9911796707
TMI Blog2016 (6) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the assessee may claim depreciation on the entire amount from the year in which the work is completed and the asset has come into existence. Exclusion of freight charges, telecommunication charges, insurance charges, travelling and financial charges from the export turnover as well as total turnover while computing the deduction u/s. 10A - Held that:- Hon’ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others (2011 (8) TMI 782 - KARNATAKA HIGH COURT) had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. X X X X Extracts X X X X X X X X Extracts X X X X ..... lting Ltd. 5.85 19 VMF Softech Ltd. 4.32 20 Visualsoft Technologies Ltd. 16.76 21 Zylog Systems Ltd. 16.87 Arithmetic Mean 12.95 4. The TPO rejected 15 companies selected by the assessee and accepted 6 companies from the set of comparables selected by the assessee. The companies accepted by the TPO from the list of comparables of the assessee are Sl.Nos.7, 11,12,13,14 & 16 in the above Table. The TPO has carried out a fresh search and added 14 more comparable companies in the final set of comparables as under : Sl. No. Name of the Company Operating Margin on Cost % W. Cap Adj. Margin % 1 Avani Cimcon Technologies Ltd. 25.62 29.60 2 Bodhtree Ltd. 18.72 20.31 3 Celestial Labs Ltd. 87.94 81.52 4 E-Zest Solutions Ltd. 29.81 30.59 5 Flextronics Software Systems Ltd. 7.86 7.12 6 iGAte Global Solutions Ltd. 13.99 13.14 7 Infosys Technologies Ltd. 40.37 39.06 8 KALS Information Systems Ltd. (Seg.) 31.29 29.60 9 LGS Global Ltd. (Lanco Global Solutions Ltd.) 27.52 27.28 10 Lucid Software Ltd. 16.50 18.65 11 Mindtree Consulting (Seg.) 16.41 16.26 12 Persistent Systems Ltd. 20.31 21.43 13 Quintegra Solutions Ltd. 21.74 19.41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds : 1. " The Order of the learned Commissioner of Income Tax (Appeals) - IV to the extent prejudicial to the appellant is bad in law. 2. The learned Assessing Officer has erred in making a reference to Transfer Pricing Officer for determining arm's length price without demonstrating as to why it was necessary and expedient to do so. The learned Commissioner of Income Tax (Appeals) - IV has erred in confirming the action of the Assessing officer. 3. The learned Assessing Officer, learned Transfer Pricing Officer and Commissioner of Income Tax (Appeals) - IV have erred in - a. passing the order without demonstrating that appellant had motive of tax evasion. b. not appreciating that the charging or computation provision relating to income under the head "Profits & Gains of Business or Profession" do not refer to or include the amounts computed under Chapter X and therefore addition made under Chapter X is bad in law. c. adopting a flawed process for issuing notices u/s 133(6) and relying on the same without providing complete information or an opportunity to cross examine the companies concerned. GROUNDS ON COMPARABLES AND REJECTION OF TP ANALYSIS OF THE APPELLANT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. 8. The learned Assessing Officer, learned Transfer Pricing Officer and Commissioner of Income Tax (Appeals) - IV have erred in not giving 9. The learned Assessing Officer has erred in disallowing a sum of ₹ 2,99,07,451/- being research and development expenses under section 37 of the Act stating that the said expenses confer an enduring benefit and is not revenue in nature and stating that R&D Expenses was incurred on behalf of parent company without appreciating that same was incurred for domestic operations. The learned Commissioner of Income Tax (Appeals) - IV has erred in confirming the action of the Assessing officer. 10. The learned assessing officer has erred in levying interest under section 234B and 234D of the Income tax Act, 1961. On facts and in the circumstances of the case and law applicable, interest under section 234B and 234D is not leviable. The appellant denies its liability to pay interest under section 234B and 234D. PRAYER 11. On an overall consideration of the facts of the case, and the law applicable: The ALP as determined by the Transfer Pricing Officer, as adopted by the Assessing Officer and as confirmed by the CIT(A), to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant prays accordingly." 8. By way of additional ground, the assessee is seeking exclusion of 3 companies namely Quintegra Solutions Ltd., e-Zest Solutions Ltd. And Persistent Systems Ltd. The assessee is also raised an issue of exclusion of certain comparable companies by applying the RPT filter at 15% as it has been consistently accepted by this Tribunal. Apart from that the assessee has also seeking inclusion of one company i.e. Indium Software India Pvt. Ltd. as a comparable. 9. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record on the issue of admission of additional grounds raised by the assessee. 10. As regards the additional grounds for applying RPT filter at 15% instead of 25% applied by the TPO, we find that the assessee did not raise any objection against 25% RPT filter applied by the TPO either before the TPO or before the CIT (Appeals). Therefore, this issue does not emanate from the impugned orders of the authorities below. Even otherwise the filter is applied for selecting the comparables and applicable to all the comparable companies either selected by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble companies selected by the TPO has been examined by the co-ordinate bench in the case of Kodiak Network (India) Pvt. Ltd. (supra). The Tribunal has finally concluded that out of 21 comparable companies selected by the TPO, 12 companies cannot be considered good comparables to the software development services provider company. 