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TMI Blog2015 (11) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had filed return of income declaring total income of Rs. 1,63,04,536/-. During the year under consideration, the assessee had entered into following international transactions: S. No. International Transactions Method Value (in Rupees) 1 Software research & development of services TNMM 16,74,24,534 2. Marketing Support Services TNMM 1,51,51,899 3. Receipt of interest free loan - 7,02,47,285 4. The assessee company had adopted TNMM to benchmark the international transaction of the segments by taking operational profit over operating cost (OP/OC) a profit level indicator in both the segments. The PLI of software development segment of the assessee was 27.28% and in the marketing service segment assessee had OP/OC of 9.11%. 5. Ld. TPO examined the calculation of PLI of comparables on the basis of current years data, vis a vis the assessee's mode of computation. There being differences in these workings, based on the financial of the comparable companies, ld. TPO rejected the assessee's contentions and worked out the calculation of OP/OC of the comparables using the following definitions as per capitaline plus database: "Operational Income (OI)=[Net Sales]+ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited Vs. DCIT (I.T.A.Nos.1181/Del/2005, 1257/Del/2007 & 1656/Del/2007), wherein the Delhi Tribunal held that "creation. of unpaid liability and write back is normal incident of business operations". Based on this judgment, I hold that provision written back should be considered as operating income and provisions created during the year should be treated as operating expenditure instead of non operating expenditure as done by the TPO. 13.3 In view of the above, I hold that in case of Engineers India Ltd., Mahindra & Acres Consulting Engineers Ltd., Priya Intl. Ltd. and Rites Ltd., provision made j Bad debts should be considered as operating expenses in nature. 14. Based on the above, the average OP/TC of the comparables comes to 14.27% (details as per Annexure 2) as against 9.11 % that of appellant. 10. Ld. CIT(A) further deleted the disallowance made by AO in respect of interest paid to NOIDA Authority and also allowed the assessee's appeal in regard to depreciation on computer peripherals @ 60% as claimed by assessee as against 25% allowed by AO. 11. Being aggrieved with the order of ld. CIT(A), the department is in appeal before us and assessee has filed cross objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same had to be capitalized to the cost of the land and could not be allowed as revenue expenditure. 16. Before ld. CIT(A) the assessee had, inter alia, submitted that the assessee had been allotted the land including super structure by NOIDA on lease for a period of 90 years for which the assessee was required to pay upfront 30% of the premium/cost of the said premises and the balance 70% was payable in 10 equal half yearly instalments along with interest @ 12% per annum. It was pointed out that the expenditure was incurred to facilitate the project of establishing the development centre for manufacture and export of software. It was pointed out that the interest payable by the assessee to the NOIDA Authority was for the period after acquisition of land including superstructure which was put to use on acquisition. Therefore, the interest pertaining to the period, post acquisition and putting into use of such land including super-structure, could not be capitalized along with the cost of land in terms of section 43(1) read with Explanation 8 thereto. Ld. CIT(A), after considering the assessee's contention, allowed the claim in terms of section 36(1)(iii), observing that as per sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en wrongly classified as 'non- operating for the purpose of comparability analysis done in the order passed by the Ld TPO 3. (b) That on the facts and circumstances of the case and in law, the Ld CIT(A) erred in not directing the Ld AO/TPO to disregard certain non-operating' expenses, which have been wrongly classified as 'operating' expenses for the purpose of comparability analysis done in the order passed by the Ld TPO 21. As far as ground no. 1 is concerned, the issue is no more res-integra and it is well settled law that only current year's financial information of comparable companies is to be used for comparability analysis. Accordingly, this ground is dismissed. 22. As far as ground no. 2 is concerned, the main contention of ld. counsel is that financial information of the company viz. Esquires Engineers & Consultants for current year is available and, therefore, the matter is restored back to the file of ld. TPO for considering the inclusion of this comparable de novo in the list of comparables, selected by him. Ground is allowed for statistical purposes only. 23. As regards ground no. 3, the main contention of assessee is that while computing the PLI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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