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2018 (1) TMI 89 - AT - Income TaxDisallowance on account of employees contributions to Provident Fund paid after the due date - Held that - Employee s contribution to PF & ESI is also allowable both u/s 43B and 36(1)(va) if it is remitted to the Govt. A/c before filing of the return of income. See M/s. Nagarjuna Engineering Constructions vs. ACIT 2017 (12) TMI 936 - ITAT, Hyderabad Adjustment made towards the ALP of the international transactions entered into by the assessee with its AEs - comparable selection criteria - Held that - The assessee is engaged in the business of software development, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Computation of deduction u/s 10A - Held that - Exclude the telecommunication charges both from the export turnover as well as from the total turnover for the purposes of computation of deduction u/s 10A of the Act. We find that this issue is covered in favour of the assessee by the decision of the Hon ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT)
Issues involved:
1. Disallowance of employees' contributions to Provident Fund paid after the due date. 2. Adjustment and addition under Transfer Pricing. 3. Exclusion of certain companies from the final list of comparables. 4. Underutilization of assets and adjustment for the same. 5. Consideration of turnover for TP adjustment. 6. Exclusion of telecommunication charges for deduction u/s 10A of the Act. Issue 1: Disallowance of employees' contributions to Provident Fund paid after the due date The assessee appealed against the disallowance of ?5,99,163 on account of employees' contributions to Provident Fund paid after the due date. The ITAT Hyderabad held in favor of the assessee based on a previous case where it was established that if the contribution is remitted to the Government account before filing the income tax return, it is allowable for deduction under sections 43B and 36(1)(va) of the Income Tax Act. Issue 2: Adjustment and addition under Transfer Pricing The assessee contested the adjustment made under Transfer Pricing for international transactions. The ITAT considered the objections raised by the assessee regarding the inclusion of certain companies as comparables. It directed the exclusion of Infosys Technologies Ltd due to its huge turnover and excluded Exensys Software Solutions Ltd and Thirdware Solutions Ltd based on previous cases citing material impact on financial results and lack of available details on software products. Issue 3: Underutilization of assets and adjustment for the same The assessee requested an adjustment for underutilization of assets during the relevant assessment year. The ITAT directed the Assessing Officer to allow adjustments for underutilization of capacity based on previous tribunal decisions. Issue 4: Consideration of turnover for TP adjustment The ITAT directed the AO to consider the segmental results of only the international transactions with associated enterprises for Transfer Pricing adjustments, excluding non-associated transactions from the turnover calculation. Issue 5: Exclusion of telecommunication charges for deduction u/s 10A of the Act The Revenue's appeal was against the exclusion of telecommunication charges from export turnover for deduction u/s 10A. The ITAT upheld the CIT (A)'s decision based on precedents from the Hon'ble Karnataka High Court and the jurisdictional High Court, dismissing the Revenue's appeal. In conclusion, the ITAT partially allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal, providing detailed analysis and legal reasoning for each issue involved in the judgment.
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