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TMI Blog2017 (12) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... as called for a remand report from the A.O and on the basis of said remand report and subsequent reply of the assessee to the remand report, he has confirmed the TP study of the assessee. This approach of the CIT(A), in our opinion, is not correct. Since the assessee has filed the TP documentation before the CIT(A), he ought to have referred the matter to the file of the TPO for determination of the ALP. Since, it is also pointed out by the assessee that there are mistakes in the margins of the comparables, we deem it fit and proper to remand the issue to the file of the AO/TPO for fresh determination of the ALP in accordance with law. Deduction u/s 10A - certificate required u/s.10A(5) of the Act having not been filed along with the return – Held that:- We find that the Hon’ble Karnataka High Court, in the case of American Data Solutions India Pvt Ltd.[2014 (2) TMI 128 - KARNATAKA HIGH COURT ] was considering the case of an assessee, which had filed Form No. 56F before the CIT(A), who granted relief to the assessee after giving opportunity to the assessee. On an appeal by the Revenue, the Hon’ble High Court held that the proceedings before the First Appellate Authority is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to F.Y 2009- 10 and selected six companies as comparable to the assessee. He arrived that the arithmetic mean of the comparable companies at 31.82% as against 10.16% margin of the assessee. He therefore, made the addition of ₹ 1,65,93,343/- as an adjustment towards ALP. Thereafter, he also considered the assessee s claim of deduction u/s 10A of the IT Act. He requested the assessee to produce the Form No. 56F, duly certified by the statutory auditors certifying the assessee s claim of deduction u/s 10A of the IT Act. Since, the assessee failed to submit the same, he disallowed the same u/s 10A of the IT Act, and brought it to tax. Accordingly, he raised a net demand of ₹ 1,05,39,250/-, against which the assessee preferred an appeal before the CIT(A), who allowed the same. 4. Against the relief granted by CIT(A), the Revenue is in appeal before us, by raising the following grounds of appeal: 1. The order of the CIT(A) is erroneous in law and on f acts of the case. 2. The CIT(A) ought to have appreciated the additional of expenditure on account of Employee Stock Option Scheme being capital in nature. 3. The CIT(A) ought to have appreciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Vivimed Labs Ltd. Vs. DCIT (2002) [ITA No. 211/Hyd/2010]. 3. CIT Vs Sabari Enterprises (2008 298 ITR 141 Kar. 4. Prithvi Inf ormation Solutions Ltd. Vs ACIT (2014) [34 ITR ( Trib) 429] (Hyd). 8.2 Having regard to the rival contentions, we find that undisputedly, the employee s contribution to PF has been paid with the delay of ten days only, but before the due date of filing of the return. In a number of cases, this Bench of the Tribunal has considered all the decisions relevant to the issue, both u/s 43B as well as 36(1)(va) r.w.s 2(24)(x) of the Act, including the decisions relied upon by the Ld. DR, and has held that both the contributions are allowable if they are paid before the due date of filing of the return of income u/s 139(1) of the Act for the sake of ready reference, the decision in the case of M/s Nagarjuna Engineering Constructions Vs. ACIT in ITA No. 766/Hyd/2017 has held as under: 2. Brief facts of the case are that during the course of assessment proceedings u/s 143(3) of the Act, the AO noticed that the employees contribution to PF of ₹ 43,01,134 and ESI of ₹ 45,000 was paid beyond the prescribed due date but the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be remitted to the Govt. A/c within the prescribed date or before the due date for filing of the return u/s 139(1) of the Act. He submitted that the Hon'ble Supreme Court in the case of Alom Extrusions has held that both the employer s as well as employees contribution which is paid before the due date of filing of return u/s 139 (1) is allowable u/s 43B of the Act. He also relied upon the judgment of the Hon'ble Andhra Pradesh High Court in the case of Hitech(India) (P) Ltd (cited Supra) wherein the constitutional validity of section 43B and explanation to clause (va) of subsection (1) of section 36 were under consideration and the Hon'ble High Court has brought out that para materia both the sections are having the same effect and are not unconstitutional. Further, he also placed reliance upon the decision of the Coordinate Bench of this Tribunal in the case of ACIT vs. Tanla Solutions Ltd (ITA No.879/Hyd/2015) and the decision of the Coordinate Bench at Visakhapatnam in the case of DCIT vs. Eastern Power Distribution Company of A.P. Ltd (ITA No.609/Vizag/2014). 