Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (8) TMI 418 - ITAT MUMBAI

2015 (8) TMI 418 - ITAT MUMBAI - TMI - Transfer Pricing adjustments - assessee had raised specific ground before the DRP argued that the TPO had included the comparables that were not relevant for determining the ALP or had excluded the comparables that were relevant,that the TPO had adopted incorrect operating margins for certain companies,that he had not considered entity level revenue,that he did not allow the assessee the benefit of risk adjustment - Held that:- Directions of the DRP are sil .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with the specific objections raised by the assessee.The DRP is supposed to support or distinguish the comparables,when the assessee files objection citing the decided judgments.In the case before us,the DRP has not discussed merits of any of the comparables objected to by the assessee.Similarly,the final decision of the DRP about FAR analysis is very general. Thus the order passed by the DRP is vague and unclear. So,in the interest of justice,matter is being restored back to the file of the DRP .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wherein held exemption u/s. 10A to be granted on foreign exchange gain earned (due to fluctuation of foreign exchange) on realization of export receipts in the year of export - Decided in favour of assessee - ITA No.1415/Mum/2014 - Dated:- 5-8-2015 - Sh. A.D. Jain and Rajendra, JJ. For The Assessee : S/Sh.M.P. Lohia,Nikhil Tiwari For The Revenue : Shri N.K. Chand-CIT Order PER RAJENDRA, AM Challenging the order dated 30.12.2013 of Dispute Resolution Panel II, Mumbai and the order of the Assessin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

46 under Section 92(4) of the Act to the total income ofthe Appellant on the premise that the international transactions entered by the Appellant with its associated enterprises (' AE') were not at arm's length;Reference made to the Transfer Pricing Officer 3.erred in referring the Appellant's case to the Learned Transfer Pricing Officer ('TPO') under Section 92CA(l) of the Act, without satisfying the conditions specified therein; Rejection of economic analysis undertaken .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an arbitrary, subjective and erroneous manner for the purpose of selection of comparable companies; 6.erred in rejecting certain comparables selected by the Appellant disregarding the fact that they meet all the comparability criteria and also erred in introducing certain additional comparables, without appreciating that they cannot be considered comparable to the Appellant; Comparable companies selected by the Appellant 7.erred in rejecting Ancent Software International Limited as a comparable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onsolidated financial statements for computing operating margins in case of Mind tree Limited and Sasken Limited; 9.erred in rejecting CG-VAK Software and Exports Limited as a comparable company on the ground that the company has persistently incurred losses, disregarding the fact that the company is not a persistently loss making company; 10.erred in rejecting SIP Technologies and Exports Limited as a comparable company on the ground that the company has persistently incurred losses, disregardi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is engaged in providing software services and hence is functionally comparable to the Appellant; 13.erred in rejecting Massesseers Software International Limited as a comparable company on the ground that the company fails the related party transaction filter, wherein the learned TPO computed the related party transactions filter erroneously; Additional Comparables introduced by the Learned TPO 14. erred in considering certain additional companies which are functionally different, as comparable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s required to be undertaken to account for the differences in level of working capital between the comparable companies and the Appellant in terms of Rule 10C(2)(e) of the Rules; Risk Adjustment 17. erred in not granting the Appellant the benefit of risk adjustments which is required to be undertaken to account for the differences in level of risks assumed between the comparable companies and the Appellant in terms of Rule I 0C(2)( e) of the Rules; Entity level approach visa- vis transaction lev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onal transaction with AEs only;Computation of operating margins for bench marking purposes 20.erred in considering incorrect operating margin for Quintegra Limited as 0.79% on operating costs as against the correct margin of -0.79%; 21.erred in considering incorrect operating margins for certain companies considered to be comparable to the Appellant for the subject assessment year viz Mindtree Limited, KALS Information System Limited, Sas ken Limited and Axis IT & T Limited; 22.erred in comp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orrect computation of export turnover 24.erred in not excluding expenses incurred in foreign currency for travelling and communication charges from the total turnover whereas the said sums were reduced from the export turnover, while computing the deduction available to the Appellant under section of 10A and Section 10AA of the Act. Incorrect computation of demand of tax 25.erred in short granting credit of taxes deducted at source of ₹ 24,28,364 while computing the tax liability for the y .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law. The assessee, engaged in the business of software development/export and IT enabled services filed its return of income on 29.9.2009 declaring the total income at ₹ 14.15 crores,after claiming exemption u/s. 10A of the Act,amounting to ₹ 51.82 crores.The AO completed the assessment u/s. 143(3) r.w.s.144C(3) of the Act determining the income of the assessee at ₹ 5 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing officer (TPO). The TPO found that the assessee had opted TNMM method for determining the arms length price(ALP) for the international transactions, amounting to ₹ 344. 34 crores,that the profit level indicator (PLI) was taken as operating profit/operating cost(OP/OC),that the assessee had identified 28 companies as comparables.In the TP report the mean/average margin for the AY.s. 06-07, 07-08 and 08-09 were used, as the data for AY.under appeal were not available in the case of all th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be treated at Arm s Length.The TPO, after examining the claim of the assessee observed that in its working of the PLI the assessee had reduced Foreign Exchange Loss(FEL)from the sales, that in the annual report FEL had been mentioned in schedule -14 which appeared as one of the items of expenditure, that it had reduced the cost base thereby inflating its OP/TC, that FEL had to be taken as the part of total cost. Accordingly, the TPO re-worked the assessee s PLI. The TPO also examined the compara .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

