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GSS Infotech Ltd. Versus Dy. Commissioner of Incometax, Circle – 2 (3) , Hyderabad

2017 (12) TMI 301 - ITAT HYDERABAD

ALP determination being the interest on loan given to AE - Held that:- The present case, the assessee has remitted the funds as loan and later on decided to convert the same as equity. It is not clear from the records that the purpose for which the loan was given. The assessee claims that it is for the business exigencies (quasi capital) and then it was converted as equity. The assessee has submitted that the parent company has allotted the shares in the FY 2011-12 but it is not clear, when the .....

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at:- The approval of the fund is only the procedural aspect, which can be cured. But it is not clear from the record submitted before us that these funds were actually deposited. We refuse to entertain the claim of the assessee that this can be claimed as expenditure. The same is the case with the treatment in the calculation of 115JB. In case the funds are deposited in the separate fund based on actuary valuation, this cannot be added back in the calculation of 115JB to determine the book profi .....

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im deduction u/s 10A. As per provision of section 10A(3), the realization should be brought to India within 6 months or as approved by proper authority, in the given case, it is RBI, which is the approved authority. Hence, assessee is eligible to claim deduction u/s 10A. Therefore, we direct the AO to allow the assessee’s claim of exemption u/s 10A. Accordingly, this ground is allowed. - Export receivable converted into equity - deduction u/s 10A - Held that:- As the issue under dispute is s .....

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ed any document in support of approval granted by RBI and FIRC certificates, we remit this issue to the file of the AO to examine the FIRC’s and approval from RBI, in case it is in order, the assessee is eligible for deduction u/s 10A on such sum. Accordingly, ground raised by the assessee is allowed for statistical purpose. - Direct the AO to allow the assessee’s claim of exemption u/s 10A by excluding the branch turnover from both export turnover and total turnover. - TPO has not follo .....

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allows assessee to bring the foreign exchange within 6 months to claim benefit under this section. In our considered view, the same can also be extended to assessee as the reasonable period outstanding. Accordingly, we direct the AO/TPO to charge interest of LIBOR + 200 bps on the outstanding amount beyond 6 months. In order to determine the period and computation of interest, the issue is remitted back to AO/TPO. Accordingly, ground raised by the assessee is allowed for statistical purposes. .....

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ant payment is proper. AO is expected to verify only the legality and genuineness of the transaction and not the rationale of such transaction, it should be the domain of the management. Accordingly, we direct the Assessee to submit the relevant information relating to purchase and payment of ERP software. The assessee has to submit the copy of bills and payment vouchers with bank statement in which such payments were cleared. We note that assessee has not submitted such information even before .....

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DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri P. Murali Mohan Rao For The Revenue : Smt. S. Mourana ORDER PER S. RIFAUR RAHMAN, A.M.: These appeals preferred by the assessee relate to AYs 2009- 10, 2011-12 & 2012-13. We shall deal with the issues ground wise along with ITA No. 602/Hyd/2017, which was heard on 27/09/2017. As the issues in all these appeals are identical, a common order is passed for the sake of convenience. ITA No. 267/Hyd/2014 for .....

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tion 92CA, with the prior approval of the CIT-II, the AO referred the case to TPO for determining the Arm s length price. 3.2 Assessee s Profile: The assessee is an information technology enabled service provider, specializing in help desk services, offshore support, maintenance etc. web based internal resource management module for HR services, design and deployment of backup solutions, oracle application ongoing support, infrastructure and managed services support, which are in the nature of I .....

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s for FY 2008-09 Item Amount in Rupees Operating Revenue 54,69,69,370 Operating Cost 25,12,24,031 Operating Profit 29,57,45,339 OP/OR 54.07% OP/OC 127.73% 3.5 Examination of TP study conducted by assessee: The assessee has carried out the economic analysis and has summarized it as under: Nature of international transaction MAM PLI Margin of assessee Margin of comparable Provision of IT enabled back office support services (received) TNMM OP/OC 29.65% 19.59% The TPO noted that the assessee compan .....

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relevant to the AY 2009-10. Interest free loan to the AE (Rs. 18,71,52,000/- and ₹ 29,04,15,000/-) 4. The TPO observed that during FY 2008-09, assessee had advanced a sum of ₹ 18,71,52,000/- and ₹ 29,04,15,000/- to its AE without any interest. The assessee was asked to explain the reasons why interest was not charged on the loan advanced by the assessee to its AE. The assessee was also requested to present an arm s length analysis in order to show that the international transac .....

