TMI Blog2019 (12) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the Assessee - HELD THAT:- As in the decision rendered in the case of Sony India (P) Ltd. Vs. DCIT [ 2008 (9) TMI 420 - ITAT DELHI-H ] this aspect has been considered and it was held that provisions written back in the P L a/c should be regarded as forming part of the operating profit of the taxpayer. Thus we hold that provision written back should be regarded as part of the revenue of the Assessee while determining PLI. TPO is directed to compute the ALP of the international transaction of rendering of SWD services in the light of the directions contained in this order, after affording the Assessee opportunity of being heard. No other grounds relating to Transfer Pricing adjustment, were pressed for adjudication. Grant of appropriate MAT credit - HELD THAT:- The issue has been dealt with by the DRP by directing the AO to allow MAT credit, if available, according to the provisions of Sec.115JAA of the Act. We are of the view that the said directions are proper and we direct the AO to allow MAT credit as per the directions of the DRP. - IT(TP)A No.113/Bang/2018 - - - Dated:- 5-12-2019 - SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 14.57 2. Genesys International Corpn. Ltd. 30.09 3. ICRA Techno Analytics Ltd. 17.24 4. Infosys Ltd. 43.10 5. Larsen Toubro Infotech Ltd. 25.47 6. Mindtree Ltd. 15.01 7. Persistent Systems Ltd. 27.20 8. RS Software (India) Ltd. 15.34 9. Sasken Communication Technologies Ltd. 12.15 10. Spry Resources India Pvt. Ltd. 26.18 AVERAGE MARK-UP 22.63 4. Based on the above average arithmetic mean of profit margin of the comparable companies, the TPO computed the ALP of the international transaction of rendering of SWD services by the Assessee to its holding company as follows:- Computation of arm s length price by the TPO an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 R S Software (India) Ltd. 16.94% Mean Margin 20.56% The above adjusted mean margin of 20.56% is higher than the adjusted mean margin of 20.06% computed by the TPO based on the tem comparables. In such circumstances, we are of the view that larger set of the comparables takes care of differences, if any, and therefore we uphold the set of the comparables selected by the TPO. 7. Pursuant to the directions of the DRP, the AO passed the final assessment order wherein the TP adjustment stood reworked at a lesser figure than what was originally suggested by the TPO. The AO passed a fair order of assessment making the addition on account of determination of ALP by the TPO as modified by the DRP. Aggrieved by the addition made in the fair order of assessment, the Assessee has raised several grounds of appeal challenging the addition on several counts. However at the time of hearing the learned counsel restricted his arguments to exclusion of 5 comparables out of the 10 comparable companies that remain in the final list of comparable companies after the directions of the DRP viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afresh by the DRP. 29. We have considered the rival submissions. In the case of Agilis Information Technologies India (P) Ltd., (supra), this Tribunal considered the comparability of the 3 companies which the Assessee seeks to exclude from the final list of comparable companies chosen by the TPO. The functional profile of the Assessee and that of the Assessee in the case of Agilis Technologies India (P) Ltd., is identical in as much as the said company was also involved in providing SWD services to its AE and the TPO had chosen some comparable companies which were also chosen by the TPO in the case of the Assessee for the purpose of comparability. In the aforesaid decision the Tribunal held on the comparability of the 3 companies which the Assessee seeks to exclude as follows: (a) Infosys Ltd., was excluded from the list of comparable companies by following the decision of the Hon ble Delhi High Court in the case of CIT Vs. Agnity India Technologies (2013) 36 taxmann.com 289 (Delhi). The discussion is contained in paragraphs 4.5 to 4.7 of the Tribunal s order. The Tribunal accepted that Infosys Ltd. is a giant risk taking company and engaged in development and sale of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculiar only when the Assessee owns software products. The objections of the Assessee are contained in its letter dated 22.12.2015 addressed to the TPO and in annexure-B to the said letter. The relevant portion of the objection is at page 711-713 of the Assessee s paper book. According to the Assessee this company is engaged in providing Geographical Information Services comprising of Photogrammetry, Remote Sensing, Cartography, Data Conversion, state of the art terrestrial and 3D geocontent including location based and other computer based related services. Page-38 of the Annual report 2012 containing the above description was brought to the notice of the TPO. Attention of the TPO was invited to the directors report to the shareholders at page ii of the annual report 2012, wherein the Directors have informed the shareholders that the company continued in its journey to be innovators and leaders in the fields of location based services related geo platforms and advanced survey techniques. There is no segmental reporting because it is stated in the annual report that this company is only in one segment viz., GIS based services and therefore there is no requirement of segmental rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that this company is predominantly into software development services. The presence of intangible assets is indicative of the fact that this company is not in software development services business. The TPO has overlooked this aspect and proceeded on the basis that the presence of intangible assets would not be significant. Rule 10B(2) of the Income Tax Rules, 1962 (Rules) specifically provides that for the purposes of sub-rule (1) of Rule 10B, the comparability of an international transaction with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; In the given facts and circumstances, we are of the view that Genesys International Corporation Ltd., cannot be considered as a comparable company and the said company should be excluded from the final list of comparable companies. We hold accordingly. 9. Respectfully following the decision of the Tribunal we hold that the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting refund for certain categories of service tax input. Based on such orders, the assessee reversed the provision by crediting profit and loss account. [Page 845-854 of PB-l (part II)]. 13. In the TP order, the TPO has considered provision for doubtful debts as non-operating in nature. The DRP has upheld the action of the TPO. 14. The assessee submits that as the reversal of provision is linked to business activity, the same should be treated as operating in nature. In support of this, the assessee relies on the following decisions: i) Sony India (P.) Ltd. V. DCIT [2008] 114 ITD 448 (Delhi) ii) Logica Private Limited v. ACIT [2013] 36 taxmann.com 374 (Bangalore-Trib). 15. We have considered the submission of the learned AR on this issue and find that in the decision rendered in the case of Sony India (P) Ltd. Vs. DCIT 114 ITD 448 (Delhi), this aspect has been considered and it was held that provisions written back in the P L a/c should be regarded as forming part of the operating profit of the taxpayer. The relevant observations of the Tribunal are as follows:- 106.2 After considering facts and circumstances of the case, we do not see any good ground for not pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit or would not be taken into consideration for computing the same. The aspect of liabilities written off was ignored without considering nature and character of such liabilities. It would have been different if a finding was recorded that provision written back did not relate to business operations of the taxpayer. There is no suggestion on the above lines. Further, it is not the case of the Revenue that liabilities written back were wrongly provided for. It is a settled and well accepted proposition that adjustment can be made only on account of differences. It is not possible to believe that other comparable entities taken into consideration are not making and writing back provision of liabilities no more required. There is no material nor there is any finding to support action of the Revenue authorities. We can therefore make a general observation that all business enterprises are making and writing back liabilities as a normal incident of operating business. The expenses for which provisions were originally made were considered operating in nature and allowed in assessment. These provisions no longer required by the taxpayer during the year under review were reversed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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