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2016 (6) TMI 1361 - AT - Income TaxTP Adjutment - software development services provided to the Associated Enterprises (AE) - selection of TNMM as MAM by TPO - comparable election - HELD THAT:- Infosys Ltd. should not be considered as part of comparables as it is a giant in the area of development of software and it assumes all risks, leading to higher profit and cannot be compared with the company which is a captive unit of its parent company assuming only limited currency risk. See AGNITY INDIA TECHNOLOGIES (FORMERLY GENBAND PVT. LTD.) VERSUS INCOME-TAX OFFICER, [2010 (11) TMI 852 - ITAT DELHI] Bodhtree Consulting Ltd there is no doubt that margin of this company has been fluctuating from (-) 50.4% to (+) 79.13%. Further perusal of the above chart shows that turnover of the company remain in the range of 10 crore to 22 crores but margin of the said company has been fluctuating between (-) 50.4% to (+) 79.13%. Such a huge variation in the margins despite the fact that scale of operation did not change that much, shows that the business circumstances of the assessee company were not normal and said company indeed passed through unusual or abnormal business circumstances. Under these circumstances, we do not find this company as a safe and reliable to be used as a comparable company. Sonata Software Ltd. related party transactions to sales ratio is more than 40% during the A.Y. 2009-10, but keeping in view request of Ld. CIT-DR and to meet ends of justice, we find it appropriate to send it back to the file of the AO/TPO to compute the same properly and exclude it from the list of comparables if ratio of RPT to Sales is found to be more than 25%. The assessee shall be free to raise any legal or factual issue with respect to this comparable. The AO/TPO shall give adequate opportunity of hearing to the assessee to submit requisite details and evidences and case laws in support of its claim, which shall be taken into consideration on objective basis before deciding this issue afresh. Working Capital Adjustment - MERCER CONSULTING (INDIA) PVT. LTD. VERSUS DCIT, CIRCLE-2, GURGAON [2014 (7) TMI 715 - ITAT DELHI] held that the issue of working capital would be relevant only when there is a situation of inventory remaining tied up or receivables being held up. The assessee contests the non-granting of the working capital adjustment - This issue could not have been brushed aside by the lower authorities in the manner as has been done in this case. Ample details have already been filed by the assessee before lower authorities, therefore, in all fairness and justice we send this issue to the file of the AO/TPO who shall consider this decision and shall give an adequate opportunity of hearing to the assessee to file further details and evidences as may be required and considered appropriate by the assessee and shall decide this issue afresh on objective basis after considering the details and evidences as may be placed on record by the assessee. Addition on account of notional interest on the alleged overdue receivables from AEs of the assessee company - HELD THAT:- Tribunal for the earlier year and find that identical issue has been decided by the Tribunal in A.Y. 2007- 08 [2016 (1) TMI 1415 - ITAT MUMBAI] we find that no independent source was searched or relied upon by the him. It is a fact that the agreements with the third parties did not contain any clause for charging interest for delayed payment. Thus, the matter has its own peculiarities. The assessee has entered in to agreement with the AE.s. and value of the transaction will have to be decided. The arguments of factoring of delayed payment in the value of service cannot be brushed aside especially when it is found that the OPTC margin earned by the assessee was 29.41 % and it was quite higher than the parties compared with i.e.app.15% - in the interest of justice interest rate should be fixed at LIBOR+200 points for the delayed payments received by the assessee from its AE.s. for the period as mentioned in the agreements.AO is directed to recalculate the interest amount accordingly - we send this issue back to the file of the AO/TPO with the directions to follow the order of the Tribunal for A.Y. 2007-08 and to compute upward adjustment to be made accordingly on account of interest. Denial of deduction u/s 10A in respect of Bangalore unit acquired on slump sale - HELD THAT:- The position of law is very clear the benefit of deduction shall not be denied to the assessee merely because the undertaking was acquired by the slump sale. The deduction is attached to the undertaking and therefore should be allowed to the assessee provided other prescribed conditions are fulfilled. But there has been some confusion with regard to appreciation of factual evidences. It has been shown to us that complete evidences including agreement and other various evidences were available. But AO has mentioned in the assessment order that the agreement filed with the AO was not eligible and it was not properly stamped. No proper discussion has been made by the DRP also in its order. Under these circumstances, we find it appropriate to send this issue back to the file of the AO to enable him to make proper verification of facts and evidences to analyze the other prescribed conditions. The deduction cannot be denied merely on the ground that the unit was acquired under slump sale. The AO shall give adequate opportunity of hearing to the assessee before deciding this issue afresh. Thus, with these directions this issue is sent back to the file of the AO with the directions given above. Reducing foreign currency expenses only from export turnover and not from total turnover while calculating the amount of deduction u/s 10A in respect of the other units - HELD THAT:- Respectfully following the decision of the Tribunal in assessee’s own case for the earlier years [2016 (1) TMI 1415 - ITAT MUMBAI] , we decide this issue in favour of the assessee and direct the AO to follow the orders of the earlier years. The AO should reduce the amount of impugned expenses incurred on foreign currency from export turnover as well as total turnover for computing the amount of deduction allowable u/s 10A. Thus, this ground is allowed. Short credit of TDS, advance tax and as assessment tax - HELD THAT:- No serious objection was raised by the Ld. DR, in this regard. The AO is directed to give opportunity to the assessee to submit requisite details and evidences with regard to correct amount of TDS, Advance Tax and Self Assessment Tax paid by the assessee and after considering the same the AO shall give credit for the correct amount as per law and facts. This ground is treated as allowed for statistical purposes.
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