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that the assessee wants to make acquisitions in USA in order to grow its business. 3) Loan given is in the nature of quasi equity. The advance given was converted into equity in FY 2011-12. Further, on 06/12/2012, the assessee submitted the details of the interest free loan extended by its Branch in USA to the extent of ₹ 29,04,15,000/- to its AE i.e. GSS America Inc., 4.2 After considering the submissions of the assessee, the TPO observed that the contention that the funds were given out .....

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fitted from the funds and not the assessee. As regards the argument of the assessee that the loan was in the nature of quasi equity and the advance was converted into equity in FY 2011-12, the TPO observed that there was a gap of almost three years between giving loan and issuance of equity and if the funds were actually given for the purpose of equity then the assessee would have insisted for issue of shares against the amount given. TPO observed that the assessee had neither received any inter .....

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ifference in %age points from US LIBOR 12 month US LIBOR rate for FY 2008-09 2.71 Average interest rate on US treasury securities for FU 200809 4.12 1.41 Average rate at which banks lend to prime customers (official site of the world bank) 4.63 1.92 Prime lending rate in USA (www. Trading economics. Com) 4.35 1.64 The TPO computed the arm s length interest on the loan given by the assessee to its AE by taking US LIBOR plus 3 percent points, which comes to 5.7% per annum, as under: S. No. Amount .....

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ee preferred appeal before the DRP and before the DRP it was, inter-alia, contended that the advancing of an interest free loan is an action to be judged in isolation of such transaction. It is a business exigency and has to be viewed from the point of view of the business. It was further contended that it is arbitrary and illegal to infer and impose interest on the assessee without considering all the issues involved like business model of the assessee, group activities, overall business margin .....

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usiness of the assessee with any facts and figures and the argument is general in nature. 7. Aggrieved, the assessee is in appeal before us raising 9 grounds of appeal, the sum and substance of which are, the ld. AO/TPO/DRP are not justified in law in determining the Arm s length price at ₹ 83,21,639/- being the interest on loan given to AE as against Rs. Nil. 8. Ld. AR submitted that the AEs had already allotted shares in respect of advances made. He submitted that investments in share ca .....

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ordinate bench has held as under: 9. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. As can be seen, out of the total amount of ₹ 9,39,15,903 treated as loans and advances to the overseas subsidiaries, the amount of ₹ 8,37,25,903 is claimed to be towards share application money and ₹ 1,01,90,000 is an advance. Therefore, once the amount of ₹ 8,37,25,903 is accepted as investment in s .....

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nch of this Tribunal in ITA No. 1816/Hyd/2012, dated 08/08/2014 held as under: 12. Therefore, considering the facts of the assessee s case, in the light of the orders passed by the coordinate benches referred to hereinabove, it is to be held that if the investments are in the nature of equity, then, they cannot be treated as loans and advances. However, for coming to a definite conclusion in this regard necessary details need to be examined from the books of account and other related documents. .....

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O/AO is also directed to examine the issue as per the existing order of DRP to the extent of adoption of LIBOR+2% rate and calculate the interest for the period of loan but not exceeding the period of 12 months. The calculation for more than 12 months by AO has to be disapproved. This ground of the assessee is considered to be allowed for statistical purposes. Facts are materially same in the present AY also as both TPO and DRP have followed the order of the DRP for the AY 2008-09. However, it w .....

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in the preceding AY 2008-09, we remit the matter back to the file of the AO for considering afresh keeping in view the decision of the Tribunal in case of Vijai Electricals Vs. ACIT (supra) and also the amended provisions of section 92B of the Act. We make it clear that if ultimately it is found that any amount given to the overseas subsidiaries are in the nature of loans and advances, AO/TPO may consider charging interest @ LIBOR +2% as per the direction of the learned DRP in AY 2008-09. Thus, .....

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usiness exigencies (quasi capital) and then it was converted as equity. The assessee has submitted that the parent company has allotted the shares in the FY 2011-12 but it is not clear, when the decision was made to convert the loan into equity. Considering the above facts and issues relating to this transaction, in our considered view, this matter needs further verification at the AO/TPO level to find out the purpose of loan, whether for business exigencies. If it is for the business exigencies .....

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to convert the loan into equity. If the decision was made during this AY, then, this transaction will not be financial transaction and accordingly, interest cannot be charged. Hence, by following the decision of Prithvi Information (supra) and with the above direction, we direct AO/TPO accordingly, needless to say a proper opportunity of being heard to assessee and at the same time, direct the assessee also to submit the relevant information before AO/TPO. Accordingly, we allow the grounds rais .....

