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TMI Blog2014 (11) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profit of the company - When the majority of the shares are held by Renowned Personalities in the field of business it will definitely influence the profitability of the company. The fact that 80% of the shares of M/s.Eclerx Services Ltd., is held by local business magnets of great prominence is not disputed - the turnover of the company will also determine the strength of the company to earn more profit - when a business entity is totally depended on a single client, the bargaining power of the company will be very limited to secure higher rates for services rendered - The capital infrastructure of the company will also influence the profitability of the company - Higher the capital infrastructure, higher will be the profitability - CIT(A) is justified in deleting the addition made by the AO – Decided against revenue. - IT APPEAL NO. 358 (MDS.) OF 2013 - - - Dated:- 4-7-2014 - A. MOHAN ALANKAMONY AND V. DURGA RAO, JJ. Shaji P. Jacob for the Appellant. N. Quadir Hoseyn and L. Natarajan for the Respondent. ORDER A. Mohan Alankamony, Accountant Member - This appeal is filed by the Revenue, aggrieved by the order of the Learned Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame from total turnover. On appeal the Ld. CIT (A) directed the Ld. Assessing Officer to recompute the deduction u/s 10A by excluding telecommunication charges of ₹ 31,91,406/- from both export turnover in the numerator and total turnover from the denominator while applying the relevant formula, by following the decision of the cases cited herein below: (i) ITO v. Sak Soft Ltd. [ITA Nos. 691 1953/Mds./2007, dated 6-3-2009] (ii) CIT Vs. Sitel Operating corporation India Lt d. (Kar.)(Mag) 204 Taxman 56 (2012) (iii) CIT Vs. Flowserve Microfinish Valves (P.) L td. 17 Taxmann.com 167 (iv) CIT Vs.Himatsingka Seide Co. Ltd. (Kar.)(Mag) 204 Taxman 153 (2012) (v) CIT Vs. Khoday India Ltd. (Kar.)(Mag) 204 Tax man 153 (2012) (vi) CIT Vs. Samsung Electronics Co. Ltd. (Kar.)(Mag) 204 Taxman 166 (2012) 4.1 Before us, the Ld. A.R. argued by stating that the Ld. CIT (A) had decided the issue following the decision of the higher judiciary and therefore requested the same may be upheld. On the other hand Ld. D.R could cite any favorable decision to support the claim of the Revenue. Therefore, after hearing bother sides and perusing the decision of the various higher f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd branded company, while as the assessee company has a single customer. (v) M/s.Eclerx Services Ltd., import huge capital assets and derive benefit from the same while as the assessee company do not have similar capital assets. (vi) There is functional dissimilarities between the assessee company and M/s.Eclerx Services Ltd. (vii) The appellant company's profit is based on the agreement with its single client on a mark-up price while as the pricing pattern of M/s.Eclerx Services Ltd., is entirely different. (viii) The method and policy of revenue recognition and capitalization of asset are different in both the Assessee Company and M/s.Eclerx Services Ltd. 5.3 However, the Ld. TPO did not accept to the submissions of the assessee and held as follows: i. That the source of investment or share holding pattern has nothing to do with operations and resulting operating profit of the business. ii. The appellant has also commented that M/s. Eclerx has regular contracts both local as well as foreign, the profit element attributable to any single contract could not be gauged with certainty so much so the results are required to be ignored when comparing with a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 9 companies (excluding M/s.Eclerx Services Ltd.) i.e. arithmetic mean of profit margin is only 15.26% whereas the appellant company is showing 16.85% profit margin. The details are as under: S.No. Name of the Company Operating Profit/Cost 1 Apollo Health Street Ltd. -13.13 2 Eureka Outsourcing Solutions Pvt Ltd -2.36 3 ICRA Online Ltd. 32.15 4 Infosys BPO Ltd 28.80 5 Infowavz Interntional Pvt Ltd. 19.00 6 Maple Esolutions Ltd 34.32 7 Tricorn Infotech Solutions Ltd. -9.44 8 Tritorn corp Ltd. 32.36 9 Mphasis Ltd. 15.66 Total 137.36 Arithmetic Mean 15.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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