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TMI Blog2013 (6) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the order passed by learned Deputy Commissioner of Income Tax (DCIT) under Section 143(3) read with Section' 144C of the Act is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned DCIT has erred both on facts and in law in assessing the income at Rs. 4,38,76,245/- as against a loss of Rs. 2,54,66,337/- declared by the assessee. 3. On the facts and circumstances of the case, the learned DCIT has erred both or, facts and in law in making an addition of Rs. 1,79,05,415/- as difference in arm's length price determined by the Transfer Pricing Officer. 4. (i) On the facts and circumstances of the case, the learned Dispute Resolution Board has erred both on facts and in law in rejecting the contention of the appellant that the Transfer Price Officer (TPO) was not justified in ignoring the com parables in respect of the two companies viz., Capital Trust Limited and Crisil Limited while determining the arm's length price. (ii) On the facts and circumstances of the case, the learned DRP has erred both on facts and in law in rejecting the contention of the appellant that the TPO was not justified in not excluding the compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gth price. 6. On the facts and circumstances of the case, the learned DCIT has erred both on facts and in law in disallowing an amount of Rs. 2,73,339/- on account of charitable donation. 7. On the facts and circumstances of the case, the learned DCIT has erred both on facts and in law in disallowing an amount of Rs. 1,70,785/- on account of entertainment expense. 8. On the facts and circumstances of the case, the learned DCIT has erred both on facts and in law in making an addition of Rs. 60,329/- by restricting depreciation on computer peripherals @ 25 per cent as against 60 per cent allowable as per law. 9. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 4. Ground Nos.1, 2, 3 & 9 are general in nature. The same do not require adjudication and the same are dismissed. 5. Ground Nos.4 & 5 are related to transfer pricing issue and ground nos.6, 7 and 8 are related to corporate issues. 6. The ground nos.4 & 5 are related to transfer pricing adjustments. The assessee has prayed that Dispute Resolution Panel-II, New Delhi has erred in rejecting contention of assessee that Transfer Pricing Officer (TPO) was not justified in ignoring the compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the company in October 2005, the area of operations of the company is BPO/KPO sector with focus on financial service offerings. Accordingly, the business of the company is not comparable and it was rejected. The website of company shows that company has developed software for payroll processing and revenues are earned through such software. Accordingly, the business of the company is not comparable and hence the company deserves to be rejected. This factual aspect was supported by various press notes and the website. October 2005 falls in the financial year relevant to Assessment Year 2006-07. In view of these facts, TSR Darashaw Limited cannot be taken as a comparable in the assessee's case. Ld. AR further submitted that since TSR Darashaw Limited has a different profile, it should be taken out of the comparables. Once it is out of comparable, then no adjustment is required. The TNMM comes to 10.93% which is within the range of +/- 5% as provided in section 92C(2), therefore, no adjustment is required. For all other grounds raised in sub-paras of ground nos.4 & 5, the ld. AR relied on the submissions made before the DRP. 8. On the other hand, ld. DR relied on the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -MUM-INTL) (xi) M/s. Symantec Software Solutions Pvt Ltd (2011-TII-60-ITAT-MUM-TP) (xii) Haworth (India) Pvt. Ltd (2011-TII-64-ITAT-DEL-TP) (xiii) M/s. ST Micro Electronics (2011-TII-63-ITAT-DEL-TP) (xiv) M/s. Exxon Mobil Company India Pvt Ltd (2011-TII-68-ITAT-MUM-TP) (xv) M/s. Birla Soft Limited - 2011-TII-70-ITAT-DEL-TP 9.1 The other issue in Ground No.4(i) of the appeal is regarding excluding Capital Trust Limited and Crisil Limited from the comparables. Ld. AR relied on the written submissions filed before DRP. The DRP dismissed the plea of the assessee on the ground that the Capital Trust Limited was engaged in the business of automobile sales and service and from this segment, the revenue was of about 80%. The other major segment is hire purchase from which it derives revenue of 18.39% of the revenue. The foreign consultancy segment contributes only 1.7% and total consideration in the segment of foreign consultancy was only Rs. 25 lacs. This company was engaged mainly in the other business activities, hence it cannot be taken as a comparable with assessee company. The company is having a very small turnover in the foreign consultancy segment, therefore, cannot be accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or if AE's business gets reduced substantially then the business of the assessee will also get adversely effected accordingly. Being a captive service provider, the assessee cannot look for other customers. In such cases, the assessee runs a greater risk than an average independent entity who can always overcome the risk by looking for other customers or other markets. The dependence on a particular client or a particular geography area alone is always considered a high risk. It can be seen from the financial crisis in 2008-09 in USA as a result of subprime crisis, many companies which were completely dependent on USA clients diversified to the other areas to overcome the risk. Further, credit risk was existed in assessee's case as there was no clause in agreement that advance payment shall be made for services. Therefore, in our considered view, this ground of the assessee has no merits. 11. The other issue involved in the ground regarding transfer pricing is giving the benefit of +/- 5% in respect of u/s 92C(2) of Income-tax Act, 1961. 12. We have heard both the sides on the issue. After hearing, we find that amendment to Proviso to section 92C by Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) DCIT vs. Haryana Oxgen Ltd. - 76 ITD 32 (Del.) Ld. AR also submitted that similar disallowances were proposed in the Assessment Year 2008-09 which has been dropped by DRP in assessee's own case. 18. We have heard both the sides. We have also considered the case laws relied upon by the assessee. After considering facts of the case, we find that there is no scope for disallowing out of club/entertainment expenses debited in the books of account of the company for personal nature, therefore, we direct to delete this disallowance. 19. Ground No.8 is against the addition of Rs. 60,329/- by restricting depreciation on computer peripherals. The DRP has upheld the Assessing Officer's action for allowing depreciation @ 25% only. The ld. AR submitted that the issue is covered in favour of the assessee by the various decisions of Hon'ble jurisdictional High Court including the decision in the case of CIT vs. Datacraft India Limited - 133 TTJ 377 and BSES Rajdhani Powers Ltd. - ITA No.1266/2010 dated 31.08.2010. He has also mentioned the other case laws as given below :- (i) Expeditors International (India)(P.) Ltd. vs. Addl. CIT - 13 DTR (Del.)(Trib.) 435; (ii) Haworth ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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