9911796707
TMI Blog2015 (11) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... rial before deciding on the percentage of risk adjustment to be allowed, if any, in accordance with law. TDS u/s 195 - Disallowance of Project Specific Costs under section 40(a)(ia) - Held that:- In the course of hearings before us, the learned Authorised Representative for the assessee fairly conceded that this issue is covered against the assessee and in favour of Revenue by the decision of the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. (2011 (10) TMI 195 - KARNATAKA HIGH COURT), relied on by the A.O./DRP wherein held , in view of the provisions of Section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 of the Act, and also to which case the assessee was also party before the Hon'ble High Court. Respectfully following it we uphold the decision of the Assessing Officer. - Decided against assessee Advance Tax Credit - Held that:- We find this Ground was raised before the DRP and the DRP had directed the Assessing Officer to examine the claim of the assessee and allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenses paid. Rs.15,43,04,052. 2.2 In view of the above international transactions entered into by the assessee, the Assessing Officer ('A.O') made a reference under Section 92CA of the Act to the Transfer Pricing Officer ('TPO') for determining the Arm's Length Price ('ALP') of these international transactions after obtaining the necessary approval from the CIT -I, Bangalore. The TPO vide order under Section 92CA of the Act dt.22.9.2011 proposed a T.P. Adjustment of ₹ 26,13,69,735 to the ALP of the assessee's international transactions in respect of the software development services rendered by the assessee. The Assessing Officer then issued a draft order of assessment under Section 143(3) rws 144C of the Act dt.30.11.2011 determining the income of the assessee at ₹ 58,69,63,275 which included, inter alia, the proposed T.P. Adjustment of ₹ 26,13,69,735. 2.3 Aggrieved by the aforesaid draft order of assessment dt.30.11.2011 for the Assessment Year 2008-09, the assessee filed its objections thereto before the DRP, Bangalore. The DRP vide its order under Section 144C(5) rws 144C(8) of the Act dt.17.9.2012 confirmed the additions / disallowances made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. iGAte Global Solution Ltd. 13.99 7. Infosys 40.37 8. Kals Information Systems Ltd. (Seg.) 41.94 9. LGS Global Ltd. 27.52 10. Mindtree Ltd. (Seg.) 16.41 11. Persistent Systems Ltd. 20.31 12. Quintegra Solution Ltd. 21.74 13. R Systems International (Seg.) 15.30 14. R S Software (India) Ltd. 7.41 15. SaskenCommunication Technologies Ltd. (Seg.) 7.58 16. Tata Elxsi (SEg.) 18.97 17. Thirdware Solution Ltd. 19.35 18. Wipro Ltd. (SEg.) 28.45 19. Softsol India Ltd. 17.89 20. Lucid Software Ltd. 16.05 Average 23.65 3.5 The Average Mean Margin of the 20 comparable companies selected by the TPO was 23.65% whereas the assessee's Mean Margin was 5.14% on total cost. After granting working capital adjustment of 0.12%, the TPO worked out the T.P. Adjustment at ₹ 26,13,69,735 as under :- Particulars. Amount (Rs.) Arm's Length Mean Margin on cost 23.65% Less : Working Capital Adjustment 0.12% Adjusted Mean Margin 23.53% Operating Cost 142,18,35,901 ALP @ 123.53% of OP Cost 1,75,63,93,888 Price recovered 1,49,50,24,153 Shortfall being adjustment u/s.92CA 26,13,69,735 Based on the above computation, the TPO proposed an adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark up to be 23.65%, in respect of the international transaction pertaining to the rendering of software development services by the Appellant; 6.3 in completely relying on the unaudited data requisitioned and consequently obtained by taking recourse to the provisions of Section 133(6) of the Incometax Act, 1961 ('the Act'), which in many instances are inconsistent with the data disclosed in audited reports. In doing so the learned TPO has erred in complying with the principles of natural justice. 6.4 in considering 25 percent as the threshold limit for the Related Party Transactions filter as this number is an arbitrary number that has been adopted without any judicial precedence or reasonable basis. 6.5 in rejecting the upper limit for sales turnover filter proposed by the appellant without providing any empirical analysis. In doing so, the learned TPO erred in not appreciating that the software industry is clearly demarcated based on size. 6.6 in accepting companies like Infosys Limited and Wipro Limited as comparable companies even though the sales of Infosys and Wipro are driven based on brand developed by them. In doing so the learned TPO and the learned AO have ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akshay Software Technologies Limited, Prithvi Information Solutions Limited, Silverline Technologies Limited, Zylog Systems Limited and VJIL Consulting Limited. 6.15in not maintaining consistency in applying the filters of rejecting companies with abnormal fluctuating margin, diminishing revenue/ persistent losses for the period under consideration, companies with peculiar economic circumstances, companies with different financial year ending, companies for which data are not available in database/ public domain and companies with related party transactions exceeding 25%. 6.16in accepting companies like Wipro Limited, Thirdware Solution Limited, Persistent Systems Limited, Quintegra Solutions Limited Tata Elxsi Limited which owns intangible assets. 6.17in accepting companies like Igate global solutions Limited, Thirdware solution Limited, E-Zest Solutions Limited and Wipro limited where segmental data pertaining to software development services is not available. 7. The learned TPO and the learned AO erred in disregarding the use of multiple year data, and ought to have accepted the use of contemporaneous data due to non-availability of current year data in the public domain at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted margin. TRANSFER PRICING ISSUES. 