Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (5) TMI 355 - AT - Income TaxTP adjustment - Comparability - determination of Arm’s Length Price (ALP) in respect of an international transaction of rendering software development services by the assessee to its Associated Enterprises (AE) - HELD THAT:- As referring to assessee as software development company and relying on M/S. APPLIED MATERIALS INDIA PVT. LTD. [2016 (9) TMI 1458 - ITAT BANGALORE] we direct the AO to exclude Persistent Systems and Solutions Ltd., and Persistent Systems Ltd., from the list of the comparable companies and remand the question of comparability of Sasken Communication Technologies Ltd., to the TPO for fresh consideration. Companies functionally dissimilar with that of assessee need to be deselected from final list of comparability. Negative working capital adjustment - HELD THAT:- As the assessee is a captive service provider entirely funded by its AE and has no working capital contingent, we accept the contention of the assessee and allow ground and hold that adjustment on account of negative working capital does not arise in the present case. Exclusion of operating expenses while computing the operating margin - Assessee filed application to file additional evidence before the Tribunaln - HELD THAT:- We find that on this issue, the DRP has merely observed that no submissions were made on the above ground of appeal. Assessee has however pointed out that in Annexure 1.26 of the objections filed by the assessee before the DRP, the submissions have been made with regard to the computation of operating margin. Since this issue has not been adjudicated by the DRP, we are of the view that it would be just and appropriate to remand this issue to the TPO/AO for consideration afresh with liberty to the assessee to file additional evidence before AO/TPO. The issue was not raised before the TPO in the assessment proceedings. Therefore, it would be appropriate if the TPO/AO are directed to consider the claim of the assessee in this regard. The TPO/AO will decide the issue after affording assessee opportunity of being heard. Disallowance of provision towards rental expenses - HELD THAT:- The deduction has been claimed by the assessee towards provision for rental expenses based on the possibility of increase in rental expenses. This is purely on the basis of the estimate and was rightly treated as contingent in nature and not allowed as a deduction by the Revenue authorities. In this regard, we are of the view that the assessee has not given any basis for its anticipated liability towards rental expenses nor has he quantified the basis of arriving at the anticipated liability. In such circumstances, we are of the view that the Revenue authorities were justified in rejected the claim of the assessee. Accordingly, this ground of appeal raised by the assessee is dismissed.
|