12 companies as mentioned in para 25 of the order of the co-ordinate bench (supra) from the set of comparables and recomputed the ALP after considering the claim of risk adjustment as well as the benefit of tolerance range of + / - 5% as per the proviso to section 92C(2). Rejection of travel expenses incurred in foreign currency from the export turnover - computation of deduction u/s 10A - Held that:- This issue is covered by the decision of the Hon'ble jurisdictional High Court of Karnataka in the case of CIT V Tata Elxsi Ltd & Others (2011 (8) TMI 782 - KARNATAKA HIGH COURT ) wherein it has been held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. Disallowance of interest paid to Telelogic Sweden (AE) - revenue or capital - Held that:- Though the assessee has failed to establish that the acquisition of fixed assets was made out of its own free reserves, however we find that there is a substance in the alternate plea of the assessee that the addition if any can be made only in respect of addition to the fixed assets post issuance of debentures because prior to the receipt of the debenture proceeds the borrowed fund cannot be utilized for the purpose of purchasing the asset. Accordingly, we direct the Assessing Officer to verify the exact date of acquisition of the fixed assets and then to decide the issue of disallowance of interest only in respect of the fixed assets acquired post issuance of debentures or payment of which is made post issuance of debentures. Disallowance of rent equalization amount - Held that:- We allow the claim of the assessee on this issue regarding rent equilisation amount. Disallowance of consultancy charges - Held that:- When the DRP has already directed the Assessing Officer to afford an opportunity to the assessee to present its case and relevant evidence, then we do not find any reason to interfere with the finding of the DRP. The learned Authorised Representative has submitted that the Assessing Officer has not given effect to the directions of the DRP. Accordingly, we direct the Assessing Officer to reconsider this issue after giving an opportunity of hearing to the assessee. Disallowance of the ratio adopted by the assessee for apportionment of the common expenses - Held that:- We find that the common expenses are invariably in the nature of head office expenses and on account of salary of the office staff and other expenses relating to head office. Therefore these common expenses have no direct or proximate relation with the ratio of the turnover. When the assessee has been consistently following the apportionment of common expenses on the basis of head count ratio then without giving any finding that this method of apportionment resulting in distortion of profits, the Assessing Officer is not justified in rejecting the same and applying some other method. In view of the above facts and circumstances and following the rule of consistency, we decide this issue in favour of the assessee and delete the addition. Set off of unabsorbed depreciation of earlier year for computation of deduction under Section 10A allowed. See CIT vs. M/s.Biocon Ltd. [2014 (12) TMI 838 - ITAT BANGALORE ]
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