TMI Blog2016 (9) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. - in absence of segmental details of the revenue earned, the company cannot be treated as comparable to the assessee Soft Sol Ltd. - prima-facie assessee’s claim appears to be correct as the RPT as a percentage of total sales works out to 60.93%. That being the case, the company under no circumstances can be treated as a comparable to the assessee. Therefore, we direct the Assessing Officer to verify this aspect and exclude this company from the list of comparables. Disallowance of provisions of expenditure - Held that:- Assessing Officer has disallowed assessee’s claim of deduction of professional fees, on the ground that it is in the nature of provision and secondly, the assessee has not deducted tax at source. However, it is the contention of the assessee before us that the amount in question has been offered as income in the subsequent assessment year i.e., A.Y. 2010-11. If the assessee has already offered the amount in dispute as income in assessment year 2010-11, it cannot be taxed twice. Therefore, we direct the Assessing Officer to verify assessee’s claim and if it is found that the amount of ₹ 2,53,936 has been offered as income by the assessee in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. That on facts and circumstances of the case and in law, Learned CIT(A) erred in not providing appropriate adjustments on account of differences between the Appellant and the comparables. 7. That on facts and circumstances of the case and in law, Learned CIT(A) erred in ignoring the provisions of Rule 10 of the Rules, international commentaries and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the purpose of determination of the arms length price. 8. That on facts and circumstances of the case and in law, Learned CIT(A) erred in upholding the actions of the Learned AO whereby the Learned AO chose the comparables based on the information gathered under section 133(6) of the Act, though such information was not available in public domain to the Appellant at the time of conducting its own Transfer Pricing study. 9. That on facts and circumstances of the case and in law, Learned CIT(A) erred in making several observations and findings which are based on incorrect interpretation of law and contrary to facts of the case. 10. That on facts and circumstances of the case and in law, Learned CIT(A) ought to have placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer, however, did not accept the claim of the assessee. The Assessing Officer in the course of proceedings before him, selected 20 companies as comparableS which also included some of the companies selected by the assessee. Though, the assessee objected to some of the companies proposed by the Assessing Officer, however, rejecting the objections of the assessee, Assessing Officer treated the 20 companies proposed by him as comparables and by applying the arithmetic mean of 25.62% of the comparables selected by him, the Transfer Pricing Officer worked out the arm's length price. The short fall of ₹ 2,66,82,392, being the difference between the arm's length price determined by the Assessing Officer and arm's length price shown by the assessee, was treated as transfer pricing adjustment. Being aggrieved of such disallowance, assessee preferred appeal before the learned Commissioner (Appeals). 6. The learned Commissioner (Appeals) after considering the submissions of the assessee was convinced that three of the companies selected by the Assessing Officer viz. Celestial Biolabs Ltd., Infosys Technologies Ltd. and Wipro Ltd., are not comparable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of the Tribunal, Hyderabad Bench, in rejecting Acropetal Technologies Ltd., as a comparable in case of CIT v/s Intoto Software India Pvt. Ltd., in ITTA no.233/2014, dated 27th March 2014. 10. The learned Departmental Representative on the other hand relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 11. We have considered the submissions of the parties and perused the material available on record. On a perusal of the audited Balance Sheet of this company, a copy of which is placed at Page-558 of the paper book. We have noted that under the head Current Assets Loans and Advances assessee has shown inventories which pre-supposes that the company is into manufacturing activities. We have also noted, considering the fact that this company is a product company; the Hon'ble Andhra Pradesh High Court in Intoto Software India Pvt. Ltd. (supra) has upheld the decision of the Tribunal in rejecting this company. It is also a fact that the Tribunal, Mumbai Bench, in Ness Technologies India Pvt. Ltd. (supra) has rejected this company as a comparable as it is not functionally similar to the assessee. Therefore, on over all consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Systems Ltd. 15. Objecting to this company, learned Authorised Representative submitted that the company is involved in product development and no segmental accounting is available. To demonstrate this fact, learned Authorised Representative drew our attention to the annual report of the company for the financial year 2008-09. He, therefore, submitted that the company cannot be treated as a comparable. In support of his contention, the learned Authorised Representative relied upon the following decisions:- i) PTC Software (I) Pvt. Ltd. v/s DCIT, ITA no.336/PN./2014, order dated 31.10.2014, reported as TS-355-ITAT-2014 (Pn.-TP), ITA no.336/Pn./2014 dated 31st October 2014; ii) Cisco Systems (I) Pvt. Ltd. v/s DCIT, 2014-TII-186-ITAT-Bang-TP; iii) Q Logic (I) Pvt. Ltd. v/s DCIT, ITA no.227/PN/2014, dated 21.10.2014; and iv) Telelogic India Pvt. Ltd. v/s DCIT, ITA no.166/Mum./2011, dated 18.05.2015. 16. The learned Departmental Representative on the other hand relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals). 17. We have considered the submissions of the parties and perused the material available on record. The prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not decided the issue. On a perusal of the computation of RPT, submitted before the Assessing Officer, a copy of which is placed at Page-12 of the paper book, prima-facie assessee s claim appears to be correct as the RPT as a percentage of total sales works out to 60.93%. That being the case, the company under no circumstances can be treated as a comparable to the assessee. Therefore, we direct the Assessing Officer to verify this aspect and exclude this company from the list of comparables. 21. At this stage, it is pertinent to mention that the learned Authorised Representative has objected to exclusion of three companies viz., (i) E-Infochip Ltd., (ii) Quentigra Solutions Ltd. and VGS Soft Ltd., on the ground that they are loss making companies. In fact, the learned Authorised Representative through documentary evidences demonstrated before us that in case of Quentigra Solutions Ltd., the company has incurred loss only in the impugned assessment year, whereas, it has earned profit in the previous assessment year. He submitted, as far as VGS Softech is concerned, facts are identical. However, as far as E-Infochip Ltd. is concerned, the learned Authorised Representative submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it will amount to addition of same income twice. He, therefore, prayed for deletion of the amount. 26. The learned Departmental Representative relied upon the observations of the Assessing Officer the learned Commissioner (Appeals). 27. We have considered the submissions of the parties and perused the material available on record. As could be seen, the Assessing Officer has disallowed assessee s claim of deduction of professional fees, on the ground that it is in the nature of provision and secondly, the assessee has not deducted tax at source. However, it is the contention of the assessee before us that the amount in question has been offered as income in the subsequent assessment year i.e., A.Y. 2010-11. If the assessee has already offered the amount in dispute as income in assessment year 2010-11, it cannot be taxed twice. Therefore, we direct the Assessing Officer to verify assessee s claim snf if it is found that the amount of ₹ 2,53,936 has been offered as income by the assessee in assessment year 2010-11 no disallowance of the said amount should be made in the impugned assessment year. This ground is allowed for statistical purposes. 28. In the result, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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