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es P. Ltd., ITA No. 6563/Mum/09 11.2 Provision for gratuity added to profit u/s 115JB. Ld. AR submitted that provision for gratuity is an ascertained liability and hence it cannot be added to book profits. He relied on the following decisions: 1. Dresser Valve India Ltd., 30 SOT 495 2. Ekla Appliances, 45 SOT 7 3. Kanco Enterprises Ltd., 65 Taxmann.com 289 11.3 Any disallowance made to the total income will increase profits u/s 10A. 11.4 Ld. AR submitted that if any disallowance is made, then th .....

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tuary valuation and opened gratuity fund account which was not approved by CIT. To avail deduction, the assessee has to evaluate the gratuity on actuarial basis and part with the fund by depositing the same in the appropriate fund account. The approval of the fund is only the procedural aspect, which can be cured. But it is not clear from the record submitted before us that these funds were actually deposited. We refuse to entertain the claim of the assessee that this can be claimed as expenditu .....

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0A. The coordinate benches of Mumbai held that the consequence of disallowance will increase profit eligible to get deduction u/s 10A. the relevant finding is given below: 6.2 We have given a thoughtful consideration to the factual position so averred by the Ld. A.R. before us and find that the CIT(A) had absolutely failed to deal with and adjudicate the aforesaid specific ground of appeal raised by the assessee before him. The Ld. A.R had submitted before us that the assessee company had busine .....

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leading to a consequent increase in the claim of deduction of the assessee u/s 10A of the 'Act', pursuant whereto the net effect would remain at Rs. Nil. We find substantial force in the contention of the Ld. A.R and are persuaded to be in agreement with him that pursuant to disallowance u/s 14A, the business profits eligible for deduction u/s 10A, to the said extent would stand enhanced. We find that the issue involved is covered by the judgment of the Hon'ble High Court of Bombay i .....

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made by the A.O is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under s. 10A the addition made on account of the disallowance of the PF/ESIC payments ought to be ignored cannot be accepted. No statutory provision to that effect having been made, the plain consequence of the disallowance made by the AO must follow. We thus in light of the aforesaid facts of the case r.w the settled position of law, herein direct the A.O that p .....

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unds relating to claim of gratuity as expenditure are dismissed. ITA No. 329/Hyd/2016 for AY 2011-12 13. Ground No. 1 was not pressed by the assessee, therefore, the same is dismissed as not pressed. 14. As regards ground No. 2 relating to the addition of ₹ 3,65,81,330/- towards interest attributed on investment made in GSS America Inc., USA of USD 2,38,08,597/-, during the FY 2010-11, the assessee had advanced a sum of USD 7,821,517 as an interest free loan to its AE i.e. GSS Americal Inc .....

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to its AE and the funds were used by the AE for acquisition and therefore, it was the AE which had directly benefitted from the funds and not the assessee. As regards the argument of the assessee that the loan was in the nature of quasi equity and the advance was converted into equity in FY 2011-12, the TPO noticed that there is a gap of more than two years between giving loan and issuance of equity. He opined that if the funds were actually given for the purpose of equity then the assessee wou .....

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see had not charged any interest on the same, the international transaction is not within the arm s length price. Accordingly, the TPO computed the adjustment u/s 92CA(3) on account of interest was at ₹ 3,65,81,330/- and the total income of the assessee was adjusted accordingly. 14.3 When the assessee filed objection before the DRP, the DRP rejected the objection and confirmed the ALP adjustment of ₹ 3,65,81,330/-. 15. Aggrieved, the assessee is in appeal before us. 16. Before us, th .....

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Vs. Union of India, 50 Taxmann.com 300 6. Dana Corporation Re, 321 ITR 178 7. Amiantit International Holding Ltd., 322 ITR 678 8. GSS Infotech Ltd. Vs. ACIT, Hyd., 497/Hyd/2015 17. Ld. DR relied on the order of DRP. 18. Considered the rival submissions and perused the material facts on record. Similar issue has been decided in ITA No. 267/Hyd/2014 (supra). Following the conclusions drawn therein, this ground is allowed. 19. Ground Nos. 3 to 6 relate to deduction u/s 10A of the Act. 20. During t .....

