9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (9) TMI 607 - AT - Income TaxTransfer Pricing adjustment - selection of comparable - Inclusion of WEAL INFOTECH LIMITED - Held that - No reason to disturb the view of the ld. CIT(A) because the assessee included it in the list of comparables in its Transfer pricing study. The very comparability of this company was not disputed by the TPO. In that view of the matter, the ld. CIT(A) cannot be faulted with for directing to include the data of a company in the list of comparables, which was originally included by the assessee and not objected to by the TPO. As regards the second aspect of the computation of the profit margin of this company, we find that the ld. CIT(A) accepted the data furnished by the assessee of this company and proceeded to include the same in the list of comparables without affording any opportunity to the TPO for examining the same. We, therefore, find that there is violation of rule 46A to this extent. Accordingly, we set aside the impugned order on this score and send the matter back to the AO/TPO for verifying the correctness of the calculation of OP/TC of this company for the purposes of calculating arithmetic mean of PLI of the comparable companies Inclusion of F I Sofex Limited & TULSYAN TECHNOLOGIES LIMITED - Held that - Even though the assessee in its TP study has included the turnover filter of less than ₹ 1 crore, the assessee has given reasons for inclusion of these two companies in the list of comparables, primarily for the reason that these are not start-up companies and functional data for these companies are reliable. The Tribunal in the case of Techbook International Pvt. Ltd. (2015 (7) TMI 473 - ITAT DELHI ) has held that low turnover per se cannot be reason to exclude a company from the comparable test. In view of the reasons given in the aforesaid order of Tribunal in case of Techbook International Pvt. Ltd., we hold that the CIT (A) is not justified in excluding F I Sofex Limited and Tulsyan Technologies Limited from the list of comparables purely on account of its low turnover. The issue needs to be examined by the AO/ TPO whether these two companies are otherwise functionally similar to that of the assessee irrespective of having low turnover. Exclusion of DATAMATICS TECHNOLOGIES LIMITED AND HINDUJA TMT LIMITED - Held that - In view of the high significant related party transactions which has not been examined either by the AO/TPO or CIT (A) in the instant case, we deem it appropriate to restore the issue to the file of AO/TPO for de novo consideration Interest Income earned on short term deposite whether business income or income from other sources - Held that - We notice that in assessee s own case for assessment year 2002-03, the matter has been decided by the Tribunal in favour of the assessee. It has been brought to our notice that this order of the Tribunal is subject matter of appeal to the Hon ble jurisdictional High Court u/s 260A of the Act. It was submitted that appeal before the Hon ble High Court is pending adjudication. For the sake of consistency, we decide the matter in favour of the assessee by holding that interest on surplus business funds kept with short term deposits is to be treated as income from business entitled to the benefit of deduction u/s 10A/10B of the Act. Exclusion of HINDUJA TMT LIMITED - Held that - this company is having high related party transactions to the extent of 68%. This categorical finding of the CIT(A) has not been challenged by the revenue in its grounds The various orders of the Tribunal have held that the companies having related party transactions in excess of 25% are to be excluded from the comparable list. Thus we hold that the CIT (A) is justified in excluding the same from the list of comparables. Whether Foreign exchange income and Misc Income are operating Income? - Held that - CIT (A) is justified in including the foreign exchange income and misc. income as the operating income. It is ordered accordingly. Denial of deduction u/s 10A of the Act in respect of the newly set up AEGSC unit - Held that - The issue in question is covered in favour of the assessee by order of the Tribunal in assessee s own case for assessment year 2002-03 and assessment year 2007-08 as held CIT(A) has considered all the parameters which may be necessary for adjudicating whether the set up of the new unit is by way of splitting up of the existing business or it is a new set up over and above the existing set up. He has recorded the finding that the physical location of both the units is different. The nature of activities is different, separate license is obtained for the new unit, separate infrastructure is created in the new unit, fresh funds have been invested in the new unit and even after the setting up of the new unit, the turnover of the old unit has not reduced but, on the other hand, increased. During AY 2002-03, when no new unit was in existence, the turnover of old unit was ₹ 129 crores which, after the setting up of the new unit, has increased to ₹ 294 crores in AY 2008-09. In view of the above facts, we do not find any infirmity in the order of ld. CIT(A) - Thus assessee was entitled for deduction u/s 10A as it had established a new unit. - Decided in favour of assessee.
