TMI Blog2018 (12) TMI 1664X X X X Extracts X X X X X X X X Extracts X X X X ..... ving any opportunity to the Assessing Officer. Therefore, the ground No.2 raised by the Revenue is also dismissed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It is an admitted fact that the assessment year involved in A.Y. 2007-08. Therefore, in view of various decisions, the provisions of Rule 8D are not applicable for assessment year 2007-08. Therefore, the action of the AO in applying the provisions of Rule 8D is incorrect. However, since the assessee has earned dividend income of ₹ 2,52,976/- and has substantial investment in shares of various companies, therefore, it cannot be said that no expenditure has been incurred by the assessee for making the investment and earning the exempt dividend income. Disallowance on estimate for this year under the facts and circumstances of the case will meet the ends of justice. We, therefore, modify the order of the CIT(A) and direct the Assessing Officer to disallow an amount of ₹ 30,000/- u/s 14A of the IT Act. Ground No.8 is accordingly partly allowed. Double disallowance being loss on sale of fixed assets since the said loss was suo moto disallowed by the assessee - HELD THAT:- We restore this matter to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per guidelines laid down by Spryance Inc. He observed that the assessee during impugned assessment year has undertaken the following international transaction:- S.No. Description of transaction Method Value (in Rs.) 1. Medical Transcription, quality assurance and related services TNMM 33,92,30,295/- 2. Reimbursement of expenses CUP 14,20,388/- 4. He observed that the assessee in its TP study report has considered all the international transactions as related to IT enabled activities and has benchmarked by using TNMM. Profit level indicator (PLI) used is OP/TC. In the TP report, the OP/TC of the assessee was shown at 14.64%. The assessee has selected four comparables whose average weighted margin was shown at 11.01%. Since the assessee has used multiple year data, the TPO rejected the same and applied the current year data. Further, since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in directing to exclude M/s Accentia Technologies Ltd. as a comparable ignoring the functional similarity of the comparable. The Medical transcription services forms the foremost segment and is an integral part of the entire gamut of services. 2. The Ld. CIT(A) has erred in law and on facts admitting the additional evidences in case of Accentia Technologies Ltd. regarding acquisition etc., without giving any opportunity to the TPO which is in violation of Rule 46A of the Income Tax Rule, 1962. 3. The Ld. CIT(A) has erred in law and on facts in directing to exclude M/s Cat Technologies Ltd. as a comparable ignoring the functional similarity of the comparable. The training and Medical Transcription Service was a major part of the income of Cat Technologies Ltd. in the A.Yrs. 2006-07, 2007-08 2008-09. The appellant craves, leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of appeal. 8. The assessee has taken the following grounds in the CO filed by it:- 1. That on the facts and circumstances of the case and in law, the CIT(A) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground is independent and without prejudice to the other grounds of cross objection preferred by the Assessee. The assessee prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal at any time before or at the time of hearing of the appeal. 9. The assessee has also raised the following additional ground in the Cross Objection:- 1. That on the facts and circumstances of the case and in law, the CIT(A)/AO/TPO erred in not granting working comparability adjustment to the operating margins of the comparable companies to account for difference in working capital of Assessee vis-a-vis the comparable companies. 10. Referring to the decision of the Hon'ble Supreme Court in the case of NTPC Ltd. vs. CIT, 229 ITR 383 (SC) and CIT vs. Nelliappan (S), 66 ITR, 722 (SC), he submitted that the additional ground raised by the assessee in the CO should be admitted. After hearing both the sides, the additional ground raised by the assessee in the CO is admitted for adjudication. 11. So far as the appeal filed by the Revenue is concerned, the ld. DR strongly supported the order of the TPO. He submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Vodafone India Services (P) Ltd. vs. DCIT (2014) 146 ITD 78 (Mumbai) for A.Y.2007-08 at para 21.1 of the order. (iv) DCIT vs. Monster.Com India Pvt. Ltd. (2017) 56 ITR(T) 1 (Hyderabad-trib.) for A.Y. 2007-08 at para 36 36.1 of the order. (v) Orange Business Services India Solutions Pvt. Ltd. vs. DCIT, ITA No. 869/Del/2016 (Delhi-Trib.) for A.Y. 2011-12 at paras 4.1 4.3 of the order. (vi) NTT Data Global Delivery Services vs. ITO, ITA No.5339/Del/2011 (Delhi-Trib.) 13. So far as the Cat Technologies Ltd. is concerned, the ld. counsel for the assessee drew the attention of the Bench to the copy of the audited accounts, copy of which is placed at page 220-244 of the paper book. Referring to page 235 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to Schedule-9 i.e., Income from operations and submitted that the assessee has derived income from three sources, namely, training income ₹ 12.14 lakhs, software development and consulting services ₹ 339.90 lakhs and medical transcription receipts ₹ 53.58 lakhs. Referring to clause (7) of the notes forming part of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisitions. Clause 2 of the Notes to Accounts reads as under:- 2. Pursuant to the Order passed by the Hon'ble High Court of the Judicature at Bombay and Ernakulam the erstwhile Subsidiaries of the Company namely Geosoft Technologies (Trivandrum) Limited (GTTL) and Iridium Technologies (India) Private Limited (ITIPL) have merged with the company with effect from April 1, 2006. 16. We, therefore, find merit in the submission of the ld. counsel for the assessee that due to non-availability of segmental information and extraordinary events occurred during the year, this company cannot be considered as comparable. The various decisions relied on by the ld. counsel for the assessee also supports his case. Under these circumstances, we do not find any infirmity in the order of the CIT(A) in directing to exclude this company from the list of comparables. Accordingly, the same is upheld. 17. So far as Cat Technologies Ltd. is concerned, here also we find from the annual report of this company that it has revenue from three sources, namely, medical transcription; software development and consultancy services; and training income. However, we find no se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has invested an amount of ₹ 87,69,780/- towards shares in various companies and has not made any disallowance for earning such exempt income. While doing so, he applied the provisions of section 14A read with Rule 8D. In appeal, the ld. CIT(A) confirmed the action of the Assessing Officer for which the assessee is in appeal before the Tribunal. It is an admitted fact that the assessment year involved in A.Y. 2007-08. Therefore, in view of various decisions, the provisions of Rule 8D are not applicable for assessment year 2007-08. Therefore, the action of the Assessing Officer in applying the provisions of Rule 8D is incorrect. However, since the assessee has earned dividend income of ₹ 2,52,976/- and has substantial investment in shares of various companies, therefore, it cannot be said that no expenditure has been incurred by the assessee for making the investment and earning the exempt dividend income. Considering the totality of the facts, we are of the considered opinion that disallowance of ₹ 30,000/- on estimate for this year under the facts and circumstances of the case will meet the ends of justice. We, therefore, modify the order of the CIT(A) and dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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