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2019 (9) TMI 1595 - AT - Income TaxTP Adjustment - Determination of Arms Length Price (ALP) of the international transaction for rendering software development services (SWD) by the assessee to its Associated Enterprises (AE) under the provisions of section 92 - Comparable selection - exclude is L & T Infotech Ltd - HELD THAT:- As relying on the light of the decision pointed out by the learned DR, the issue of comparability of this company should be sent back to the AO / TPO for fresh examination as was directed by the Tribunal in the case of CGI Information Systems and Management Consultants Pvt. Ltd.,[2018 (10) TMI 1797 - ITAT BANGALORE]. We hold and direct accordingly. Exclusion of provision of bad and doubtful debts from the operating cost of the comparable companies - While considering the international transaction in the distribution segment, the TPO has himself considered provision for bad and doubtful debts as part of the operating expenditure and by the same logic he should have treated provision for bad and doubtful debts as part of the operating cost in the hands of the comparable companies also. As far as the software development segment of the assessee is concerned, there is no provision for bad and doubtful debts. As in the case of Principal CIT Vs. Business Process Outsourcing India Pvt. Ltd., [2018 (7) TMI 380 - KARNATAKA HIGH COURT] wherein in an appeal against the order of the Tribunal holding that provision for bad and doubtful debts should be considered as part of the operating expenditure, the Hon’ble High Court confirmed the order of the Tribunal and dismissed the appeal of the Revenue as one not giving rise to any substantial question of law - we are of the view that provision for bad and doubtful debts should be treated as operating expense while computing the PLI OP/OC of the comparable companies which ultimately remains for comparison.
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