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2018 (4) TMI 1621 - AT - Income TaxDisallowance of deduction u/s 10B - Held that - Since in the year under consideration also the assessee has made alternative claim for allowing deduction under section 10A of the Act, we, therefore, respectfully restore the matter to the file of the Assessing Officer for examining the claim of the assessee for allowing deduction under section 10A of the Act. It is needless to mention that assessee shall be afforded adequate opportunity of being heard. Accordingly, relevant grounds of the appeal are allowed for statistical purposes. Transfer pricing adjustment - Comparability analysis - Held that - Assessee has rendered services of the analysis of the projects and entering those details into the tracker and deliver the final output to its AE. Thus, assessee can be characterized as engaged in providing High-end ITes services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Also the company to be excluded on the ground of extraordinary event of amalgamation.
Issues Involved:
1. Disallowance of deduction under section 10B and alternate claim under section 10A of the Income-tax Act. 2. Transfer pricing adjustment of ?1,91,52,194/-. 3. Levying of interest under Section 234B and Section 234C of the Income-tax Act. Detailed Analysis: 1. Disallowance of Deduction under Section 10B and Alternate Claim under Section 10A: The Assessing Officer (AO) denied the deduction claimed by the assessee under section 10B of the Income-tax Act, citing that the approval was received from the Director of Software Technology Park of India (STPI) and not by the Board appointed by the Central Government. The AO also rejected the alternative claim under section 10A. The Dispute Resolution Panel (DRP) upheld these decisions. The Tribunal, considering the precedent set in the assessee’s own case for assessment year 2007-08 and the decisions of the Hon’ble jurisdictional High Court in Regency Creations Ltd. and Valiant Communications Ltd., restored the matter to the AO for examining the claim of deduction under section 10A, ensuring the assessee is afforded adequate opportunity of being heard. 2. Transfer Pricing Adjustment of ?1,91,52,194/-: The assessee, engaged in providing research and analysis services, reported an international transaction valued at ?18,38,35,355/-. The Transfer Pricing Officer (TPO) rejected the use of multiple year data and applied certain filters, selecting 9 comparables and allowing working capital adjustment. The DRP upheld the TPO’s approach. The Tribunal examined the functional analysis of the assessee and adjudicated on the inclusion/exclusion of comparables: - Infosys BPO Limited: Excluded due to its giant turnover compared to the assessee, following the precedent set by the Hon’ble jurisdictional High Court in New River Software Services Private Limited. - Accentia Technologies Ltd.: Excluded due to the extraordinary event of amalgamation, following the Tribunal’s decisions in similar cases. - TCS E-serve International (I) Ltd. and TCS E-serve Ltd.: Retained as comparables, as the Tribunal found them functionally similar to the assessee and rejected the argument of supernormal profit and brand impact. - E4e Healthcare Services Pvt. Ltd.: The matter was restored to the TPO/AO to provide the Annual Report to the assessee and decide on its inclusion/exclusion. - Fortune Infotech Ltd., Datamatics Financial Services Ltd., Optimus Global Services Ltd., and Sparsh BPO Services Ltd.: The Tribunal restored the issue of inclusion of these companies to the TPO/AO for fresh analysis based on factual nature and financial statements. The Tribunal directed the TPO/AO to recompute the adjustment to the international transaction in light of the above directions. 3. Levying of Interest under Section 234B and Section 234C: The ground was dismissed as infructuous since it was consequential in nature. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions for re-examination and recomputation by the AO and TPO. The decision was pronounced on 27th April 2018.
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