Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (3) TMI 1379 - AT - Income TaxTP Adjustment - Comparable selection - determination of ALP for provision of SWD services - HELD THAT:- Companies functionally dissmilar with that of assessee need to b deselected from list of comparables. As relying on case of M/s.NXP India Ltd. [2020 (5) TMI 86 - ITAT BANGALORE] we direct exclusion of the following three companies from the list of comparable companies viz., CG Vak Software & Exports Ltd., Larsen & Toubro Infotech Ltd., and Persistent Systems Ltd. Also we find that in the decision in the case of NXP India Pvt.Ltd. [2020 (5) TMI 86 - ITAT BANGALORE] directed inclusion of the following 2 companies viz., Helios & Matheson Information Technology Ltd., and R.Systems International Ltd. Inclusion of R.Systems International Ltd., in the list of comparable companies and remand the question of comparability of the company M/S.Helios & Matheson Pvt.Ltd., to the AO/TPO for fresh consideration as directed in the case of NXP India Pvt.Ltd. (supra) after affording Assessee opportunity of being heard. Spry Resources India Pvt. Ltd to be included as relying on case of Synamedia India (P) Ltd. [2020 (5) TMI 211 - ITAT BANGALORE] dealt with an identical claim made by the assessee who a SWD service provider such as the assessee and in whose case also, the very same 7 comparables chosen in the case of assessee in the appeal was chosen as comparable by the TPO. Inclusion of a company by name Evoke Technologies Ltd. - Reasons given by the DRP for not considering this company as a comparable company was due to inconsistency in export turnover for different AYs and incurring of consultancy charges which was alien in the business of SWD services. In this regard, the learned Counsel for the assessee has drawn our attention to a decision of the ITAT Delhi Bench in the case of DCIT Vs. Sumi Motherson Innovative Engineering Ltd. [2014 (2) TMI 652 - ITAT DELHI] Tribunal took the view that while applying TNMM, it is not allowed to compare each and every item of operating cost incurred by assessee with similar cost in case of comparables to ask for adjustment, rather it is overall effect of all such individual items culminating into operating profit, which is considered for benchmarking assessee's international transaction. We are of the view that Evoke Technologies Pvt. Ltd., which is admittedly rendering SWD services should be regarded as a comparable company and the reasons given for not including the comparable by the DRP cannot be sustained. We direct the inclusion of the aforesaid companies. Nature of expenses - software expenses - revenue or capital expenditure - HELD THAT:- We have perused the final Order of Assessment and in para 2, the AO has not followed the directions of the DRP. The DRP had given a specific direction to the AO to examine the invoice and ascertain the nature of expenses and if it is noticed that the expenses are only renewal of licence fees for application software for an year or less, then the expenditure has to be allowed as a revenue expenditure. We therefore deem it fit and proper to set aside the order of AO and remand the issue to AO for fresh consideration in accordance with directions of the DRP. We hold and direct accordingly. Disallowance on account of provision for leave encashment - HELD THAT:- We are of the view that deduction to the extent of leave encashment as actually been paid should be allowed. We direct the AO to examine the claim of the assessee in this regard and allow deduction on the basis of the actual payment. The other grounds of appeal are purely consequential and does not require any adjudication.
|