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TMI Blog2020 (9) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... m are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. In terms of sec.92(1) of the Act, any income arising from an international transaction shall be computed having regard to the arm's length price. 3. In this appeal by the Assessee, the dispute is with regard to determination of Arms' Length Price (ALP) in respect of the aforesaid international transaction of rendering ITeS to the AE. 4. The Assessee filed a Transfer Pricing Study (TP Study) to justify the price paid in the international Transaction as at ALP by adopting the Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) of determining ALP. The Assessee selected Operating Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the TPO as adjustment to ALP was added to the total income of the Assessee by the AO. The Assessee filed objections before the DRP and the DRP gave certain directions. Based on the directions of the DRP, the AO passed the final order of assessment. To the extent the Assessee got relief from the DRP, the revenue has preferred appeal before the Tribunal on the following grounds:- 1. The order of the CIT (Appeals) is opposed to law and the facts and circumstances of the case. 2. On the facts and circumstances of the case, whether the Ld CIT(A) is justified in directing the TPO to exclude the company M/s. Acropetal Technologies Limited, without appreciating that the definition of ITeS service in the CBDT Notification doesn't differentiate between BPO and KPO services and that there is no basis for the contention that the companies providing KPO services do not fall in the category of ITeS providers. 3. On the facts and circumstances of the case, whether the Ld CIT(A) is justified in directing the TPO to exclude the company M/s. E-Clerx Services Limited, without appreciating that the definition of ITeS service in the CBDT Notification doesn't differentiate between BPO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12] and it was held that the companies providing high end services cannot be compared to companies providing back office support services. Relevant extract is reproduced below:- "78. To sum up, we hold that the potential comparables of ITES sector level can be selected by applying broad functional test at first stage and although the comparables so selected can be put to further test, depending on facts of each case, by comparing the specific functions performed in the international transactions with that of uncontrolled transactions to attain the relatively equal degree of comparability as discussed above, the classification of ITES into low-end BPO services and high-end KPO services for comparability analysis would not be fair and proper. The first question referred to this Special Bench is whether for the purpose of determining the arm's length price of international transactions of the assessee company providing back office support services to their overseas associated enterprises, companies performing KPO functions should be considered as comparable ?. In our opinion, the answer to this question will depend on the facts and circumstances of each case inasmuch as if the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed here that the appellant has sought inclusion of Microgenetics Systems Ltd. on the grounds that since it is into medical transcription services which falls under ITeS, it is comparable with the appellant. At the same time, the appellant has sought exclusion of Accentia Technologies even though the company is also into medical transcription services, though for this particular year, it has been excluded on account of extraordinary events. The appellant's approach to the TP study is therefore not uniform. The appellant has also sought for inclusion of 3 companies viz. R-Systems International Ltd., Caliber Point Business Solutions Ltd. and Jindal Intellicom Private Ltd.; however the same have been rejected by the TPO because of the different financial year ending. As the adoption of this filter has been upheld in pares 5.7 supra, the exclusion of these three companies by the TPO is upheld. This ground of appeal is therefore partly allowed." (Emphasis supplied) 13. We are of the view that it would be just and appropriate to set aside the issue of comparability of this company to the TPO/AO for consideration afresh. We hold and direct accordingly. 14. The other grounds of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02591 60777 Folklore Attendance module & Attendance reader 328728 98618 TOTAL DEPRECIATION 387497 17. Admittedly the assessee did not deduct tax at source on the payment made to non-resident for purchase of software. The AO was of the view that the payment in question was in the nature of royalty and since the assessee did not deduct tax at source as required u/s.195 of the Act, the sum claimed as depreciation should be disallowed by invoking the provisions of section 40a(i)/(ia) of the Act. Accordingly, the aforesaid sum of Rs. 3,87,497 claimed as depreciation on software was disallowed by the AO. 18. On appeal by the assessee, the CIT(Appeals) confirmed the order of AO. 19. The crux of the argument of the ld. counsel for the assessee was that depreciation is a statutory allowance and it cannot be disallowed by invoking the provisions of section 40a(i)/(ia) of the Act and in this connection placed reliance on the decision of Mumbai Tribunal in the case of SKOL Breweries Ltd. v. DCIT [2013] 29 taxmann.com 111 [Mum Trib]. 20. The ld. DR relied on the order of CIT(Appeals). 21. We have considered the rival submissions and we find that admittedly the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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