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2016 (6) TMI 1473 - AT - Income TaxTP Adjustment - TP analysis based on the segmental results given by the assessee - HELD THAT:- As expenditure having been allocated based on turnover, the operating profit to operating cost ratio in the AE segment will under go substantial change if there is a change in the revenues shown in the AE segment. It is therefore fundamentally important that correct revenue is adopted for the AE as well as the non-AE segments for the TP study. TPO had proceeded to make the TP analysis based on the segmental results given by the assessee originally. This, in our opinion could lead to functionally wrong results. The issue regarding Transfer pricing requires a fresh look by the lower authorities so that the revenue stream is correctly bifurcated between AE and non-AE segment. This being a threshold bifurcation before proceeding with the TP study, we are of the opinion that additional evidence has to be admitted. We therefore admit the additional evidence and remit the matter back to the file of TPO/ AO for consideration afresh. All the issues raised by the assessee in relation to TP pricing are kept open. AO / TPO is directed to redo the TP analysis after correctly working out the revenue streams for AE and non-AE segments with regard to the software development services and proceed in accordance with law. Deduction u/s.10A - By virtue of the definition of the term ‘export turnover’, given in explanation (iv) to Section 10A of the Act, the contention of the assessee that communication expenditure and telecommunication expenditure have to be included in export turnover cannot be accepted. Nevertheless as mentioned by us whatever is reduced from total turnover should also be deducted from export turnover for working out the deduction u/s.10A of the Act. AO is directed to do so. Ground is partly allowed. Loss brought forward from the earlier years, were not allowed to be set off - assessee submitted that loss for the earlier years after giving effect to the appellate decisions had to be set off against the current business income of the assessee - HELD THAT:- We are of the opinion that the matter can be verified by the AO. If the assessee had not claimed set-off of brought forward loss in its return of income, then there is no question of allowing such set off. However, if the assessee had claimed such losses and if the losses were to be reworked based on orders of higher judicial forums then the loss that remains would have to be allowed to be set off. We direct the AO to verify this aspect and proceed in accordance with law. Ground is allowed for statistical purpose.
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