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2017 (6) TMI 1315 - AT - Income TaxDeductions u/s. 10A - reduction of the items of expenditure incurred in foreign currency i.e; on communication and travel which are attributable to the delivery of software outside India and in rendering of technical services outside India - HELD THAT:- Jurisdictional High Court of Karnataka in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] has held that when certain expenses are excluded from the, export turnover for the purpose of computing deduction admissible under the Act, like u/s. 10A of the Act, such expenses are also to be excluded from total turnover, as export turnover forms part of total turnover. The decision in the case of Tata Elxsi Ltd. (supra) has also been followed by the Hon'ble Court in the case of CIT v. Motor Industries Co. Ltd. [2015 (7) TMI 876 - KARNATAKA HIGH COURT] , holding that if any expenditure is sought to be reduced from export turnover, then it should also be reduced from total turnover for the purposes of computing the eligible deduction u/s 10A of the Act. In this legal and factual matrix of the case, as discussed above, we find no reason/requirement to interfere with or deviate from the finding rendered by the DRP on this issue and, therefore, uphold the same. - Decided against revenue Risk adjustment - DRP order in granting the assessee 1% risk adjustment arbitrarily and on an ad hoc basis - HELD THAT:- While the co-ordinate benches of this Tribunal in specific cases have been directing the TPO to grant the assessee risk adjustment, if warranted, based on examination of the working submitted by the assessee; in this case however we find that the DRP has allowed ad hoc risk adjustment of 1%, without any examination of the assessee's working of risk, the facts of the case or assigning reasons for its finding. In these factual circumstances, we are of the opinion that the decision of the DRP in granting the assessee an ad hoc 1% risk adjustment is baseless and bereft of any examination of the assessee's working of risk, if any, the facts of the assessee's, case vis a vis the comparable companies etc. We, therefore, set aside the order of the DRP granting the assessee ad hoc risk adjustment of 1%. Consequently, ground of Revenue's appeal is allowed. TP Adjustment - comparable selection - HELD THAT:- Exclusion of companies from the list of comparables on account of it failing to satisfy the filter of 75% revenues to be from software technology services revenue. Companies functionally dissimilar with that of assessee's international transactions in software development services need to de deselected from final list.
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