GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (8) TMI 79 - ITAT DELHI

2016 (8) TMI 79 - ITAT DELHI - TMI - Disallowance of recruitment expenses and training expenses - Held that:- When the assessee has come up with specific pleas that he has made payment of ₹ 37,89.007/- to the third party recruitment agency, access fee to various job sites like naukari.com etc. and ₹ 16,01,153/- for imparting training to the new employees who have recently joined and on job training to existing employees, which have otherwise been not disputed by the AO/DRP, recruitme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oyees that the employee will work for specific period, as the attrition rate in software industry is highest, recruitment of employees and imparting of training to them cannot be considered as of enduring benefit. - Addition being expenditure on quality audit by treating the same as capital expenditure being in the nature of enduring benefit to the company - Held that:- Keeping in view the fact that the expenditure on account of quality audit incurred by the assessee even if treated to be 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

iding this issue against assessee - TDS u/s 195 - AO treating the payment for acquisition of software as fee for technical services / royalty - Held that:- Judgment cited as DIT vs. Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT] is applicable to the facts and circumstances of the case in which undisputedly no licence has been issued by the AEs in favour of the assessee for transfer of copyrights but assessee has merely paid the consideration for transfer of copyrighted article in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disallowed - Held that:- As assessee in this case is engaged in providing software development services to its group companies and to arrive at ALP of the international transactions, the ld. TPO / DRP resorted to comparability by selecting different sets of comparable companies and after applying the various filters, the ld. TPO selected 10 comparable companies as mentioned in para 8.7 of his order, the appropriate transfer pricing adjustment can only to be made qua the international transaction .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

KULDIP SINGH, JUDICIAL MEMBER and SHRI N.K. SAINI, ACCOUNTANT MEMBER For The Assessee : S/Shri S.D. Kapila, R.R. Maurya, Sanjay Kumar, Advocates and Shri Pankaj, CA For The Revenue : Shri Piyush Jain, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, M/s. SAIC India Private Limited (hereinafter referred to as the assessee ), by filing the present appeal sought to set aside the impugned order passed by the AO/TPO/DRP qua the assessment year 2008-09 on the grounds inter alia that :- I. C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ture and thereby disallowing sum of ₹ 3,60,220. 3. That on the facts and circumstances of the case and in law, the Ld. AO erred in disallowing sum of ₹ 1,80,120 for purchase of software under section 40 (a) of the Act holding such payment to be covered under the head fee for technical services / royalty and thereby holding that the assessee was required to withhold taxes on such payment. 4. That on the facts and circumstances of the case and in law, the Ld. AO erred in treating the p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he act, to the Assessee's international transactions and thereby making an addition of ₹ 83,695,508. 7. That the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. TPO for computation of the arm's length price, as is required under section 92CA(1). 8. The Ld. TPO erred in law in:- 8.1 C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to Rule 10B(4) of the Income Tax Rules, 1962 . 10. The Ld. AO/Ld. TPO/Ld. DRP erred on facts and in law in determining the arm's length price of the international transactions:- 10.1 In rejecting, arbitrarily the comparability analysis conducted by the Assessee for determining the arm's length price on the basis of surmises and presumptions. 10.2 In not taking into consideration the fact that, during the year under consideration, the Assessee had undergone a change in its business struc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reasoning. 10.4 In rejecting the companies which are functionally comparable to the Assessee. Similarly, the Ld. AO/TPO erred by retaining companies which were not comparable to the Assessee. 10.5 In not providing adjustment for the differences in the working capital profile of the Assessee vis a vis comparables. 10.6 In including retention bonus as a part of operating expenses. 11. The Ld. AO/TPO erred in facts and in law in not providing Assessee any opportunity of being heard on subjective g .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

