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2015 (11) TMI 1308 - AT - Income TaxTransfer pricing adjustment - adjustment to the Arms’ Length Price (“ALP”) to an international transaction - Held that:- The turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores (as laid down in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT [2011 (8) TMI 952 - ITAT BANGALORE]) . Thus, companies having turnover of more than 200 crores have to be eliminated from the list of comparables KALS Information Systems Limited and Accel Transmission Limited companies was not comparable in the case of the assessees engaged in software development services business. Megasoft Ltd -segmental margins in so far as it relates to providing software services by Megasoft alone should be taken for the purpose of comparison. Lucid Software Limited, has to be excluded as functionally not comparable with that of the assessee Geometric Software Ltd. (Seg.) & Ishir Infotech Ltd.the related party transaction in the case of companies exceeds 15% ( 19.98 % in the case of Geometric Software Ltd. and 21.97% in the case of Ishir Infotech Ltd.) and in view of the decision of the Tribunal in the case of 24 X 7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] followed by this Tribunal in the case of Logica Private Ltd.[2015 (3) TMI 401 - ITAT BANGALORE] wherein it was held that where the RPT exceeds 15%, such companies should not be taken as comparable companies. Avani Cimcon Technologies Ltd. and Celestial Labs Ltd. not comparable to the software service provider companies. E-Zest Solutions Ltd. - With regard to the objection of the leaned DR that the functional profile of the company E-Zest Solutions Ltd. in AY 07-08 has to be compared with that in AY 08-09 decided by the Tribunal, we accept the said prayer and for this limited purpose direct the TPO/AO to examine as to whether there is any change in the profile of the said company so that it can be regarded as comparable with an Assessee rendering software development service such as the Assessee. Computing deduction under section 10A - Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude expenses incurred in foreign currency towards travelling and expenses incurred towards communication both from export turnover and total turnover, as has been prayed for by the assessee Not granting set-off of current year unabsorbed depreciation against the adjustments made to the business income - Held that:- The AO in his order computed total income treating income declared in the return as “Nil”. Despite specific objection by the Assessee in this regard before the DRP, the DRP did not consider the claim of the Assessee. We are of the view that it would just and appropriate to direct the AO to verify the claim of the Assessee for set off of current year unabsorbed depreciation against the adjustments made to the business income, if the claim of the Assessee is found to be correct, the AO shall give consequential relief to the Assessee.
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