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2023 (4) TMI 76 - AT - Income TaxTP Adjustment - Comparable selection - Assessee is engaged in the business of providing Information Technology (“IT”) support services / software development services and IT Enabled services (“ITES”) to its AEs - HELD THAT:- Exclusion of M/s Genesys International Corporation Ltd, M/s Infosys Ltd. as functionally dissimilar. ICRA Techno Analytics Limited - As the method as to how that RPT filter is considered by the TPO / CIT(A) needs factual verification we remit the issue of exclusion of M/s. ICRA Techno Analytics Ltd back to the TPO/AO for examining afresh. Spry Resources India Private Limited - As TPO and the CIT(A) has not given any clear finding with regard to the factual aspects, we remit the issue of exclusion of M/s Spry Resources P Ltd back to the TPO/AO for fresh examination. Comparables for ITeS Segement - Exclusion of Excel Infoways Ltd (“Excel”) - We notice that the coordinate bench of the Tribunal in the case of Micro Focus Software India Private Limited [2020 (3) TMI 1442 - ITAT BANGALORE] has considered the issue and held that Excel be excluded. The relevant part of the decision of the Tribunal is extracted in the later part of this order. Respectfully following the said decision we uphold the decision of CIT(A) to exclude Excel from the list of comparables. Exclusion of M/s Infosys BPO Ltd, TCS E-serve Ltd., M/s BNR Udyog Ltd and M/s Excel Infoway Ltd., from the list of comparable companies and the issue of exclusion Universal Print Systems Ltd is restored to the file of AO/TPO for examining it afresh. Exclusion of Jindal Intellicom Limited - In assessee’s case, the CIT(A) has suomoto excluded company on the ground that there is no reliable segmental information with respect to the ITES segment. Considering the facts of the case and the decision of the coordinate bench in the case of CGI Information Systems & Management Consultants (P.) Ltd. [2018 (4) TMI 1755 - ITAT BANGALORE] we remit the issue back to the TPO/AO. The TPO/AO directed to verify the segmental details and consider the issue in the light of the decision of the coordinate bench. Negative working capital adjustment - HELD THAT:- As decided in Tivo Tech Private Limited [2020 (6) TMI 708 - ITAT BANGALORE] where it has been held that 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. Thus we direct the TPO not to make negative working capital adjustment. TPO is further directed to recomputed the ALP of the ITeS segment in accordance with the directions given in this order. Deduction u/s 10AA - Non-submission of the endorsed softex forms - HELD THAT:- From the definition it is clear that for the purpose claiming the deduction u/s.10AA, the proceeds of the export turnover should have been brought into India. We notice that the Hon’ble Tribunal in the case of Microsemi India (P.) Ltd [2015 (10) TMI 2103 - ITAT HYDERABAD] has held that the furnishing of the SOFTEX Form and certification of the said form by STPI is a postfacto procedure prescribed by the Reserve Bank of India to ensure timely and appropriate collection of export proceeds and that the deduction u/s.10A is to be granted based on the receipt of export proceeds into India in convertible foreign exchange. AO has denied the deduction, based on the findings of AY 2010-11 by stating that some of the SOFTEX forms are not certified and that the Bank of America has not sent any reply. However there was no adverse finding recorded by the AO with regard to the SOFTEX forms and there is no discussion of the documents submitted by the assessee for the year under consideration. Further, copies of the invoices and softex forms submitted to the authorities and the letters addressed to them requesting endorsement are furnished by the assessee before is in the additional evidence. In view of this we remit the issue to the AO to verify the evidences submitted. Chennai unit was formed by splitting up of the existing units - The test is to be performed on the first year of commencement of business. It is noticed that the coordinate bench of the Tribunal in the case of IBM India (P.) Ltd [2020 (8) TMI 196 - ITAT BANGALORE] has considered a similar issue and held that that the satisfaction of conditions in section 10AA(4) regarding formation are required to be established only in the year of formation. In assessee’s case the Chennai unit is formed in the year 2009 and the first year of claiming the deduction u/s.10AA is AY 2010-11. We therefore direct the AO to keep in mind in the remand proceedings that conditions in section 10AA(4) regarding formation are required to be established only in the year of formation. No evidence for data transmission or export of software - We notice that the issue is settled now by the decision of the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] which is affirmed by .HCL Technologies case [2018 (5) TMI 357 - Supreme Cour] that any adjustment made to the export turnover ought to be correspondingly made to the total turnover as parity is to be maintained between the two. We therefore direct the AO accordingly to make the adjustment, if any, towards telecommunication charges in foreign currency from the export turnover and the total turnover in the remanded proceedings. Disallowance of Marked to Market losses - AO made disallowance holding it to be a notional and contingent and treated the same as a speculative loss in terms of Section 43(5) - HELD THAT:- We notice that similar issue is considered by the coordinate bench of the Tribunal in assessee own case AY 2009-10 [2022 (4) TMI 1468 - ITAT BANGALORE], wherein AO as directed to delete the disallowance of loss for the reason that loss on account of foreign exchange fluctuations is allowable as a deduction under Section 37(1) - For the year under consideration, AO did not dispute the fact that the loss incurred by the Assessee is in the ordinary course of its business. Therefore we hold that no disallowance is warranted for MTM loss incurred and the AO is directed to delete the addition. Disallowance of Advances written off - reason quoted by the AO and the CIT(A) for not allowing the deduction is that the efforts made by the assessee to recover the money from the employees is not clearly demonstrated - HELD THAT:- We notice that a similar issue is considered by the coordinate bench of the Tribunal in the case of M/s.Xchanging Solutions Limited [2022 (6) TMI 1232 - ITAT BANGALORE] AR prayed for admission of additional evidences before the Tribunal as these evidences when considered would substantiate the claim of the assessee. The additional evidences now produced go the root of the issue and the core reason for not allowing the claim of the assessee. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Thus we remit the issue to the AO for a de novo consideration based on the evidences and supporting furnished by the assessee after giving a reasonable opportunity of being heard to the assessee. It is ordered accordingly. Interest on delayed remittance of TDS - Addition on the ground that it is not an allowable expenditure under the Act - HELD THAT:- The coordinate Bench of this Tribunal in Velankani Information Systems Ltd. [2018 (10) TMI 68 - ITAT BANGALORE] dealt with this issue and held that interest on delayed payment of TDS cannot be allowed as deduction. Thus we hold that interest on delayed payment of TDS is not an allowable deduction and dismiss the ground raised by the assessee. Disallowance of Gratuity payment claimed - AR submitted that during the year under consideration, the Assessee was undergoing a transition phase on account of the merger and thus, certain employees were not covered under the gratuity scheme of the merged entity - HELD THAT:- AR during the course of hearing submitted additional evidence (pages 1-87 of the additional evidence compilation (Vol II)) with regard to details of the pay register extracts and the payslips evidencing payment of more than 90% of the gratuity. We admit the additional evidence and since the same goes to the root of the issue and remit the issue to the AO with a direction to examine the additional evidence and allow the claim accordingly. Credit of TDS and advance tax - HELD THAT:- We direct the AO to verify and allow the claim in accordance with law.
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