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2014 (5) TMI 889 - AT - Income TaxTransfer pricing adjustment Selection of comparables -Avani Cincom Technologies Ltd. KALS Information Systems Ltd. Held that:- The TPO has included this company in the final set of comparables only on the basis of information obtained u/s 133(6) of the Act - it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables - Non-furnishing the information obtained u/s 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable thus, the matter is remitted back to the AO/TPO for fresh adjudication. Infosys Technologies Ltd. Held that:- The assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable - it owns significant intangible and has huge revenues from software products - the breakup of revenue from software services and software products is not available - the company ought to be omitted from the set of comparable companies. Tata Elxsi Ltd. Held that:- This, company is predominantly engaged in product designing services and not purely software development services - The details in the Annual Report show that the segment "software development services" relates to design services and are not similar to software development services performed by the assessee - Tata Elxsi Ltd. is not a software development service provider and therefore it is not functionally comparable the company is not to be considered for inclusion in the set of comparables. Wipro Limited Held that:- The company is engaged both in software development and product development services - There is no information on the segmental bifurcation of revenue from sale of product and software services - The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him - Another major flaw in the comparability analysis carried out by the TPO is that he adopted comparison of the consolidated financial statements of Wipro with the stand alone financials of the assessee which is not an appropriate comparison. Corporate Tax - Deduction u/s 10B of the Act Held that:- Following CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - while computing the deduction u/s 10A/10B of the Act, if the export turnover in the numerator is to be arrived at after excluding certain expenses, then the same should also be excluded from the total turnover in the denominator the AO is directed to exclude the above mentioned expenses on communication and travel incurred in foreign currency both from export turnover as well as from the total turnover while calculating the eligible deduction u/s 10B of the Act Decided in favour of Assessee.
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