Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2019 (4) TMI 2156

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... was reached by the AO, before making a reference to the TPO for benchmarking of the international transactions of the appellant. 3. The learned AO / TPO / DRP erred in computing PLI of appellant in an erroneous manner by a. including items of revenue and items of expenses relating to DTA activity which were excluded while allowing 10A deduction b. not including service tax refund, despite the same being an operating income and despite the direction of the learned DRP 4. Alternatively & without prejudice to Ground No.3, the learned I-T authorities erred in law and on facts in not treating compensation for facilities as operating income eligible for computation of profit level indicator of the appellant company. 5. The learned I-T authorities erred in law and on facts in proposing that PLI of appellant is 4.07% by considering the payout cost as operating cost for computing PLI. The learned I-T authorities ought to have appreciated the unique business model of appellant and that, the payout cost is nothing but pass through cost for the appellant, and not any operating cost. 6. Alternately and without prejudice to Ground No.5, learned I-T authorities erred in law and .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ith its associated enterprises aggregating Rs. 19,71,22,387/-. The Assessing Officer made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) to determine the arm's length price of international transactions. The assessee in TP study report at the time of filing the return of income had adopted TNMM method for benchmarking the transactions pertaining to rendering of services to its associated enterprises. The assessee had taken 9 comparable companies from ITES segment extracted from Prowess data line basis to benchmark the transactions, after applying permissible filters under TNMM method. During transfer pricing proceedings, the assessee filed revised transfer pricing audit report and to explain the arm's length price of all international transactions under Comparable Uncontrolled Method (CUP), TNMM method and also profits split method but finally relied on CUP method for justification of its arm's length price. The reason for revising the basis from TNMM to CUP was rejection during TP proceedings of assessee relating to assessment year 2010-11. The assessee had taken 6 comparable companies from ITES segment to benchmark its transactions in .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Ltd. and the second issue was raised vide grounds of appeal No.3 and 4 i.e. computation of PLI. The learned Authorized Representative for the assessee further pointed out that the DRP had given directions to the Assessing Officer to re-compute PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. However, the said directions have not been followed and hence, the Assessing Officer/TPO needs to be directed in this regard. This is the issue raised vide ground of appeal No.7. Vide ground of appeal No.8, the issue is against exclusion of Accentia Technologies Ltd., wherein the plea of assessee was that it was functionally not comparable. The assessee was engaged in ITES services, whereas Accentia Technologies Ltd. was engaged in healthcare and other activities of KPO services. Our attention was drawn to the ratio laid down by Pune Bench of Tribunal in Aptara Technologies Pvt. Ltd. Vs. DCIT in ITA No.291/PUN/2016, relating to assessment year 2011-12, order dated 05.06.2018 and by the Hon'ble Bombay High Court in Pr.CIT Vs. BNY Mellon International Operations (India) (P) Ltd. (2018) 255 TAXMAN 397 (Bom) on this issue. Vide ground of appeal No.10, the assessee has raised the issue o .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... esentative for the assessee pointed out that the assessee had owned DTA unit and expenses relating to DTA unit i.e. Rs. 36,70,199/- have been included for working out the PLI of assessee. He first proposed that the said expenses of DTA unit should not be considered as operating cost of the assessee and should be excluded. In the alternate, he pointed out that in case the said expenses are included, then income relating to DTA unit of Rs. 9,41,905/- should also be considered as part of revenue items. The second plea raised by assessee was that service tax refund needs to be added as revenue item in the hands of assessee. The learned Authorized Representative for the assessee then referred to written note filed by Revenue and pointed out that the issue raised in ground of appeal No.3(b) has been accepted by Revenue. He then referred to ground of appeal No.4 raised by assessee i.e. alternate ground of appeal No.4 and pointed out that both income and expenses of DTA unit should be considered for computing PLI and in that regard, PLI of assessee would work out to 5.20%. 13. The learned Departmental Representative for the Revenue placed reliance on written note on this issue. 14. We ha .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... parables and determine the arm's length price of international transactions, if any, in the hands of assessee. The grounds of appeal No.3 and 4 are thus, allowed. 17. The ground of appeal No.7 raised by assessee is against re-computation of PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. The DRP has already directed the Assessing Officer / TPO to carry out re-working which has not been carried out by the Assessing Officer/TPO. Hence, direction is issued to re-compute the PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. as per directions of DRP. 18. Now, the last issue vide ground of appeal No.10 against allowance of working capital adjustment. The assessee claims that it was in better financial position as it had received advances from associated enterprises and had no debtors. We find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer / TPO to allow working capital adjustment and rework the margins of comparables. The Assessing Officer is thus, directed to work out arm's length price of international transactions, after affording reasonable opportunity of hearing to the assessee. The grounds of appeal raise .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates