TMI Blog2017 (2) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be set off against the profit of its Thiruvanathapuram unit while calculating deduction available to the assessee u/s. 10A of the Act. See Yokogawa India Ltd case [2016 (12) TMI 881 - SUPREME COURT] wherein held loss of a STPI unit could not be set off against the profit of the unit on which deduction u/s.10A of the Act was being claimed. Ground of the assessee stands allowed. Disallowance of set off of its loss in its STPI unit against profits of non STPI unit - Lower authorities had denied the set off treating the STPI unit as a stand alone one - Held that:- The issue in our opinion is covered in favour of the assessee by virtue of the judgment of Hon’ble Bombay High Court in the case of Hindustan Unilever Limited vs. DCIT [2010 (4) TMI 206 - BOMBAY HIGH COURT ] wherein observed that loss sustained by an unit which was eligible for deduction u/s. 10B of the Act could be set off against normal business income. - Decided in favour of assessee Provision made for expenditure disallowed - Held that:- DRP was obliged to give specific findings with regard to the claim of the assessee after going through the records. We are of the opinion that the matter requires a fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.10 is on levy of interest u/s.234B of the Act which is consequential in nature. Ld. Counsel for the assessee submitted before the Bench that he was not pressing ground no.11, on levy of interest u/s.234C of the Act. This leaves us ground Nos.2 to 9, of which ground no.8 is on issues relating to Transfer Pricing. Additional ground Nos. 12 and 13 are also on Transfer Pricing. Grounds relating to Transfer Pricing will be dealt with in the later part of this order. 3. Vide its grounds 2 3, assessee assail exclusion of telecommunication and foreign travel expenditure from its export turnover while computing the eligible deduction under section 10A of the Act. There is also an alternative claim that sums excluded from export turnover were to be excluded from total turnover also. Claim of the assessee that telecommunication expenditure and foreign travel expenditure incurred in foreign currency could not be excluded from export turnover cannot be accepted in view of definition of export turnover given in Explanation 2(iv) to Sec. 10A of the Act. However, viz-a-viz its alternative claim that these expenditure if excluded from export turnover were to be deducted from total tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression total income of the assessee in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section 10A as total income of the undertaking . Accordingly, we are of the opinion that loss incurred by the assessee in its Chennai GFA unit shall not be set off against the profit of its Thiruvanathapuram unit while calculating deduction available to the assessee u/s. 10A of the Act. Ground No.4 of the assessee stands allowed. 8. Vide its ground No.5, grievance raised by the assessee is that the lower authorities did not allow set off of its loss in its STPI unit against profits of non STPI unit. Lower authorities had denied the set off treating the STPI unit as a stand alone one. The issue in our opinion is covered in favour of the assessee by virtue of the judgment of Hon ble Bombay High Court in the case of Hindustan Unilever Limited vs. DCIT 325 ITR 102. Para 24 of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of its provision made for expenditure was disallowed by the ld. Assessing Officer. 10. Ld. Authorised Representative submitted that ld. Assessing Officer in the draft assessment order had disallowed provisions totaling G2,00,24,664/- for a reason that there was no charge of the said amount in the profit and loss account. As per ld. Authorised Representative assessee had objected this before the ld. DRP and ld. DRP had allowed this ground vide paragraph 16(vi) of its order. However, as per ld. Authorised Representative, ld. Assessing Officer in the final assessment order did not allow a portion of such provisions made for Chennai VA unit, Thiruvanathapuram unit and Chennai GFA unit based on a wrong presumption that assessee could not produce any supporting documents. As per ld. Authorised Representative assessee had produced break-up of such expenditure before ld. Assessing Officer. Reliance was placed on paper book page Nos.179 to 184 which gave the break-up of the provision. 11. Per contra, ld. Departmental Representative submitted that ld. DRP was obliged to arrive at a specific conclusion. According to him, ld.DRP did not have power to issue directions for further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er tax has been deducted and claimed by the assessee in its return and decide accordingly. Ground No.9 is allowed for statistical purpose. 17. This leaves us with ground No.8 of the original grounds and ground nos.12 13 of additional grounds which are on transfer pricing related matters. 18. Ld. Counsel for the assessee submitted that he was seeking exclusion of M/s. Infosys BPO Ltd and Cosmic Global Limited from the list of comparables considered by ld. Transfer Pricing Officer for bench marking the international transactions of the assessee with its Associated Enterprise abroad. According to him, in case, M/s. Cosmic Global Limited was considered to be a good comparable, then one another comparable suggested by the assessee namely M/s. MCS Ltd also needed to be included in the list of comparables. In support of the above pleadings, ld. Authorised Representative relied on the profile of the assessee which has been extracted by the ld. TPO at para 2 of its order at 12.09.2011 in which he has classified the assessee as an IT enabled service provider. 19. Continuing his submission, ld. Authorised Representative stated that assessee was providing services to its Associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity India Technologies Pvt. Ltd (2013) 93 DTR 375. 21. Contra, ld. Departmental Representative submitted that M/s. Cosmic Global Limited was assessee s own comparable and therefore assessee could not now seek exclusion. Viz-a-viz M/s. Infosys BPO Limited, submission of the ld. Authorised Representative was that volume of activity was not relevant when functional profiles were similar. Thus, he supported the orders of the lower authorities. 22. We have considered the rival contentions and perused the orders of the authorities below. No doubt M/s. Cosmic Global Limited was one of the comparables considered by the assessee in its own TP study. However, assessee had before the ld. TPO itself pointed out that M/s. Cosmic Global Limited had very low employee cost to total cost ratio, proving that it was getting its work done through outsourcing. Assessee had raised this issue before ld. DRP as well. By virtue of decision of Special Bench in the case of Dy. CIT vs. Quark Systems P. Ltd (2010) 42 DTR 414 which was upheld by Hon ble Punjab and Haryana High Court (62 DTR 182) , an assessee cannot be estopped from seeking exclusion of a comparable which was on its own list. Assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclude the said concern from the final set of comparables . We are therefore of the opinion that M/s. Cosmic Global Limited has to be excluded from the list of comparables. Ordered accordingly. 23. Coming to the comparability of M/s.Infosys BPO Limited, Hon ble Bombay High Court in the case of M/s. Pentair Water India Pvt. Ltd, (supra) had upheld the order of the Tribunal in the case, wherein it was observed as under:- Infosys BPO Ltd. :- In this case also we noted the turnover in respect of this Company is ₹ 649.56 crores while the turnover of the Asseessee company is around ₹ 11 crores which is much more than 65 times of the Assessee's turnover. We, therefore, do not find any illegality or infirmity in the order of CIT(A) in excluding this Company out of the comparables. Accordingly, we confirm the order of the CIT(A) . No doubt here turnover of the assessee was G64.27 crores. However the turnover of M/s.Infosys BPO Ltd for the impugned assessment year was G850 Crores which was more than ten times that of assessee. Therefore we are of the opinion that M/s. Infosys BPO Ltd was operating at a different level and could not have been compared w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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