TMI Blog2015 (12) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded from the export turnover, has to be excluded from the total turnover as well. Respectfully following the decision of the Hon’ble jurisdictional High Court, we allow the alternate ground raised by the assessee in this regard. Relief allowable u/s. 10A of the Act is to be computed after setting off the brought forward depreciation losses of the assessee - Held that:- The issue has to be set aside to the file of the Assessing Officer. Accordingly, we remit the issue to the Assessing Officer for fresh consideration and decision in accordance with the decision of the Chennai Bench of the Tribunal in the case of S.R.A. Systems Ltd. [2014 (3) TMI 357 - ITAT CHENNAI] wherein held un-absorbed depreciation has to be set-off before computing the exemption allowable u/s.10A & the assessee can claim deduction u/s.10A before setting off of brought forward losses - IT(TP)A No.1669/Bang/2012 - - - Dated:- 30-12-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Sharath Rao, CA For The Respondent : Smt. Neera Malhotra, CIT(DR) ORDER Per Asha Vijayaraghavan, Judicial Member This appeal is by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the assessee submitted that for both the activities there is only one customer i.e., the AE and both the activities are interrelated as the technical support team carries out support services to the only customers of IWOV Inc. who purchase the products. The TPO accepted the assessee s contentions. He found that the assessee has a contract agreement with the AE CALLED IT Enabled backoffice service agreement dated 1.4.2008 which enumerated the following activities to be performed:- - Instructing the customer how to repair his product over the telephone. - Dispatching the service pack when an onsite repair of the product is required. - Providing advice, trouble shooting, training and information regarding the selection, maintenance application and debugging of the contract products. 6. Thus the TPO observed that the ITES segment is only an adjunct to the other segment and from the segmental results the TPO found that the ITES constitute only 19.75% of the revenues. Accordingly, the TPO aggregated both the segments for the transfer pricing analysis. 7. The final list of comparables selected by the TPO are as follows:- 8. Further, in the TP order u/s. 92CA, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined 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 criteria used by the TPO for selection of comparables. 11. The assessee has raised the following additional ground of appeal before the Tribunal, which reads as follows:- 1. The learned TPO has, in his-fresh study, erred in finalising the transfer pricing order with the companies mentioned below as comparable to the Appellant despite these companies failing to meet the legally acceptable criteria for comparability. The Honorable DRP has also erred in confirming the order of the TPO in this regard. These companies should be rejected as comparables, notwithstanding that they were not contended before the lower authorities or were contended on a different parameter. Avani Cimcon Technologies Ltd; Bodhtree Consulting Limited; e-Zest Solutions Limited; Infosys Systems Limited; KALS Information Systems Limited; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 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 as well who seems to have selected this company as a comparable based on the reasoning given in the TPO s order for the earlier year. It is evidently clear from this, that the 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 TPO for inclusion of this company in the list of comparables is defective and suffers from serious infirmity. 9.4.2 Apart from relying on the afore cited judicial decisions in the matter (supra), the assessee has brought on record substantial factual evidence to establish that this company is functionally dissimilar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he margin of the assessee, the entire TP adjustment of ₹ 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 opportunity of being heard to the assessee. The AO/TPO is also directed to recompute the working capital/risk adjustment as claimed by the assessee. 18. The next issue that arises for consideration is that the revenue authorities erred in concluding that expenditure incurred in foreign currency and telecommunication charges are to be excluded from the export turnover for the purpose of computation of deduction u/s. 10A of the Act. Reliance was placed in this regard on the decision of Patni Telecom (P) Ltd. (308 ITR 414) (Hyd ITAT) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 forward losses. The ld.AR of the assessee in order to fortify the stand of assessee has placed reliance on the decision of the Tribunal in assessee s appeal for the AY.2005-06 and AY.2007-08 (supra). The ld.AR has also drawn support from the judgment of the Hon ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd.(supra). On the other hand, the ld.DR has relied on the latest decision of the Hon ble Apex Court in the case of M/s.Himatsingka Seide Ltd., Vs. CIT (supra). The Hon ble Supreme Court of India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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