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TMI Blog2019 (8) TMI 1663X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny for this Assessment Year and subsequent thereto, the Assessing Officer (AO) made a reference under section 92CA of the Act to the Transfer Pricing Officer (TPO) for determination of the arms length price (ALP) of the international transactions reported by the assessee in the year under consideration. The TPO passed an order under section 92CA of the Act dated 14.01.2016 proposing an adjustment of Rs. 3,37,89,086/- to the international transactions entered into by the assessee in the ITES segment. Thereafter, the AO passed the draft order of assessment under section 143(3) r.w.s. 144C(1) of the Act dated 14.03.2016, wherein the assessee's income was determined at Rs. 9,06,05,986/-; which included the TP adjustment of Rs. 3,37,89,086/-. 2.2 Aggrieved by the draft order of assessment dated 14.03.2016 for Assessment Year 2012-13, the assessee filed its objections thereto before the DRP. The DRP issued its direction thereon under section 144C(5) of the Act vide order dated 07.10.2016, pursuant to which the AO passed the final order of assessment under section 143(3) r.w.s. 144C(1) of the Act dated 25.11.2016 wherein the assessee's income was determined at Rs. 9,93,98,783/-, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the above computation, the TPO proposed a TP adjustment of Rs. 3,37,89,086/- which was incorporated in the draft order of assessment dated 14.03.2016. Pursuant to the DRP's directions issued on 25.10.2016, the TP adjustment of Rs. 4,18,48,488/- was, inter alia, incorporated in the impugned final order of assessment dated 25.11.2016 for Assessment Year 2012-13. 5.0 Ground Nos.1 to 11 and 15 and 16 5.1 At the outset of proceedings before us, the learned AR of the assessee filed a chart of comparables that the assessee wanted either to be excluded from or included in the final set of comparables and Notes on Arguments. It was submitted by the learned AR that out of the 16 grounds raised on transfer pricing issues, only grounds 12, 13 and 14 related to the plea for exclusion and inclusion of companies from final set of comparables are being pressed; and all other ground Nos. 1 to 11, 15 and 16 (supra) are not being pressed. It is submitted that even in ground No.13, relating to inclusion of companies in the list of comparables, only one company, namely, Crystal Voxx Ltd., is being urged / pressed. In these circumstances, ground Nos. 1 to 11, 15 and 16 raised in this appeal, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, namely (i) Universal Print Systems Ltd., (ii) BNR Udyo Ltd., (iii) TCS E-serve Ltd., and (iv) Excel Infoways Ltd., back to the file of the TPO with the same directions rendered by the Co-ordinate Bench in the case of Mobility Infotech India (P) Ltd. We hold and direct accordingly. Consequently, ground No.12 is disposed off as indicated above. 7. Ground No.13 - Plea of assessee for inclusion of Company M/s. Crystal Voxx Ltd., (Crystal) in the set of comparables 7.1 In this regard (supra), the assessee has sought inclusion of the following 4 companies in the final set of comparables:- (i) ICRA Online Ltd., (ii) Techprocess Solutions Ltd., (iii) Crystal Voxx Ltd., (iv) Cameo Corporate Services Ltd., At the outset, the learned AR for the assessee submitted that the assessee is only pressing for the inclusion of Crystal Voxx Ltd., in the final set of comparables and is not pressing for inclusion of of the other three companies listed at (i), (ii) and (iv) in the final set of comparables. So, we need to deal only with the comparability or otherwise of Crystal Voxx Ltd., ('Crystal'). 7.2 The learned AR submitted that this company, 'Crystal' was suggested as an additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lts, the Auditors have mentioned that this company was predominantly a Business Process Outsourcing (BPO) company and therefore this company cannot be said to be an ITES company. The learned counsel for the Assessee brought to our notice that in the very same note, the auditors have also mentioned that the only reportable segment was BPO. Therefore this company was a BPO company and the results of the BPO which is the only segment ought to have weighed in the mind of the TPO to include this company as a comparable company. 25. We have considered the submission of the learned counsel for the Assessee and are of the view that the plea raised by the Assessee is correct and the TPO ought to have regarded this company as comparable company because the only reportable segment of this company was BP We direct the TPO to include this company as a comparable company." 7.4.2 Respectfully following the decision of the Co-ordinate Bench of this Tribunal in the case of FNF India P. Ltd., (supra), we hold and direct that this company, Crystal Voxx Ltd., is to be included in the final set of comparables. 8. Ground No.14 - Assessee's plea for inclusion of M/s. Informed Technologies Ltd., in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / TPO shall afford the assessee adequate opportunity of being heard and to put forth details / submissions required in the matter, which shall be duly considered by the AO / TPO before deciding the matter. We hold and direct accordingly. Consequently, ground No.14 of assessee's appeal is allowed for statistical purposes. CORPORATE TAX ISSUES 9. Ground No.17 - Disallowance under section 14A r.w. Rule 8D 9.1 In this ground, the assessee contends that no disallowance under section 14A of the Act r.w. Rule 8D(2)(iii) of the Rules was called for as no expenditure has actually been incurred and debited in the profit and loss account by the assessee. 9.2 We have considered the rival contentions in the matter. On a perusal of the record before us, it is seen that in the course of assessment proceedings, the AO observed that the assessee had made investments in shares yielding exempt dividend income amounting to Rs. 91,96,047/- which are claimed exempt from tax under section 10(34) of the Act. The AO did not accept the assessee's claim that no expenditure had been incurred to earn the exempt income and invoking the provisions of section 14A r.w. Rule 8D(2)(iii) to compute the indirect ..... 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