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TMI Blog2014 (3) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 2008-09 the assessee has impugned the directions of the Dispute Resolution Panel [DRP] dated 30-01-2013 u/s.144C(5) r.w.r.13 of the DRP Rules. The second appeal is consequent to the rectification petition filed by the assessee under rule 13 of the DRP Rules which was dismissed by the DRP vide impugned order. I.T.A. No. 1547/Mds/2012: 2. The assessee is a company registered under the provisions of the Companies Act, 1956 and is engaged in providing computer software consultancy and development services to customers worldwide in various business areas. For the AY.2008-09, the assessee filed its return of income on 28-09-2008 declaring its income as 'NIL', after claiming deduction u/s.10A of the Act. The case of the assessee was selected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DRP, Chennai. The DRP rejected the objections of the assessee with regard to exclusion of internet charges from export turnover, dis-allowance of deduction u/s.10A and the addition made with regard to setting off of brought forward depreciation before allowing deduction u/s.10A. As regard the objections of the assessee in respect of determination of ALP, the DRP rejected the objections of the assessee on merits but directed the TPO to adopt arithmetic mean of PLI of comparables at 13.35% as against 21.86% adopted by TPO. The Assessing Officer on the basis of the directions of the DRP passed final assessment order u/s.143(3) r.w.s.144C(8) of the Act on 06-07-2012. Aggrieved against the assessment order, the assessee has come in appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the DRP has erred in arriving at the arithmetic mean of PLI of comparables at 13.35%. The authorities below have erred in not adopting the PLI based on the study carried out by the assessee. The DRP as well as the Assessing Officer has failed to take into consideration the fact that the comparables adopted by the TPO have functional differences and had related party transactions. Moreover, there was huge variance in the turnover of comparable companies viz-a-viz assessee. The ld.AR submitted that the last ground in the appeal is that the Assessing Officer erred in adopting the operating cost at Rs. 20.93 Cores as against the total operating cost of Rs. 20.09 Crores as per the audited accounts for the year ending 31-03-2008. 4. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the eligible expenditure has to be excluded from export turnover as well as total turnover. Respectfully following the same, this ground of appeal of the assessee is allowed. The expenditure incurred on account of the internet expenses for export of software is to be excluded from export turnover as well as total turnover. 6. The second issue in appeal is dis-allowance u/s.10A on the ground that the assessee has been formed by splitting up or/and re-construction of the business activities already in existence. We find that this issue had cropped up in the case of assessee in the AY.2002-03 as well. The co-ordinate bench of the Tribunal in ITA No.2255/Mds/2006 decided on 16-05-2008 had held that the assessee has not been formed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such, un-absorbed depreciation has to be set-off before computing the exemption allowable u/s.10A. In respect of setting-off of the brought forward losses, the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd.(supra) still holds good. Accordingly, the assessee can claim deduction u/s.10A before setting off of brought forward losses. In view of the above, this ground of appeal of the assessee is partly allowed. 8. The fourth issue in appeal relates to upward adjustment of Rs. 5,12,00,000/- made by DRP on the basis of difference in PLI of the assessee viz-a-viz PLI of comparables. The TPO did not accept the submissions of the assessee that the prices charged by the assessee from its associate enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined herein above. 9. The assessee has raised an additional ground of appeal in respect of the value of operating cost. The Assessing Officer has adopted operating cost as Rs. 20.93 Crores, whereas the assessee's contention is that as per audited accounts for the financial year ending on 31-03-2008, the total operating cost of the assessee is Rs. 20.09 Crores. This is a factual error which is to be rectified after referring to the books of accounts of the assessee. This issue is remitted back to the Assessing Officer to adopt the correct value of operating cost after verifying the same from the audited accounts of the assessee for the year ending 31-03-2008. This ground of appeal is allowed for statistical purpose. In view of our abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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