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2017 (4) TMI 1347 - AT - Income TaxWorking capital adjustment restricted by the TPO but allowed by the DRP - Held that:- In view of the decision of the coordinate bench of the Tribunal in assessee's own case for the assessment year 2009-10 we do not find any reason to interfere with the directions of DRP of this issue as held when the average margin of the comparable companies are taken, it takes care of the differences if any in the comparable companies. Therefore, there is no rationale in allowing the risk adjustment. The objection is therefore not found acceptable. Consequently this ground of the revenue's appeal is dismissed. Whether the income enhanced due to disallowance u/s. 40(a)(ia)is eligible for deduction u/s. 10A? - Held that:- This issue of disallowance made u/s. 40(a)(ia) eligible for deduction of tax holiday under law is covered by the decision of Keval Construction [2013 (7) TMI 291 - GUJARAT HIGH COURT] as held whatever be the ultimate profit of the assessee as computed even after making disallowance under section 40(a)(ia) of the Act, would qualify for deduction as provided under the law - Decided in favour of Assessee. Exclusion of communication expenses from the export turnover as well as total turnover while computing the deduction u/s. 10A - Held that:- DRP has directed the AO to exclude the communication expenses both from export turnover as well as total turnover while computing the deduction u/s. 10A by following the decision of Hon'ble jurisdictional High Court in case of Tata Elxsi Ltd (2011 (8) TMI 782 - KARNATAKA HIGH COURT). No error or illegality in the directions of the DRP qua this issue. Comparability analysis - Held that:- As the assessee who is into captive service provider of ITES companies functionally dissimilar with that of assessee need to be deselected from final list. Thus exclude these two companies namely Accentia Technologies Limited and eClerx Services Limited from the set of comparables. Foreign exchange gain / loss was treated as non-operating in nature - Held that:- For the purpose of computing the margins for the assessment year under consideration only the gain or loss which pertains to the export made during the year under consideration has to be taken into account as operating revenue or cost. Accordingly, we direct the AO / TPO to compute the operating margins of the assessee as well as comparable companies by considering the gain or loss arising from forex fluctuation on account of the exports made during the year. Risk adjustment - Held that:- Though the assessee has claimed risk adjustment on the ground that assessee being a captive service provider operates at low risk level in comparison to comparable companies however, the assessee has not furnished the relevant details and computation of risk level of the assessee as well as the comparable companies. Therefore in the absence of the relevant details and working it is not possible to work out the adjustment on account of difference in risk level of assessee and comparable Disallowance u/s. 14A r.w. Rule 8D - Held that:- Expression 'does not form part of the total income' in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. Thus Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. See case of Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT]
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