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2016 (3) TMI 1242 - AT - Income TaxTPA - comparability - Held that:- The assessee engaged in R & D services in the field of e-commerce, e-solutions, internet security and management, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable. To summarise we direct exclusion of Avani Cimcon Technologies Ltd, Celestial Labs Ltd, E- Zest Solutions Ltd, Flextronics Software Systems Ltd (seg), Helios & Matheson Information Technology Ltd, Infosys Technologies Ltd, Ishir Infotech Ltd, Kals Information Systems Ltd, Lucid Software Ltd, Persistent Systems Ltd, and Wipro Ltd (seg), from the list of comparables. Comparability of M/s. Tata Elxsi Ltd (seg), is remitted back to the TPO / AO for consideration afresh as per law. We also direct that Megasoft Ltd, shall be considered for inclusion only after segmentation of its results. Needless to say working capital adjustment shall be reworked by the AO / TPO confining to the comparables that are left after exclusions. Deduction u/s 10A computation - foreign currency expenditure on telecommunication expenditure not excluded from the export turnover - Held that:- Submission of the assessee that what has been reduced from export turnover should also be deducted from the total turnover while working out the deduction u/s.10A of the Act, needs to be accepted in view of the judgment of Hon’ble jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). Allowability of software expenditure - revenue or capital expenditure - Held that:- What we find is that the nature of software expenditure was not analysed by the lower authorities. AO had simply considered it as a capital outgo without verifying whether the expenditure was relatable to application software or system software, which gave enduring benefit to the assessee. It is true that some application software can have enduring quality. A close analysis of the expenditure is required for coming to a reasoned conclusion We are of the opinion that the matter requires a fresh look by the AO. We remit the issue back to the file of the AO for consideration in accordance with law.
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