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2020 (12) TMI 1193 - AT - Income TaxTP Adjustment - Comparable selection - Geometric Software Solutions Co. Limited, Bodhtree Consulting Limited, Flextronics Software Systems Limited (Seg.) and Tata Elxsi Limited (Seg.) - HELD THAT:- All the four companies referred above were considered by co-ordinate bench in the case of Sharp Software Development India P. Ltd. [2017 (1) TMI 1734 - ITAT BANGALORE] and they have been held to be not good comparable companies. Accordingly, following the decision rendered by the co-ordinate bench in the case of Sharp Software Development India P. Ltd. (supra), we direct exclusion of four companies cited above Computation of book profit u/s. 115JB - A.O. took the view that the Provision for bonus is a contingent liability and hence, the same is required to be added to the net profit for the purpose of computing book profit u/s. 115JB - HELD THAT:- We notice that the nature of liability in respect of "provision for bonus" was examined by Chennai bench of Tribunal in the case of ACIT Vs. Sun Paper Mills Ltd. [2011 (7) TMI 1372 - ITAT CHENNAI] - The above said decision was rendered by Chennai Bench of Tribunal in the context of Section 115JB only. The Ld A.R. also submitted that the assessee that the assessee has actually paid the bonus in the succeeding year. Accordingly, we hold that the provision for bonus created by the assessee is an ascertained liability. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to exclude it from book profit. Disallowance u/s. 14A - A.O. computed the disallowance by applying rule 8D(2)(iii) of I.T. Rules - HELD THAT:- Since the provisions of Rule 8D has been held to be prospective in nature, i.e., from AY 2008-09 onwards, the tax authorities are not justified in applying the same to the assessment year under consideration. However, the provisions of sec. 14A shall apply to the exempt income. Hence the disallowance u/s. 14A should be made on a reasonable basis. Hon'ble Bombay High Court, in the case of Godrej Agrovet Ltd. [2014 (8) TMI 457 - BOMBAY HIGH COURT] has upheld disallowance of 2% of the dividend income to meet the requirements of sec. 14A prior to insertion of Rule 8D. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s. 14A to 2% of the exempt dividend income.
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