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TMI Blog2017 (9) TMI 1800X X X X Extracts X X X X X X X X Extracts X X X X ..... t correct margins of said concern Jeevan Softech Ltd. and then determine average margins of comparables and apply the same. E-clerx Services Ltd. being KPO company and not comparable from the final list of comparables. Assessee in the written note has furnished PLI after working capital adjustment of said concerns at 19.22% and has pointed out that no adjustment is to be made on account of arm's length price of international transactions, in view of proviso to section 92C(2) of the Act, under which range of +/- 5% of operating revenue be applied. So, we direct the Assessing Officer to verify the computation in this regard and delete the addition in the hands of assessee. Erroneous calculation of capital adjustment - HELD THAT:- DRP had directed to compute working capital adjustment in the hands of comparables. However, the Assessing Officer has not effectively complied with the said directions. Accordingly, we direct the Assessing Officer to re-compute the margins after working capital adjustment. The grounds of appeal Nos. 1 to 5 raised by the assessee are thus, allowed. Deduction for contribution to Provident Fund - addition u/s 43B - HELD THAT:- Where the assessee du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not complying with the binding directions of the Hon'ble DRP (para 3.3 to 3.6 on page nos. 5 and 6) in computing the operating margin of certain comparable companies. 5. Erroneous calculation of working capital adjustment The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred on the facts and in circumstances of the case in not complying with the binding directions of the Hon'ble DRP (para 13.4 on page 27) in computing the working capital adjustment. 6. Inappropriate application of the enhanced foreign exchange earnings filter of greater than 75% The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred on the facts and in circumstances of the case in application of enhanced foreign exchange earnings filter of 75% (25% as applied by the Appellant) and has rejected Allsec Technologies Ltd. having a foreign exchange earnings/service income ratio of 54.14%, however, has accepted Jeevan Softech Ltd having a foreign exchange earnings/service income ratio of 59.49%. 7. Erroneous non-application of turnover filter The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground above. 16. Each of the above grounds of appeal is without prejudice to the other. 17. The appellant reserved the right to amend, alter or add to the grounds of appeal. 4. The Revenue in 303/PUN/2015 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case, the Ld. Dispute Resolution Panel erred in directing the Assessing Officer to exclude E-clerx on the basis of the fact the company is in the business of KPO. 2. On the facts and in the circumstances of the case, the Ld. Dispute Resolution Panel erred in not considering the fact that the assessee is taking inconsistent approach in selecting comparable. 3. On the facts and in the circumstances of the case, the Ld. Dispute Resolution Panel erred in ignoring the Hon'ble ITAT's decision in the case of Willis Processing Services Ltd. TS 49 ITAT 2013 (Mum.) and Agilent Technology International Ltd. TS 165 ITAT (2013) Del and Vodafone India Services TS 95 ITAT 2013 (Mum.). 4. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the Hon'ble Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was claimed to be against the assessee. Further, corporate issue raised by way of ground of appeal No. 12 was against contribution to Provident Fund amounting to ₹ 36,68,560/- paid during the year. The said amount was paid consequent to the demand raised by the Regional Provident Fund Commissioner in respect of dues of both employees contribution and employer's contribution and interest thereon. The assessee paid the said demand but in the books of account, it had shown the said amount as advance recoverable and debited to the Profit and Loss Account as provision for doubtful debts. The assessee had in the return of income for the year under consideration, disallowed such an amount being provision for doubtful debts. Subsequently, the said liability was confirmed in the hands of assessee in assessment year 2013-14 and no further appeal was filed by the assessee. Hence, the provision for doubtful advances were reversed during the assessment year 2013-14 and the amount was offered to tax in the said year on the ground that the employees contribution of PF was covered under the provisions of section 43B(b) of the Act and was allowable in the year in which the payment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment) 1 BNR Udyog Ltd (segmental)23.77% 2 Infosys BPO Ltd. 35.13% 3 Accentia Technologies Ltd. 39.33% 4 Jeevan Scientific Technology Ltd. (segmental) (earlier known as Jeeven Softech Ltd.) 43.00% 5 Fortune Infotech Ltd. 22.46% 6 Cosmic Global Ltd. 18.33% 7 Caliber Business Point Solutions Ltd. 19.30% 8 Jindal Intellicom (P) Ltd. 14.08% 9 Informed Technologies India Ltd. 28.54% 10 Coral Hubs Ltd. (Formerly Vishal Information Technology Ltd.) 32.05% 11 Eclerx Services Ltd. 55.97% Average 30.18% 9. The average margins after working capital adjustment was 30.18% as against the margins shown by the assessee at 18.78% and an adjustment of ₹ 14,17,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded from final list of comparables. Accordingly, we hold so and direct the Assessing Officer/TPO to exclude Infosys BPO Ltd. 12. The next concern against which the assessee has raised objections is Accentia Technologies Ltd. on the ground of extraordinary events during the year under consideration. The said concern had acquired