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2020 (9) TMI 1093 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Assessee which is a captive software development service provider and renders software development and solutions and ITES to support the global contracts negotiated by Aspect US and other affiliates, thus companies functionally dissimilar with that of assessee need to be deselected. Information Technology Enables service segment - Exclusion of company functionally dissimilar and who fails the TPO’s own filter of export turnover in excess of 75% of total sales. Determining a negative working capital adjustment in both the SWD services Segment and ITeS segment - HELD THAT:- The Assessee is running the business without any working capital risk as compared to the comparables. Therefore, requirement for adjustment of negative working capital does not arise. negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis - Ground of Assessee is allowed. Re-computation of deduction under Section 10A by reducing travel expenses incurred in foreign currency and communication charges only from export turnover - HELD THAT:- Although the DRP rejected the primary contention of the Assessee that neither the telecommunication charges nor the travel expenses ought to be reduced from its export turnover, it accepted its alternate contention that they should also be reduced from its total turnover by following the decision of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] upheld by the Hon’ble Supreme Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] . Accordingly, it directed the AO to exclude the above expenses from both its export and total turnovers while computing the deduction allowable under Section 10A. Thus, on the basis of the DRP’s above directions, the disallowance under Section 10A came to be deleted in toto in the final assessment order. - Decided against revenue.
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