TMI Blog2018 (6) TMI 1844X X X X Extracts X X X X X X X X Extracts X X X X ..... power. Therefore, this comparable is rightly rejected by the CIT(A) as given a categorical finding as to the function of the comparable and the requirement of the highly skilled manpower. Excess depreciation on computer accessories - Whether eligible items for depreciation at 60%? - HELD THAT:- CIT(A) has given the finding that the assessee had purchased computer peripherals like wireless access point, G-Tran, Carry cass, Pan Cards, spike buster, pen drive, ETI enhancements, switches, keylock, battery, tae, extension card, tv tune, convertor, charger etc. Rs. 1,62,975/- as computer peripherals. The Hon ble Jurisdictional High Court in BSES Yamuna Powers Ltd. [ 2010 (8) TMI 58 - DELHI HIGH COURT] classified these items as eligible items for depreciation at 60%. Therefore, the decision of the Hon ble Jurisdictional High Court is squarely applicable in assessee s case. Therefore, Ground No. 2 of the Revenue s appeal is dismissed. - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For the Appellant : Sh. Kumar Pranav, Sr. DR For the Respondent : Ms. Vandana Bhandari, CA ORDER PER SUCHITRA KAMBLE, JM This appeal is filed aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into by the assessee during the financial year 2007-08. The Assessee had selected 13 comparable companies in ITES segment and 9 in advisory support service segment. The margin of the Assessee was 16% and 30% respectively in these two- segments. The margin of the comparables was less as compared to the Assessee company and therefore the TP study justified the international transaction as at arm's length. The TPO accepted the transaction in the advisory support service segment as at arm's length. However, TPO rejected the TP documentation relating to ITES segment. The TPO conducted independent search of the comparables based on different sets of quantitative filters. The information available in the public domain was supplemented by collecting further information from the comparable companies by using the powers u/s 133(6). The TPO issued a detailed show cause notice to the assessee. After the receipt of the response, the TPO analyzed the submissions and decided to take 20 comparables. The TPO has taken OP/TC as the PLI and TNMM as the most appropriate method and further allowed working capital adjustments to the comparables. As a result, the mean margin of the comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l held as under: VISHAL INFORMATION TECHNOLOGIES LTD. (VISHAL) 55. The taxpayer sought to exclude Vishal on ground of functional dissimilarity having huge assets and company is operating on outsourcing business model having low asset base with employee cost of 2% of the turnover vis- -vis the taxpayer who has employee cost/turnover ratio of 36%. 56. The Ld. DR for the Revenue contended that in case Vishal is to be excluded on ground of outsourcing its work then Cosmic Global and Spanco are also liable to exclude. However, to counter this argument, the Ld. AR for the taxpayer contended that even exclusion of Cosmic and Spanco will not cause prejudice to the taxpayer in any manner. In these circumstances, we are not going into the merits of this argument as the comparability of a company is required to be examined on the basis of functional comparability and in the light of section 10B(2) of the Act. 57. Annual report of Vishal is available at pages 336 to 347 of the paper book shows that its sales is pegged at Rs. 30,60,10,382/-, salaries and wages to the tune of Rs. 70,27,632/- i.e. 2.3% as against sales of the taxpayer at Rs. 5,01,05,563/- and salaries/wages at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Agnity India Technologies Pvt. Ltd. in ITA 1204/2011 dated 10.07.2013, Calibrated Healthcare Systems India Pvt. Ltd. vs. ACIT ITA No. 5271/Del/2012, New River Software Services (P) Ltd. vs. ACIT ITA No. 451/Del/2013 and United Health Group Information Services (P) Ltd. vs. ACIT ITA No. 6312/Del/2012 and ordered to be excluded by taking into account its functional profile, risk profile, nature of services, ownership of IP rates, expenditure on R D etc. 61. When we compare the aforesaid business profile of Wipro vis- -vis the taxpayer, there are stark dissimilarities as Wipro is a giant company having huge asset base, brand value, goodwill and presence in the global market, spending 8.5% of the total revenue on R D and it is a full fledged risk bearing service provider. Moreover, marketing expenses of Wipro is 3% of the total turnover. 62. So, we are of the considered view that Wipro is not a suitable comparable for benchmarking the international transactions. MOLDTEK TECHNOLOGIES LTD. 79. The Ld. DR for the Revenue contended that Moldtek Technologies Ltd. is a suitable comparable and the reasons given by the Ld. CIT (A) that indulging in evasion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of 204% in IT (KPO) Division Billings from Rs. 375 lakhs in 2005-06 to Rs. 1140 lakhs in 2006-07. Moldtek Technologies Ltd. has also achieved a profit of Rs. 830.71 lakhs as against Rs. 394.97 lakhs in the previous year registering a growth of 134%. IT/KPO Division rose sharply from Rs. 1.60 crores to Rs. 5.75 crores registering a growth of 259.4%. It is also categorically referred in Director s report, available at page 246 of the paper book, that the company is planning to pursue further acquisition opportunities to maintain a better average rate of growth for structural engineering services. So, we are of the considered view that the factum of merger and acquisitions also make Moldtek Technologies Ltd. as unsuitable comparable vis- -vis the taxpayer and has been rightly excluded by the Ld. CIT (A). The facts are not different in the present year as well, therefore, in the present year also following the order of the Tribunal in A.Y. 2007-08 in assessee s own case these three comparables has to be excluded as these comparables are functionally different from the assessee company. As relates to the Genesys International Corporation Ltd., the Ld. AR pointed that this company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinary event being the reason to reject this company did not find favour with him. Reasons for decision: This company provides Geospatial Services, viz., photogrammetric services, preparation of cadastral maps from aerial photographs etc. using niche software tolls. It requires a different skill set, e.g., services of draftsman, cartographers and civil engineers etc. Though it is an ITeS company but it performs functions that need highly skilled manpower. Though it is an ITeS company but it performs functions that need highly skilled manpower. Therefore, I am in agreement with the contention of the assessee that it is not functionally comparable with the assessee. Therefore, I hold that this company should be excluded. The CIT(A) has given a categorical finding as to the function of the comparable and the requirement of the highly skilled manpower. Therefore, this comparable is rightly rejected by the CIT(A). The CIT(A) further while deciding on the final list of comparables held as under: 10.2 Based on the above discussion, the final set of comparables is as follows: S.No. Company OP/TC (%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is settled due to the judgment of the Hon ble Jurisdictional High Court in CIT vs. BSES Yamuna Powers Ltd. (I.T. Appeal No. 1267/Del/2010 dated 31.08.2010). We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciate at the higher rate of 60%. The assessee s case is squarely covered by the above judgment of Jurisdictional High Court. Further, reliance has also been placed on the following judgments: DCIT vs. Datacraft India Ltd. (Mumbai Special Bench ITAT in ITA No. 7462 and 754) ACIT vs. Container Corporation of India Limited (2009-TIOL-195- ITAT-DEL) Delhi ITAT Expeditors International India (P) Ltd. vs. Addl. CIT (118 TTJ 652) (Delhi Tribunal) ACIT, Circle 3(1), New Delhi vs. Cincom System India Pvt. Ltd. (Delhi Tribunal in ITA No. 1534/Del/2008) ACIT, Circle 3(1), New Delhi vs. Continental Carriers Pvt. Ltd. (Delhi Tribunal in ITA No. 2137/Del/2008) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
