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2016 (3) TMI 1271 - AT - Income TaxTPA - selection of comparables - Held that:- Assessee is engaged in providing software development and call centre services only to its Associated Enterprise [AE]. Being the captive service provider, it has remunerated for the services on the basis of cost + 15% mark up, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable. Computation done by the AO u/s. 10A by excluding expenditure of travel expenses, telecommunication expenses from the definition of export turnover - Held that:- There is no evidence on record that travel expenses pertain to rendering of services. Travel expenses cannot be included in freight. Therefore, we are of the opinion that travel expenses incurred in foreign exchange alone cannot be disallowed from the export turnover. Therefore, we direct the AO to exclude this amount. Coming to the issue of telecommunication expenses, nothing was brought on record that the same was not incurred in connection with export of software or rendering of services. This expenditure can be attributable to the telecommunication expenses which the provisions require exclusion from export turnover. However, since the amount of ₹ 1,38,70,965/- was considered as ‘telecommunication expenses’, which are reduced from export turnover, we direct the AO/TPO to exclude the same from also the total turnover while computing the deduction u/s. 10A of the Act. The jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] has held that whatever is excluded from export turnover should also be excluded from the total turnover. Consequently, AO is directed to exclude the same from total turnover as well. Levy of interest u/s. 234B & 234D - Held that:- These are consequential in nature. However, AO is directed to give the working to assessee if any interests are being levied or charged while giving effect to this order.
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