5.1 In the course of proceedings before us, the learned Authorised Representative for the assessee submitted a chart, explaining the assessee's position regarding the acceptability or otherwise of each of the companies selected by the TPO in the list of comparable companies to the assessee. The learned Authorised Representative also submitted that he would put forth submissions only on the comparability of the individual companies selected by the TPO in the final set of comparables and also on the inclusion of two of the companies selected by the assessee but rejected by the TPO. 5.2 In this context, it was submitted that only the following grounds of appeal in respect of TP Issues are being pressed and would require consideration and adjudication by the Bench :- i. Grounds at S.Nos.3 & 4 pertaining to the grant of risk adjustment. ii. Grounds No. 6.5 to 6.11, 6.16 and 6.17 related to the exclusion of individual companies selected by the TPO. iii. Ground No.6.13 related to the exclusion of two comparables. iv. Additional Ground raised for exclusion of Bodhtree Consulting Ltd. v. Addl. Ground raised in respect of exclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 6.17 Exclusion of companies from list of comparables sought for by the assessee. The learned Authorised Representative for the assessee brought to our notice that out of the 20 comparables chosen by the TPO, 13 companies as listed below would have to be excluded as not comparable to the assessee in the case on hand, as laid down by the co-ordinate bench of this Tribunal in the case of M/s. Sonus Networks India Pvt. Ltd. (supra). 1) Avani Cincom Technologies Ltd. 2) Bodhtree Consulting Ltd., 3) Celestial Bio labs Ltd. 4) E-Zest Solutions Ltd. 5) Infosys Technologies Ltd. 6) KALS Information System (Seg.) 7) Persistent Systems Ltd. 8) Quintegra Solutions Ltd. 9) Tata Elxsi Ltd. (Seg.) 10) Thirdware Solutions Ltd. 11) Wipro Ltd. 12) Softsol India Ltd. 13) Lucid Software Ltd. 6.2 We have heard both parties and perused the material on record. We find that the following were the relevant observations and findings of the co-ordinate bench of this Tribunal in the case of Sonus Networks India Pvt. Ltd., in IT(TP)A No.1567/Bang/2012 dt.14.5.2015 for Assessment Year 2008-09 at paras 10 to 19.3 thereof, while excluding the 12 of the aforesaid companies listed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2007-08) to the period under consideration (i.e. Assessment Year 2008-09). In support of this contention, it was submitted that :- (i) The extract from the Website of the company clearly indicates that it is primarily engaged in development of software products. The extract mentions that this company offers customised solutions and services in different areas; (ii) The Website of this company evidences that this company develops and sells customizable software solutions like "DX Change, CARMA, etc. 7.4 The learned Authorised Representative submitted that a co-ordinate bench of the Tribunal in its order in Curram Software International Pvt. Ltd., in its order in ITA No.1280/Bang/2012 dt.31.7.2013 has remanded the matter back to the file of the Assessing Officer / TPO to examine the comparability of this company afresh, by making the following observations at paras 9.5.2 and 9.5.3 thereof :- " 9.5.2 As regards the submission of the learned Authorised Representative, we are unable to agree that this company has to be deleted from the list of comparables only because it has been deleted from the set of comparables in the case of Trilogy E-Business Software India Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to afford the assessee adequate opportunity of being heard and to make its submissions in the matter, which shall be duly considered before passing orders thereon. It is ordered accordingly." The learned Authorised Representative submits that this company was selected as a comparable by the TPO not by any FAR analysis or as per the search process conducted by the TPO, but only as an additional comparable for the reason that it was selected as a comparable in the earlier year i.e. Assessment Year 2007-08 on the basis of information obtained under section 133(6) of the Act. In this regard, the learned Authorised Representative took us through the relevant portions of the TP order under section 92CA of the Act and the show cause notices for both the earlier year i.e. Assessment Year 2007-08 and for this year and contended that the selection of this company as a comparable violates the principle enunciated in Curram Software International Pvt. Ltd. (supra) that a company can be selected as a comparable only on the basis of FAR analysis conducted for that year and therefore pleaded for its exclusion. The learned Authorised Representative also submitted that he has brought on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Assessment Year 2007-08 in ITA No.845/Bang/2011 dt.22.2.2013, and in the case of Trilogy E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011), we direct the A.O./TPO to omit this company from the list of comparables. 9. Celestial Biolabs Ltd. 9.1 This comparable was selected by the TPO for inclusion in the final list of comparables. Before the TPO, the assessee had objected to the inclusion of this company in the list of comparables for the reasons that it is functionally different form the assessee and that it fails the employee cost filter. The TPO, however, brushed aside the objections raised by the assessee by stating that the objections of functional dissimilarity has been dealt with in detail in the T.P. order for Assessment Year 2007-08. As regards the objection raised in respect of the employee cost filter issue, the TPO rejected the objections by observing that the employee cost filter is only a trigger to know the functionality of the company. 9.