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ble foreign exchange within the stipulated period that is within 6 months from the end of FY 2010-11 (i.e. before 30/09/2011 as per section 10A(3) of the Act. S.No. Particulars as to when the sale proceeds were received Amount received in Rs. Details as to how deduction u/s 10A is allowable 1 Within 6 months from the end of FY 2010-11 (i.e. before 30/09/2011) 9,96,73,705 As per section 10A(3). 2 Within one year from the date of invoice as per RBI Circular 1,51,57,968 Not eligible for deduction 3 .....

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nge received up to 30/09/2011 alone, ignoring the directions contained in various circulars issued by RBI under the regulations of FEMA. It was further submitted that the AO should have considered the amounts realized to the extent of ₹ 1,51,57,968/- within the period of one year from the date of invoiced as export turnover eligible for deduction u/s 10A of the Act as per the time allowed by the appropriate authority i.e. RBI. 22. After considering the submissions of the assessee, the DRP .....

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7,24,76,941/-, however, for the purpose of computation of deduction u/s 10A, the export turnover is restricted to the extent of realization of sale proceeds i.e. ₹ 11,48,31,673/-. 24. Aggrieved, the assessee is in appeal before us. 25. As regards ground No. 3 to 3a & 3b., regarding export receivable received after 1 year 2.5 months of ₹ 17,61,37,767/-, the ld. AR submitted that letter from Authorised Dealer with regard to the regularization of export proceeds is entitled to exemp .....

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the realisations for eligible current account transactions of the company outside India. In the light of the letter addressed by UTI Bank Ltd., with regard to regularization of export proceeds, we admit the additional evidence and hereby hold that the assessee is entitled to exemption u/s 10A(3) of the act and we direct the AO accordingly. 26. Ld. DR relied on the order of DRP. 27. Considered the rival submissions and perused the material facts on record. As the issue under dispute is squarely c .....

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approved authority. Hence, assessee is eligible to claim deduction u/s 10A. Therefore, we direct the AO to allow the assessee s claim of exemption u/s 10A. Accordingly, this ground is allowed. 28. As regards ground No. 4 to 4 & 4b regarding export receivable converted into equity of ₹ 8,15,07,501/-, the ld. AR submitted that when realizations were actually transferred to subsidiary as an investment within the extended time by RBI, it is to be considered for exemption u/s 10A. He relied .....

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the Assessing Officer is a procedural nature and it can be cured by permitting appropriate rectification at the first appellate stage. Being so, we do not find any infirmity in admitting the additional evidence by CIT(A) for adjudication. The CIT(A) during the first appellate stage called for the summary of monies remitted and received through different modes by the assessee. The CIT(A) after examination of documents came to the conclusion that all the remittance were supported with FIRCs or ap .....

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and does not include the deeming provisions as per the RBI (relating to the capitalized proceeds/work in progress). In our opinion, the provisions of Explanation 2 to section 10A(3) is applicable for a situation where sale proceedings are credited to a separate account maintained outside India with the approval of RBI. In the present case, the remittance is within the prescribed time limit and the Explanation 2 is irrelevant. Further, FIRCs, being issued by the approved dealers of the foreign ex .....

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t authority as RBI and the competent authority being RBI authorize the capitalization and then such authorization should automatically get validated as the said authority specifically authorized under the provisions of section 10A(3) of the 1T Act. Further, the Wholly Owned Subsidiary has been incorporated in France by the name 'Sankhya Sari' with the appropriate approval from RBI that certain amount of Euros be invested into this company within one year from the date of approval. This a .....

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venue is having also objection regarding that the C1T(A) has granted deduction u/s 10A in respect of invoices which has not fallen due and according to the DR, the RBI letter of approval dated 31.7.2003 is applicable only for those invoices for which extension of time had been granted but not for which has not fallen due and it cannot be given exemption for future receivables and work in progress. According to Learned Authorized Representative for the assessee, the process of developing and deli .....

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Wholly Owned Subsidiary as investment. In our opinion, the work in progress/future receivables cannot be considered for deduction u/ s 10A. However, when these amounts on realization were actually transferred to Wholly Owned Subsidiary as an investment within the extended time by RBI, it is to be considered for exemption u/s 10A if the other conditions are fulfilled by the assessee and similar is the position in case of work in progress. The Assessing Officer has to re-compute deduction u/s 10A .....

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if it is within the extended time. 29. Ld. DR relied on the order of DRP. 30. Considered the rival submissions and perused the material facts on record. As the issue under dispute is squarely covered by the decision of the coordinate bench of this Tribunal in the case of Sankhya Infotech Ltd. (supra) and the assessee has received approval for the investment, such investments were out of sale proceeds. The authorized dealer has adjusted against such investment and issues FIRC s to the assessee, t .....

