2020 (10) TMI 841 - AT - Income Tax

TP Adjustment - comparability of Sasken Communication Technologies Ltd with that of assessee - HELD THAT - This comparable cannot be compared with a contract service provider like assessee and accordingly direct Ld. AO/TPO to exclude this company from finalist. Indexation for computing capital gains on slump sale - Rectification of mistake - Tribunal inadvertently mentioned section 55 instead of section 50 B - HELD THAT - AO to compute the quantum of capital gains in accordance with law as slum sale. Ld. AO is directed to decide the cost of the undertaking for the purpose of computing capital gains that is arisen on transfer of asset as a going concern and is directed to value as per section 50 B of the act. Ld. AO is also directed to decide the depreciation on the block of assets and capital gain has to be computed in accordance with section 40-50 and section 50 B of the act. Accordingly we allow this ground raised by assessee. Addition u/s 40(a)(ia) for non-deduction of TDS - HELD THAT - Primarily, this issue is against assesee in case of CIT Vs. Samsung Electronics Ltd. 2009 (9) TMI 526 - KARNATAKA HIGH COURT . However, Ld.AR submitted that TDS has been deducted on payment made to Software Productivity Research Asia Pacific PTE Ltd. Details of the TDS deducted is furnished by assessee in Form 15CB. We therefore directed Ld.AO to verify the same. If claim of assessee is found to be correct, no disallowance should be made to the extend, TDS is deducted. Accordingly this ground raised by assessee stands allowed for statistical purposes.

Summary

Issues:
1. Rectification of alleged mistakes in the tribunal's order
2. Exclusion of a comparable company for lack of segmental information
3. Working capital adjustment for determining ALP
4. Exclusion of specific companies from comparables
5. Incorrect mention of sections in the order

Issue 1: Rectification of Alleged Mistakes
The assessee filed a petition seeking rectification of mistakes in the tribunal's order. The primary mistake highlighted was regarding the comparability of Sasken Communication Technologies Ltd with the assessee. The tribunal initially remanded the comparable to the Ld.AO/TPO for verification based on the availability of segmental information. However, upon further review, it was noted that the segmental information provided by Sasken was only related to revenue and did not include expenditure details, leading to a decision to exclude Sasken from the final list of comparables. The tribunal referred to past decisions and directed the Ld. AO/TPO to exclude Sasken from the list based on functional dissimilarities with the assessee.

Issue 2: Exclusion of a Comparable Company
The tribunal deliberated on the exclusion of Sasken Communication Technologies Ltd as a comparable due to functional differences with the assessee. The decision was based on the lack of segmental information regarding expenditure, despite revenue details being available. Citing past rulings and the functional profile of Sasken, the tribunal concluded that Sasken's diverse functions and significant intangibles warranted its exclusion from the final list of comparables.

Issue 3: Working Capital Adjustment
Regarding the working capital adjustment for determining ALP, the tribunal observed an alleged mistake in the order related to a negative working capital adjustment. The assessee contended that the tribunal did not address the issue of negative working capital adjustment, leading to a request for rectification. The tribunal decided to recall the order to adjudicate the exclusion of two comparables and address the working capital adjustment issue.

Issue 4: Exclusion of Specific Companies
The assessee alleged a mistake in the tribunal's order concerning the exclusion of two companies, Evoke Technologies Private Limited and Think Software Global Private Limited, which were not adjudicated upon while deciding ground 12.2. The tribunal acknowledged the oversight and recalled the order to address the exclusion of these companies as requested by the assessee.

Issue 5: Incorrect Mention of Sections
The tribunal acknowledged an error in mentioning Section 55 instead of Section 50 B in the order related to the computation of slump sale. The tribunal rectified the mistake and directed the Ld. AO to compute the capital gains in accordance with the provisions of section 50 B instead of providing indexation, as previously stated.

In conclusion, the judgment addressed various issues raised by the assessee regarding mistakes in the tribunal's order, exclusion of comparable companies, working capital adjustments, and incorrect references to sections. The tribunal carefully analyzed the submissions, referred to past decisions, and rectified the identified mistakes to ensure a fair and accurate adjudication of the case.