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TMI Blog2019 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... suant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in making an adjustment amounting to INR 38,25,56,571/- (INR 38,20,01,686/- to the value of international transactions entered into by the Appellant with its associated enterprise ("AE") with respect to export of transaction processing service, INR 41,533/- on account of excess claim of depreciation and INR 5,13,352/- on account of disallowance of repairs and maintenance expenses). 2. Erroneous selection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and circumstances of the case in confirming the following functionally non-comparable companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant. 6. Disallowance of claim of depreciation on professional wireless devices The learned DCIT, pursuant to the directions of the Hon'ble DRP, has erred in law and on facts in disallowing the claim of depreciation of INR 41,533 on professional wireless devices on the ground that the same are not in the nature of computer or computer related items. 7. Disallowance of repairs and maintenance expenses under section 37 of the Act The learned DCIT, pursuant to the directions of the Hon'ble DRP, has erred in law and on the facts in disallowing expenditure on repairs and maintenance of INR 5,67,481 on the ground that the same are capital in nature. 8. Each one of the above grounds of appeal is without prejudice to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at arm's length price. The TPO however, only selected two of the concerns selected by assessee, which were later rejected, and the TPO applied data of contemporaneous period and by revising the filters had finally selected four concerns as comparables, which are as under:- Sr. No. Name of the Company PLI = OP/OC% 1 Excel Infoways Ltd. (Seg.) 41.48 2 Ninestar Information Technologies Ltd. 19.57 3 Microgenetics Systems Ltd. 20.43 4 Universal Print Systems Ltd. (Seg.) 59.40 7. Since the average mean margins of said comparables worked out to 29.84% as against margins of assessee at 15.25% and an upward adjustment of Rs. 37.81 crores was made in the hands of assessee. The Assessing Officer issued draft assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to assessment years 2011-12 and 2012-13 along with SA Nos.45 & 46/PUN/2018, order dated 25.04.2018 and also in Cummins Turbo Technologies Limited Vs. DCIT in ITA No.388/PUN/2017, relating to assessment year 2012-13, order dated 21.01.2019. 9. We find that the issue of comparable following different module wherein filter of employee cost is applied and the concern has low employee cost to sales ratio, then the margins of such concern cannot be applied as in ITES segment it is an admitted position that the said segment is high employee cost oriented venture. The Tribunal while deciding similar issue had vide paras 18 and 19 held as under:- "18. In the ITES segment, it is an admitted position that the same is oriented involving hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the said concern is not to be included in the final list of comparables. The Assessing Officer shall afford reasonable opportunity to the assessee and after verification, determine the arm's length price of international transactions." 10. Following the same parity of reasoning, we hold that where a concern is selected was showing low employee cost to sales ratio, then such concern cannot be selected while benchmarking international transactions of assessee in ITES segment, which is an employee oriented segment. Hence, we find no merit in the order of Assessing Officer/TPO/DRP to include Excel Infoways Ltd. in the final list of comparables, hence we direct to exclude the same. 11. Now, coming to next concern which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces were in the nature of computers and hence, were entitled to depreciation @ 60%. However, depreciation was allowed to assessee as office equipment @ 15%. The DRP confirmed the disallowance proposed by Assessing Officer in the draft assessment order, Assessing Officer in turn, passed final assessment order. 13. The claim of assessee before us is that the said devices were multipurpose devices used in BPO industries and since it was supposed to be intelligent wireless systems, which were ideal for BPO office professionals and the said devices were compatible with certain types of PCs only, could be connected to computers via Bluetooth and similar technology, hence claim of depreciation @ 60%. We find no merit in the plea of assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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