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2015 (8) TMI 703 - AT - Income TaxTransfer Pricing adjustment - software development services segment - selection of comparable - Held that:- We direct Infosys Technologies Ltd. be excluded from the final list of comparable companies chosen by the TPO the reason being that the latter is giant in the area of development of software and it assumes all risks, leading to higher profit. See Agnity India Technologies Pvt. Ltd. v. ITO [2010 (11) TMI 852 - ITAT DELHI] confirmed by HC [2013 (7) TMI 696 - DELHI HIGH COURT] Satyam Computer Services Ltd. to exclude from the final list of comparables. Margins of Visualsoft Technologies Ltd., which is at Sl.No.15 of the list of comparables chosen by the TPO - the basis on which the DRP came to the conclusion that the segmental details are not available in the public domain is erroneous, as the data taken by the assessee are based on the annual report of this company, a copy of which is placed at page 456 of the assessee’s paperbook. We are therefore of the view that it would be just and appropriate to set aside the directions of the DRP in this regard and direct the TPO/AO to verify the claim of the assessee and if found correct, to take only the segmental margins of this company as pleaded by the assessee. Working capital adjustments - Held that:- The annual reports of the comparable companies chosen for the purpose of calculating working capital adjustment are accepted as additional evidence. The issue, however, requires verification by the TPO/AO and therefore the order of the DRP in this regard is set aside and the issue is remanded to the TPO/AO for fresh consideration in light of the material now made available by the assessee. Allsec Technologies Ltd. should be excluded from the list of comparable companies. Club expenses disallowed as a deduction u/s. 37(1) - as per revenue the same were personal in nature and cannot be regarded as expended wholly and exclusively for the purpose of business - Held that:- As relying on CIT v. United Glass Mfg. Co. Ltd.[2012 (9) TMI 914 - SUPREME COURT] wherein taken the view that club membership fees of employees incurred by the assessee is business expenses u/s. 37 of the Act. In view of the aforesaid decision the claim of assessee in this regard has to be allowed. - Decided in favour of assessee. Disallowance of employee provident fund liability u/s. 36(1)(va) - Held that:- It is not disputed that the aforesaid employees’ contribution to provident fund was paid by the assessee on or before the due date for filing return of income for AY 2006-07. In such circumstances, no disallowance can be made u/s. 36(1)(va). See CIT v. Sabari Enterprises & Ors. (2007 (7) TMI 169 - KARNATAKA HIGH COURT) wherein it was held that employees’ contributions to provident fund are allowable deductions, even though made beyond the due date of furnishing return of income as per section 139(1). Thus the disallowance made by the revenue authorities has to be deleted. Accordingly, the same is directed to be deleted. - Decided in favour of assessee.
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