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2015 (11) TMI 635 - AT - Income TaxTransfer pricing adjustment - CIT(A) excluded M/s. Synergy Log-in Systems Ltd and M/s. Transworld Infotech Ltd from the list of comparables selected by TPO for bench marking the value of international transactions of assessee with its AE - Held that:- Unless and until there are reliable published accounting records, which would help to cull out the result of a comparable company for a financial year comparable to that of the tested party any attempted comparison would not yield correct results. In our opinion the CIT (A) was justified in directing exclusion of M/s. Synergy Log-in Systems Ltd and M/s. Transworld Infotech Ltd, since their accounting year ended on a different date, when compared to that of the assessee. - Decided against revenue. Foreign exchange loss / gain held as operating in nature by CIT(A) - Held that:- Considering the nature of activities of assessee and the nature of revenues earned by it from software development activities rendered abroad, we are of the opinion that the foreign exchange gain could have been construed only as incidental to the sales, payment to suppliers etc., We cannot therefore find any fault with the direction of the CIT (A) to consider such foreign exchange gain as operating in nature.- Decided against revenue. Reworking of the operating margin by allocating cost on the basis of man-hours as directed by CIT(A) - Held that:- There is no dispute that assessee was billing its AE on cost plus basis. Such cost was arrived at by the assessee by allocating the indirect cost on the basis of manhours and direct cost directly. When the revenue of the assessee itself was based on an allocation done on man-hour basis, in our opinion, it was not appropriate to adopt a different yardstick for working out its PLI. That for a software development company, the most appropriate method for allocating indirect cost is head-count method has been clearly brought out by Hon’ble Delhi High Court judgment in the case of EHPT India P. Ltd [2011 (12) TMI 49 - DELHI HIGH COURT ] - Direction of CIT (A) that apportionment of cost has to be done on man-hour basis and not on turnover basis could not be faulted with. We do not find any reason to interfere with the direction of CIT (A) in this regard. - Decided against revenue.
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