TMI Blog2016 (9) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the claim of the assessee to treat the stamp duty and registration expenses as revenue expenditure. - I.T.A. No.1892/Del/2013 - - - Dated:- 25-7-2016 - SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri S.P. Singh, AR, Shri Vishnu Goel, Adv., Ms. Somya Seth, CA For The Respondent : Shri Amrendra Kumar, CIT DR ORDER PER BEENA A. PILLAI, JM: This appeal has been preferred by the Revenue against the order dated 12.02.2013 passed by Ld. CIT(A) XX, New Delhi for the Assessment Year 2008-09. 2. The brief facts of the case are as under: 2.1 The assessee filed its return of income declaring total income of ₹ 14,53,161/- on 26.09.2008. The case was selected for scrutiny and notice u/s 143(2) was issued to the assessee. In response thereto, representatives of the assessee attended the proceedings and furnished requisite details / information sought by the Assessing Officer. 2.2 During the assessment proceeding, Ld. A.O. observed that the assessee is engaged in the business of rendering software development to its Associated Enterprises (AE) i.e. Intuit Inc. USA. The assessee company mainl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO rejected the additional filters used by the taxpayer like R D filter. The TPO issued a detailed show cause notice to the assessee indicating the reasons for rejection of TP documentation and the search for appropriate comparables based on different filters. The assessee responded to the show cause notice by making a detailed submission before him. The Ld. TPO considered the objections raised by the assessee in his order. 2.7 The draft order u/s 144C was passed and served upon the assessee. The assessee vide his submission dated 25.01.2012, stated to file an appeal before Ld. CIT(A) u/s 246A of the Act. Accordingly, Ld. A.O. passed the final assessment order on 22.02.2012 on the basis of the order passed by Ld. TPO. 2.8 Aggrieved by the assessment order passed by the A.O., the assessee preferred appeal before Ld. CIT(A). Before Ld. CIT(A), it was submitted that there is no dispute in respect of MAM adopted, i.e. TNMM and the assessee had agreed upon OP/OC to be the PLI. The Ld. TPO agreed for an entity level analysis that was carried out by the assessee in TP study. The only issue that was disputed by the assessee was in respect of the comparables selected by the TPO. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report Total segmental cost C=A-B 14,471,510 3,010,563 17,482,073 Segment Revenue less Segment expenses Add Unallocated cost D 1,256,696 88,217 1,344,913 Total Cost E=C+D 15,728,206 3,098,780 18,826,986 Revised F=A-E 4,812,479 (1,656,876) 3,155,603 OP/OC% G=F/E 30.60% -53.47% 16.767% Total cost as per P L after excluding interest on car loan A 18,826,986 Page 14 and 17 of annual report Total cost as per segmental accounts B 17,482,073 Please see above Remaining cost not calculated to segmental ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in respect of these comparables. Apart from these, Ld. CIT(A) had excluded the new comparables which was Celestial Biolabs, as this comparable has been rejected by the DRP in many cases. Before dealing with these comparables, it is necessary sine qua non to discuss the functional profile of the assessee. 3.3 From the TP study, it is observed that the assessee is a wholly owned subsidiary of Intuite Inc. USA (AE). The assessee started its operation in Oct. 2004, and its role was to manage the parent relationship with the 3rd parties call centers located in India. The main business of the assessee is to provide application development services to the Intuite group. 3.4 Profile of the Group: The Intuit group, founded in 1983, has nearly 8,200 employees with major offices in 16 states across the U.S., and offices in Canada. It is a leading provider of business and financial management solutions for small businesses, accounting professionals and consumers primarily in the USA. It offers financial software and Web-based financial services for consumers and small businesses. Intuit provides software for online tax preparation and filing and online mortgages. Intuit also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objected to the inclusion of this comparable for the reason that it is functionally different from the assessee. The Ld. TPO however, brushed aside the objections raised by the assessee by stating that the objections of functional dissimilarity has been dealt with in detail in the T.P. order for Assessment year 2007-08. As regards the objection raised in respect of the employee cost filter issue, the TPO Ld. rejected the objections raised by assessee by observing that the employee cost filter is only a trigger to know the functionality of the company. 4. Before us, the Ld. A.R. contended that this company is not functionally comparable, as the company is into bio-informatics software product / services and the segmental break up is not provided. It was submitted that :- (i) this company is engaged in the development of products (in the field of bio-technology, Pharmaceuticals, etc. and therefore, is not functionally comparable to the assessee (ii) This company has been held to be functionally incomparable to software service providers by the decision of the co-ordinate bench of this Tribunal in following cases for Assessment Year 2007-08: (a) 3DPLM Software Solutions Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. TPO has not carried out any independent FAR analysis for this company for this year viz. Assessment Year 2008-09. To that extent, in our considered view, the selection process adopted by the Ld. TPO for inclusion of this company in the list of comparables is defective and suffers from infirmity. 6.1 Apart from relying on the afore cited judicial decisions, the assessee has brought on record substantial factual evidence to establish that this company is functionally dissimilar and different from the assessee before us. Even the Ld. CIT(A) has discussed at para 3.8.2 6.2 We do not find any infirmity in the findings of Ld. CIT(A). We thus direct the Ld. TPO to exclude this comparable form the list of comparables. 6.3 In respect of the margins calculated in respect of Sasken Communication Technologies Ltd., KALAS Information Systems Ltd. And Softsol India Ltd., the Ld. CIT(A) had directed to grant working capital adjustments. In the remand report, the Ld. A.O. did not follow the directions of Ld. CIT(A). 6.4 Ld. CIT(A) thus accepted the margins submitted by the assessee, which is in accordance with the margins considered by DRP in many cases. 6.5 We have perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld.AR is not applicable to the present case under consideration as it is applicable where the set off each to be made against the profits of a STP/EOU/SEZ unit, before the deduction under section 10 A/10 B of the Income tax Act is allowed. 6.8 We accordingly direct the Ld.AO to allow the set off as per law. Accordingly this ground raised by the assessee stands allowed. Ground No. 2: 7. The assessee in its return of income had claimed deduction of rent and rates expenses of ₹ 13,,42,841 /- under section 37 (1) of the act. During the course of assessment proceedings the Ld. AO called for the details of the rates and taxes expended as debited in the P L account. The assessee furnished the requisite details wide letter dated 21st of December 2011. The assessee was asked to explain as to why the stamp duty and registration expenses of the lease deed should not be capitalised. The assessee relied upon various judicial pronouncements in support of its contention that the expenses incurred towards stamp duty and registration of the lease deed east to be considered as revenue expenditure. 7.1 The Ld. AO disagreeing with the submissions made by the assessee held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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