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2019 (12) TMI 1511 - AT - Income TaxDeduction U/s 10A/10B - proportionate allocation of the head office expenses made by the A.O. while computing the profits of the units eligible for deduction U/s 10A/10B - HELD THAT:- As decided in own case [2017 (10) TMI 233 - ITAT MUMBAI] assessee is having four units based at various locations which were controlled through its headquarter. The expenditure incurred by head office like travel and conveyance, communication expenses, legal and professional charges and rates and taxes definitely is having relevance to its total business. Therefore, we are of the view that the AO was right in allocating head office expenses to the units eligible for claiming exemption u/s 10A / 10B of the Act. We further observe that there is merit in the argument of the assessee that only net expenses of head office should be allocated to the units claiming exemption u/s 10A / 10B, because the assessee is generating other income like interest on fixed deposit and rent which may have some bearing on the functioning of its units claiming exemption u/s 10A / 10B. Therefore, we are of the view that the issue needs to be re-examined by the AO in the light of the submissions of the assessee. Hence, we set aside the issue to the file of AO and direct him to consider the issue afresh after affording opportunity of hearing to the assessee. TPA - Comparable selection - HELD THAT:- Respectfully following the order of the Tribunal in assessee’s own case for the A.Y. 2010-11 [2019 (10) TMI 1241 - ITAT MUMBAI], we do not find any infirmity in the order of the ld. CIT(A) for directing exclusion of companies namely M/s Infosys Ltd. and M/s Larsen & Turbo Infotech Limited from the final set of comparables. M/s Zylog Systems Limited, the ld CIT(A) has directed for exclusion after recording a finding to the effect that it is a giant in its area of operation and assumes greater risks translating into higher profitability. Thus, this giant sized company with advantages such as brand, intangibles etc. cannot be compared to a company such as the assessee company which is a captive unit of his AE assuming only limited risks. After recording a similar finding, the ld. CIT(A) also excluded Infosys Lt., which is already covered by the order of the Tribunal. The ld DR could not place on record any material so as to persuade us to deviate from the finding of the ld. CIT(A). Functional comparability M/s Thirdware Solutions Ltd. and M/s Kals Information Systems Ltd. with the software development service segment of the assessee - We had carefully perused the order of the Tribunal [2019 (10) TMI 1241 - ITAT MUMBAI] and found that exactly on the similar facts and circumstances, the Tribunal have confirmed the action of the ld. CIT(A) for exclusion of these companies from the set off final comparables. The ld DR has fairly conceded the fact that the issue is covered by the order of the Tribunal - we do not find any infirmity in the order of the ld. CIT(A) for excluding these comparables. Working capital adjustment while determining the arm’s length price of the international transaction in the nature of provision of software development services - HELD THAT:- As the facts and circumstances during the year under consideration are pari materia, accordingly, we direct the A.O. to grant working capital adjustment while determining the ALP for international transaction in terms of direction given by the Tribunal in [2019 (10) TMI 1241 - ITAT MUMBAI]
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