TMI Blog2018 (10) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... t premium on forward exchange contract is earned in the normal course of the business to hedge against fluctuations in foreign currency exchange rate and gains from such contract has to be considered while computing the PLI in the international transaction with the AE. It is ordered accordingly. Selection of comparable - Held that:- We find that the objections raised by the assessee have been disposed off by the DRP without passing a speaking order. The assessee has raised various contentions why the above mentioned companies are not comparable companies. The objections with regard to non-availability of segmental account details for the above comparables, presence of intangibles for above mentioned companies and failure to satisfy certain filters adopted by the TPO himself were not discussed in TPO’s order nor in DRP’s order. The DRP on its part has merely confirmed the TPO’s order without passing a speaking order. Therefore, we deem it appropriate to restore this issue to the files of the TPO - IT(TP)A No.57/Coch/2016 And SA No.62/Coch/2017 - - - Dated:- 23-10-2018 - Shri Chandra Poojari, AM And Shri George George K, JM For The Appellant : Sri.Raghunathan S For Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh several grounds are raised before the Tribunal, the learned AR confined his submission only to the following issues:- (i) Exclusion of forward premium while computing the operating margin of the assessee; and (ii) TPO has erroneously included the following companies as comparable companies, viz., ICRA Online Limited, Acropetal Technologies, Accentia Technologies Limited, and Jeevan Scientific Technologies Limited. (iii) The assessee is entitled to the claim of deduction u/s 10A of the I.T.Act. 5. We shall take up for adjudication the above issues and dispose off the same as under:- ( i) Assessee is entitled to deduction u/s 10A of the I.T.Act (Corporate Tax) The assessee company had claimed deduction u/s 10A of the I.T.Act amounting to ₹ 1,85,34,036. The Assessing Officer denied the deduction u/s 10B of the I.T.Act by placing reliance on the judgment of the Hon ble Delhi High Court in the case of CIT v. Regency Creations Ltd. [(2013) 255 CTR 63 (Del.)] . According to the A.O., the assessee s unit was not approved by an appropriate authority constituted u/s 14 of the Industrial (Development Regulations) Act, 1951 and hence was not entitled to dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S-516-HC-2015 (Del.) (vi) J.C.Infosoft Technologies (ITA No.1135/Del/2011) (vii) Valiant Communications Ltd. (ITA 438-441/2012) (Delhi HC). 5.5 In the above mentioned cases it was held that if section 10B was denied for the reason that unit was not having necessary approval from the appropriate authority, the authorities are duty bound to consider the alternative claim of deduction u/s 10A of the I.T.Act and grant the same, provided the conditions are satisfied as prescribed u/s 10A of the I.T.Act. The alternative claim of the assessee that it should be granted deduction u/s 10A of the I.T.Act was not considered by the Assessing Officer nor the DRP in its directions for the reason that no claim was made u/s 10A of the I.T.Act in the return of income. Admittedly, the assessee had claimed deduction u/s 10B of the I.T.Act in its return of income. When the claim u/s 10B of the I.T.Act was sought to be denied, the assessee during the course of assessment proceedings claimed deduction u/s 10A of the I.T.Act. In the above mentioned cases, it was stated when claim u/s 10B of the I.T.Act is denied, the assessee s alternative claim u/s 10A of the I.T.Act made during the assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) RBI Notification No.FEMA 25/RB-2000, dated 3rd May, 2000; (b) Ledger extracts; and (c) Forward contracts with the bank. 6.3 The learned Departmental Representative present supported the orders passed by the Income-tax Authorities. 6.4 We have heard the rival submissions and perused the material on record. We find an identical issue was considered by the Tribunal in assessee s own case for the immediately preceding assessment year in ITA No.146/Coch/2015 (order dated 07.09.2018) in assessee s own case for the assessment year 2010-2011, wherein the Tribunal had restored the issue to the TPO with certain specific directions. The relevant finding of the Tribunal in assessee s own case for assessment year 2010-2011 reads as follows:- 6.1 The Transfer Pricing Officer in its order dated 23.01.2014 had excluded the foreign exchange gains while arriving at the Profit Level Indicator (PLI). Before the DRP, the assessee had taken the ground that foreign exchange gains is part of the operating profit margin of the assessee. Further, the assessee in the additional ground before the DRP, had also raised a contention that premium on forward exchange contract is also to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous margin computation. Accentia Technologies Limited *Non-availability of segmented accounts. *Functionally not comparable. *On site services. *Presence of intangibles. Acropetal Technologies Limited *Functionally not comparable. *Research and development activities. *Business promotion expenses. *IT enabled service revenue (i.e. nonfinancial services) less than 75% of total turnover (34.90%) *Erroneous margin computation. Jeevan Scientific Technology Limited *Functionally not comparable. *IT enabled service revenue less than INR 1 crore (INR 769.21 lacs). *IT enabled service revenue (i.e. nonfinancial services) less than 75% of total turnover (70.15%) *Significant marketing cost. *Abnormal profits and peculiar economic circumstances. *Erroneous margin computation. 7.1 The DRP rejected the objections raised by the assessee without passing a speaking order. The DRP confirmed the finding of the TPO. 7.2 Aggrieved by the inclusion of the above said companies as comparable companies, the assessee has raised this issue before the Tribunal. Before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the rival submissions and perused the material on record. We find that the objections raised by the assessee have been disposed off by the DRP without passing a speaking order. The assessee has raised various contentions why the above mentioned companies are not comparable companies. The objections with regard to non-availability of segmental account details for the above comparables, presence of intangibles for above mentioned companies and failure to satisfy certain filters adopted by the TPO himself were not discussed in TPO s order nor in DRP s order. The DRP on its part has merely confirmed the TPO s order without passing a speaking order. Therefore, we deem it appropriate to restore this issue to the files of the TPO. The assessee shall raise all the contentions raised before us and shall place necessary evidence to prove its case that the above mentioned companies should not be adopted as comparable companies. 7.5 In the result, ground No.4.4 is allowed for statistical purposes. SA No.62/Coch/2017 8. Since the appeal is disposed off, the Stay Application filed by the assessee is dismissed as infructuous. 9. In the result, the appeal filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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