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2015 (11) TMI 538 - ITAT BANGALOREExclusion of telecommunication expenditure and foreign currency expenditure from total turnover while computing the deduction available u/s.10A - Held that:- Parity has to be there between export turnover and total turnover while excluding items from the export turnover. CIT (A) correctly directed exclusion of telecommunication expenditure and foreign currency expenditure from total turnover while computing the deduction available u/s.10A as relying on case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided against revenue. Exclusion of all comparables that were having any related party transactions (RPT) from the list of comparables considered for bench marking the pricing of international transactions of the assessee as per CIT(A) - Held that:- CIT (A) fell in error in directing exclusion of comparables which were having any RPTs. RPT ratio has to be considered at 15% in accordance with the above decision. Vis-a-vis argument of the Ld. AR that a few of the companies which come back to the list of comparables, still had to be excluded, for other reasons, we are of the opinion that the submission warrants consideration. These companies will be considered by us when we take up the appeal of the assessee, while adjudicating on the grounds taken by the assessee seeking exclusion of certain comparable companies. - Partly in favour of revenue. Eligiblity for 5% deduction while making the ALP analysis relying on proviso to Section 92C(2) - Held that:- The impugned assessment year being 2005-06, the proviso to Section 92C(2) as it stood prior to substitution brought in by Finance (No.2) Act, 2009, w.e.f. 1.10.2009 applied. The question whether + / - 5% disallowance could be allowed as a standard deduction, had come up before this Tribunal in the case of Sap Labs India P. Ltd v. ACIT [2010 (8) TMI 676 - ITAT, BANGALORE ]. CIT (A) had followed the Coordinate Bench decision in Sap Labs India P. Ltd (supra), wherein it was held that prior to the substitution, the second limb of the old proviso could be construed as a standard deduction available to the assessee. - Decided against revenue. Exclusion of certain companies from the list of comparables questioned by assessee - Held that:- . Though abnormal profits as such may not be a reason for exclusion of a company from the list of comparables, if such abnormal profits were caused due to amalgamation then unless contribution of the amalgamating company to the profits are brought out, in our opinion, comparability gets eroded. We are therefore of the opinion that Exensys Software Solutions Ltd, has to be excluded from the list of comparables. Infosys Technologies Ltd and Satyam Computers Ltd be excluded based on functionality for the former and unreliable financial results for the latter. No sufficient data to come to a conclusion that Thirdware Solutions Ltd was into software product development and not in software development services. Its revenue stream does show some licence income, but there was substantial software services income also. We are therefore of the opinion that the issue whether Thirdware Solutions Ltd can be considered as a good comparable requires a fresh look by the AO / TPO, after getting requisite information from the concerned company. Hence, comparability of Thirdware Solutions Ltd is remitted back to the file of AO / TPO. Tata Elxsi Ltd, and Sankhya Infotech Ltd directed to be excluded as these companies were functionally different.. TPO has been able to demonstrate that Flextronics Software Systems Ltd was predominantly into software development service. Just because an insignificant portion of revenue was generated from sale of products and related services or business process outsourcing, a conclusion cannot be drawn that it was not into software development services. We are therefore of the opinion that Flextronics Software Systems Ltd was properly considered as a good comparable. Coming to Foursoft Ltd, admittedly RPT was in excess of 15% is directed to be excluded. Geometric Software Solutions Co. requires a fresh look by the AO so as to verify whether RPT exceeded 15%
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