9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (7) TMI 1220 - AT - Income TaxTransfer pricing adjustment - comparability - Held that - As it is clear from the business profile of the assessee recorded by the TPO that the international transactions in the ITES pertaining to data processing and in the nature back end service support to the AE group of Co s, thus companies functionality dissmilar with that of assessee need to be deselected from final list of comparable. In view of the statement and plea of the learned AR we direct the AO/TPO to re-compute the ALP after excluding the above two Co. namely M/s Eclerx and M/s Mold Tek (Supra) and then determine the adjustment, if any after giving the benefit of tolerance range of 5%. Computation of deduction u/s 10A - Held that - The communication expenses are excluded from the export turnover then, the same should also be excluded from the total turnover in view of the judgment in the case of CIT v. Tata Elxsi Ltd. 2011 (8) TMI 782 - KARNATAKA HIGH COURT for the assessment year 2003-04.
Issues Involved:
1. Transfer Pricing Adjustments 2. Adjustment under Section 10A of the IT Act 3. Disallowance under Section 40(a)(i) of the IT Act Issue-wise Detailed Analysis: Transfer Pricing Adjustments: Ground No. 5: The assessee company, engaged in export of software development and ITES services, contested the transfer pricing adjustments made by the TPO and confirmed by the DRP. The TPO rejected 8 comparables selected by the assessee and added 15 more, resulting in 20 comparables with an average margin of 24.75%. The TPO allowed a working capital adjustment of 0.74%, leading to an adjustment of Rs. 30,27,18,666/-. The DRP revised the working capital adjustment to 2.79% and excluded one comparable. The assessee challenged the inclusion of Eclerx Services Ltd. and Mold Tek Technologies Ltd. in the comparables. Eclerx Services Ltd.: The assessee argued that Eclerx Services Ltd. is a high-end KPO, not comparable to its low-end ITES services. The Special Bench in Maersk Global Centres India (P.) Ltd. and the Mumbai Tribunal in Lionbridge Technologies (P.) Ltd. held that Eclerx, being a high-end service provider, is not comparable to low-end ITES providers. Following these decisions, the Tribunal directed the AO/TPO to exclude Eclerx from the comparables. Mold Tek Technologies Ltd.: The assessee argued that Mold Tek Technologies Ltd. is involved in structural engineering KPO services and underwent an extraordinary event of demerger and amalgamation. The Special Bench in Maersk Global Centres India (P.) Ltd. and the Mumbai Tribunal in Lionbridge Technologies (P.) Ltd. held that Mold Tek, being a KPO and having undergone extraordinary events, is not comparable to low-end ITES providers. The Tribunal directed the AO/TPO to exclude Mold Tek from the comparables. The Tribunal directed the AO/TPO to re-compute the ALP after excluding Eclerx and Mold Tek and determine any adjustment after giving the benefit of the +/-5% tolerance range. Adjustment under Section 10A of the IT Act: Grounds No. 15 & 16: The assessee contested the exclusion of communication expenses from export turnover for the computation of deduction under Section 10A. The Tribunal, following the jurisdictional High Court's decision in CIT v. Tata Elxsi Ltd., held that if communication expenses are excluded from export turnover, they should also be excluded from total turnover. This ensures uniformity in the formula for computing deductions under Section 10A. The Tribunal decided this issue in favor of the assessee. Disallowance under Section 40(a)(i) of the IT Act: Ground No. 17: The assessee contested the disallowance of Rs. 7,42,22,683/- under Section 40(a)(i) for not deducting tax at source on payments made to non-resident vendors, deemed as royalty fees for technical services. However, the assessee did not press this ground during the hearing, and it was dismissed as not pressed. Conclusion: The appeal was partly allowed, with the Tribunal directing the exclusion of Eclerx and Mold Tek from the comparables for transfer pricing adjustments and deciding the issue of communication expenses under Section 10A in favor of the assessee. The disallowance under Section 40(a)(i) was dismissed as not pressed.
|