5. The learned DR, on the other hand, supported the orders of the authorities below and tried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company at 10.16% and selected the comparable af ter adoption of requisite turnover f ilters and determined the Arithmetic Mean at 31.82%. Thus, the ALP was accordingly worked out and upward d TP adjustment amounting to ₹ 1,65,93,343/- was made. During the course of remand proceedings, the AR of the assessee company has submitted the Transfer Pricing documentation and selected the comparable as shown below and are accordingly reasoned and rejected. S.No Name of the Comparable company Reason for rejection 1 M/s AOK in-house BPO Services Ltd., The comparable company turnover for A.Y. 2009-10 2010-11 is ₹ 28.05 ₹ 37.23 crores whereas the assessee-company turnover for the A. Y.2009-10 2010-11 is ₹ 5.63 crores and ₹ 7.71 crores only. Thus there is huge difference in turnovers between the comparable selected and the assessee company and as economies of scale influences profitability, hence selection of inappropriate Turnover Filter (1-50 crores) is not acceptable wherein the appropriate Turnover Filter should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and ₹ 7. 71 crores only. Thus, there is huge difference in turnovers between the comparable selected and the assessee company and as economies of scale influences profitability, hence selection of inappropriate Turnover Filter (1-50 crores) is not acceptable wherein the appropriate Turnover Filter should be adopted at ₹ 1-10 crores and thus the selected comparable falls Turnover Filter and accordingly has to be rejected. 7 M/s International Biotech Park Limited The business of the comparable company is development of Biotechnology Park, which is completely different from the assessee company business of Computer Software Development / IT enabled services. Hence, the comparable falls Basic Industry Selection Filter and accordingly has to be rejected. 8 M/s Technologies Limited The comparable company turnover for A. Y.2009- 10 2010-11 is ₹ 19.13 ₹ 15.85 crores whereas the assessee-company turnover for the A. Y.2009-10 2010-11 is ₹ 5.63 crores and ₹ 7.71 crores only. Thus .there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover filter of ₹ 10 crores and above, and that application of appropriate turnover i.e ₹ 1 to 10 crores is necessary to identify suitable comparables as economies of scale influence profitability of a company. He observed that out of the 9 comparable company selected by the assessee companies, 8 companies are to be rejected due to inappropriate selection and application of turnover filter. He therefore requested the CIT(A) to refer the matter to TPO for determination. In reply to the remand report, the assessee submitted that the assessee has taken turnover filter of ₹ 1 to 50 crores, as the assessee was having a turnover of ₹ 1.56 crores and 7.71 crores for the A.Ys 2009-10 and 2010-11 respectively and justified the comparables selected by it. The CIT(A) accepted the assessee s contentions and deleted the addition made an account of TP adjustment. 9.2 The Ld. DR submitted that, the assessee has not submitted the TP documentation before the A.O but has submitted it before the CIT(A) and if the assessee has not selected appropriate comparables, then, the CIT(A) ought to have remanded the matter to the TPO, since the TPO was the competent authority to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record, we find that the Hon ble Karnataka High Court, in the case of American Data Solutions India Pvt Ltd., was considering the case of an assessee, which had filed Form No. 56F before the CIT(A), who granted relief to the assessee after giving opportunity to the assessee. On an appeal by the Revenue, the Hon ble High Court held that the proceedings before the First Appellate Authority is continuation of assessment process and the audit report though was not produced before the assessing authority, the lower appellate authority was duty bound to take note of the said audit report and grant benefit, if the assessee is entitled to. We find that in the case before us, the A.O has not held that the assessee has not fulfilled the other conditions prescribed u/s 10A of the IT Act. It is also not in dispute that the Form No. 56F has been filed before the A.O with a delay. The assessee has filed the additional evidence in support of the deduction u/s 10A of the Act. We are inclined to admit the same and remand to the file of the A.O with a direction to allow the deduction u/s 10A of the Act in accordance with law after verifying if the assessee satisfies all other conditions u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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