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2016 (1) TMI 1406 - AT - Income TaxTP adjustment - exclusion of certain companies and against inclusion of certain companies by the TPO and as confirmed by the DRP and exclusion of certain companies as directed by DRP - HELD THAT:- As regards Accentia Technologies Ltd., is concerned, assessee had contended that the company operates in a different environment from that of the tax- payer and further that it has intangibles of Brand/IPRs. It was also stated that Accentia Technologies Ltd., used its own software on which it owns IP rights and offers different services to its customers as is evidenced from the annual report. Assessee had also objected that the company operates in knowledge process outsourcing and provides data analytics, data management and process improvement solutions to global enterprise clients. As regards Infosys BPO Ltd., is concerned, it was submitted that the company has huge turnover with global brand value and operates on large scale with lakhs of employees. It was submitted that the talent pool available with such companies is significantly different and high value and such companies having different functions, assets and risk profile is to be excluded. As regards TCS E-Serve International Ltd., is concerned, the assessee had contended that the assessee is a subsidiary of TCS e-Serve Limited and being part of the group of a large conglomerate, this company has large client base. As regards TCS E-Serve Limited, though TCS E-Serve International Ltd., has not been considered in any of the above decisions, we find that the rationale on which these companies have been excluded is also applicable to TCS E-Serve International Ltd. - we direct the TPO/A.O. to exclude TCS E-Serve International Ltd., also from the final list of comparables. Accordingly, Ground No.3 of the assessee is allowed International transactions - Disallowance of expenditure of copyright infringement settlement expenses paid to the A.E. as non-operating and extraordinary expenditure while calculation of arms length margin - HELD THAT:- Unless it is found to be not relating to the normal business operations of the assessee company, it cannot be directed to be excluded from the operating expenditure of the assessee. Further, assessee’s contention that it does not relate to the relevant financial year is also to be verified by the A.O. In view of the same, we deem it fit and proper to remit this issue to the file of the TPO for re-determination as to whether it forms part of the operating expenditure of the assessee. Seeking inclusion of two companies ICRA Online and Territory Services Ltd., as comparables to that of the assessee company, the Ld. Counsel for the assessee, has drawn our attention to the submissions of the assessee before the TPO and as to why the TPO has rejected these companies. He has also drawn our attention to the factual inconsistencies in the findings of the TPO against these two companies. Considering the same, we remit the issue to the file of TPO for reconsideration as to whether these factual inconsistencies do exist and after verification of the said details, the TPO may take a decision in accordance with law. Ground No.4 of the assessee is treated as allowed for statistical purposes Addition u/s 36(1)(ii) loyalty rewards - HELD THAT:- We find that the loyalty rewards do not fall in the same category as bonus and commission as envisaged under section 36(1)(ii) of the Act. Therefore, respectfully following the judgment in the case of Sri Ram Ltd.. vs. CIT (2008 (4) TMI 273 - DELHI HIGH COURT), we direct the A.O. the allow this expenditure. Deduction u/s 10A - Reduce the telecommunication charges from both the export turnover as well as total turnover for the purpose of computation of deduction under section 10A - This issue is covered in favour of the assessee by the decision in the case of CIT & another vs. Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT]
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