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2014 (7) TMI 303 - AT - Income TaxTransfer pricing adjustments – Selection of comparables – Related party transactions filter - Functionally different filter - Exceptional year of Operations - Error in margin computation - Held that:- There is a merit in assessee’s contentions about non-comparability of various comparable companies selected by the TPO - as regards the Exensys Software Solutions Ltd., there is an extra-ordinary event which resulted in high operating margin of that company - Bodhtree consulting Ltd, Four Soft Ltd, Infosys,., Sankhya Infotech Ltd., Thirdware Solutions Ltd, Tata Elexi (seg) etc, are also to be excluded - the AO is directed to exclude the above comparables and re-work out the arm’s length margin - inclusion or exclusion of these companies would only be academic in nature as exclusion of 7 comparables out of the 16 selected by the TPO would result in OP/TC at 14.25% against assessee’s margin of 13.89% - The above two companies average PLI is at 4.36% - inclusion of the above two would further reduce the PLI – thus, exclusion of 7 companies itself would make the assessee’s PLI at arm’s length when compared to the average mean of the balance 9 comparables – Decided in favour of Assessee. Expenses on communication and freight and expenses – Expenses incurred in foreign currency – Deduction u/s 10A of the Act – Held that:- Following Patni Telecom P. Ltd. vs. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A] - the expenditure incurred in foreign exchange and communication / internet charges should be excluded from the ‘export turnover’ as well as from ‘total turnover’ for the purpose of deduction u/s 10A of the Act – thus, the order of the FAA is upheld – Decided against Revenue.
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