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2014 (7) TMI 1249 - HC - Income TaxTPA - Rejection of comparable - Tribunal rejecting Companies on the ground of exceptionally large scale of operations and functional difference and failing the RPT filter being more than 15% - Held that - Tribunal followed the decision of a Co-ordinate Bench in M/s.Intoto Software India (P) Limited (2013 (10) TMI 599 - ITAT HYDERABAD). Learned Standing Counsel for the Revenue fairly states that the above order of the Tribunal has been confirmed by this Court. The issue therefore needs no further reconsideration communication expenses should be excluded both from export turnover as well as total turnover for the purpose of computing deduction under Section 10A - Held that - Tribunal merely followed the decision of the Karnataka High Court in CIT. v. Tata Elxsi Limited (2011 (8) TMI 782 - KARNATAKA HIGH COURT) which was also followed by the Tribunal in ITO v. Sak Soft Limited (2009 (3) TMI 243 - ITAT MADRAS-D). Though the learned Standing Counsel states that an appeal has been preferred against the decision of the Karnataka High Court it holds good till set aside. We are not persuaded to disagree with the reasoning of the Karnataka High Court in the above decision. Np question of law.
Issues:
1. Rejection of companies based on scale of operations and comparables' margins. 2. Rejection of companies due to functional differences and lack of consideration for verticals/horizontals. 3. Rejection of companies based on related party transactions exceeding 15%. 4. Exclusion of communication expenses from export turnover for deduction under Section 10A. Analysis: Issue 1: The Tribunal's rejection of companies based on the scale of operations and comparables' margins was upheld by the High Court. The decision was supported by a Co-ordinate Bench ruling in a similar case. The Revenue's appeal was dismissed as no substantial question of law was raised for consideration. Issue 2: The Tribunal's rejection of companies due to functional differences and lack of consideration for verticals/horizontals was also upheld by the High Court. The Court noted that the tax payer had not considered verticals/horizontals while selecting comparables. The decision was in line with previous rulings and no substantial question of law was found for consideration. Issue 3: Regarding the rejection of companies based on related party transactions exceeding 15%, the Court found the rationale of the 25% threshold limit in accordance with the Income-Tax Act, 1961. The Tribunal's decision was supported by the relevant legal provisions, and the appeal was dismissed. Issue 4: The Tribunal's decision to exclude communication expenses from export turnover for deduction under Section 10A was based on a precedent set by the Karnataka High Court. The High Court found no reason to disagree with the reasoning of the Karnataka High Court and upheld the Tribunal's decision. As no substantial question of law was raised, the appeal was dismissed. In conclusion, the High Court dismissed the Revenue's appeal under Section 260-A of the Income Tax Act, 1961 in relation to the assessment year 2007-08. The decisions of the Tribunal were upheld based on existing legal precedents and provisions, and no substantial questions of law were found for consideration.
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