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2024 (2) TMI 522 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Mold-Tek has provided derivative losses during the year and this is foreign currency exposure, which has to be considered while comparing the results before it can be selected. It is also pertinent to note that while working out the operating margin of the said company, provision for derivative loss of ₹. 6.43 crores made by Mold-Tek technologies Ltd. was excluded by the Assessing Officer treating the same as non-operating expenses whereas in the case of Rushabh Diamonds [2013 (11) TMI 520 - ITAT MUMBAI], it was held by the Division Bench of this Tribunal that the gain or loss arising from the forward contract entered into for the purpose of foreign currency exposure on the export and import has to be taken into consideration while computing the operating profit. Therefore, respectfully following the above decision, we are inclined to direct the TPO/AO to remove the above company from the final list of comparables. M/s Eclerx and Accentia Technologies Ltd. be eliminated as functionally different. Restricting working capital adjustment - We observe that TPO has adopted the adhoc 2% for finalizing the WCA without assigning any reasons for adopting the above said percentage. We are inclined to remit this issue back to the file of TPO to adopt the reasonable percentage on actual basis based on the data available on record. Accordingly, this ground of appeal is allowed for statistical purpose. Non-grant of TDS Credit - As considering the overall merits on the submissions made by the assessee we are inclined to remit this issue back to the file of AO with a direction to verify the records submitted by the assessee on merit as per law. It is needless to say that assessee may be given a proper opportunity of being heard. In the result, the issue under consideration is remitted back to the file of AO for statistical purpose. Computation of deduction u/s 10A - HELD THAT:- As relying on HCLTechnologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] we hold that the expenses excluded from the export turnover have to be excluded from the total turnover as well while computing deduction under section 10A of the Act. Accordingly, ground raised by the revenue is dismissed. Disallowance u/s 14A r.w.r.8D - HELD THAT:- We observe that the assessee has earned dividend income from domestic and foreign companies and the 14A disallowance applicable only on the dividend earned by the assessee from domestic companies. Further, the assessee has made submissions that the Assessing Officer has not recorded satisfaction before invoking rule 8D. It is fact on record that the AO has invoked rule 8D considering the fact that the rule 8D is applicable for this year and instead of going into this aspect, we are inclined to direct the Assessing Officer to make disallowances based on the settled position of law, in the following cases, the Hon’ble High Courts and coordinate benches has given clear findings that the disallowance u/s 14A is restricted only to the extent of exempt income earned and the investments to be considered for making disallowances are only on those investments which has actually earned the dividend. Assessing Officer is directed to re-work disallowance u/s.14A under rule 8D(2)(iii) by adopting only those investments which has yielded exempt income. The assessee gets the relief accordingly. This ground of appeal is partly allowed. TP Adjustment in relation to financial data analysis services - comparabaility analysis - HELD THAT:- Comparable TCS e-serve is distinguishable on the basis of high turnover and brand value not on the basis of functionality test. In our view, whether the turnover makes the difference. We observe that the Turnover of TCS is ₹.1578 crores in this segment, whereas the Turnover of the assessee is ₹. 114 Crores, there is significant difference and it is about 14 times - we direct the Transfer Pricing Officer to exclude the comparable TCS e-serve from the final list of comparables.
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