2016 (7) TMI 1294 - AT - Income Tax

TPA - selection of M/s.Quintegra Solutions Limited (Quintegra) as comparable - Held that - It is appropriate to remit the issue to the file of AO to see whether any extraordinary event took place in this assessment year or not and also to see whether the loss is persisting continuously or not, decide the issue accordingly. Computing the deduction u/s.10AA - Held that - Direction to AO to exclude to reduce same amounts which has reduced from export turnover from total turnover also for computing the deduction u/s.10AA r. See Sak Soft Limited 2009 (3) TMI 243 - ITAT MADRAS-D

Summary

Issues Involved:
1. Condonation of delay in filing the Revenue’s appeal.
2. Inclusion of Quintegra Solutions Limited as a comparable for Transfer Pricing.
3. Computation of deduction under section 10AA of the Income Tax Act.
4. Levy of interest under sections 234B, 234C, and 234D.
5. Initiation of penalty proceedings under section 271(1)(c).
6. Admissibility of the Revenue’s appeal as time-barred.

Detailed Analysis:

1. Condonation of Delay in Filing the Revenue’s Appeal:
The Assessing Officer (AO) filed the appeal with a delay of 29 days, attributing it to the mixing up of papers in his office. The Tribunal found the reasons bona fide and condoned the delay.

2. Inclusion of Quintegra Solutions Limited as a Comparable for Transfer Pricing:
The assessee considered Quintegra Solutions Limited as a comparable, which was rejected by the Transfer Pricing Officer (TPO) due to continuous losses and extraordinary events like company takeovers. The Dispute Resolution Panel (DRP) directed exclusion only if the losses persisted continuously over three years. The Revenue argued that Quintegra had been incurring losses continuously from FY 2008-09 to 2011-12 and thus should not be considered comparable. The assessee countered that Quintegra had operational profit and cited financial analysis to support this claim. The Tribunal referred to various precedents, emphasizing that only companies with abnormal losses should be excluded. The Tribunal remitted the issue back to the AO to verify if any extraordinary events occurred and if the losses were continuous.

3. Computation of Deduction under Section 10AA:
The DRP directed the AO to reduce the same amounts from total turnover that were reduced from export turnover for computing the deduction under section 10AA, relying on the Special Bench decision in the case of Sak Soft Ltd. The AO did not follow this directive, citing an appeal pending before the Madras High Court. The Tribunal noted that in the absence of any stay by the High Court, the lower authorities are bound to follow the Special Bench decision. Consequently, the Tribunal upheld the DRP's directive.

4. Levy of Interest under Sections 234B, 234C, and 234D:
The Tribunal stated that the interest under sections 234B, 234C, and 234D is consequential and mandatory, to be charged accordingly.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The assessee challenged the initiation of penalty proceedings under section 271(1)(c), arguing there was no concealment of facts. The Tribunal dismissed this ground as premature.

6. Admissibility of the Revenue’s Appeal as Time-Barred:
The assessee in the Cross Objection argued that the Revenue’s appeal should not be admitted as it was time-barred. This issue was already addressed in the Revenue’s appeal where the delay was condoned. Therefore, the Tribunal dismissed this ground.

Conclusion:
- The Revenue’s appeal was partly allowed for statistical purposes.
- The assessee’s appeal was partly allowed.
- The assessee’s Cross Objection was dismissed.
- The Tribunal remitted certain issues back to the AO for further verification and directed adherence to the Special Bench decision in the case of Sak Soft Ltd.