2020 (8) TMI 323 - AT - Income Tax

TPA - Comparable selection - HELD THAT - Because of the extraordinary events that took place in the period under considerationwe direct the Assessing Officer/TPO for exclusion of Infosys BPO and TCS E serve Ltd from the finalist of comparables. So long as a company is functionally similar to the assessee merely because it does not match with the turnover, it cannot be rejected. Adjustment in respect of interest on receivables - HELD THAT - If working capital adjustment is granted, then no separate adjustment or interest receivables is required. We are fortified in our decision by the decision of Kusum Healthcare P. Ltd. 2017 (4) TMI 1254 - DELHI HIGH COURT . Claim of deduction u/s 10A - HELD THAT - This Tribunal following the earlier decision of the Tribunal held that assessee was entitled for deduction u/s 10A on the ground that it has established a new unit. Once already deduction u/s 10A on the same unit has been allowed in the earlier years by the Tribunal, therefore, no different view can be taken for the same unit on similar set of facts for denying the deduction in Assessment Year 2009-10. TDS u/s 195 - Disallowance u/s 40(a)(i) - payments in respect of certain amounts, such as, technology service, fee charge out, receipt of services, professional charges and relocation expenses - HELD THAT - It is true that most of the relocation expenses are in respect of salary paid to employees of the assessee who travelled abroad for business of the appellant. However, in our considered opinion, these details need verification. We, accordingly, restore this issue to the file of the AO and is directed to very details and examine whether the payments have been made by the assessee to its own employees who travelled abroad and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. Grant of TDS - HELD THAT - We direct the Assessing Officer to give credit of TDS as per provisions of law.

Summary

Issues involved:
1. Transfer pricing adjustment
2. Denial of deduction u/s 10A of the Act
3. Disallowance of relocation expenses u/s 40(a)(i) of the Act
4. Non-granting of tax deducted at source

Detailed Analysis:
1. Transfer Pricing Adjustment:
The appellant, a subsidiary of an American company, engaged in data management, faced transfer pricing adjustments by the TPO. The TPO selected 8 comparable companies for benchmarking international transactions, resulting in an upward adjustment. The appellant sought exclusion of certain comparables based on previous tribunal decisions. The Tribunal directed the exclusion of specific comparables and inclusion of others based on functional similarity and turnover criteria.

2. Denial of Deduction u/s 10A:
The appellant claimed a deduction u/s 10A for a unit set up during a specific financial year. The Tribunal considered previous decisions and directed the AO to allow the deduction, citing the establishment of a new unit and consistency in granting deductions for the same unit in earlier years.

3. Disallowance of Relocation Expenses:
The Assessing Officer disallowed relocation expenses, considering them as FTS/royalty under the India USA DTAA and subject to TDS. The appellant argued that a substantial portion of expenses was for employee travel, not covered by the Centrica case. The Tribunal found the details needed verification and remanded the issue to the AO for further examination, directing proper verification and a fresh decision.

4. Non-Granting of Tax Deducted at Source:
Regarding the issue of non-granting of TDS credit, the Tribunal directed the AO to give credit as per legal provisions. The levy of interest was deemed consequential, with the AO instructed to apply it as per the law.

In conclusion, the Tribunal allowed the appeal in part for statistical purposes, providing detailed directions for reconsideration of the issues related to transfer pricing adjustments, deduction u/s 10A, disallowance of relocation expenses, and granting of tax deducted at source. The judgment emphasized the importance of consistency, functional similarity, and adherence to legal provisions in determining tax liabilities and deductions.