TMI Blog2018 (7) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Income Tax Appellate Tribunal B Bench: Bangalore, Annexure A dated 18/03/2016 in IT(TP)A.No.1388/Bang/2011 for AY 2005-06. 2. The appellants - Revenue have suggested three substantial questions of law which are quoted below for ready reference: - (1) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the assessing authority to reduce the expenses so incurred, both from export turnover as well as from total turnover in accordance with the decision of this Hon ble Court in case of CIT Vs. Tata Elxsi even when said order has not reached finality and there is no such computation prescribed under the provisions of Section 10A? (2) Whether on the facts and in the circumstances the Tribunal is right in directing the Transfer Pricing Officer to exclude the companies as comparables namely, Bodhtree Consulting Ltd. Exensys Software Solutions Ltd. Sankhya Infotech Ltd. Foursoft Ltd., Thirdware Solutions Ltd. Tata Elxi Ltd. Infosys Technologies Ltd. Flextronics Ltd. and Geometric Software Solutions company Ltd. even when the TPO has chosen the said comparables as all the required tests are satisfied? (3) Whether on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Clause 6.11 of Exim Policy dealing with entitlement for supplies from the DTA states that supplies from the DTA to EOU/EHTP/STP/BTP units will be regarded as deemed export , besides being eligible for relevant entitlements under paragraph 6.12 of the Policy. They will also be eligible for the additional entitlements mentioned therein. What is of importance is when a supply is made from DTA to STP, it does not satisfy the requirements of export as defined under the Customs Act. However, for the purpose of Exim Policy, it is treated as deemed export . Therefore, when Section 10A of the Act was introduced to give effect to the Exim Policy, the supplies made from one STP to another STP has to be treated as deemed export because Clause 6.19 specifically provides for export through Status Holder. It provides that an EOU/EHTP/STP/BTP unit may export goods manufactured/software developed by it through other exporter or Status holder recognized under this policy or any other EOU/EHTP/STP/BTP unit. What follows from this provision is that to be eligible for exemption from payment of income tax, export should earn foreign exchange. It does not mean that the undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well . 7. In so far as the second substantial question of law is concerned, the learned ITAT in its Order dated 18/03/2016 has given the following findings, the relevant portion of which is quoted below for ready reference:- Satyam Computers Ltd: 10.1. Out of the above comparables, Satyam Computer Services Ltd. was excluded by CIT(A) on the basis of non-reliability of financial data. Revenue has accepted the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable and retain it in the list. Sankhya Infotech Ltd.. Thirdware Solution Ltd.. Tata Elxsi Ltd.. 10.5. These three companies are rejected as comparables on functionality in the case of ITO Vs. M/s. Sunquest Information Systems (India) Private Limited, in IT(TP)A No.1302/Bang/2011 dt.11-06-2015 (supra) (paras 19-20, 22-26, 27-30 respectively) and in the case of Cordys Software India P. Ltd., in ITA No.1451/Hyd/2010 dt.13-06-2014 (supra) at para.No.13. The analysis by the Co-ordinate Benches is as under: 10.6. ... ... Four Soft Ltd. 10.7. The objection by Assessee is that this company is a product company was analysed and accepted in the case of ITO Vs. M/s. Sunquest Information Systems (India) Private Limited, in IT (TP)A No.1302/Bang/2011 dt.11-06-2015 (supra)para 22. It was held that the said company has derived income from software license and AMCs. Since functionality was already analysed, respectfully following the Co-ordinate Benches also, the same was to be excluded. i. Intoto Software India Pvt. Ltd. ITA No.1196/Hyd/2010; ii. Cordys Software India P. Ltd. ITA No.1451/Hyd/2010 Geometric Software Solutions Company Ltd. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted for ready reference:- 11.2. Not only that, the explanation brought in by Finance Act, 2014 w.e.f. 01-04-2015 also specifies that the provisions of second proviso shall also be applicable to all assessments or reassessments proceedings pending before the AO as on the first day of October 2009. The present proceedings were concluded before that day. So, the second proviso to Section 92C(2) does not apply to the impugned order. The pre-amended proviso, as interpreted by various authorities does permit standard deduction of (+) or (-) 5% to Assessee. The order of Ld.CIT(A) is confirmed. The revenue s ground is rejected accordingly. 9. However, this Court in a recent judgment in I.T.A.No.536/2015 c/w. I.T.A.No.537/2015 (Pr. Commissioner of Income Tax, Bangalore and Another Vs. M/s. Softbrands India P. Ltd.,) rendered on 25-06-2018, has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable and the relevant portion of the said judgment is quoted below for ready r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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