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TMI Blog2015 (12) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... on, loss on sale of asset, donation & finance expenses) 4. The segmental details pertaining to software development services and IT Enabled Services are as under (as per TP Report):- Description Software services IT Enabled Services Pre marketing activity Operating revenue 182721000 23922000 15849000 Operating expenses 158888000 20273000 14408000 Operating profit 23833000 3649000 1441000 Profit margin to cost 15% 18% 10% Segment relating to Software 5. The transactions pertaining to the software development services are analysed as under. As the method followed by the TPO and the tax payer is TNMM, these transactions are aggregated for the transfer pricing study. Even though the assessee has furnished copies of the separate contract agreement with the AEs for the software services and ITES segment, it is seen that the TP study was undertaken by the assessee by aggregating the revenues of both the segments. The TPO sought clarification from the assessee as to why aggregation was done for the different segments and he proposed to consider the two segments separately for TP analysis and determination of arm's length margin accordingly. In reply, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been done in these cases." 9. The TPO computed the working capital adjustment as per the formula given in Annexure to the OECD Guidelines, 2010. He considered the PLR adopted by SBI, the largest schedule bank, for short term working capital loans for the relevant FY 2007-08 and adopted the rate of 12.68% p.a. while computing the working capital adjustment as follows:- Taxpayer Account 31-03-2008 01-04-2007 Sundry Debtors 31,277,623 5,211,632 Unbilled Revenue Less: Advances from customers Taxpayer's payable (trade) 10,661,605 9,656,093 Average Receivables (trade) 18,244.327 Average Payables (trade) 10,158,849 On the basis of above data, the TPO computed the working capital adjustment at 1.87%. 10. The ld. counsel for the assessee pointed out that the ALP determined by the TPO prior to grant of working capital adjustment was 23.65% in comparison to ALP of 14.87% as determined by the assessee. He submitted that on the analysis of comparables chosen in the TP report by the assessee, only LGS Global Ltd. was accepted by the TPO as a comparable and the remaining 41 comparables were found to have failed the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. counsel for the assessee relied upon the decision of the coordinate Bench of this Tribunal in Broadcom Communications Technologies Pvt. Ltd. in IT(TP)A No.1587/Bang/2012 (AY 2008-09) order dated 26.06.2015 wherein the relevant observations of the Tribunal was as follows:- "7.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncement relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y .2008-09 has held that this company be excluded from the list of comparables as it is functionally different from a provider of software development services to its AEs holding as under as paras 9.4.1 to 9.4.2 thereof which is extracted hereunder:- "9.4.1 We have heard both the parties and perused and carefully considered the material on record. While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an assumption that it would continue to be applicable for this year as well, the same parity of reasoning is applicable to the TPO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s selected by the TPO, the arithmetic mean of the comparables (before working capital adjustment) would be 20.83% and the margin of the assessee considering the +5 % range would work out to 21.11% as per the following computation:- Particulars Amount + 5% Operating Revenue 206,643,000 216,975,150 Operating Cost 179,161,000 179,161,000 Operating Profit 27,482,000 37,814,150 NCP (based on Op Cost) 15.34 21.11 Since the arm's length margin after exclusion of Celestial Biolabs Ltd. falls within the range of +/- 5% of the margin of the assessee, the entire TP adjustment of Rs. 13,330,876 made by the revenue authorities has to be deleted. 17. We have heard both the parties and perused the material on record. After exclusion of Celestial Biolabs Ltd. from the final set of comparables arrived at by the TPO, the arithmetic mean of the comparables, according to the assessee, would be 20.83% which is within the +5% range of 21.11% and the TP adjustment made by the AO/TPO is to be deleted. We, therefore set aside the issue to the file of the AO/TPO for verification of the assessee's claim and decide the issue afresh in accordance with law, after providing reasonable op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taka High Court in the case of Yokogawa India Ltd. (supra) will hold field since the Hon'ble Supreme Court dismissed the SLP of the assessee in the case of Himatsingke Siede (supra) in limine without laying any ratio decendi based on the principle held by the Apex Court in the case of Indian Oil Corporation Ltd. v. State of Bihar & Ors. (167 ITR 897). The Tribunal, further adopting the principle laid down by the Apex Court in the case of Vegetables Products Ltd. (88 ITR 192 (SC) that where two views are possible, the construction in favour of the assessee is to be adopted, held that brought forward losses and unabsorbed depreciation cannot be set off for computing the deduction u/s. 10A of the Act. 24. We have heard both the parties. We have heard both the parties. We find that similar issue came up for consideration before the Chennai Bench of the Tribunal in the case of S.R.A. Systems Ltd. in ITA No.1547/Mds/2012 and the Tribunal by its order dated 21.02.2014 held as follows:- "7. The third issue in appeal relates to the method of computation of deduction u/s.10A of the Act. The assessee has claimed deduction u/s.10A before setting off of unabsorbed depreciation and brought for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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