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2016 (7) TMI 1373 - AT - Income TaxTPA - selection of comparables - Held that:- Assessee is engaged in provision of information technology (IT) enabled services in the nature of survey programming, data collection, data analysis and business research. It is a captive contract service provider rendering IT enabled services to its associated enterprise. The assessee has an approximately 80% of its workforce as graduates for undertaking data collection activities. Further, it also employs MCA’s, BCA’s and diploma holders for undertaking data processing and survey programs. It’s data processing staff comprises only 15% of the personnel of Exevo India. Thus with the above understanding of the nature of services provided by the assessee to its AE’s, companies functionally dissimilar with that of assessee need to be deselected from final lost of comparables. Working capital adjustment - Held that:- While comparing the margins earned by the comparable companies there is always the assessee, the difference on account of working capital employed should also be factored into. In order to improve the reliability of results, the financial data of comparable companies are required to be adjusted. The efforts stated decisions of this tribunal has held that in practice such adjustments usually include adjustments for accounts payable, accounts receivable and inventory. We accordingly allow this ground of appeal raised by the assessee Unabsorbed depreciation adjustment - Held that:- When the assessee has brought forward business losses as well as unabsorbed depreciation, the Act specifies a sequence in which these allowances shall be set off. While computing total income of an assessee, carry forward unabsorbed depreciation can be set off in future years only after setting off the brought forward business losses. Further the provision is clear that carry forward unabsorbed depreciation can be set off not only against income from profits and gains from business and profession, but also against income from any other head including income from other sources. In the present case the assessee has brought forward business losses as well as unobserved depreciation. The act specifies the sequence in which these allowances can be set off. Section 72 (3) implies that, the set off of unobserved depreciation as per section 32 (2) against business income shall be given effect to only after setting off the brought forward business losses. From the calculation made by the Ld.AO, it is observed that the Ld.AO has adjusted the amount of unobserved depreciation from the business income before making adjustment for brought forward business losses. The circular relied upon by the Ld.AR is not applicable to the present case under consideration as it is applicable where the set off each to be made against the profits of a STP/EOU/SEZ unit, before the deduction under section 10 A/10 B of the Income tax Act is allowed.
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