92CA (3) of the Income-tax Act, 1961 (for short the Act ) to the Transfer Pricing Officer (TPO) to determine the Arm s Length Price (ALP) in respect of the international transactions entertained into by the assessee during the financial year 2007-08. Assessee company is a provider of engineering and technology application solution and concentrates on using its domain knowledge to provide solution to wide range of industries viz. energy, environment, financial services, health care, life science .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

acted as an entrepreneur and the transfer pricing arrangement between the company and its marketing subsidiary was based on a revenue split. During the year under assessment, assessee company entered into international transaction as under:- Nature of transaction Method Value 1 Provision of Software Development Services TNMM 404,411,559 2 Cost reimbursement paid TNMM 4,972,708 3 Reimbursement received Cup 10,349,580 4. Assessee company to benchmark its international transaction for provision 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

enditure and consequently, reduced from total expenditure and similarly another sum of ₹ 66,84,551/- being the foreign exchange fluctuation has been treated as non-operating whereas both these items are in the nature of operating expenses. Accordingly, assessee was called upon to treat retention bonus of ₹ 1,70,00,000/- and foreign exchange fluctuation of ₹ 66,84,551/- as operating expenses computed as under :- Operating Revenue Rs.46,16,24,534/- Operating Cost (Revised) Rs.43, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

companies having employee cost to total cost of 25%; related party transaction is considered at 25% and used the data for financial year 2007-08 for benchmarking the international transaction. 8. By applying the aforesaid filters, the ld. TPO, out of 25 comparables chosen by the assessee for benchmarking its international transaction, accepted 5 comparables only and proposed to select 10 comparables having arithmetic mean at 27.02%. After considering the objections raised by the assessee, TPO h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cted by ld. TPO viz. : i. Aarman Software Private Limited ii. Ace Software iii. Bells Softech Limited iv. CG-VAK Software & Exports Limited v. Hypersoft Technologies Limited vi. ICSA India Limited vii. IKF Technologies viii. Melstar Information Technologies Limited ix. Prithvi Information Solutions Limited x. Synetairos Technologies Limited xi. Vishesh Infotecnics xii. Maars Software International Limited Agreeing with the contentions raised by the assessee company, all the aforesaid 12 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

the observation made by AO as to disallowing a sum of ₹ 43,12,128/- out of staff recruitment expenses of ₹ 53,90,160/- and training expenses of ₹ 16,01,153/- after allowing 1/5th of these expenses and retention bonus expenses. Feeling aggrieved, the assessee company has come up before the Tribunal by way of filing the present appeal. 11. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by 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

Software Solutions Ltd. 6. Kals Information System Ltd. On the grounds inter alia that the assessee has sought to exclude FCC Software and Kals Information before the lower revenue authorities but rejected the plea raised by the assessee; that the plea raised by the assessee for exclusion of the companies referred in the additional ground is based upon the findings and rulings of the Tribunal which were not available in the public domain at that time; that the assessee cannot be estopped to see .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowed to para-drop favourable comparables and exclude unfavourable ones at this stage as it has been granted full opportunity to choose the correct comparables before TPO; that except Bothtree Consulting Limited, none of the comparables now sought to be introduced by the assessee has been taken before the TPO; that taking new comparables at this stage would cause prejudice to the revenue as complete search of the new comparables is not possible at this stage. 14. Keeping in view the ratio of 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

ssee is entitled to argue before the appellate authorities that a wrong stand taken at the time of filing of return of income should be allowed to be modified; that in case, the assessee has not included correct comparable in its TP study nor sought to exclude the comparables chosen by the TPO, the assessee cannot be estopped from furnishing the correct position regarding comparables at any stage of the proceedings, we are of the considered view that to arrive at the logical conclusion as to ben .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

