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2015 (1) TMI 604 - AT - Income TaxDefinition of export turnover and total turnover - exclusion of foreign exchange gain of ₹ 10,36,754 from the ‘export turnover’ for the purpose of computing the deduction u/s.10A - Corporate tax issues - Held that:- Since the issue is covered by various decisions as accepted by DRP we direct the A.O. to exclude the same amounts from total turnover also. Transfer Pricing Issues - selection of comparable - Held that:- Kals Info Systems Ltd., and Accel Transmatics Ltd. are to be excluded for the purpose of comparison while determining the ALP of the impugned transaction in this appeal as they are developing software products and not purely or mainly software development service provider. For Megasoft Ltd. it is found that it has two separate segments i.e. product and services. Therefore, if at all, the AO/TPO considers the aforesaid company to be a comparable, then, he is directed to consider software development services segment alone for comparability analysis. For Infosys Technologies Ltd.as accepted the fact that the assessee is purely a software development service provider to its AE whereas Infosys is not a captive service provider like assessee. It is a fact that Infosys is engaged in diversified activities and also engaged in development of products consultancy and solution. That apart, the size, reputation and brand value of Infosys, in no way makes it comparable to a small captive service provider like assessee therefore excluded. For Tata Elxsi Ltd. (Seg.)is also to be excluded from the list of comparables while determining the, ALP of the international transaction. For Flextronics Software Systems Ltd., (seg) it is functionally different and A.O. could not have taken this company as comparable company without making suitable adjustments for the differences. Therefore, this comparable has to be excluded. However, since, this aspect was not examined by any Coordinate Bench in A.Y. 2006-07, restore this to the file of TPO to examine the functions of the above company and determine whether that is comparable or not, keeping in mind the decision of Coordinate Bench of earlier A.Y. and later A.Y. about the functional differences. The issue is restored to the file of TPO. Working capital adjustment - Held that:- There is no reason why negative working capital adjustment was made. Moreover, as already decided to exclude certain comparables which may result in varying working capital adjustment. Therefore, the issue is restored to the file of TPO to rework out it. - Decided in favour of assessee for statistical purposes.
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