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2015 (1) TMI 868 - AT - Income TaxTransfer pricing adjustment - Disregarding the ALP, as determined by the assessee in the TP documentation - Held that:- TPO has given a detailed reasoning for rejecting the assessee’s TP document, therefore we decide the issue against the asssessee. Selection of comparables - Held that:- No reason to interfere with the orders of TPO and DRP in applying filter of excluding companies with companies with employee cost of less than 25% of total cost. While selecting the comparable ld. TPO / Ld. DRP in principle were agreeable that software Product Company cannot be compared with software service provider. This is evident from the fact that TPO while applying the filters had accepted the assessee’s filter of rejecting companies undertaking significantly different functions compared to assessee. Restore this issue of inclusion of above four companies namely, Bodhtree Consul., Cat Tech., Infosys and Tata Elxsi to the TPO for fresh consideration. For Persistent Systems Limited as find from the Annual Report that it has been deriving income from sale of software service and software products and the segmental details were not available. Since this company was included as comparable by the assessee itself and not contested before the TPO/DRP and in the interest of the principles of natural justice and fairness, we direct the TPO to examine as to whether the income derived from sale of products can be excluded while working out the margin of this company. For Thirdware Solutions Ltd we are in agreement with the DRP’s observation that‘Software development, implementation and support services are various sub-segments of software development services only and require employment of software engineers’.In view of the above, the TPO is directed to include this company as comparable with a rider to exclude the figure of sale and purchase of license. For TCS it cannot be considered as comparable and, accordingly, the TPO is directed to exclude TCS from the list of comparable as it is dissimilar to that of the assessee. For L & T Infotech & Mindtree TPO was justified in including these companies as comparable as no potentially comparable company can be excluded from the list of comparable simply because of its high turnover. Risk adjustment - Held that:- The assessee has not come up with the calculation of quantified risk adjustment as pointed out by the Tribunal for the preceding AY. - Decided against the asssessee. Denying a working capital adjustment to the operating profit margins of the comparable - Held that:- Matter restored to the file of TPO for making the working capital adjustment to the profit margins of comparable subject, of course, to assessee demonstrating that there was difference in the levels of working capital employed viz-a-viz the comparable. - Decided in favour of assessee for staistical purposes. Adding FBT paid for computing the book profit u/s 115 JB - Held that:- Do not find any reason to interfere with the order of ld. DRP because as per sec. 115 WA Fringe Benefit Tax is an additional incometax and, therefore, it is to be treated at par with income-tax for computing book profit. - Decided against assessee.
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