termined by the TPO by providing an opportunity to be heard to the parties. So, we hereby allow the application under consideration without prejudice to the merits of the case. 15. Though corporate tax grounds as well as transfer pricing grounds are inter-linked but, for the sake of brevity, all the grounds under both the heads are being discussed separately. CORPORATE TAX GROUNDS GROUND NO.1 16. AO/DRP disallowed a sum of ₹ 43,12,128/- out of recruitment expenses of ₹ 37,89,007/- an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he profit of the company for a long period. 17. Ld. AR for the assessee contended that recruitment and training expenses incurred by the assessee are revenue expenditure, hence allowable and relied upon judgment cited as Hindustan Aluminium Corporation Ltd. vs. CIT - (1986) 159 ITR 673 and CIT vs. Munjal Showa Ltd. - (2010) 329 ITR 449. 18. Hon ble Supreme Court in judgment cited as Hindustan Aluminium Corporation Ltd. (supra) while deciding the identical issued held as under :- CAPITAL OR REVEN .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ITS - IS REVENUE EXPENDITURE AND AN ALLOWABLE DEDUCTION - INCOME TAX ACT, 1961, S. 37. 19. Similarly, Hon ble jurisdictional High Court in judgment cited as CIT vs. Munjal Showa Ltd. (supra) while deciding the identical issue held as under :- CAPITAL OR REVENUE EXPENDITURE - FEES PAID TO FOREIGN COMPANY FOR DESIGNS AND DRAWINGS AND EXPENSES ON FOREIGN TECHNICIANS FOR TRAINING ASSESSEE S PERSONNEL - EXPENDITURE FOR FACILITATING PROCESS OF MANUFACTURE - EXPENSES INCURRED ARE REVENUE EXPENDITURE - .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ough a recruitment agency is recurring process and such expenditure cannot be avoided / deferred. At the same time, in the globalised set up, sudden upgradation of knowledge and skill of the IT engineers / technicians for providing IT Software Development Services particularly to foreign AE is also necessary for earning profit by a company. Moreover, when undisputedly there is no memorandum of understanding between the assessee company and its employees that the employee will work for specific p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n of ₹ 3,60,220/- debited by the assessee to the profit and loss account during the year under assessment being expenditure on quality audit by treating the same as capital expenditure being in the nature of enduring benefit to the company. Ld. AR for the assessee contended that quality data expenses are in the nature of revenue expenditure necessary for smooth conduct of business and also is the requirement of many clients with such certificate be obtained before awarding the contract. 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

ases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y and mechanically without regard to the particular facts and circumstances of a given case. (iii) What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency. 22. Keeping in v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the assessee company has not been enhanced in any manner. So, we are of the opinion that DRP has erred in deciding this issue against assessee. Consequently, ground no.2 is determined in favour of the assessee. GROUND NO.3 23. Assessee claimed to have incurred expenses of ₹ 3,00,200/- for purchase of PTC software. AO, in compliance to the directions passed by the ld. DRP, made addition of ₹ 1,80,120/- on the ground that the assessee has failed to comply with the provisions of secti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

acquisition of software as fee for technical services / royalty. 26. Ld. DRP, while relying upon the decision rendered by ITAT, Delhi in the case of Grarcemac Corp. vs. ADIT (ITA No.1331 - 1336 of 2008) held that the consideration for acquiring such software was royalty which was taxable in India u/s 9(1)(vi) and Article 12 of DTAA, amended by Finance Act, 2012 with retrospective effect and it is provided therein that royalty includes payment for transfer of any right to use computer software an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

