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2019 (4) TMI 2134 - AT - Income TaxTP Adjustment - comparable selection - Exclusion of Alphageo (India) Ltd. - HELD THAT:- As there is a stark difference between employee cost to total cost ratio in the case of Alphageo of 7.55% as against 60.35% in case of the taxpayer. Further when we examine the show cause notice issued by the TPO, he has himself applied the export filter that the company having export turnover less than 25% is not to be taken as comparable. So, when Alphageo fails the export filter which is less than 25% as against 100% export of the taxpayer company, the same cannot be a valid comparable. So, we are of the considered view that Alphageo is not a suitable comparable vis-à-vis the taxpayer and as such has been rightly excluded by the ld. CIT (A). Allowable deduction u/s 10B - exclusion of misc. income from the net profit of the business of the undertaking on the ground that the taxpayer has not fulfilled three conditions laid down u/s 10B - HELD THAT:- Undisputedly, the taxpayer has duly shown the misc. income in profit & loss account under the head “other income”, which represents amount recovered from its employees towards the notice pay in relation to the period of notice not served. It is also not in dispute that the salary of the employees is claimed as expenses of the undertaking of the taxpayer and that subsequent recovery on termination of the employee should also be credited to the respective undertaking. Thus by applying the decision rendered in Birla Soft (India) Ltd. vs. DCIPT [2011 (12) TMI 385 - ITAT DELHI] CIT (A) has rightly allowed the notice period pay received as income while computing the deduction u/s 10B of the Act because amount received towards notice period pay was to be treated as income derived from the eligible undertaking. The decision rendered by the Hon’ble Supreme Court in Liberty India [2009 (8) TMI 63 - SUPREME COURT] applies to DEPP/Duty Drawback benefits which do not form part of net profit for the purpose of computation of profits and do not fall within the expression “profits derived from industrial undertaking” for the purpose of section 80IB. So, ld. CIT (A) has rightly held that Liberty India (supra) is not applicable to the facts and circumstances of the case. - Decided against the Revenue. Suitability of Stup Consultants Pvt. Ltd. as a comparable for benchmarking the international transactions undertaken by the taxpayer with its AE - Coordinate Bench of the Tribunal in case cited as Emerson Process Management Power & Water Solutions India (P.) Ltd. vs. ACIT [2016 (4) TMI 1176 - ITAT DELHI] examined the suitability of Stup vis-à-vis Emerson Process Management Power & Water Solutions India (P.) Ltd. which is engaged in providing “Application Engineering” software development and related services to its group company and found the same as not a suitable comparable for AY 2008-09 as having different functional profile compared to the assessee company. Thus Stup is not a suitable comparable vis-à-vis taxpayer on ground of functional dissimilarity, non-availability of segmental information and on ground of failing the export filter, hence we order to exclude it from the final set of comparables.
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