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s as follows: 5. Erred in wrongly considering the profits of business at ₹ 8,15,07,501/- instead of ₹ 8,59,12,141/-while calculating the deduction u/s 10A. 31.1 It is general in nature and has already been adjudicated in the above paragraphs. 32 Ground No. 6 is as follows: 6. Erred in not excluding the invoice of Bangladesh Branch of ₹ 1,71,48,146/- from the total turnover while calculating the deduction u/s 10A of the Act. 33. Ld. AR of the assessee submitted that onsite sales .....

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held as under: 5. We have heard both the parties and perused the material available on record. In our opinion export turnover means the sale proceeds of any goods or merchandise exported out of India, but does not include freight or incidence attributable to the transport of goods or merchandise beyond the customs stations as defined in the Customs Act. The Sec. 10B was brought into statute book with a object to grant incentive to export oriented undertaking engaged in export of article of thing .....

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estive of the fact that it was with a view to encourage foreign exchange inflow. Under the provisions of S.10B to avail the deduction under this sec. the undertaking has to bring into India the sale proceeds in convertible foreign exchange, which shall be physically brought to India. Repatriation of these receipts is the main condition, in availing of Sec.10B. The sale proceeds must be receivable in convertible foreign exchange. Therefore, the avowed object is to encourage inflow of convertible .....

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gument of the assessee's counsel is bereft of any merit since the branch sales cannot be equated with on site development of software which is not identical. In our humble opinion, assessee is not entitled for benefit of Sec. 10B on the Branch sales and it is to be excluded both from export turnover as well as from total turnover. Accordingly, this ground raised by the revenue and as well as by the assessee is dismissed. 34. Ld. DR relied on the order of DRP. 35. Considered the rival submiss .....

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required to be adjudicated as the main grounds are adjudicated in favour of the assessee. ITA NO. 602/Hyd/2017 for AY 2012-13 37. Ground Nos. 1 & 2 regarding invalid transfer pricing proceedings and invalid draft assessment order was not pressed by the ld. AR of the assessee at the time of hearing, therefore, the same are dismissed as not pressed. 38. As regards ground Nos. 3, 4 & 5 relating to the addition of ₹ 9,36,79,227/- u/s 92CA(3), the TPO, after rejecting the TP study filed .....

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ic Systems Ltd. 7.01 9. TCS E-Serve Ltd. (merged) 65.82 10 Cross Domain Solutions Pvt. Ltd. 29.88 Total 249.59 24.96 After applying the average margins of the comparables to the financials of the assessee, the result is as under: Description Amount Arm s length Margin 24.96% Less: WCA -2.51% Adjusted Arm s length margin 27.47% Operating Cost (OC) 65,82,78,605 Adjusted Arm s length Margin (%) AALM) 27.47% % of AE sales on total revenue 13.31% Proportionate cost on AE sales 8,76,16,882 Arm s lengt .....

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rrect margin calculation and relating to search applied, filters and comparables. Ld. DRP has confirmed the MAM adopted by TPO and the comparables selected by TPO. However, they agreed the objection raised by assessee and for convenience, the findings of are reproduced below: Having considered the submissions, we have perused the record to observe that the TPO vide para m page 13 of the TPO order dated 30.01.2016 in which the TPO rejected the request of the' assessee-on the reason that the a .....

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ssessee. This view is also finds support from the decision of the Hon'ble AP & Telangana High Court in the case of BA Continuum India Pvt Limited (ITTA 440 of 2014) (supra) and also by OECD guidelines, accordingly, we direct the assessing officer to consider the margin in the case of the assessee as well as comparables after excluding depreciation. 39.1 As per the above directions of the DRP, the TPO determined the adjustment of ₹ 10,19,56,655/- as against ₹ 9,36,79,227/- mad .....

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as arrived ALP adjustment without excluding depreciation, in our considered view the ALP adjustment arrived at by the TPO is not as per the directions of DRP. Hence, we remit this issue back to the AO/TPO to calculate the TP adjustment excluding depreciation. Accordingly, this ground raised by the assessee is allowed on this aspect. Hence, we are not inclined to adjudicate the other grounds raised by the assessee relating to TP adjustment. 42. As regards ground No. 6 to 6a & 6k regarding add .....