10.4 On the other hand, the learned Departmental Representative has submitted that the decision of the co-ordinate bench of this Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra) cannot be applied directly in the case of the assessee without verifying the similarity of the business profile of the assessee and M/s. Kodiak Network (India) Pvt. Ltd. (supra). The learned Departmental Representative has submitted that the assessee's business activity in this segment is providing/provision of software development services which may be the inclusive of software development product and therefore the Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra) has directed the exclusion of certain comparable companies on the ground of having software product. The said finding cannot be applied in the case of the assessee without verifying the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee objects to the inclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee offers software development services to its AEs. The TPO had rejected the objections of the assessee on the ground that this comparable company has categorized itself as a pure software developer, just like the assessee, and hence selected this company as a comparable. For this purpose, the TPO had relied on information submitted by this company in response to enquiries carried out under section 133(6) of the Act for collecting information about the company directly. 7.2 Before us, the learned Authorised Representative reiterated the assessee's objections for the inclusion of this company from the list of comparable companies on the ground that this company is not functionally comparable to the assessee as it is into software products. It is also submitted that the segmental details of this company are not available and the Annual Report available in the public domain is not complete. It was further contended that the information obtained by the TPO under section 133(6) of the Act, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are equally applicable to the facts of the assessee's case also. Unless the facts and the FAR analysis of Triology case is comparable to that of the assessee in the case on hand, comparison between the two is not tenable. (ii) After demonstrating the similarity and the comparability between the assessee and the Triology case, the assessee also needs to demonstrate that the facts applicable to the Assessment Year 2007- 08, the year for which the decision in case of Triology E-Business Software India Pvt. Ltd. (supra) was rendered are also applicable to the year under consideration i.e. Assessment Year 2008-09. 9.5.3 It is a well settled principle that the assessee is required to perform FAR analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. That being so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to subsequent years. To do that, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. Viewed in that context, the assessee has not discharged the onus upon it to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.5 Per contra, the learned Departmental Representative supported the order of the TPO / DRP for inclusion of this company Avani Cincom Technologies Ltd. in the final set of comparables. 7.6.1 We have heard both parties and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act. In these circumstances, it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables. Nonfurnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected IT(TP)A 1380/Bang/2012 Page 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers as SaaS (Software as a Service). 8.3 Per contra, the learned Departmental Representative opposed the exclusion of this company from the list of comparable companies. The learned Departmental Representative contended that since the assessee had accepted the TPO's proposal for inclusion of this company in the set of comparables and had not objected to its inclusion even before the DRP, the objections raised by the assessee in this regard, at this stage, ought to be rejected. 8.4.1 We have heard both parties and perused and carefully considered the material on record. Admittedly, there is no disputing the fact that the assessee had never objected to the inclusion of this company in the set of comparbales in earlier proceedings before the TPO and the DRP. It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds challenging the inclusion of this ompany in the list of comparbales. In fact in the assessee's own case for Assessment Year 2007-08, this company was selected as a comparable by the assessee itself. We, therefore, find no merit in the contentions raised by the learned Authorised Representative of the assessee in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the profit margins so that the difference in functional comparability can be eliminated. By not resorting to such a process of making adjustments,the TPO has rendered this company as not qualifying for comparability. We therefore accept the plea of the assessee in this regard." (iv) The rejection / exclusion of this company as a comparable for Assessment Year 2007-08 for software service providers has been upheld by the coordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. in ITA No.112/Bang/2011, CSR India Pvt. Ltd. in IT(TP)A No.1119/Bang/2011 and by the ITAT, Delhi Bench in the case of Transwitch India Pvt. Ltd. in ITA No.6083/Del/2010. (v) 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 instant case and hence ought to be rejected. In support of this contention, the assessee has also referred to and quoted from various parts of the Annual Report of the company. 9.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparable companies. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form the list of comparables. The A.O./TPO are accordingly directed. 10. KALS Information Systems Ltd. 10.1 This is 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 grounds of functional differences and that the segmental details have not been provided in the Annual Report of the company with respect to software services revenue and software products revenue. The TPO, however, rejected the objections of the assessee observing that the software products and training constitutes only 4.24% of total revenues and the revenue from software development services constitutes more than 75% of the total operating revenues for the F.Y. 2007-08 and qualifies as a comparable by the service income filter. 10.