TMI Blog2017 (5) TMI 1733X X X X Extracts X X X X X X X X Extracts X X X X ..... to the turnover of the present year has to be taken into account - assessee should establish that the foreign exchange gain earned by the assessee in the present year which the assessee wants to include in the operating income of the present year is arising in respect of the turnover of the present year because in T. P. study, operating profit is worked out to arrive at the Profit percentage on turnover of the present year and therefore, only that gain which is relatable to the turnover of the present year has to be taken into account. A. O./TPO should decide this issue afresh - Appeal of the revenue is allowed for statistical purposes. Disallowance u/s 14A - HELD THAT:- We find force in the submissions of the learned AR of the assessee that this issue should go back to the A.O. for a fresh decision because the figure of opening investment has to be taken being the investment on 01.04.2008 and not on 31.03.2008 and since the company M/s Raman Boards Limited got merged with the assessee company w.e.f. 01.04.2008, the investment in that company has become nil on that date and there is no other investment on that date and as a result, for computing disallowance u/s 14A, the avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gain is operating income, it has to be seen that such gain is in respect of the turnover of the present year and then only, it can be considered for computing ALP of the present year. She submitted that on this aspect, there is no finding of the A. O. or CIT (A) and therefore, the matter may be restored to A. O. or CIT (A) for a fresh decision after examining this aspect. The learned AR of the assessee supported the order of CIT (A). He also submitted that in case of comparables, it is not possible to find out whether the Foreign Exchange Gain is in respect of the turnover of the present year or earlier year. 5. We have considered the rival submissions. Regarding this issue, we find force in the submissions of the learned DR of the revenue that even after holding that the Foreign Exchange Gain is operating income, it has to be seen that such gain is in respect of the turnover of the present year or an earlier year and then only, it can be considered for computing ALP of the present year if the said gain is in respect of the turnover of the present year. Since, there is no finding of any of the lower authorities on this aspect, we feel it proper that this matter should go to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out average investment, the A.O. should adopt the opening investment at NIL and closing investment at ₹ 73.29 Lacs. He further submitted that the A. O. has considered the total interest expenditure of ₹ 8.46 Crores without going into this aspect that whether any part of interest expenditure is having direct nexus with earning of taxable income. He submitted that this matter may be restored back to the A.O. for a fresh decision. Learned DR of the revenue supported the orders of the lower authorities. 10. We have considered the rival submissions. We find force in the submissions of the learned AR of the assessee that this issue should go back to the A.O. for a fresh decision because the figure of opening investment has to be taken being the investment on 01.04.2008 and not on 31.03.2008 and since the company M/s Raman Boards Limited got merged with the assessee company w.e.f. 01.04.2008, the investment in that company has become nil on that date and there is no other investment on that date and as a result, for computing disallowance u/s 14A, the average investment amount has to be worked out by adopting the opening investment at NIL and closing investment at ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany i.e. L T Infotech Limited, he submitted that the relevant pages in this regard are 434 to 436 as per which, the matter was restored to TPO for verification of correct RPT and to exclude it if the same is more than 15%. He submitted that in the present case also, the issue regarding this comparable i.e. L T Infotech Limited may be restored back. He also submitted that in respect of the issue regarding Working Capital Adjustment also, same tribunal order is relevant and our attention was drawn to Paras 34 35 on pages 443 to 445 of the paper book. Learned Dr of the revenue submitted that before applying any tribunal order on which, reliance is placed, it should be seen that the profile is same. She drawn our attention to page 2 of the order of the TPO and pointed out that it is noted by the TPO that the assessee is rendering software development services to AE engaged in Product Development and integration also in addition to three other activities and since these are comparables are also in product development the assessee in these two cited cases is not engaged in product development, these tribunal orders are not applicable. 13. We have considered the rival submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by following another tribunal order rendered in the case of Novell Software Development India Pvt. Ltd. vs. DCIT vide order dated 31.08.2015 in IT9TP)A No. 1287/Bang/2011 and this finding is given in that order dated 31.08.2015 that this company owns IPR and has branded products also. Regarding L T Infotech Limited, we restore the matter back to AO/TPO for a fresh decision with the direction that he should verify the correct RPT % of this company and to exclude it if the same is more than 15%. In respect of Working Capital Adjustment claim also, we restore the matter to AO/TPO for a fresh decision by following the tribunal order rendered in the case of VMware Software India Pvt. Ltd. vs. DCIT (Supra) because it was held by the tribunal in this case in paras 34 and 35 that AO/TPO should recomputed the working capital adjustment by taking the actual data without putting any upper limit. In the present case also, the AO/TPO should recompute the working capital adjustment by taking the actual data without putting any upper limit. 14. In the result, the appeal of the assessee is partly allowed for statistical purposes. 15. In the combined result, the appeal of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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