IQ group of companies in the United Kingdom and there was amalgamation of Asscent Infoserve Pvt. Ltd. with the said concern and because of these extraordinary events, the margins of said companies should not be included in the final set of comparables. The Pune Bench of Tribunal in Aptara Technologies (P.) Ltd. v. Asstt. CIT [2016] 72 taxmann.com 352 (Pune - Trib.) and Cummins Turbo Technologies Ltd. v. Dy. CIT [2017] 79 taxmann.com 260 (Pune - Trib.) has held that the said concern cannot be accepted as comparable. The Tribunal in Aptara Technologies (P.) Ltd. (supra) held as under:- '14. We find that the Tribunal in assessee's own case in assessment year 2008-09 in ITA No. 2235/PN/2012, order dated 02.02.2015 had held that the said concern could not be considered as comparable because of certain extraordinary events. The said ratio was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hyderabad Bench of the Tribunal in the case of Capital IQ Information Systems (India) Private Limited (supra) and by the Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions India Pvt. Ltd. (supra) is squarely applicable to the present case also. The aforesaid Benches of the Tribunal found that during the year under consideration there were extraordinary events that took place in the said concern which warranted exclusion of this company as a comparable. We therefore hold that the said concern cannot be considered as a comparable. 15. Further, similar proposition has been laid down by different Benches of Tribunal while deciding the appeals relating to assessment year 2010-11 and it has been held that because of extraordinary events during the year, the concern Accentia Technologies Ltd. was not comparable to the entities engaged in ITES. Following the same parity of reasoning, we hold that Accentia Technologies Ltd. is to be excluded from the final set of comparables.' 13. Following the same parity of reasoning as in Aptara Technologies (P.) Ltd. (supra) and Cummins Turbo Technologies Ltd. (supra), we hold that Accentia Technologies Ltd. cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction and by including Jeevan Softech Ltd. in the final list of comparables. 28. In the totality of the above said facts and circumstances of the case, we find merit in the claim of assessee and direct the Assessing Officer/TPO to work out the correct margins of said concern Jeevan Softech Ltd. and thereafter, determine the average margins of comparables. Accordingly, we direct the Assessing Officer/TPO to exclude three concerns i.e. (1) Accentia Technologies Ltd., (2) Cosmic Global Ltd. and (3) Informed Technologies Ltd. from the final list of comparables and to correct the margins of Jeevan Softech Ltd. and work out the average margins of comparables. It was the case of learned Authorized Representative for the assessee before us that the same would be within +/- 5% and hence no addition on account of arm's length price of international transaction with the associate enterprises is to be made in the hands of assessee. 16. Following the same parity of reasoning, we direct the Assessing Officer/TPO to work out correct margins of said concern Jeevan Softech Ltd. and then determine average margins of comparables and apply the same. 17. The next issue which needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune Bench of Tribunal in Cummins Turbo Technologies Ltd., UK v. DDIT (Int. Tax) (supra), we uphold the order of CIT (A) in excluding Eclerx Services Ltd. The grounds of appeal raised by the Revenue are thus, dismissed.' 19. Accordingly, we direct the Assessing Officer/TPO to re-work mean margins of said comparables by first excluding the margins of E-clerx Services Ltd., Infosys BPO Ltd. and Accentia Technologies Ltd. and reworking margins of Jeevan Softech Ltd. The learned Authorized Representative for the assessee in the written note has furnished PLI after working capital adjustment of said concerns at 19.22% and has pointed out that no adjustment is to be made on account of arm's length price of international transactions, in view of proviso to section 92C(2) of the Act, under which range of +/- 5% of operating revenue be applied. So, we direct the Assessing Officer to verify the computation in this regard and delete the addition in the hands of assessee. 20. Before parting, we may refer to the issue raised by way ground of appeal No. 5 i.e. against erroneous calculation of capital adjustment. 21. The learned Authorized Representative for the assessee pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer to allow said claim of ₹ 38,68,560/- under section 43B(b) of the Act. The Assessing Officer did not adjudicate the same and issued draft assessment order. 26. The claim of assessee before us is that in view of decision of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers Shareholders [2012] 349 ITR 336, wherein it has been held that the assessee is entitled to raise before appellate authorities any claim which was not claimed in the return of income and hence, the same may be allowed. 27. We find merit in the plea of assessee where the assessee during the course of assessment proceedings had made a claim before the Assessing Officer for allowing the benefit of deduction under section 43B of the Act. The assessee has made payment of PF dues during the year under consideration and consequently, the assessee is entitled to claim the said amount as deduction in the instant assessment year itself. Accordingly, we hold so and direct the Assessing Officer to allow the deduction of ₹ 36,68,560/-. The ground of appeal No. 12 is thus, allowed. 28. The ground of appeal No. 13 is not pressed and hence, the same is dismissed as not pressed. ..... 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