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee and ought to be rejected /excluded from the list of comparables for the following reasons:- (i) This company is functionally different from the software activity of the assessee as it is into software products. (ii) This company has been held to be functionally not compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in the case of Triology E-Business Software India Pvt. Ltd. (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of coordinate benches of the Tribunal (supra), the assessee has also brought on record evidence from various portions of the company's Annual Report to establish that this company is IT(TP)A 1380/Bang/2012 Page 9 of 34 functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the coordinate benches of the Tribunal for Assessment Year 2007-08 (cited supra) are applicable for this year i.e. Assessment Year 2008-09 also, this company ought to be excluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dissimilar and different from the assessee and hence is not comparable and the finding rendered in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility purposes and for computing the margins, which is in contradiction to the TPO's own filter of rejecting companies with consolidated financial statements. 12.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by the TPO is that he adopted comparison of the consolidated financial statements of Wipro with the stand alone financials of the assessee; which is not an appropriate comparison. 12.4.2 We also find that this company owns intellectu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services' relates to design services and are not to software services provided by the assessee. (iv) Tata Elxsi Ltd . invests substantial funds in research and development activities which has resulted in the 'Embedded Product Design Services Segment' of the company to create a portfolio of reusable software components, ready to deploy frameworks, licensable IPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd . is clearly functionally different/dis-similar from the assessee and therefore ought to be omitted form the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely software development services. The details in the Annual Report show that the segment " software development services" relates to design services and are not similar to software development services performed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Representative submits that since the Annual Report of the company does not contain detailed descriptive information on the business of the company, the assessee places reliance on the details available on the company's website which should be considered while evaluating the company's functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering KPO services ought not to be considered as comparable to software development companies and relied on the decision of the coordinate bench in the case of Capital IQ Information Systems (India) (P.) Ltd . v. Dy. CIT (International Taxation) [2013] 32 taxmann.com 21 (Hyd. - Trib.) and prayed that in view of the above reasons, this company i.e. e-Zest software Ltd., ought to be omitted from the list of comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of E-Gain Communications (P.) Ltd. v. ITO [2009] 118 ITD 243/[2008] 23 SOT 385 (Pune), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The learned A.R. prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications (P.) Ltd. (supra) has directed that since the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provider and therefore this company i.e.Lucid software Ltd., ought to be omitted from the list of comparables. 16.2 per contra, the learned Departmental Representative supported the action and finding of the TPO in including this company in the list of comparables. 16.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007- 08 (IT(TP)A No.845/Bang/2011), LG Soft India (P.) Ltd. (supra), CSR India (P.) Ltd. (supra); the ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd (supra) and the Delhi ITAT in the case of Transwitch India (P.) Ltd. (supra) have held, that since this company, is engaged in the software product development and not software development services, it is functionally different and dis-similar and is therefore to be omitted from the list of comparables for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of another company, namely Lucid Software Ltd. had rendered a finding that in the absence of segmental information, a company be taken into account for comparability analysis. This principle is squarely applicable to the company presently under consideration, which is into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Representative support the action of the TPO in including this company in the list of comparables. 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Therefore, following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telcordia Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llip;……… have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. Investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks." (iv) The TPO has applied the filter of excluding companies having peculiar economic circumstances. Quintegra fails the TPO's own filter since there have been acquisitions in this case, as is evidenced from the company's Annual Report for F.Y. 2007- 08, the period under consideration. The learned Authorised Representative prays that in view of the submissions made above, it is clear that inter alia, this company i.e. Quintegra Solution Ltd. being functionally different and possessing its own intangibles/IPRs, it cannot be considered as a comparable to the assessee in the case on hand and therefore ought to be excluded from the list of comparables for the period under consideration. 18.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the set of comparables to the assessee for the period under consideration. 