Issues Involved:
1. Transfer Pricing Adjustment: Inclusion and exclusion of specific companies from the comparable list. 2. Corporate Tax Issue: Taxation of interest income on short-term deposits and income tax refunds. 3. Departmental Appeal: Exclusion of Hinduja TMT Limited from the comparable list and classification of foreign exchange and miscellaneous income as operating income. 4. Deduction under Section 10A: Eligibility of the AEGSC unit for deduction under Section 10A of the Income Tax Act. Issue-wise Detailed Analysis: 1. Transfer Pricing Adjustment: Inclusion of Weal Infotech Limited: The assessee argued for the inclusion of Weal Infotech Limited in the comparable list. The TPO had excluded it due to the unavailability of current year data. The Tribunal referenced the case of ACIT vs. Convergys India Services (P) Ltd., where it was held that financial data can be included at the appellate stage when it becomes available. The Tribunal restored the issue to the AO/TPO for reconsideration. Inclusion of F I Sofex Limited and Tulsyan Technologies Limited: These companies were excluded by the TPO due to their turnover being less than Rs. 1 crore. The Tribunal referenced Techbooks International Pvt. Ltd. vs. DCIT, which held that low turnover alone is not a valid reason for exclusion if the companies are functionally comparable. The Tribunal restored the issue to the AO/TPO to determine functional similarity irrespective of turnover. Exclusion of Datamatics Technologies Limited and Hinduja TMT Limited: The assessee sought the exclusion of these companies due to significant related party transactions exceeding 25%. The CIT(A) excluded Hinduja TMT Limited but not Datamatics Technologies Limited. The Tribunal, referencing Nokia India (P) Ltd. vs. DCIT, held that companies with related party transactions exceeding 25% should be excluded. The issue was restored to the AO/TPO for reconsideration. 2. Corporate Tax Issue: Interest Income on Short-Term Deposits: The AO taxed the interest income on short-term deposits as "Income from Other Sources" and denied deduction under Section 10A/10B. The CIT(A) upheld this view, referencing M/s Liberty India Ltd. vs. CIT, which held that such income is not derived from the business undertaking. However, the Tribunal, referencing the assessee's own case and other judgments, decided in favor of the assessee, treating the interest as 'income from business' eligible for deduction under Section 10A/10B. Interest Income from Income Tax Refund: The assessee did not press this ground, following the Tribunal's order in its own case for previous assessment years. 3. Departmental Appeal: Exclusion of Hinduja TMT Limited: The CIT(A) excluded Hinduja TMT Limited due to high related party transactions (68%). The Tribunal upheld this exclusion, referencing Nokia India (P) Ltd. vs. DCIT and ACIT vs. Convergys India Service (P) Ltd., which held that companies with related party transactions exceeding 25% should be excluded. Foreign Exchange and Miscellaneous Income as Operating Income: The CIT(A) included foreign exchange and miscellaneous income as operating income. The Tribunal upheld this inclusion, referencing multiple judgments that classified such income as operating in nature. 4. Deduction under Section 10A: Eligibility of AEGSC Unit: The AO denied deduction under Section 10A for the AEGSC unit, considering it an expansion of the existing FCE unit. The CIT(A) held that the new unit was not formed by splitting up or reconstruction of the existing business and was eligible for deduction. The Tribunal upheld this view, referencing its own orders in the assessee's case for previous assessment years. Conclusion: The assessee's appeal was partly allowed, and the revenue's appeal was dismissed. The Tribunal ordered the AO/TPO to reconsider specific issues related to transfer pricing adjustments and upheld the CIT(A)'s decisions on other issues.
|
