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2019 (4) TMI 2125 - AT - Income TaxTP Adjustment - comparable selection - Exclusion of Infosys BPO Hartron Communications Ltd and Capgemini Business Services India P. Ltd - HELD THAT - From a perusal of the order reproduced here in above and the objection raised by the assessee it is clear that the assessee has raised multiple objections. But the DRP while passing the order had restricted to adjudication of one or two objections only and has not bothered to consider and pass an elaborate and reasoned order accepting or rejecting these comparables. We deem it appropriate to remand the matter back for examination of these comparables to the file of the TPO / AO by considering all the objections raised by the assessee. Needless to say while doing so the TPO will also consider the binding precedent of the jurisdictional Tribunal in the matter of CGI Information Systems Management Consultants P. Ltd 2018 (10) TMI 1797 - ITAT BANGALORE and shall also consider the other decisions of the coordinate bench including the decision of Hyundai Motor Engineering P. Ltd 2018 (8) TMI 658 - ITAT HYDERABAD - Ground is allowed for statistical purpose. Exclusion of Harton Communication Ltd Omega Healthcare Management and e4e Healthcare Business Services P. Ltd - as submitted that these companies not comparable as the assessee had submitted before us that RPT is 100% more than 15% and therefore this fact was required to be examined - DRP had passed a cryptic stereo type order and had not specifically dealt with all the objections raised by the assessee. In view of the above the order passed by the DRP is cryptic stereotyped and is without any reasoning. As the order was silent on material aspects therefore we remand the Ground to the file of to AO / TPO to decide a fresh . Comparables R Systems International Limited (seg) and Caliber Point Business Solutions and Informed Technologies India Ltd excluded on the pretext that current year data is not available and the calendar year of these three companies are different from the calendar year of the assessee company - As in Mickinsey Knowledge Center case 2021 (10) TMI 751 - DELHI HIGH COURT after elaborate discussion had recorded a finding that if the current year data can be derived / deduced by including the first and last quarter of the calendar year and the company is an otherwise functionally comparable with the assessee then the data so derived should be utilised for the purposes of carrying out the FAR analysis. In view of the above we allow the ground no.8 raised by the assessee and remand the matter back to the TPO / AO for the purpose of recalculating the current year data in the manner laid down above. Risk adjustment - Since we are remanding the matters in respect of nine comparables to the file of TPO therefore we deem it appropriate to remand this matter also back to the file of the AO / TPO with a direction that the assessee shall provide detailed working of the risk assumed by the assessee and also by comparables on the basis of the parameters laid down by various pronouncements including in the matter of Mercedes Benz Research Development India (P.) Ltd supra Computation of working capital adjustment - DRP had directed the TPO to work out the working capital adjustment as per its direction. However the TPO while giving effect to the directions of the DRP had repeated the working capital adjustment previously done by the TPO - HELD THAT - As in terms of the submission made by the Ld. DR we remand this issue to the file of the TPO for the calculating the working capital adjustment if any in accordance with law and the TPO shall consider all the binding decisions of the High Court / coordinate bench. These grounds are allowed for statistical purpose. Working capital adjustment at interest rate applicable to US currency - TPO had considered average PLR of 14.58% while computing the working capital adjustment - AR had submitted that the assessee is only receiving in US currency therefore rate as applicable in US should be considered for working out working capital adjustment - HELD THAT - In terms of the submission made by the Ld. DR we remand this issue also to the file of the TPO for recalculating the working capital adjustment if any in accordance with Cotton Natural 2015 (3) TMI 1031 - DELHI HIGH COURT Rampgreen Solutions 2015 (8) TMI 931 - DELHI HIGH COURT etc and any other decisions as found applicable. TPO shall consider all the binding decisions of the High Court / coordinate bench. This additional ground no 5 is allowed for statistical purpose. Computation of deduction u/s. 10A - HELD THAT - We find that this issue is put to rest by the judgment of HCL Technologies Ltd 2018 (5) TMI 357 - SUPREME COURT wherein as decided the issue in favour of the assessee holding that the expenses be reduced both from the export turnover as well as from the total turnover. Thus we direct that the expenses incurred shall be deducted both from the export turnover as well as the total turnover for arriving at the deduction u/s. 10A.
