9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 1095 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT - E-Zest Solutions Limited - As in the case of GXS India Technology Centre (P.) Ltd. 2015 (8) TMI 227 - ITAT BANGALORE , since assessee in our case is into software development services, same cannot be functional compared with E-Zest Solutions Limited, which is into KPO services. Therefore, we direct the AO / TPO to exclude E-Zest Solutions Limited from the final list of comparables. It is ordered accordingly. Softsol India Limited - On identical facts, the Tribunal in the case of GXS India Technology Centre (P.) Ltd. (supra) had held that Softsol India Limited is to be excluded from the comparables list of companies on account of that it was having related party transactions in excess of 15%. In view of the above order of the Tribunal and also for the fact that assessment year being the same (A.Y.2008-2009), we direct the AO / TPO to exclude Softsol India Limited from the final list of comparable companies. Benefit of deduction u/s 10A in respect of additions agreed for the MAP proceedings - HELD THAT - On identical facts, the Tribunal in assessee s own case 2020 (6) TMI 699 - ITAT BANGALORE had held that additions agreed under MAP proceedings was entitled to the benefit of deduction u/s 10A. Deduction u/s 10A of the I.T.Act by excluding the expenditure deducted from the export turnover also to be reduced from the total turnover - HELD THAT - We are of the view that the above issue raised by the Revenue is no more res integra. As in the case of CIT v. HCL Technologies Ltd. 2018 (5) TMI 357 - SUPREME COURT had held that when expenditure are reduced from the export turnover, the same need to be reduced also from the total turnover while calculating deduction u/s 10A of the I.T.Act. In view of the dictum laid down by the Hon ble Apex Court, ground No.1 raised in Revenue s appeal is rejected.
Issues Involved:
1. Exclusion of E-Zest Solutions Limited from the final list of comparables. 2. Exclusion of Softsol India Limited from the final list of comparables. 3. Entitlement of the assessee to benefit under Section 10A of the Income Tax Act in respect of additions agreed under Mutual Agreement Procedure (MAP). 4. Calculation of deduction under Section 10A by excluding expenditure from both export turnover and total turnover. Issue-wise Detailed Analysis: 1. Exclusion of E-Zest Solutions Limited from the final list of comparables: The assessee sought the exclusion of E-Zest Solutions Limited from the list of comparables, arguing that it is functionally different as it is engaged in consultancy and technical services categorized as KPO services, unlike the assessee, which is into software development services. The Bangalore Bench of the Tribunal in the case of GXS India Technology Centre (P.) Ltd. had previously excluded E-Zest Solutions Limited on similar grounds. The Tribunal reiterated that E-Zest Solutions Limited, primarily engaged in KPO services, cannot be functionally compared to software development services companies. Consequently, the Tribunal directed the AO/TPO to exclude E-Zest Solutions Limited from the final list of comparables. 2. Exclusion of Softsol India Limited from the final list of comparables: The assessee argued for the exclusion of Softsol India Limited due to its related party transactions (RPT) exceeding 15% for the assessment year 2008-2009. The Bangalore Bench of the Tribunal in the case of GXS India Technology Centre (P.) Ltd. had excluded Softsol India Limited on identical facts due to its RPT exceeding 15%. Following this precedent, the Tribunal directed the AO/TPO to exclude Softsol India Limited from the final list of comparable companies for the same assessment year. 3. Entitlement of the assessee to benefit under Section 10A of the Income Tax Act in respect of additions agreed under Mutual Agreement Procedure (MAP): The assessee sought the benefit of deduction under Section 10A for additions agreed under MAP proceedings. The Tribunal referred to its previous order in the assessee’s own case for the assessment year 2007-2008, where it was held that additions agreed under MAP were entitled to the benefit of deduction under Section 10A. The Tribunal noted that the MAP is a procedure under the Double Taxation Avoidance Agreement (DTAA) and that the provisions of Rule 44H of the Income Tax Rules, 1962, support the assessee's claim. The Tribunal concluded that the proviso to Section 92CA(4) of the Act, which disallows deductions under Section 10A for adjustments made by the AO, does not apply to adjustments made under MAP. Therefore, the assessee was entitled to the benefit of deduction under Section 10A for additions agreed under MAP. 4. Calculation of deduction under Section 10A by excluding expenditure from both export turnover and total turnover: The Revenue contended that the CIT(A) erred in directing the AO to exclude expenditure from both export turnover and total turnover while calculating the deduction under Section 10A. The Tribunal referred to the Supreme Court's decision in the case of CIT v. HCL Technologies Ltd., which held that when expenditures are reduced from the export turnover, they must also be reduced from the total turnover. Following this precedent, the Tribunal rejected the Revenue's ground and upheld the CIT(A)'s direction. Conclusion: The Tribunal directed the exclusion of E-Zest Solutions Limited and Softsol India Limited from the final list of comparables. It also upheld the assessee's entitlement to the benefit under Section 10A for additions agreed under MAP and confirmed the calculation method for deduction under Section 10A by excluding expenditures from both export turnover and total turnover. The appeal filed by the Revenue and the assessee was partly allowed.
|
