TMI Blog2020 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ] we delete the disallowance made by the AO. - ITA No. 7725/MUM/2012 - - - Dated:- 27-7-2020 - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Vijay Mehta/ Anuj Kisnadwala, AR For the Revenue : Mr. Michael Jerald, DR ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the order dated 30.10.2012 passed by the Addl. Commissioner of Income Tax-2(1), Mumbai (hereinafter the AO ) u/s 143(3) r.w.s. 144C(13) of the Income Tax Act 1961, (the Act ). 2. The grounds of appeal filed by the assessee read as under : 1. On facts and circumstance of the case and in law, the AO grossly erred, in conformity with the directions of Dispute Resolution Panel ( DRP'), Mumbai u/s 144C(13) of the Dimension Data India Act, in making the transfer pricing adjustment of ₹ 0.66 crores in respect of technical support services (I.T. enabled services) rendered by the appellant to its overseas associated enterprises. The Appellant submits that no transfer pricing adjustment is warranted in its case and wishes to raise the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 14A offered by the Appellant having regard to the accounts of the assessee. 2.3 Without prejudice to the above ground, the AO has erred in incorrectly applying the provision of rule 8D by not excluding the investments which was producing partly taxable income and partly exempt income. 2.4 In view of the above, the additional disallowance of ₹ 17,48,571/- made u/s 14A r.w. Rule 8D be deleted. 3. Briefly stated, the facts of the case are that the appellant filed its return of income for the assessment year (AY) 2008-09 on 27.09.2008 showing income of ₹ 56,13,59,411/- under the normal provisions and ₹ 54,94,24,812/- u/s 115JB of the Act. It is engaged in trading of the networking products and in providing services such as training, maintenance, installation, consultancy, facility management, outsourcing and systems integration in the area of information communication systems and computer networking and computer hardware and software. The appellant is a part of Datacraft group which is engaged in providing IT services and solution that helps clients plan, build, support and manage their IT infrastructures. During the year under consideration, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47.19 47.40 11. IServices India Pvt. Ltd. 13.4 9.58 12. Mold-Tek Technologies Ltd. 17.85 96.66 13. R Systems International Ltd. (Seg.) 21.33 4.30 14. Spanco Ltd. (Seg.) 41.7 11.04 Average 29.92% Thus the TPO by determining the margin at 29.92% based on the arithmetical mean of above 14 companies, determined the ALP at ₹ 7,25,96,567/-, making an adjustment of ₹ 83,98,618/- after considering the suo motu adjustment made by the appellant of ₹ 27,32,259/-. The appellant objected the above adjustment before the DRP. We find that vide order dated 07.09.2012, the DRP directed the AO to recompute the adjustment on the basis of the following 12 comparables : Sr. No. Company Name NCP % 1. Accentia Technolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ineligible units. The Tribunal has held that the taxing authorities have rightly apportioned expenses amounting to ₹ 13.28 lakhs as not eligible for deduction u/s 10A of the Act. Thus it is submitted by the Ld. counsel that M/s Datamatics Financial Services Ltd. be rejected as a comparable to the present appellant. 5. On the other hand, the Ld. Departmental Representative (DR) submits that in the case of Accentia Technologies Ltd. (Seg.), the company is mainly engaged in providing medical transcription, billing and coding services, which are clearly IT enabled services, along with software development and implementation services. About 80% of the revenue during the year has come from medical transcription, coding and billing services. Therefore, it is stated by him that the company can be considered as predominantly an IT enabled service provider. Referring to Acropetal Technologies (Seg.), it is explained by the Ld. DR that the company is engaged in providing engineering services and has been classified as ITeS and therefore, it is comparable to the appellant. Referring to Cosmic Global Ltd., the Ld. DR submits that this comparable was accepted by both the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to a ITES service provider has held that since the company is engaged in providing engineering design service which is a high end service in the nature of KPO it cannot be treated as comparable. The ratio laid down by the Special Bench as aforesaid has been consistently followed in the other decisions of the Tribunal cited by the learned Sr. Counsel wherein it has been held that the company cannot be treated as comparable as it is involved in providing KPO service which is functionally different from low end ITES service provider. Further, it is seen that in case of Symphony Marketing Solutions India Pvt. Ltd. (supra) this company has been rejected on the ground of more than 25% RPT as well as merger and acquisitions made during the relevant previous year. In view of the aforesaid decisions of the Tribunal including the Special Bench decision, we are persuaded to hold that this company cannot be treated as comparable to the assessee. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to exclude the same from the list of comparables. In the above order, the Tribunal has also considered the issue of comparability of Acropetal Technologies Ltd. whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial Services P. Ltd. are excluded by us, we direct the AO to compute the arithmetic mean margin of the remaining comparables and pass consequential order. Needless to say, the AO would give a reasonable opportunity of being heard to the appellant before passing the order. 7. The next issue relates to disallowance of ₹ 17,48,571/- made by the AO u/s 14A r.w. Rule 8D. In the assessment order dated 30.10.2012, the AO has mentioned that the assessee has received dividend of ₹ 2,94,47,744/- from its investment in mutual funds, which is claimed exempt. Further, the AO has observed as under: It is seen that the assessee whereas showing gross receipts as per P L Account at ₹ 325.03 crores, has shown expenditure, at ₹ 269.54 crores. A look at the operating and other expenses details show that the assessee has incurred expenditure amounting to ₹ 77.51 crores under various sub-heads, which include items such as rent, rates and taxes, repairs maintenance, salaries bonus, gratuities, professional fee, telephone and similar expenses. Thus, the assessee's logic that it has not incurred any expenditure whatsoever for earning this exempt income of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid-19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial work all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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