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2023 (6) TMI 607 - AT - Income Tax


Issues Involved:
1. Transfer Pricing (TP) Adjustments
2. Disallowance under Section 40(a)(i) of the Income Tax Act
3. Discrepancy in Assessed Income

Summary:

1. Transfer Pricing (TP) Adjustments:
The assessee sought the exclusion of 11 companies from the list of comparable companies used for determining the Arm's Length Price (ALP). The Tribunal adjudicated the functional comparability of each company:

- Larsen and Toubro Infotech Ltd., Mindtree Limited, Persistent Systems Ltd., Infosys Limited: The Tribunal excluded these companies citing functional dissimilarities, significant R&D activities, onsite revenue, and the presence of intangibles. The decision was based on precedents in the assessee's own case and similar cases like Yahoo Software Development India P. Ltd.

- Tata Elxsi Ltd.: Excluded due to its engagement in diverse activities and significant R&D, following the Tribunal's earlier decisions in the assessee's own case for previous years.

- Cygnet Infotech Pvt. Ltd.: Excluded as it was found to be engaged in ITES and other non-comparable services, following the Tribunal's decision in Radisys India Ltd.

- Infobeans Technologies Ltd.: Excluded due to its involvement in high-end KPO services and lack of segmental data, consistent with the Tribunal's decisions in earlier years and Radisys India Ltd.

- Nihilent Ltd.: Excluded based on functional dissimilarity and lack of segmental data, following the Tribunal's decisions in the assessee's own case and Subex Ltd.

- Consilient Technologies Pvt. Ltd.: The issue was remanded to the AO/TPO for fresh consideration in light of new submissions regarding its functional profile.

- Threesixty Logica Testing Services Pvt. Ltd.: The issue was remanded to the AO/TPO to reconsider its comparability with the assessee.

- Cybage Software Pvt. Ltd.: Excluded due to its diversified services and lack of segmental data, following the Tribunal's decisions in earlier years.

2. Disallowance under Section 40(a)(i) of the Income Tax Act:
The AO disallowed Rs. 9,67,88,064/- for non-deduction of tax at source on payments made to the AE, treating it as Fees for Technical Services (FTS). The Tribunal restored the matter to the AO to reconsider in light of the Karnataka High Court's judgment in Flipkart Internet Pvt. Ltd., directing the AO to verify if the assessee had deducted tax under section 192 for the entire salary paid to seconded employees.

3. Discrepancy in Assessed Income:
The assessee contended that the AO adopted an incorrect figure of Rs. 171,42,79,925/- instead of Rs. 169,52,74,032/-. The Tribunal noted that the discrepancy arose from a rectification order dated 10.05.2019 under section 154. The Tribunal restored the issue to the AO, stating that any modification in the rectification order should reflect in the Final Assessment Order.

Conclusion:
The appeal was partly allowed, with specific directions for the exclusion of certain comparables and remand of issues related to disallowance under section 40(a)(i) and discrepancy in assessed income to the AO for fresh consideration.

 

 

 

 

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