TMI Blog2020 (3) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... which withholding tax have been actually paid by the deductor. Hence, having adjudicated the issue of allowability of expenses claimed in the year of deduction in favour of the assessee on first principles, we however, consider it as just and expedient to restore the issue back to the file of the AO for verification of actual payments of TDS at applicable rates on made to M/s Hexaware as noted above. AO is directed to allow the deduction of expenses on being satisfied that the tax has been deducted and paid during the previous year relating to assessment year 204-15 towards expenses in controversy. It shall be open to the assessee to support its claim before the AO in this regard with proof of payment of taxes in the light of aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with respect to software development support and related services ('IT Services'). b) The Hon'ble Dispute Resolution Panel PDRP'1 grossly erred in law and on facts in not dealing with the objections raised by the Appellant in relation to functionality of companies selected by the TPO in the order issued under Section 92CA of the Act. c) The AO / TPO erred in law and on facts as he failed to establish that the Appellant shifted profits outside India. 2 Determination of arm's length price / Erroneous data used by the Ld. TPO a) The Ld. AO / Ld. TPO grossly erred on facts and in law in rejecting the filters and sea process adopted by the Appellant in the Transfer Pricing Study without considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . TPO. d) The Ld. AO / Ld. TPO / Hon'ble DRP erred on facts and in law in considering Infosys Limited, Larsen Toubro Infotech Ltd., Mindtree Ltd., Persistent Systems Ltd., R S Software (India) Limited, Cigniti Technologies Limited, SQS India BFSI Limited and Thirdware Solutions Limited as comparable to the captive software development services function rendered by the Appellant. The Ld. Panel erred in upholding the actions of the I.d. AO/ Ld. TPO. e) The Ld. AO/Ld. TPO also erred on facts and in law in arbitrarily rejecting companies with different year ending (i.e. other than 31 March 2014). The Ld. AO / Ld. TPO excluded R Systems International Ltd and Helios and Matheson Information Technology Ltd. selected by the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. TPO The Ld. AO/Ld. TPO erred in law and on facts in not allowing appropriate adjustments under Rule 10B to account for, inter alia, differences in (a) accounting practices, (b) marketing expenditure, (c) research and development expenditure, (d) risk profile between the Appellant and the comparable companies. The Ld. Panel erred in upholding the actions of the Ld. AO/ Ld. TPO. 5 Variation of 3% from the arithmetic mean The Ld. AO/Ld. TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Income Tax Act, 1961 (`Act') available to the Appellant. The Ld. Panel erred in upholding the actions of the Ld. AO/ Ld. TPO. 6 Disallowance under section 40(a)(i) of the Act in AY 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds of appeal No.1-5 are thus dismissed as withdrawn. 5. Ground no.6 concerns disallowance under S. 40 (a)(i) of the Act. In the course of hearing, it was pointed out on behalf of the assessee that certain expenses were incurred towards payments made to a party M/s Hexaware which were covered within the ambit of S. 40(a)(i) of the Act, among other adjustments made by the AO. The amount so paid to Hexawere was thus disallowed by the AO in the assessment year 2012-13 on the ground that the company failed in its obligations to deduct appropriate tax on such payments before making remittance. The issue has been agitated before the appellate authority in the assessment year 2012-13 with regard to disallowance of payment made. However, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the previous year relevant to assessment year 2014-15 in question. 7. We have carefully considered the submissions made on the point and also perused the case records. We agree with the proposition made on behalf of the assessee on first principles for reversal of disallowance carried out u/s 40(a)(i) of the Act for the assessment year 2012-13 in the assessment year 2014-15 on actual payment of withholding taxes. The proviso to sec.40(a)(i) of the Act enables the AO to allow deduction of expenses in computing the income of the previous year in which withholding tax have been actually paid by the deductor. Hence, having adjudicated the issue of allowability of expenses claimed in the year of deduction in favour of the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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