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2021 (1) TMI 1215 - AT - Income TaxTransfer pricing adjustment made in respect of "Engineering Design Segment" - non-USA related transactions - HELD THAT:- USA related transactions constituted 96.30% of the total turnover of EDS segment for margin was agreed to be 15.85% under MAP resolution. The coordinate bench has taken the view that the same rate may be adopted for non-USA related transactions also in the assessee's own case relating to 2008-09[2021 (7) TMI 84 - ITAT BANGALORE] - Accordingly, following the decision rendered by the coordinate bench in AY 2008-09, we direct the AO/TPO to adopt the margin of 15.85% to non-USA related transactions also under engineering design services segment. Transfer Pricing adjustment made in respect of "Marketing Support Services" - Comparable selection - HELD THAT:- We notice that M/s. Asian Business Exhibition & Conferences Ltd. and ICC international Agencies Ltd. have been directed to be excluded by the coordinate bench in the case of Electronic Imaging India Pvt. Ltd. [2017 (7) TMI 1335 - ITAT BANGALORE]. Following the above decision, we direct exclusion of both these companies. After exclusion of the above said 2 companies, only M/s. Cyber Media Research Ltd. would remain. The TPO may determine the sufficiency or otherwise of one comparable company after considering the facts of the case and after hearing the assessee. Working capital adjustment is supported by the decision of coordinate bench in the case of Huawei Technologies India Pvt. Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] we direct the A.O. to allow working capital adjustment on actual basis. Disallowance u/s. 40(a)(ia) in respect of broad band connectivity charges - HELD THAT:- As decided in own case[2021 (7) TMI 84 - ITAT BANGALORE]we direct the A.O. to delete the disallowance of broadband charges made u/s. 40(a)(ia) as held assessee has simply obtained broadband/Internet facility from the service provider M/s. Tata Indicom. It is not a case where a service contract has been entered into. The facility is open to all and sundry and any member of the public can avail of it. In such circumstances, the view of the AO that the nature of service rendered as an element of implicit contract is struck down and therefore, the addition cannot be sustained in first appeal. Disallowance u/s. 40(a)(ia) of depreciation claimed on software purchases for non-deduction of tax at source - as submitted by Ld. A.R., depreciation is not an item included u/s. 40(a)(ia) of the Act and hence the depreciation cannot be disallowed - HELD THAT:- We find support by this proposition on the decision rendered by the coordinate bench in the case of UKN Properties Pvt. Ltd.[2021 (7) TMI 106 - ITAT BANGALORE] - Accordingly, the disallowance of depreciation u/s. 40(a)(ia) of the Act is liable to be deleted. The Ld. DRP however has directed the A.O. to treat software purchases as revenue expenditure and disallow the same u/s. 40(a)(ia) of the Act. In this regard, the Ld. CIT(A) has followed the decision rendered in the case of Samsung Electronics Company Ltd.[2011 (10) TMI 195 - KARNATAKA HIGH COURT] which has since been reversed by Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] Accordingly, in our view, the disallowance of entire amount of software purchases u/s. 40(a)(ia) of the Act treating the same as revenue expenditure requires fresh examination at the end of the A.O Business profits eligible for deduction u/s. 10A of the Act - A.O. had taken the view that the expenses deducted from export turnover cannot be deducted from the total turnover for the purpose of computation of deduction u/s. 10A - HELD THAT:- DRP directed the Assessing officer to deduct the expenses from total turnover also following the decision rendered by jurisdictional Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. The above said decision of Hon'ble High Court has since been upheld by Honourable Supreme Court in the case of HCL Technologies Ltd.[2018 (5) TMI 357 - SUPREME COURT]. Accordingly, we do not find any infirmity in the direction given by Ld. DRP.
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