Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 1066 - AT - Income TaxTP Adjustment - comparable Selection - assessee has challenged that the upper turnover of the companies selected by the TPO which are more than 200.00/- crores cannot be considered as a good comparable - HELD THAT:- Respectfully following the decision of the coordinate bench of the Tribunal in the case of Barracuda Networks India Private Limited [2022 (5) TMI 322 - ITAT BANGALORE] we hold that the companies whose turnover in the current year is more than Rs. 200 crores needs to be excluded for the purpose of comparable companies. Exclusion of R S software (India) Ltd - This issue of inclusion of R S software (India) Ltd has also been decided by the Hon'ble Tribunal in the case of Barracuda Networks India (P.) Ltd. [2022 (5) TMI 322 - ITAT BANGALORE] If by application of any filter an enterprise undertaking uncontrolled transaction similar to an international transaction is regarded as not being comparable in the earlier two years immediately preceding the current year and thereby attracting the provisions of rule 10B(2) or 10B(3) then the data for those years will not have any influence on the determination of transfer prices in relation to the transactions being compared for the current year and hence have to be ignored. On a harmonious reading of the provisions of rule 10CA, 10B(3) (4) of the Rules, we agree with the stand taken by the learned counsel for the Assessee. Therefore, if at all R.S.Software Ltd., is to be regarded as a comparable company, then the margins for AY 2014-15 and 2015-16 of the company have to be ignored because in those years they are to be regarded as not comparable. Thus we hold that R.S. Software Ltd., should be excluded from the list of comparables. Akshay Software Technologies Ltd.- As per director’s report the Technology Absorption (i) The assessee company does not import any technology during the year under review (ii) The company is a service provider and therefore has not set up a formal Research and Development unit whereas in the case of assessee company the Research and Development activity is done at the entity level as noted supra. As per director’s report the Akshay Software is a service provider. The assessee company is engaged for providing I. T. Infrastructure Services as narrated above. These facts require consideration and reexamination by the TPO/AO. However the comparability of this company is sent back to the TPO/AO for fresh consideration. A Miles Software Services Ltd., and Sasken Technologies Ltd., the assessee first time sought to be included for the comparable before the DRP as a good comparable because it passes all the filters and FAR analysis and the ld.DRP has without examining the functions and applying filters rejected. Considering to the file of assessee we are remitting back the issue to the file of TPO for de-novo consideration and the TPO will deicide the issue as per law. Exclusion of CG Vak Software and Exports Ltd., by holding that the company is not functionally comparable and it is engaged in diversified activities and engaged in providing outsourced product development which is dissimilar to the IT infrastructure support services as engaged by the assessee and significant research and development activities has also been carried out by this company - We consider it appropriate to direct the TPO to verify and adopt the figures as per the annual report of these companies and accordingly their PLI margin shall be recomputed. We, therefore, remand to TPO/AO, the question whether CG Vak is a comparable company functionally and also compute correct margin in the light of the above observations. Accordingly this ground is allowed for statistical purpose. Interest on delayed receivables in ground - HELD THAT:- We are not accepting the direction of the DRP for applying short term SBI Interest rate because the interest on receivables are a separate international transactions as decided by the Hon.ble jurisdictional High Court in the case of DCIT vs.AMD India Pvt. Ltd. [2018 (8) TMI 2094 - KARNATAKA HIGH COURT] therefore, it requires separate bench are also rejecting marking. We also reject the arguments of the ld.AR that the interest on receivables is not international transactions. On going through the order of DRP we noted that the principles of natural justice have been violated since no opportunity of being heard was provided when DRP directed to adopt SBI short term deposit rate instead of Libor plus 450 basis points adopted by the TPO. Since the tax payer has not complied the notice issued by the ld.TPO on 27/05/2019 and the assessee has filed detailed chart in the case of delay receivables from the debtors. therefore, the matter needs reconsideration. As in the case of Verifone India Technology (P.) Ltd. [2022 (12) TMI 1203 - ITAT BANGALORE] wherein the Tribunal has directed the lower authorities to benchmark the transactions by following any one of the methods prescribed under the Income-tax Rules. We are inclined to follow the same and direct the AO/TPO to benchmark the transaction as per the provisions of the Act and Rules formulated there under. It goes without saying that any proposed addition should result in an opportunity of being heard and adhere to the principles of natural justice. Capacity Utilization - HELD THAT:- We observe from the order of the DRP that he claimed first time before the ld. DRP. Since this is the first year of operation and if the assessee has underutilized his capacity and if he satisfied the provisions of the income tax act on this issue then the assessee is eligible for capacity utilization. On perusal of the documents/Financial Statements/ Copy of Income Tax Return filed before us, we observed that the assessee has claimed full depreciation on entire Fixed Assets as per section 32 of the I. T. Act. and the revenue has also allowed the Depreciation claimed, it shows that the entire assets were put to use during the impugned financial year i.e there was no under utilized capacity. If the claim of the assessee is accepted for under utilization sitting capacity i.e. the relevant assets which were kept idle for the year or sitting capacity were not utilized, therefore, in theses assets depreciation can not be claimed as per section 32 of the I.T. Act. because of it is the first year of operation. Since this issiue has not been examined by the lower authorites on this aspect also. Considering the entire observations and facts of the case of the assessee the TPO is directed to decide the issue denovo and decide the issue in accordance with law and the assessee is directed to provide requisite documents for early disposal of the case.
|