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable, as the company is into bio-informatics software product / services and the segmental break up is not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an assumption that it would continue to be applicable for this year as well, the same parity of reasoning is applicable to the TPO as well who seems to have selected this company as a comparable based on the reasoning given in the TPO's order for the earlier year. It is evidently clear from this, that the TPO has not carried out any independent FAR analysis for this company for this year viz. Assessment Year 2008-09. To that extent, in our considered view, the selection process adopted by the TPO for inclusion of this company in the list of comparables is defective and suffers from serious infirmity. 9.4.2 Apart from relying on the afore cited judicial decisions in the matter (supra), the assessee has brought on record substantial factual evidence to establish that this company is functionally dis-similar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the Tribunal in the case of - (a) Trilogy E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011). (b) LG Soft India Pvt. Ltd. (IT (TP) A No.112/Bang/2011) (c) CSR India Pvt. Ltd. (IT (TP) A No.1119/Bang/2011) and (d) Transwitch India Pvt. Ltd. (IA No.6083/Del/2010) (iv) The facts pertaining to this company has not changed from Assessment Year 2007-08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the case on hand and hence ought to be excluded from the list of comparables. In support of this contention, the learned Authorised Representative drew our attention to various parts of the Annual Report of this company. (v) This company is engaged not only in the development of software products but also in the provision of training services as can be seen from the website and the Annual Report of the company for the year ended 31.3.2008. (vi) This company has two segments; namely, a) Application Software Segment which includes software product revenues from two products i.e. 'Virtual Insure' and 'La-Vision' and b) The Training segment which does not have any product revenues. 10.3 Per contra, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gin. The TPO, however, rejected these objections raised by the assessee on the grounds that turnover and brand aspects were not materially relevant in the software development segment. 11.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee in the case on hand. The learned Authorised Representative drew our attention to various parts of the Annual Report of this company to submit that this company commands substantial brand value, owns intellectual property rights and is a market leader in software development activities, whereas the assessee is merely a software service provider operating its business in India and does not possess either any brand value or own any intangible or intellectual property rights (IPRs). It was also submitted by the learned Authorised Representative that :- (i) the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2010 has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any intangible and hence does not have an additional advantage in the market. It is submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. 12. Wipro Ltd. 12.1 This company was selected as a comparable by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the list of comparables on several grounds like functional dis-similarity, brand value, size, etc. The TPO, however, brushed aside the objections of the assessee and included this company in the set of comparables. 12.2 Before us, the learned Authorised Representative of the assessee contended that this company i.e. Wipro Ltd., is not functionally comparable to the assessee for the following reasons :- (i) This company owns significant intangibles in the nature of customer related intangibles and technology related intangibles, owns IPRs and has been granted 40 registered patents and has 62 pending applications and its Annual Report confirms that it owns patents and intangibles. (ii) the ITAT, Delhi observation in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856(Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and a market leader assuming all risks leading to higher profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id decision of the co-ordinate bench of the Tribunal i.e. 24/7 Customer.Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration. 13. Tata Elxsi Ltd. 13.1 This company was a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on several counts like, functional dis-similarity, significant R&D activity, brand value, size, etc. The TPO, however, rejected the contention put forth by the assessee and included this company in the set of comparables. 13.2 Before us it was reiterated by the learned Authorised Representative that this company is not functionally comparable to the assessee as it performs a variety of functions under software development and services segment namely - a) product design, (b) innovation design engineering and (c) visual computing labs as is reflected in the annual report of the company. The learned Authorised Representative submitted that, (i) The co-ordinate bench of the Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Authorised Representative that the nature of product developed and services provided by this company are different from the assessee as have been narrated in para 6.6 above. Even the segmental details for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company as fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded from the list of comparable portion." As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007- 08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly. 14. E-Zest Solutions Ltd. 14.1 This company was selected by the TPO as a comparable. Before the TPO, the assessee had objected to the inclusion of this company as a comparable on the ground that it was functionally different from the assessee. The TPO had rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd. Supra) that KPO services are not comparable to software development services and are therefore not comparable. Following the aforesaid decision of the co-ordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e-Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. / TPO is accordingly directed. 