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2015 (11) TMI 431 - AT - Income TaxComputation of deduction u/s.10A - profits derived from development and export of computer software - AO excluded telecommunication expenses and travelling expenses incurred in foreign currency - Held that:- As decided by the Hon’ble High Court of Karnataka in the case of Tata Elxsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT) wherein it has been held that whatever is excluded from export turnover should also be excluded from the total turnover. Thus exclusion of the aforesaid items of expenditure both from the export turnover and also from the total turnover confirmed - Decided in favour of assessee. Set off loss of non-STPI units against the profits of the STPI units while computing deduction u/s.10A of the Act in respect of the profits of the STPI Units disallowed - Held that:- Assessee is eligible for deduction u/s. 10A of the Act in respect of the profits of STPI units without setting off the loss of non-STPI units. The relevant grounds of appeal of the revenue are accordingly dismissed. See CIT Vs. Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] - Decided in favour of assessee. Transfer pricing adjustment - Held that:- Bodhtree Consulting Ltd cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is a software product company and not a software development services company. See Nethawk Networks case [2013 (11) TMI 967 - ITAT MUMBAI] Infosys Ltd be excluded from the list of comparable companies as it is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. KALS Information Systems Ltd. has been considered as not comparable to a pure software development services company, thus we hold that KALS Information Systems Ltd. should not be regarded as a comparable. Tata Elxsi Ltd. - in assessee’s own case for the A.Y. 2007-08, this company was not regarded as a comparable in its software development services as are functionally different from that of the assessee and hence they deserve to be deleted Persistent Systems Ltd. be excluded from the final list of comparable companies chosen by the TPO. as it is in product designing services and into software product development. We direct the AO / TPO to correctly work out the PLI of the final comparables after giving due adjustment for the working capital on actual basis. Related ground of the assessee is therefore allowed. Infosys BPO Ltd be excluded as a comparable as it is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. Accentia Technologies Ltd is directed to be excluded from the list of comparables as pursuant to the scheme of amalgamation of the erstwhile Asscent Infoserve Private Limited (subsidiary of the company) with the company as approved by the shareholder in the court convened meeting held on the 25th day of April, 2009 and subsequently sanctioned by the honorable high court of Judicature at Mumbai vide order dt 21st August 2009 and Honorable high court of Karnataka at Bangalore vide order dt 6th February 2010, the assets and liabilities of the erstwhile company was transferred and vested in the company with effect from 1st Apr, 2008 and the scheme has been given effect to in the accounts of the year. Cosmic Global Ltd. - assessee prayed for exclusion of this company as a comparable on the ground that this company makes abnormal profits. He was however unable to furnish any evidence to substantiate his claim. Accordingly, the prayer for rejection of this company as a comparable is rejected. Eclerx Services Ltd. should be excluded from the final list of comparables as this company was functionally different and was accordingly engaged in providing high end services involving specialized knowledge and domain expertise in its field Disallowance of full credit in respect of TDS and foreign tax credit - Held that:- If credit was not given for the reason that the same was not appearing in Form 26AS, than the CBDT Instruction No.5/2013 dated 8.7.2013 whereby it had directed all the Assessing Officers to verify the TDS certificate and not go only on the basis of entry in Form 26AS, will apply. We are of the view that it would be just and appropriate to direct the AO to verify the claim of assessee for credit of TDS and foreign tax paid in light of the CBDT Instruction referred to above. The AO will afford opportunity of being heard to the assessee in this regard.
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