2020 (10) TMI 24 - ITAT DELHI

TP Adjustment - comparable selection - Functional similarity - HELD THAT:- The assessee is engaged in the business of software development, maintenance and IT enabled services.It provides system integration, enterprise solutions, software development services to the clients of its associated enterprise and two other independent customer is in UK, US and other countries in Europe as well as in India. It provides information technology enabled services in the nature of back-office process outsourcing and inbounds and outbound voice based services (BPO), thus companies functionally dissimilar with that of assessee need to be deselected from final comparable list.

TDS u/s 195 - Disallowance of management services fees u/s 40 (a) (i) - Addition on account of management services fee on which no tax is been deducted - Indo French DTAA - HELD THAT:- As relying on own case [2016 (8) TMI 166 - DELHI HIGH COURT] payment made by the petitioner for the managerial services provided by the latter cannot be taxed as fee for technical services thus said payments are not liable to withholding of tax under section 195.

Disallowance of deduction u/s 10 AA - reasons for restricting the disallowance as AO excluded foreign exchange outgo, telecommunication charges, subsistence allowance for on-site employees and standby and callout charges from the total turnover for the purpose of computing deduction u/s 10 AA - claim of the assessee is that both the export turnover and total turnover for computing that deduction under this Section should be on the same basis - HELD THAT:- In view of the decision of the coordinate benches and the honourable High Court in assessee’s own case we reverse the order of the learned assessing officer and direct to consider a sum of all items in total turnover also for computing deduction u/s 10 AA of the income tax act. Accordingly, ground of the appeal is allowed.

Disallowance of foreign-exchange loss on account of unrealized foreign exchange forward contracts entered into for hedging the export proceeds against the currency fluctuation holding the same to be contingent in nature - HELD THAT:- Assessee has claimed to place on record party-wise break up of revenue earned by the appellant, which comprises break up of MTP (Management Transfer Price) and LTP (Legal Transfer Price)/ true-up values of invoices raised on AEs. On sample basis, the appellant is furnishing invoice wise break up and corresponding invoices raised on Steria Ltd., UK, revenue wherefrom comprises 81% of the total revenue for the year. All these evidences need to be closely examined by the learned assessing officer to follow the direction of the learned dispute resolution panel. The direction of the learned dispute resolution panel is to only disallow the excess sum debited by the assessee in the books which is not been recovered. In view of this with respect to the submission of the assessee made during the course of hearing before us we set aside the whole issue before the learned that assessing officer with a direction to the assessee to show that the amount of loss that has been disallowed has also been recovered by the assessee from its associated enterprise. The learned assessing officer may examine the same and if it is found already been recovered by the assessee from its associated enterprise, to delete the disallowance. In view of this, ground number of the appeal is allowed accordingly.

Short credit of advance tax paid - HELD THAT:- On careful consideration of the rival arguments raised before us we direct the assessing officer to consider the credit of advance tax paid to the assessee of the above sum after proper verification.

No TDS liability on a sum paid by the assessee to its group entity based in France - See INRASOFT LTD. [2013 (11) TMI 1382 - DELHI HIGH COURT]