15. Thirdware Solutions Ltd. (Segment) 15.1 This company was proposed for inclusion in the list of comparables by the TPO. Before the TPO, the assessee objected to the inclusion of this company in the list of comparables on the ground that its turnover was in excess of ₹ 500 Crores. Before us, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the grounds that it is into software product development and therefore functionally different from the assessee. In this regard, the learned Authorised Representative submitted that - (i) This company is engaged in the development of software products. (ii) This company has been held to be functionally different and therefore not comparable to software service providers by the order of a co-ordinate bench of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A No.845/Bang/2011), following the decision of Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (ITA No.7821/Mum/2011). (iii) The rejection of this company as a comparable to software service providers has been upheld by the co-ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. (ITA No.1121/Bang/2011) and CSR India Pvt. Ltd. [ IT(TP)A No.1119/Bang/2011 ] and by the Delhi Bench of the Tribunal in the case of Transwitch India Pvt. Ltd. (ITA No.6083/Del/2010). (iv) The factual position and circumstances pertaining to this company has not changed from the earlier Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the case on hand. 17. Persistent Systems Ltd. 17.1.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable for the reasons that this company being engaged in software product designing and analytic services, it is functionally different and further that segmental results are not available. The TPO rejected the assessee's objections on the ground that as per the Annual Report for the company for Financial Year 2007-08, it is mainly a software development company and as per the details furnished in reply to the notice under section 133(6) of the Act, software development constitutes 96% of its revenues. In this view of the matter, the Assessing Officer included this company i.e. Persistent Systems Ltd., in the list of comparables as it qualified the functionality criterion. 17.1.2 Before us, the assessee objected to the inclusion of this company as a comparable submitting that this company is functionally different and also that there are several other factors on which this company cannot be taken as a comparable. In this regard, the learned Authorised Representative submitted that : (i) This comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re were peculiar economic circumstances in the form of acquisitions made during the year. The TPO rejected the assessee's objections holding that this company qualifies all the filters applied by the TPO. On the issue of acquisitions, the TPO rejected the assessee's objections observing that the assessee has not adduced any evidence as to how this event had an any influence on the pricing or the margin earned. 18.1.2 Before us, the assessee objected to the inclusion of this company for the reason that it is functionally different and also that there are other factors for which this company cannot be considered as a comparable. It was submitted that, (i) Quintegra solutions Ltd., the company under consideration, is engaged in product engineering services and not in purely software development services. The Annual Report of this company also states that it is engaged in preparatory software products and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendered by the company are described as under : " Leveraging its proven global model, Quintegra provides a full range of custom IT solutions (such as development, test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s intangible assets. The co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010 dt.9.11.2012) has held that if a company possesses or owns intangibles or IPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted form the list of comparables, as in the case on hand. 18.3.2 We also find from the Annual Report of Quintegra Solutions Ltd. that there have been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect on the performance of the company, then that company shall be removed from the list of comparables. 18.3.3 Respectfully following the decision of the co-ordinate bench of the Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (supra), we direct that this company i.e. Quintegra Solutions Ltd. be excluded from the list of comparables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider. 19. Softsol India Ltd. 19.1 This company was selected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree Consulting Ltd., the learned Authorised Representative for the assessee has submitted that, for exclusion of this company from the list of comparables to the assessee in the case on hand, reliance is placed on the decision of the co-ordinate bench of this Tribunal in the case of CISCO Systems (India) Pvt. Ltd., in IT(TP)A No.271/Bang/2014 dt.14.8.2014, wherein it was held that this company is a software product company and not a software development services company. It is submitted that this decision was followed in several cases, including Sonus Networks India Pvt. Ltd. (supra). It was also submitted that the co-ordinate bench of this Tribunal in the case of NXP Semi-conductors P. Ltd. in IT(TP)A No.1560/Bang/2012 from Assessment Year 2008-09 has also held that Bodhtree Consulting Ltd. is not comparable to companies engaged in software development services. 