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2015 (8) TMI 712 - ITAT BANGALORETransfer pricing adjustment - Computation of Deduction u/s.10A - Held that:- The Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) has held that while computing the deduction under section 10A of the Act, if the export turnover in the numerator is to be arrived at after excluding certain expenditure, then the same expenditure should also be excluded from the total turnover also. Respectfully following the same, we dismiss this ground of revenue and direct the Assessing Officer to exclude the expenditure incurred in foreign currency towards daily allowance, support allowance and travel both from export turnover as well as from total turnover for computing deduction under section 10A of the Act - Decided in favour of assessee. Selection of comparable - Related Party Transactions (RPT) - Held that:- Respectfully following the decision of 24/7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] wherein held companies with RPT in excess of 15% of total revenues are to be excluded from the set of comparable, we hold that the learned CIT (Appeals) was not correct in holding that companies with any RPT have to be excluded from the set of comparable companies, and direct the TPO / A.O. to apply the RPT filter at 15% of total revenues for including / excluding the comparable companies, excluded by the learned CIT (Appeals), in the final set of comparables. - Decided partly in favour of revenue. Turnover Filter of ₹ 200 Crores - Held that:- This Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (2011 (8) TMI 952 - ITAT BANGALORE) has held that turnover is an important filter of comparability which has to be adopted for determination of ALP and has determined the upper limit of the turnover filter to be applied at ₹ 200 Crores in cases where the turnover of the assessee is less than ₹ 200 Crores. In the case on hand, the turnover of the assessee being approx. ₹ 7.97 Crores only, falls within the range of ₹ 1 Crore to ₹ 200 Crores. Therefore, following the decision of the co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (supra), we hold and direct that only those companies having a turnover of ₹ 1 Crore to ₹ 200 Crores be taken as comparable companies and consequently uphold the decision of the learned CIT (Appeals) in excluding five companies, i.e. IGate Global Solutions Ltd. (Seg), Flextronics Software Systems Ltd.,L&T Infotech Ltd.,Satyam Computer Services Ltd and Infosys Technologies Ltd. from the TPO’s list of comparables. - Decided against revenue. Companies with Abnormal Profits - CIT (Appeals) excluding companies with profit margin of more than 50% from the final set of comparable companies by holding the profit margin in excess of 50% to be abnormal - Held that:- CIT (Appeals) has excluded two companies namely, (1) Enensys Software Solutions Ltd. ;and (2) Thirdware Solutions Ltd., from the list of comparables merely because they have high profits, without examining whether these companies satisfy the comparability analysis. In this factual matrix, respectfully following the decision of the Special Bench of the ITAT, Mumbai in the case of Maersk Global Centres (India) Pvt. Ltd.(2014 (3) TMI 891 - ITAT MUMBAI ), we hold that the learned CIT (Appeals) was wrong in excluding the companies merely because of high profit margins, reverse his finding in the matter and restore the matter to the file of the TPO. The TPO is directed to re-examine - Decided in favour of revenue by way of remand. Standard deduction 5% - CIT (Appeals) granting standard deduction of 5% in computing the ALP of the international transactions - Held that:- The new section 92C(2A) of the Act mandates that if the Arithmetic Mean Price falls beyond + / - 5 % from the price charged in international transactions, then the assessee does not have any option referred to in section 92C(2)of the Act. Thus, as per this amendment, it is clear that the + / - 5 % variation is allowed only to justify the price charged in the international transactions and not for adjustment / standard deduction purposes. The aforesaid amendment has settled the issue and accordingly the 5% standard deduction is not allowable to the assessee in the case on hand. The various judicial decisions cited pertain to the period prior to the retrospective amendment by way of insertion of section 92C(2A) of the Act by Finance Act, 2012 and are therefore not of any help to the assessee. In this view of the matter, we hold that the learned CIT (Appeals) erred in allowing the assessee the benefit of 5% standard deduction and accordingly reverse this order of this issue in view of the retrospective amendment w.e.f. 1.4.2002 brought about by the insertion of Section 92C(2A) of the Act by Finance Act, 2012. - Decided in favour of revenue.
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