2016 (12) TMI 1607 - AT - Income Tax

TPA - ALP determination - TNMM used as the most appropriate method to arrive at Arms length price (ALP) - comparables selection - Held that - Assessee has been treated as a low end ITES service provider rendering data processing or an IT enabled services who is not involved in domain knowledge so as to include any KPO service provider as a comparable. Companies functionally dissimilar with that of assessee need to be deselected from final list of comparability. Deduction under section 10A being granted on the gross total income - set of the brought forward losses of assessment year 2001-02 and 2002-03 against the balance profit under the head claimed - Held that - No infirmity in the directions given by Ld.CIT(A) in computing deduction under section 10 A before carry forward of losses. Accordingly this ground raised by revenue stands dismissed. See CIT vs. Black & Veatch Consulting Pvt. Ltd. 2012 (4) TMI 450 - BOMBAY HIGH COURT

Issues:
1. Addition of Rs. 7,76,09,600 by the CIT(A) in the revenue's appeal.
2. Allowance of deduction under section 10A before setting off carry forward losses in the revenue's appeal.
3. Exclusion of M/s Mould Tech Technologies Ltd. from comparables in the revenue's appeal.
4. Treatment of deduction under section 10A in the revenue's appeal.
5. Cross objection by the assessee supporting the CIT(A)'s order.

Addition of Rs. 7,76,09,600 by the CIT(A) in the revenue's appeal:
The Tribunal noted that the CIT(A) erred in deleting the addition by ignoring the computation of margins adopted by the TPO. The CIT(A) upheld the TPO's selection of comparables based on industry analysis, rejecting the TP study submitted by the assessee. The Tribunal dismissed the revenue's appeal, affirming the exclusion of the addition.

Allowance of deduction under section 10A before setting off carry forward losses in the revenue's appeal:
The dispute revolved around the order of the CIT(A) allowing the deduction under section 10A before setting off carry forward losses. The Tribunal considered the nature of the deduction under section 10A and cited relevant High Court decisions. Following the legal interpretation, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order.

Exclusion of M/s Mould Tech Technologies Ltd. from comparables in the revenue's appeal:
The issue centered on the exclusion of M/s Mould Tech Technologies Ltd. as a comparable. The Tribunal analyzed the company's operations and profitability, concluding that it was not functionally similar to the assessee. Citing past Tribunal decisions, the Tribunal upheld the CIT(A)'s decision to exclude the company from the list of comparables.

Treatment of deduction under section 10A in the revenue's appeal:
The Tribunal considered the treatment of deduction under section 10A in the context of setting off carry forward losses. Referencing High Court rulings, the Tribunal affirmed the CIT(A)'s direction to compute the deduction under section 10A before setting off losses. Consequently, the Tribunal dismissed the revenue's appeal.

Cross objection by the assessee supporting the CIT(A)'s order:
The cross objection by the assessee supported the CIT(A)'s decision, particularly in the context of the exclusion of M/s Mould Tech Technologies Ltd. As the Tribunal upheld the exclusion, the remaining grounds raised by the assessee in the cross objection were deemed dismissed. Therefore, the cross objection filed by the assessee became infructuous.

This detailed analysis of the legal judgment highlights the key issues addressed by the Tribunal, providing a comprehensive understanding of the decision-making process and the legal interpretations applied in resolving the disputes.

← Previous Next →