Issues Involved:
1. Laconic and devoid of reasoning order by DRP. 2. Bad in law final assessment order. 3. Transfer Pricing (TP) adjustment issues. 4. Re-computation of deduction under section 10AA. 5. Disallowance of software development expenses. 6. Levying of interest under sections 234B and 234C. 7. Initiation of penalty proceedings under section 271(1)(c). Detailed Analysis: 1. Laconic and Devoid of Reasoning Order by DRP The assessee contended that the order passed by the DRP under section 144C(5) of the IT Act lacked reasoning and application of mind. The Tribunal found that the DRP's order was indeed cryptic and stereotyped, failing to consider the objections raised by the assessee comprehensively. Consequently, the matter was remanded back to the TPO/AO for a detailed examination. 2. Bad in Law Final Assessment Order The assessee argued that the final assessment order dated 26.09.2017, passed under section 143(3) read with section 144C(13) of the IT Act, was bad in law and on the facts of the case. The Tribunal did not provide a specific ruling on this issue but addressed the substantive grounds of appeal, which implicitly covered this aspect. 3. Transfer Pricing (TP) Adjustment Issues The Tribunal addressed multiple grounds related to TP adjustments: - Ground 6: The Tribunal found that the DRP did not adequately address the objections raised by the assessee regarding the inclusion of Infosys BPO, Hartron Communications Ltd, and Capgemini Business Services India Pvt. Ltd. The matter was remanded back to the TPO/AO for a detailed examination, considering all objections and relevant precedents. - Ground 7 and Additional Grounds 2 and 3: The Tribunal noted that the DRP's order was cryptic and did not address all objections regarding the exclusion of Hartron Communications Ltd, Omega Healthcare Management, and e4e Healthcare Business Services Pvt. Ltd. These issues were remanded for fresh consideration by the TPO. - Ground 8: The Tribunal allowed the ground related to the exclusion of R Systems International Limited (seg), Caliber Point Business Solutions, and Informed Technologies India Ltd. The matter was remanded to the TPO/AO for recalculating the current year data as per relevant judicial precedents. - Additional Ground 1: The Tribunal remanded the issue of risk adjustment back to the TPO/AO, directing the assessee to provide detailed working of the risk assumed. - Additional Grounds 4 and 5: The Tribunal remanded the issues related to errors in computation of working capital adjustment and the applicable interest rate for working capital adjustment to the TPO for fresh computation. 4. Re-computation of Deduction Under Section 10AA The Tribunal addressed Ground 13, which pertained to the deduction under section 10AA. The Tribunal followed the judgment of the Hon'ble Supreme Court in CIT v. HCL Technologies Ltd, directing that expenses should be reduced from both the export turnover and the total turnover for arriving at the deduction under section 10AA. 5. Disallowance of Software Development Expenses The Tribunal did not specifically address the grounds related to the disallowance of software development expenses (Grounds 15, 16, and 17) in the provided judgment text. 6. Levying of Interest Under Sections 234B and 234C The Tribunal did not specifically address the ground related to the levy of interest under sections 234B and 234C (Ground 18) in the provided judgment text. 7. Initiation of Penalty Proceedings Under Section 271(1)(c) The Tribunal did not specifically address the ground related to the initiation of penalty proceedings under section 271(1)(c) (Ground 19) in the provided judgment text. Conclusion: The appeal was allowed for statistical purposes, with multiple issues remanded back to the TPO/AO for fresh consideration and detailed examination. The Tribunal emphasized the need for the TPO/AO to consider all objections raised by the assessee and follow relevant judicial precedents.
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