les.Vide its letter,dt.4.1.13,the assessee contended before the TPO that it had carried out TP study as per the provisions of law,that comparables adopted by it should not have been rejected, that to undertake fresh comparability analysis on the basis of data available for AY.under appeal was not correct, that the use of multiple year data should not be rejected. The assessee challenged the rejection of some of its comparables as well as the inclusion of a few of comparables from the accepted/ r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

jority of the companies searched had finalised their audited accounts much before 30/9/2009, that the assessee had failed to furnish any evidence to show that it had made reasonable efforts to access the current year data either on data base or otherwise, that most of the comparable selected by the assessee were listed companies who had published their accounts for the year ending 31.3.2009 before 30thSeptember 2009, that the TP report was to be prepared by Oct.,2009.He proposed TP adjustment of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the comparables and working capital adjustmen -ts,that the DRP had erred in rejecting CG-VAK software and exports,SIP Technologies and Exports Ltd.,R.S.Software(India)Ltd.,as comparables,that it erred in considering certain addition -al companies as comparables which were functionally different,that it had erred in not granting the assessee the benefit of the working capital adjustment that was required to be undertaken to account for the differences in level of working capital between the compa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in considering incorrect operating margin for Quintegra Limited,that the DRP considered operating margin as 0.79% on operating costs as against the correct margin of (-)0.79%,that the applications filed by the assessee u/s. 154 of the Act before the AO on 04. 03. 2013 and 24.10.2013 respectively were pending with the AO,that the DRP erred in considering incorrect operating margin for certain companies considered to be comparable to the assessee for AY.under appeal.The AR pressed comparables of M .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that were not relevant for determining the ALP or had excluded the comparables that were relevant,that the TPO had adopted incorrect operating margins for certain companies,that he had not considered entity level revenue,that he did not allow the assessee the benefit of risk adjustment.We further find that the directions of the DRP are silent over all the issues raised by the assessee against the order of the TPO.In our opinion,the order of the DRP falls under the category of non speaking order .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

parables,when the assessee files objection citing the decided judgments.In the case before us,the DRP has not discussed merits of any of the comparables objected to by the assessee.Similarly,the final decision of the DRP about FAR analysis is very general.Being the first appellate authority it is the duty of the DRP of pass a reasoned order after meeting the arguments raised by the assessee.An order without reasons is no order in the eyes of law.We find that vide Circular no.5 of 2000 dated 03.0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

133ITR736),the Honble Assam High Court has emphasised the importance of passing a reasoned order as under : Section 250(6) of the I.T. Act, 1961, prescribes the manner of disposal of an appeal. An order must be in writing containing the points for determination and decision.The object is obvious. It enables a party to know the precise points decided in his favour or against him. Absence of formulation of points for decision or want of clarity in decision puts a party in a quandary. A decision ag .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the AO is directed to decide the rectification applications filed by the assessee before him,if same are not disposed off till the receipt of the order.First effective Ground of appeal is decided in favour of the assessee,in part. 6.Ground no.24 pertains to non exclusion of expenses incurred in foreign currency for travelling and communication charges from the total turnover.While objecting to the Draft assessment order,the assessee had stated that the AO while computing the deduction available .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

contended that the DRP did not consider the submission of the assessee and the judgment of the Hon ble Jurisdictional High Court delivered for AY.s.2005-06 and 2006-07,that the Tribunal had decided the identical issue in favour of the assessee while adjudicating the appeal for the AY.2007-08.He referred to the page no.443to445 of the paper book.DR left the issue to the discretion of the Bench. 6.2.We have heard the rival submissions and perused the material on record.We find that the Hon ble Bom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version