Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (2) TMI 1915 - AT - Income TaxComputation of deduction under section 10A - exclusion of expenditure from both the export turnover and total turnover for the purposes of computation of deduction u/s 10A - HELD THAT:- This issue before us stands covered by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd.[2011 (8) TMI 782 - KARNATAKA HIGH COURT] which proposition has been upheld by the Hon’ble Apex Court in the case of CIT Vs. HCL Technologies Ltd., [2018 (5) TMI 357 - SUPREME COURT]. The only grievance of Revenue in the grounds raised was that the decision of the Hon’ble Karnataka High Court in the case of Tata Elxsi Ltd., (supra) had not attained finality and an SLP by the Department is pending before the Hon’ble Apex Court. Now, in view of the decision of the Hon’ble Apex Court in HCL Technologies Ltd.,[2018 (5) TMI 357 - SUPREME COURT]this issue is no longer res integra and therefore we find no reason to interfere in the decision of the DRP on this issue. Working Capital Adjustment - DRP in restricting the working capital adjustment on the basis of advances received from AEs in the absence of debtors and inventory in the case of the assessee for calculating the cost of working capital built in the profit margin - Based on the discussions in the body of the TP order, the assessee had raised objections before the DRP, which had issued directions that no such restriction shall be made on the working capital adjustment and it shall be granted as per actuals. As the working capital adjustment has been granted at actuals i.e., (-)1.40%, without making any restriction as contended by Revenue in the grounds of appeal, ground Nos. 4 and 5 raised on this issue are infructuous as they require no adjudication and are accordingly dismissed as infructuous. Exclusion of M/s. Acropetal Technologies Ltd., (Acropetal) - DRP has not adjudicated on the functional comparability of ‘Acropetal’ vis-à-vis the assessee in the case on hand. Instead, the DRP has rendered a finding that the services rendered by ‘Acropetal’ are predominantly on-site services and applied the on-site filter. The DRP further directed that ‘Acropetal’ needs to be excluded from the set of comparables as its employee cost is less that 25% and employee cost filter should be applied. As seen that neither the assessee in its TP study nor the TPO has applied the on-site filter while determining the ALP. Similar is the case with employee cost filter; which has neither been applied by the assessee nor by the TPO while determining the ALP. As such the DRP has applied these filters suo moto. When new filters are applied, it is necessary to examine whether such an application of a new filter has any impact on the other companies about their inclusion or exclusion. It is also seen that the DRP has not rendered a finding on the functional comparability of ‘Acropetal’ even though a specific ground has been raised and the judicial decisions in this regard have been brought to the notice of the DRP. In view of the above, we deem it appropriate to remand the issue of comparability of Acropetal Technologies Ltd., back to the file of the TPO with a direction that the two filters i.e., on-site filter and employee cost filter, applied by the DRP suo moto, may be applied to the other comparable companies as well and functional capacity be decided. Exclusion of ICRA Online Ltd. and Sundaram Business Services Ltd. - In the absence of any such discussion or decision being rendered, as claimed, applying the 75% export earning filter suo moto is not tenable. Further, if any new filters are applied, it is imperative to examine whether the application of such a filter has any impact on the other companies about their inclusion or exclusion in the set of comparables. That ‘ICRA’ was not selected as a comparable by TPO’s in other cases cannot be a valid ground for exclusion in this case also, unless the reasons for such exclusion in other cases are known. In view of the above, we deem it appropriate to remand the issue of comparability of this company i.e., ICRA Online Ltd., to the file of the TPO with the direction that the filter applied suo moto by the DRP in the case of ‘ICRA’ be applied to the entire set of comparable companies. Company, ‘Sundaram’, was selected as a comparable by the TPO and the assessee had accepted the same without any objection. We find that the DRP suo moto examined the comparability of this company and directed its exclusion from the set of comprables on the ground that it fails the 75% export earning filter, a new filter introduced by the DRP, which was not applied either by the TPO or the assessee. Since we have taken the stand that if any new filter is applied, it should be applied uniformly on the entire set of comparable companies, we deem it appropriate to remand the issue of comparablity of this company, Sundaram Business Services Ltd., back to the file of the TPO with a direction that the 75% export earning filter, applied, suo moto, by the DRP, be applied on the entire set of comparable companies. Exclusion of Infosys BPO Ltd., (Infosys) on grounds of functional dissimilarity, the application of new filters by the DRP will have no bearing on its exclusion or inclusion as it would continue to remain excluded on grounds of functional comparability. Therefore, we find there is no need to remand the comparability of this company to the file of the TPO, as sought for by the learned DR. Consequently, ground of Revenue’s appeal is dismissed. Exclusion of Eclerx Services Ltd. - No infirmity in the order of the DRP and the direction of the DRP to exclude ‘Eclerx Services Ltd.,’ from the set of comparables is upheld, since this company ‘Eclerx’ is excluded on grounds of functional dissimilarity, the application of new filters by the DRP will have no bearing on its exclusion or inclusion as it would continue to remain excluded on grounds of functional comparability. Therefore, there is no need to remand the matter to the TPO, as sought for by the learned DR. Accentia Technologies Ltd., be excluded from the list of comparable companies on grounds of functional dissimilarity. Jeevan Scientific Technology - new filters applied suo moto may be applied on the other comparable companies as well and then the inclusion/exclusion of this company as a comparable be decided. Comparability of R Systems International Ltd - Respectfully following the decision of Mercer Consulting Pvt. Ltd., [2016 (8) TMI 1163 - PUNJAB AND HARYANA HIGH COURT], we also deem it appropriate to follow the principle that if data, relating to the financial year in which the international transaction has been entered into, is directly available from the annual accounts of that company, then the company ought be examined / considered for comparability. We, accordingly, remand the matter of comparability of R Systems International Ltd., back to the file of the AO to examine / decide afresh. Short Credit for TDS - HELD THAT:- AO directed to examine and verity the assessee’s claim in respect of grant of short credit for TDS in accordance with law. Charging of interest u/s 234D - HELD THAT:- The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum H. Ghaswala [2001 (10) TMI 4 - SUPREME COURT] therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234D of the Act. The AO is, however, directed to recompute the interest chargeable u/s 234D of the Act, if any, while giving effect of this order.
|