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2023 (3) TMI 598 - ITAT BANGALORETP Adjustment - exclusion/inclusion of comparables under SWD & MSS segment - HELD THAT:- An admitted position that coordinate bench of this Tribunal in assessee’s own case in [2022 (2) TMI 1353 - ITAT BANGALORE] excluded comparables with high turnover and have been consistently following the turnover range of Rs.1 to 200 Crores and Rs.200 to Rs.2000 crores, so on and so forth. Thus we direct the Ld. AO/TPO to exclude the comparables with high Turnover, mentioned herein above. Two comparables that assessee seeks to exclude on functional dissimilarities - Infobeans Technologies Ltd. - On perusal of financial statement we note the revenue recognition is only under one head being “Expert” - We also notice that in Related Party Transaction details this company has earned revenue from it’s AE. From this it is clear that this company is rendering services to non-AE customers also, whereas the assessee before us is a captive service provider only catering to the requirements of its AE. Under such circumstances we do not deem it fit to be considered in the final set of comparables. Cygnet Infotech Pvt. Ltd. - In the annual report it is mentioned that this company derives revenue various services by providing Enterprise Solutions, Application content, Management services etc. It is also mentioned that the revenue recognition is by providing man power support to its customers. AT page 2033 of the paper book, we note that this company bares all the risks attributable to a full fledged entrepreneur. In our view this company cannot be considered as a good comparable. Excluding R. Systems International Ltd. confirmed. Incorrect computation of margins of comparables by the Ld.TPO - We note that the Ld. TPO has not correctly computed the margins of the comparables those have been finally retained post DRP’s directions. As in the present appeal, assessee has already alleged inclusion/exclusion of comparables, we direct the AO/TPO to adopt and compute the correct margins of the comparables that would be finally sustained based on the directions herein above. Accordingly, this ground raised by the assessee stands allowed. Pressman Advertising Ltd. - As business over view of this company is shown to be advertising, public relation, design and digital. As there is no segmental details available, it is difficult to analyse the revenue generated by this company from the advertising segment. Therefore, in our view, cannot be considered to be functionally comparable with that of assessee. Majestic Research Services and Solutions Ltd. - We note that this comparable is into various activities like Digital Network Services and into analysing media and marketing information based on various concepts through different mediums of interactions. Therefore, in our considered opinion, this comparable cannot be compared with assessee and deserves to be excluded. ESOP considered as operating cost by the Ld.AO/TPO - HELD THAT:- As no cost is charged to the assessee, and that the employees of the assessee is informed regarding the taxability of the option exercised by the employee. On perusal of the financials, it is noticed that, nothing has been debited as ESOP expenses.TPO has not drawn the complete facts of the case and has also not provided complete details of the decision by the Supreme Court of Iserael. The Ld.TPO has recorded that the Israeli company is remunerated at cost plus mark up by foreign affiliate for services. In the present facts, the re is no mark up paid by the AE to the assessee. Such abstract reference by the revenue authorities is least expected. TPO failed to consider the basic fact that, purchase cost of the shares of foreign AE is charged from the employees of the assessee directly and the assessee deducts TDS on the 15% discount received by such employees, who have opted for the scheme. In our view, based on the option scheme and the “Employee Information Supplement India”, the 15% discount received by such employees of the assessee cannot be treated as operating in nature. Non-granting of working capital adjustment - HELD THAT:- We note that this issue is no longer res integra, as the Tribunal has been consistently granting working capital adjustment to the assessee while computing ALP of international transactions on actual. This view is fortified by the order of this Tribunal in the case of Huawei Technologies India Pvt. Ltd.[2021 (8) TMI 1334 - ITAT BANGALORE] - we direct the Ld.AO/TPO to grant working capital adjustment. Delayed remittance of PF - HELD THAT:- This issue has been now settled by the decision of Hon’ble Supreme Court in case of Checkmate Services (P.) Ltd [2022 (10) TMI 617 - SUPREME COURT] thus we hold that the employees contribution to PF and ESI should be remitted before the due date as per explanation to section 36(1)(va) i.e. on or before the due date under the relevant employee welfare legislation like PF Act, ESI Act etc., for the same to be otherwise allowable u/s.43B. We therefore see no reason to interfere with the order of the CIT(A). The grounds taken by the assessee on this issue is dismissed.
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