7.2 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited by the assessee. We find that the coordinate bench of this Tribunal, in the case of M/s. CISCO Systems India Pvt. Ltd. (supra) has excluded this company from the list of comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before us, the learned Authorised Representative for the assessee submitted that the assessee seeks inclusion of the following companies in the set of comparable companies :- 1) Aarman Software Pvt. Ltd. 2) VMF Softech Ltd. 8.2 It was submitted that the TPO had rejected the above two companies only on the ground that the export sales are not more than 25% of the sales during the year under consideration. The assessee, however, submits that the export sales of these two companies are more than the 25% limit specified in the filter adopted by the TPO and therefore these two companies have been wrongly rejected as comparables by the TPO. 8.3 We have heard the rival submissions of both the learned Authorised Representative and learned Departmental Representative in the matter and perused and carefully considered the TPO's order and the material on record in the matter. 8.3.1 In the case of Aarman Software Ltd., the TPO had observed that this company is having 100% of domestic sales and therefore fails the export sales filter of 25%. However, from the extract of the Annual Report of the company submitted by the assessee, it appears that the entire sales of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he comparables on par with the assessee company. Following the above decision and of the co-ordinate bench (supra), we also hold that in principle, the assessee may be granted risk adjustment, if so required in the peculiar facts of the case for bringing the comparable companies on par with the assessee. However, the quantum of risk adjustment to be granted, if any, is remanded back to the file of the TPO. The TPO is directed to examine the details of the quantitative computation of risk adjustment and attendant details submitted by the assessee justifying its claim for risk adjustment and to take into account the same along with all the relevant material before deciding on the percentage of risk adjustment to be allowed, if any, in accordance with law. It is ordered accordingly. Consequently, Ground Nos.3 & 4 are treated as allowed for statistical purposes. CORPORATE TAX ISSUES. 10. Ground No.6: Disallowance of Project Specific Cost. 10.1 This Ground is in respect of the disallowance of project specific costs amounting to ₹ 11,25,95,270 u/s.40(a)(i) of the Act. 10.2 In the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation Adjustment. 12.1 The assessee has submitted that the depreciation cost as a percentage of the cost of the assessee during the financial year is significantly different from that of the comparable companies. Therefore, in order to achieve reliable comparability, the margins of the comparable companies should be adjusted for differences in depreciation cost of the comparable companies and the tested party. In support of the above contention the learned Authorised Representative placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. in ITA No.227/Bang/2010 dt.9.11.2012. 12.2 We have heard both parties and perused and carefully considered the material on record, including the judicial decision cited by the assessee. It is not in dispute that the assessee had not raised this issue before the authorities below and has raised this issue before us for the first time. We find that this issue being a legal issue, can be raised before the Tribunal for the first time as has been held by the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. (supra), the relevant portion of which is extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions. We find force in the submissions of the learned Departmental Representative. Whether an adjustment towards depreciation is warranted or not may be, issue of principle. But whether the principle needs to be applied to a particular case or not would depend on the peculiar facts of that case. It cannot be anybody's case that an adjustment has to be necessarily granted whenever and wherever there is difference in depreciation between the tested party and the comparables. An adjustment for difference in depreciation is a valid principle for comparability, but whether this case entails such an adjustment has to be examined in the light of the particular facts of the case. Hence, the additional ground raised by the assessee is as much as issue of fact as it is of principle. 19.5 Before us, the assessee has not been able to adduce any reason as to why this issue was not raised before the authorities below. It gives credence to the view of the learned Departmental Representative that this claim is only an afterthought, pursuant to the learned CIT (Appeals) confirming the adjustments proposed by the TPO. 19.6 Besides this, the adjustment for depreciation, sought for by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the claim for adjustment towards depreciation in the light of our observations from paras 19.3 to 19.8 of this order and to dispose the matter expeditiously after affording adequate opportunity of being heard to the assessee. It is ordered accordingly." 12.3 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. (supra), we admit the additional ground raised for grant of depreciation adjustment and remit the matter to the file of the TPO to consider and examine the assessee's claim for adjustment towards depreciation in the light of the Tribunal's observations at paras 19.4 to 19.8 of the order of the co-ordinate bench (supra) after affording the assessee adequate opportunity of being heard and to submit details/explanations required, which shall be duly considered. It is ordered accordingly. Consequently, this additional ground is treated as allowed for statistical purposes. 13. As regards the other additional grounds raised on account of wrong computation of margins and wrong computation of working capital adjustment, the learned Authorised Representative for the assessee submitted that these are computati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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