18.4 We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of comparables by the order of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (ITA No. 845/Bang./2011) on the ground that the 'Related Party Transactions ('RPT') is in excess of 15%. The learned Authorised Representative submitted that for the current period under consideration, the RPT is 18.3% and therefore this company requires to be omitted from the list of comparables. 19.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables as this company was a pure software development service provider like the assessee. 19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer.Com (P.) Ltd. (supra). As the facts for this year are similar and material on record also indicates that RPT is 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les as listed above are not functionally not comparable with software development service provider. Accordingly, following the order of this Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra), we direct the A.O./TPO to exclude 12 comparable companies from the set of comparables. 11.1 The next grievance of the assessee is regarding incorrect operating margin taken by the TPO. The learned Authorised Representative of the assessee has submitted that the TPO has computed the profit margin of the assessee without excluding the Fringe Benefit Tax ('FBT'). The learned Authorised Representative has referred to the decision of the Tribunal in assessee's case for the asst. year 2007-08 and submitted that an identical issue has been decided by the Tribunal by directing the A.O./TPO not to consider the FBT as part of the operating cost of the assessee when the same was not considered as part of the OC in the case of the comparables. The learned Authorised Representative has submitted that while computing the operating margin the TPO has considered the total expenditure at page 138 of the paper book showing that the total cost includes FBT. The learned Authorised Representative h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment by observing that this has been considered and discussed in detail in the order for earlier years. We find that on similar facts, different co-ordinate benches of this Tribunal in the case of Intellinet Technologies India Pvt. Ltd. (ITA No.237/Bang/2010) and Bearing Point Business Consulting Pvt. Ltd. (ITA No.1124/Bang/2011) have held that the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue back to the file of the TPO. Following the decisions in the aforementioned cases of the co-ordinate benches of this Tribunal (supra), we remand the issue of market risk adjustment to the file of the Assessing Officer/TPO for examining the issue in the light of the decisions cited." In view of the above decisions of the co-ordinate benches of the Tribunal, we direct the TPO to consider the risk adjustment of the margins of comparables for bringing them on par with the assessee. 12.1 The next issue raised by the assessee is regarding web site creation expenses which has been disallowed by the A.O by treating the same as capital in nature. 12.2 The learned Authorised Representative of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case the learned CIT (Appeals) has erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 4. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred inaccepting M/s. VGL Softech Ltd. as a comparable. 5. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred in deleting M/s. Celestial Biolabs from the comparables as functionally different. 6. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred in holding that the reimbursement of expenditure towards freight of ₹ 1,27,288, telecommunication charges of ₹ 65,70,127, insurance charges of ₹ 18,57,172, travelling and conveyance charges ofRs.2,71,19,823 are to be excluded from the total turnover as well, for computation of deduction under Section 10A of the IT Act whereas such exclusion is permitted to arrive at the export turnover only as per the definitions given in section 10A of the IT Act and total turnover has not been defined in section 10A of the Act. 7. The CIT (Appeals) ought to have appreciated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the relevant data is not available in the public domain. The CIT (Appeals) has considered the relevant details obtained under section 133(6) of the Act. 14.4 In view of the above facts when the TPO did not examine the relevant details and data, we set aside this issue to the record of the TPO to consider the relevant information of this company as filed by the assessee before the CIT (Appeals) as well as before us. However, the learned Authorised Representative has submitted that these details were available with the TPO. In any case, we direct the TPO to consider the relevant details and then decide the issue of comparability after giving an opportunity of hearing to the assessee. 15. The other objections of the revenue is regarding exclusion of certain companies including Celestial Biolabs which stand decided in view of our finding in the assessee's appeal in directing the 12 companies to be excluded from the set of comparables. 16. The next ground is regarding exclusion of freight charges, telecommunication charges, insurance charges, travelling and financial charges from the export turnover as well as total turnover while computing the deduction u/s. 10A of the Act. 16.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. To the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Therefore, though there is no definition of the term 'total turnover' in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. When the statute prescribed a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to total turnover. The submission of the revenue, however, misses the point that the expression "total turnover" has not been defined at all by Parliament for the purposes of s.10A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. 'export turnover' would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from 'export turnover' for the purposes of the numerator would be brought in as part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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