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company, which was rejected by the TPO and computed the interest as under: Opening balance as on 01/04/2012 ₹ 108,96,88,358/- Closing Balance as on 31/03/2012 ₹ 140,93,76,299/- Total ₹ 249,90,64,657/- Average ₹ 124,95,32,329/- Interest @ 3.90% pm on ₹ 124,95,32,329/- = 4,87,31,761/-. 43. When the assessee objected the same before the DRP, the DRP upheld the addition. 44. Considered the rival submissions and perused the material facts on record. Similar issue arose .....

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charge interest on the basis of LIBOR + 200 bps. In case, it is determined as equity, then, no interest can be charged in this transaction. Accordingly, ground raised by the assessee is allowed for statistical purposes. 45. As regards ground No. 7 & 7a to 7k regarding addition of ₹ 1,04,34,308/- towards interest on receivables, the TPO observed that there are outstanding receivables to the tune of ₹ 7,71,72,081/-, which were not reported either in Form 3CEB or in the TP Document. .....

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the assessee objected the same before the DRP, the DRP directed the assessee to furnish the necessary details to the TPO which is necessary for computation of interest in accordance with the directions within 15 days of receipt of this order on receipt of which the AO will give effect to the directions. Further, the DRP directed if the assessee fails to furnish such information before the AO within the specified time, the AO shall treat the objection as rejected. 47. Aggrieved, the assessee is .....

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lso no basis for adopting only two months as credit period. RBI itself allows an year for the amounts to be realised, if they are in foreign exchange. Whether it is AE or non-AE, it is in the interest of business that assessee receives the foreign exchange early so that it can claim deduction u/s 10A. Therefore, in our view, putting a limit of two months of credit period itself is arbitrary. Moreover, as seen from the calculation provided in page 7 of the assessment order, the date of realizatio .....

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s contentions. Grounds are considered allowed. As the issue under consideration is materially identical to AY 2010- 11, except for the reason that assessee does not charge interest to both AE and non AE but during this year, the entire receivables had not been received. It is not submitted before us, the reasonable period of outstanding allowed to the debtors in the normal business. Considering the fact that section 10A allows assessee to bring the foreign exchange within 6 months to claim benef .....

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377; 14,62,50,000/- towards asset written off and ₹ 4,87,57,000/- towards depreciation claimed on the above asset, in the computation of total income, the AO observed that the assessee claimed ₹ 14,62,50,000/- towards loss on asset written off. Further, from the depreciation schedule as per IT Act, it was observed that the assessee claimed depreciation of ₹ 4,87,57,000/-, in addition to the write off of ₹ 14,62,50,000/- on the same block of asset. When the assessee was as .....

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ssee submitted that the said ERP product was written off as the company was not taking any assignment based on the above ERP based software. When asked to furnish evidence/bill in support of the ERP package which was written off during FY 2011-12, the assessee furnished a copy of the invoice. 49.1 The AO referring to the provisions of section 37(1) and section 50 of the Act, observed that the assets written off of ₹ 14,62,50,000/- as claimed by the assessee is not allowable u/s 32(1)(iii), .....

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im of written off of ₹ 14,62,50,000/-. The AO observed that the Assessee failed to prove the following: 1. The purchase of ERP package was not proved 2. Utilisation of the ERP package for the purpose of business was not proved. 3. The ERP package was really written off in its books of account was not proved. In view of the above, the AO disallowed the depreciation of ₹ 4,87,57,000/- and ₹ 14,62,50,000/- and added to the income of the assessee. 50. Aggrieved, the assessee prefer .....

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ond sale, the assessee has not been able to produce the basic information to establish the genuineness of the purchase. Further, assessee being a reasonably small company cannot afford to buy such expensive software without a proper business plan and write off the same without giving any valid justification. Write off of such a valuable asset that too soon after its acquisition without there being any proper business rationale supports the view taken by the AO. It is also pertinent to observe th .....

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R reiterated the submissions as submitted before the DRP, while ld. DR relied on the order of DRP. 52. Considered the rival submissions and perused the material facts on record. The above said ERP software was purchased and installed in the FY 2009-10 relevant to AY 2010-11. The same was accepted by the department and accordingly assessments u/s 143(3) were completed. The same asset was written off by the assessee due to change in the business model. In this AY, the AO was not satisfied with the .....

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purchased and allowed the depreciation in the scrutiny assessment u/s 143(3) in the earlier AYs. No doubt the assessee has discharged the duty of compliance but that does not mean the present AO cannot verify the relevant verification filed in earlier year, particularly, when the transaction is of huge value. The assessee is expected to retain the relevant information of this transaction. Considering the huge investment on the softwaree, it should have passed due process of approval in the organ .....

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