software by making following observations :- 89. There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ty rights inherent in and attached to the software product in favour of the licensee/customer is what is contemplated by the Treaty. Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because it is only integral to the use of copyrighted product. Apart from such incidental facility, the licensee has no right to deal with the product just as the owner would be in a position to do 91. There is no transfer of any right in respect of copyright by the Assessee and it is a case of mere transfer of a copyrighted article. The payment is for a copyrighted a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ight has not been transferred in favour of the assessee qua the software purchased by it rather assessee s right was restricted to use the copyrighted product for internal business purpose. 29. Identical issue has been dealt with by the Tribunal in case cited as SMS Demag (P.) Ltd. vs. DCIT, 9 (1), New Delhi - (2010) 38 SOT 496 (Delhi), the operative part of the findings are as under:- "Section 40(a)(i) of the Income-tax Act, 1961, read with article 24 of the DTAA between India and Germany .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cannot be treated either as royalty or fees for technical services - Held, yes - Whether therefore, payment for SAP software could not be charged to tax in India as interest or royalty or fee for technical services - Held, yes - Whether even otherwise because of non-discriminatory clause 24(1) of DTAA with India and Germany, foreign national could not be subjected to provisions of section 40(a)(i) and, therefore, amount paid by assessee for acquisition of computers could not be taxed in India - .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o examine the issue of allowability and the retention of bonus claimed by the assessee company as it has direct impact on TP adjustment. 32. Assessee debited an amount of ₹ 2,10,21,984/- on account of retention bonus paid to its employees, out of which AO/DRP disallowed an amount of ₹ 1,68,17,587/- being 4/5th of the total liability of ₹ 2,10,21,984/- by treating the same as capital expenditure on the grounds that the said expenditure was incurred due to amalgamation of Bangalo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Ld. AR for the assessee contended that AO/DRP have erred in treating the retention bonus as amalgamation expenses because it was not a case of amalgamation rather it was a case of sale of Bangalore branch of US company by the assessee company. 35. In the backdrop of the aforesaid facts and circumstances, the first question arises for determination in this case is as to whether transfer of business of one of the branch of SAIC Group of USA to the assessee company on November 30, 2007 amounts to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ere is no material on file to arrive at the conclusion that it was a case of amalgamation rather a case of sale on transfer of the shares by the assessee company to SAIC Group, USA. So, the findings of the AO/DRP that the retention bonus expenditure are amalgamation expenses are based upon surmises only. 37. DRP in order to ascertain whether the payment of retention bonus actually entail any extra expenditure by the assessee as compared to the earlier years and succeeding years called upon the a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e industry - Tata Consultancy Services TCS), Infosys Technologies, and Wipro- are currently witnessing high attrition rates. TCS reported an attrition rate of 11.5% - up from 10.6% a year ago; the attrition rate at Infosys was 13.17% in FY07 - higher than 11.2% recorded in FY06; the rate at Wipro witnessed a surge to 17.4% as against 14.6% during the previous fiscal, in its global IT services and product business That is why the payment of various incentives to retain the employees such as Emplo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nditure by the assessee as compared to the earlier years and subsequent years, the assessee was requested by this panel to provide the details of the employees cost and the total operating cost for the F.Y.2005-06 to F.Y.2010-11. The details filed by the assessee vide letter dated 23.08.2012 are as follow. Trend of employee cost to total operating cost Financial Year Employee Cost Total Operating Cost Employee cost as a percentage to total operating cost 2006-07 149,200,190 222,227,392 67.14% 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant amount to have any substantial effect on the profit margin of the company. 39. Ld. DRP also noticed that retention bonus was payable over next three years and now in the year under assessment alone. Ld. DRP returned self contradictory findings that on the one hand, it is observed that the payment of retention bonus and allotment of ESOPs is very common feature in software industry and therefore such cost would be embedded in the employee cost of comparable also and on the other hand, ld. 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

le to income-tax under the head "Salaries"- (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

So, when the retention bonus has been paid by the assessee company to the erstwhile employees of SCICOM in order to ensure the smooth functioning of the business to arrest the attrition rate prevalent in the software industry, it would certainly enhance the profitability of the assessee company. So, we are of the considered view that payment of retention bonus made by the assessee company partakes character of salary payable to its employee for the business purposes and has to be treated as rev .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se expenditure are entitled to be allowed u/s 37 of the Act. So, we hereby determine ground no.4 in favour of the assessee company. 43. Now, coming to TP grounds specifically raised by the assessee company, during the year under assessment, assessee company was engaged in the profession of software development services to its group company and has entered into international transactions with its AE to the following effect :- No. Nature of transactions Method Value of transaction 1. Provision 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

s of filters chosen 10 comparables arrived at arithmetic mean OP/OC margin of comparables at 26.79% and computed ALP of software development services provided by the assessee company to its AE as under :- 1. Operating Cost 435,559,139/- 2. Arms length margin 26.79% of the OC 3. Arms length price (ALP) 552,245,432/- 4. Price received by the assessee 461,624,534 5. Adjustment proposed by TPO {(3) - (4)} 90,620898 46. Undisputedly, TNMM is the most appropriate method applied by both the assessee co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ich are discussed as under:- AARMAN SOFTWARE PRIVATE LIMITED 48. TPO as well as DRP have rejected this company as comparable on the sole ground that its annual report for the year ending March 2008 is not available in the public domain. However, ld. AR brought on record the annual report of this comparable company lying at page 799 to 812 of Volume IV of the paper book, which fact has not been controverted by the ld. DR. So, we are of the considered view that when functional dissimilarity betwee .....

