9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (11) TMI 1509 - AT - Income TaxTPA - comparable selection criteria - functional comparability - Held that - Services provided by the assessee are in the nature of Information Technology Enabled Services, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Deduction u/s.10A - Held that - Hon ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others (2011 (8) TMI 782 - KARNATAKA HIGH COURT) had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator.
Issues Involved:
1. Exclusion of certain companies from the list of comparables. 2. Inclusion of certain companies in the list of comparables. 3. Exclusion of expenditure incurred in foreign currency from the export turnover while computing the deduction under Section 10A of the Act. Detailed Analysis: 1. Exclusion of Certain Companies from the List of Comparables: Apex Knowledge Solutions Ltd.: The assessee argued that this company is functionally not comparable as it generated revenue from software exports amounting to ?4.92 Crores without segmental details. The Tribunal agreed, citing a similar decision in the case of Willis Processing Services (I) Pvt. Ltd. vs. DCIT, and directed the AO/TPO to exclude this company from the comparables. Vishal Information Technologies Ltd.: The Tribunal noted that in the assessee's own case for the Assessment Year 2007-08, this company was found not comparable due to its operating model and inventory holdings. Hence, it was directed to be excluded. Goldstone Infratech Ltd. (Seg): The Tribunal found that this company failed the 25% export revenue filter, as its foreign exchange earning was only ?4.24 lakhs out of a total BPO segment turnover of ?5.02 Crores. Following the decision in HSBC Electronic Data Processing India Ltd. vs. ACIT, the Tribunal directed the exclusion of this company. Maple eSolutions Ltd.: The Tribunal rejected the assessee's argument regarding unreliable financial statements due to past allegations against the directors, stating that these allegations were unrelated to the company's business activities. Thus, this company was not excluded from the comparables. Asit C Mehta Financial Services Ltd.: The Tribunal found this company engaged in diversified activities with an amalgamation during the year, failing the employee cost filter and having more than 15% RPT. Following the decision in HSBC Electronic Data Processing India Ltd. vs. ACIT, the Tribunal directed the exclusion of this company. 2. Inclusion of Certain Companies in the List of Comparables: Geneysis International Corporation Ltd.: The Tribunal noted that this company had a Related Party Transaction (RPT) of 26.33%, which exceeded the acceptable filter of 15% or even 25%. Therefore, it was not considered a good comparable. Mercury Outsourcing Management Ltd.: The Tribunal found that this company had a turnover of only ?45.33 lakhs, which did not satisfy the turnover filter in comparison to the assessee's turnover of more than ?27 Crores. Hence, it was not considered a good comparable. 3. Exclusion of Expenditure Incurred in Foreign Currency from the Export Turnover: The Tribunal directed the AO to exclude the expenses incurred in foreign currency both from the export turnover and the total turnover while calculating the deduction under Section 10A of the Act. This decision was based on the precedent set by the Hon’ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd., which established that the components of export turnover in the numerator and denominator should be consistent to avoid anomalies. Conclusion: The appeal of the assessee was partly allowed, with specific directions to exclude certain companies from the list of comparables, reject the inclusion of others, and adjust the calculation for the deduction under Section 10A of the Act. The Tribunal's decisions were based on functional comparability, revenue filters, and adherence to established legal precedents.
|
