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2015 (3) TMI 309 - AT - Income TaxTransfer pricing adjustments - selection of comparable - Held that:- As far as the comparables objected by assessee as relying on the case of M/s.Cisco Systems (India) Private Ltd., Vs. DCIT (2014 (11) TMI 849 - ITAT BANGALORE), the co-ordinate bench after examining in detail, excluded Bodhtree Consulting Ltd., Infosys Ltd., Kals Information Systems Ltd (Seg) and Tata Elxsi (Seg) from the list of comparable. Comp-U Learn Global Tech India Ltd. - As relying on case of M/s Kenexa Technologies Pvt. Ltd. Vs. DCIT [2014 (11) TMI 587 - ITAT HYDERABAD] wherein assessee submitted before the DRP that Comp-U-Learn Tech India Ltd. was engaged in the development of new software (product development) in ITES call centre and BPO services. It was further submitted that schedule XIII of the Annual Report shows software development expenditure at only 25% of the total expenditure. The TPO extracted the 133(6) notice and held that the company has nil onsite revenue and satisfied all the filters applied by the TPO. We are of the opinion that some more analysis has to be done and we direct the TPO to look into the financial statement of the company and also provide an opportunity to the assessee to submit relevant details to substantiate its claim that Comp-U-Learn Tech India Ltd. is not a comparable company - Decided in favour of assessee for statistical purposes. I-Gate Global Solutions Ltd - On a perusal of the P&L account of this company for the year ended March 2009 it is seen that the company has claimed ‘expenses’ towards raw materials, stores and spares. Therefore, it needs to be examined in detail whether assessee’s claim that the company is into product development is correct. As relevant informations required for coming to a definite conclusion are not before us, we are inclined to remit the issue of comparability of this company to AO/TPO for considering afresh. - Decided in favour of assessee for statistical purposes. Inclusion of comparable - CG-VAK Software Exports Ltd (Seg) - Held that:- Considering the assessee's submission that employee cost is more than 80% of the total revenue and in the annual report, the expenditure was categorized under the heading ‘Cost of Services’, which should be considered as employee’s cost. It was further submitted that TPO should have obtained information by using his powers u/s.136 seeking clarifications in relation to the employees cost and other related costs. Having examined the annual report placed in Paper Book Page No.205, we are prima-facie satisfied that cost of services reported as separate item in Schedule 15 to the accounts pertains to employee cost. However, the TPO has not examined this aspect nor he obtained any information, therefore, in the interest of justice, we are of the opinion that selection of this comparable should be re-examined by the TPO after giving due opportunity to assessee. - Decided in favour of assessee for statistical purposes. Goldstone Technologies Ltd - TPO rejected this company under the foreign exchange earnings filter - Held that:- Since company is in the process of providing IPTV services and on the basis of information available in public domain, satisfies all selection criteria adopted by the TPO. It was further submitted that Assessing Officer has powers to obtain the information u/s.133(6) and assessee should be given opportunity to examine the contrary disclosures if any, in the annual report. Considering assessee’s submissions and reliance on the annual report, we are of the opinion that this comparable also can be re-examined by the TPO whether it satisfies all the filters adopted by the TPO and the company is comparable to the assessee’s functions. For this purpose, selection of this comparable is restored to the file of the TPO who should examine afresh after giving due opportunity to assessee. - Decided in favour of assessee for statistical purposes. Larsen & Toubro Infotech Ltd - Held that:- On a question about the turnover of this company, it was fairly admitted that the turnover of this company is ₹ 1,870 Crores during the year. Since the turnover itself is very huge and that company has multi-faceted activities, we are of the opinion that this company cannot be selected as comparable on the basis of functional analysis as well as on turnover basis. - Decided against assessee. Quintegra Solutions Ltd - not selected by the TPO on the reason that it fails the export turnover filter and Financial Year 2008-09 was a year of peculiar economic circumstances for the company - Held that:- There is no need to include this company as comparable. We uphold the TPO’s observations on this and reject company as comparable to assessee’s activities. - Decided against assessee. Foreign tax credit denied - Assessee-company has rendered services to one of its group entities in Spain - The said AE deducted tax @20% on the payments made to assessee - Held that:- We were surprised with the observations of the DRP. The DRP seems to have ignored provisions of Section 90 of the IT Act. Not only that, Article 25 of the DTIA entered between India and Spain also comes into play. Since neither the Assessing Officer nor DRP considered the issue in the correct perspective, we are of the opinion that the matter should be re-examined by the Assessing Officer to give necessary credit to assessee. With these observations, the issue in this ground is restored to the file of Assessing Officer for fresh adjudication. - Decided in favour of assessee for statistical purposes.
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