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 total cost whereas assessee for benchmarking international transaction applied the filter of employees cost more than 25% of the total sales. However, assessee company proved on record that employees cost (cost of service) as percentage of the total revenue of the company is 75.55%. During the course of argument, ld. AR for the assessee has fairly conceded that filter of employees cost more than 25% of total cost is to be applied in this case. 50. Assessee brought on record profit and loss .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed to be reconsidered by the TPO by taking into account the cost of services while applying the filter of employees cost of more than 25% of total cost. So, we hereby restore the issue to the TPO to decide afresh by providing opportunity of being heard in the light of the observation made herein before. KALS INFORMATION SYSTEM LTD. 51. This company has been accepted as a comparable by the TPO but the assessee has opposed its inclusion on the ground that its segmental margin having inconsistency .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ged observations made by the DRP by providing an opportunity of being heard to the assessee company. WORKING CAPITAL ADJUSTMENT 52. The ld. AR for the assessee while relying upon the provisions of Rule 10B(1)(e) read with Rule 10B (3) contended that working capital adjustment should be made on reasonably accurate basis. DRP disallowed the working capital adjustment by making following observations :- 10. The assessee has contended that it should have been allowed working capital adjustment to ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

party cannot be adjusted to bring it at par with each of the comparable because degree of difference in functions, assets and risks of each of comparable with that of the assessee differs in case of each comparable. To carry out the adjustment, the availability of relevant information to accurately identify the difference and then quantify impact of such difference is a pre-requisite. In this case, we only know the amount of working capital deployed by the comparables on the first and last day .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able that daily average is substantially different from the average of the amount of working capital deployed by the comparables on the first and last date of the accounting period. The adjustment for functional differences etc. is to be allowed only if it can be ascertained with reasonable accuracy which is impossible in this case because of unavailability of relevant data. Therefore, this panel endorses the proposal of the AO to disallow the working capita] adjustment claimed by the assessee. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r with the submission of the Ld. DR that the issue raised in ground No. 6 & 7 on account of working capital adjustment and risk adjustment depend upon the fact and circumstances of each case. But at the same time we are of the view that these factors are equally important to consider while selecting comparable companies. In the present case the assessee is engaged in the business of software development and providing marketing services, hence there is no dispute that appropriate adjustment t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e since it depends upon the facts of the case of the assessee. The request for such adjustments cannot be summarily rejected unless some analysis of the case of the assessee is made vis-a-vis comparables companies. We thus set aside the matter to the file of the Ld. TPO/AO to consider these aspect of adjustment while deciding the issue afresh vis-a-vis the comparable companies in the business of software development as discussed hereinabove in the present order of the Tribunal. It is needless to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d for statistical purposes. 55. Identical issue has also been dealt with by the ITAT, Delhi Bench E , New Delhi in case cited as M/s. Nokia India Pvt. Ltd. vs. Addl. CIT (ITA No.551/Del/2011) and determined the issue in favour of the assessee by returning the following findings :- 5.1 Thus it is the contention of the ld. counsel of the assessee that the TPO while determining the arm's length price of the subject international transaction during assessment year 2006-07 ignored the fact the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee vis-a-vis A.Y. 2005-06, the benefit of working capital adjustment should be allowed to the assessee in the subject year under appeal as well. 5.2 Ld. counsel of the assessee has further submitted that Rules 10B(1)(e) of the Rules prescribe that at the time of application of Transactional Net Margin Method, the net profit margin needs to be adjusted to account for the difference if any between the international transaction and comparable uncontrolled transactions. The relevant text of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market;" ……… The ld. counsel has further submitted that the Hon'ble Delhi, ITAT has also upheld the need of making working capital adjustment in following ju .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at for the sake of consistency and to protect the interest of the revenue, the adjustment made by the TPO has to be upheld. 6. We have carefully considered the submissions in light of the material produced and precedent relied upon. It is an undisputed fact that on the same set of facts and in the same business model the assessee has been provided the working capital adjustments in the preceding assessment years. Under the circumstances, in our considered opinion, it was incumbent upon the TPO t .....

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