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2020 (2) TMI 1632 - AT - Income TaxTP Adjustment - determination of Arm’s Length Price (ALP) in respect of an international transaction for rendering information Technology Enabled Services (ITES) by the assessee to its Associated Enterprise (AE) - comparable selection - HELD THAT:- Acropetal Technologies Ltd. (`Acropetal) company is engaged in provision of a variety of IT enabled services comprising of Enterprise solutions, IT Infrastructure Management Services, Cloud Services, Greenhouse Gas Management, unlike the Assessee who is a provider of routine IT enabled services. Further, the company is engaged in provision of engineering design services which are in the nature of high end IT enabled services which are in the nature of Knowledge Process Outsourcing ("KPO"), which is not comparable to the Assessee's ITES. Jeevan Scientific Technologies Ltd. ("Jeevan") - If the service income from the BPO segment alone is considered, the component of service income to the total revenue of this company is less than 75% of total operating revenue. In any event if the turnover of BPO segment is considered it is less than Rs.1 Crore and this company fails to satisfy the TPO's own filter of service revenue from the relevant segment having to be in excess of Rs. 1 crore as the revenue from the BP0 segment of the said company is Rs. 79 lakhs only. The company is therefore not comparable to the Assessee and the DRP's findings on exclusion of Jeevan are right in law and ought not to be interfered with. iGate Global Solutions Ltd. ("iGate") is engaged in provision of varied services and no segmental breakup of the same is available in its Annual Report. Further. the company's' software services segment is clubbed with its ITEs segment and there is no breakup between the revenues generated from the two segments. During the year under consideration, this company had acquired majority equity interest in Patni Computer Systems Ltd. rendering it incomparable due to it failing the TPO's own filter of having peculiar economic circumstances. In addition, the company owns significant intangibles in its name, which is evident from the balance sheet of the company for the Financial Year 2010-11 - We are of the view that the above reasons given by the DRP for excluding this company as a comparable company is right and does not call for any interference. Computation of deduction u/s 10A - excluding communication expenses and expenses incurred in foreign currency both from the export turnover as well as total turnover while computing the deduction - HELD THAT:- DRP correctly accepted the Assessee’s alternate contention and held that the expenses ought to be reduced from its export and total turnover by following the judgment of the Hon’ble High Court of Karnataka in CIT Vs Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] thus sums excluded from Export turnover in fact ought not to have been so excluded as per the definition of Export Turnover as defined in Sec.10A of the Act, do not require any adjudication and are accordingly, dismissed. TDS u/s 195 or 192 - disallowance u/s 40(a)(i) - cross charge of salary paid to Aon Services Corporation, USA - HELD THAT:- It is not disputed by the revenue that in respect of the payments made to Aon Services Corporation, USA towards reimbursement of salary expenses the assessee has duly deducted tax at source u/s 192 of the Act. In fact, in the letter dated 02-03-2015 the assessee has highlighted this aspect in para-2 at page-3 of the aforesaid letter. Though, the assessee has not taken a specific plea that no disallowance u/s 40(a)(ia) of the Act can be made for short deduction of tax at source, yet the fact remains that the aforesaid plea is a legal plea which can be adjudicated on the basis of facts already available on record. We are of the view, that decision of the Hon’ble Karnataka High Court in the case of Kishore Rao & Others [2016 (4) TMI 430 - KARNATAKA HIGH COURT] clearly supports the plea of the assessee. The decision rendered in case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT], taking a view that there can be no disallowance of expenses u/s 40a(ia) of the Act for short deduction of tax at source has been followed by the Hon’ble Karnataka High Court. In the given facts and circumstances of the case, we are of the view that the order of CIT(A) has to be upheld. Therefore, the question whether the payment in question has to be regarded as fees for technical services rendered or mere reimbursement of expenses does not call for any adjudication.
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