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TMI Blog2018 (12) TMI 1664X X X X Extracts X X X X X X X X Extracts X X X X ..... e details are very much available in the audited accounts in the form of Notes to Accounts, therefore, there was no necessity of giving any opportunity to the Assessing Officer. Therefore, the ground No.2 raised by the Revenue is also dismissed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It is an admitted fact that the assessment year involved in A.Y. 2007-08. Therefore, in view of various decisions, the provisions of Rule 8D are not applicable for assessment year 2007-08. Therefore, the action of the AO in applying the provisions of Rule 8D is incorrect. However, since the assessee has earned dividend income of 2,52,976/- and has substantial investment in shares of various companies, therefore, it cannot be said that no expenditure has been incurred by the assessee for making the investment and earning the exempt dividend income. Disallowance on estimate for this year under the facts and circumstances of the case will meet the ends of justice. We, therefore, modify the order of the CIT(A) and direct the Assessing Officer to disallow an amount of 30,000/- u/s 14A of the IT Act. Ground No.8 is accordingly partly allowed. Double disallowance being loss on sale of fixed assets since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing impugned assessment year has undertaken the following international transaction:- S.No. Description of transaction Method Value (in Rs.) 1. Medical Transcription, quality assurance and related services TNMM 33,92,30,295/- 2. Reimbursement of expenses CUP 14,20,388/- 4. He observed that the assessee in its TP study report has considered all the international transactions as related to IT enabled activities and has benchmarked by using TNMM. Profit level indicator (PLI) used is OP/TC. In the TP report, the OP/TC of the assessee was shown at 14.64%. The assessee has selected four comparables whose average weighted margin was shown at 11.01%. Since the assessee has used multiple year data, the TPO rejected the same and applied the current year data. Further, since the assessee in the original TP study had used four comparables to benchmark the transactions, the TPO retained the two comparables, namely, R. Systems International and Firstsource Solutions and proposed five more comparables and determined the arithmetic mean at 16.15%. After considering the objections filed by the assessee, the TPO finally selected the following comparables and computed the ALP at 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken the following grounds in the CO filed by it:- 1. That on the facts and circumstances of the case and in law, the CIT(A) erred in partially upholding the order of the Assessing Officer ("AO") / Transfer Pricing Officer ("TPO") which is arbitrary, bad in law and void ab-initio. 2. That the CIT(A) erred on facts and in law in upholding the action of the AO in invoking the provisions of Chapter X - Special Provisions relating to avoidance of tax of the Act, without appreciating that the income of the Appellant was exempt under sections10A/10B of the Act, and therefore, there could not have been any erosion of tax revenue from India. 3. That the CIT(A) erred on facts and in law in upholding the action of the AO in invoking the provisions of Chapter X - Special Provisions relating to avoidance of tax of the Act, without appreciating that there would have been no profit shifting from India. 4. That the CIT(A) erred on facts and in law in not appreciating that the order passed under section 92CA of the Act is without jurisdiction, and therefore, consequential transfer pricing adjustment made by the AO, is null and void abinitio. 5. That the CIT(A) erred on facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ld.CIT(A), without properly appreciating the facts, has directed the Assessing Officer to exclude Accentia Technologies Ltd. and Cat Technologies Ltd. from the list of comparables. He submitted that the above two comparables be included and the arithmetic mean be computed accordingly so as to determine the ALP of the international transaction. 12. The ld. counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). So far as Accentia Technologies Ltd. is concerned, he drew the attention of the Bench to the copy of the annual report of the said company, copy of which is placed at pages 269 to 314 of the paper book. Referring to page 311 of the paper book (internal page 51 of the annual report), he drew the attention of the Bench to the income from operations which is from three sources, i.e., (a) medical transcription, (b) coding, and (c) software development. Referring to clause (19) of the Notes to Accounts, he submitted that the auditors have stated that the company has only one segment of activity, namely, "healthcare receivables management" and, therefore, segment reporting as defined in AS-17 does not apply. He accordingly submitted that it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the Bench to the following:- "7. SEGMENT REPORTING The Company's exclusive business is Medical Transcription, Training Software Development and Consulting Services as such this is the only reportable segment as per Accounting Standard -17 on Segment Reporting issued by the Institute of Chartered Accountants of India. As the Company consider whole of India as asingle geographical segment, the disclosures related to secondary segments are not relevant for the Company." 14. He accordingly submitted that Cat Technologies Ltd., has not disclosed any segments. Further, this company is having majority of its revenue from software development and, therefore, this company is primarily a software development company. Therefore, in absence of segmental information, the same cannot be considered as a good comparable. Referring to the following decisions, he submitted that Cat Technologies Ltd. have been directed to be excluded on account of unavailability of separate segments in financials:- i) Nokia Siemens Networks India vs. ACIT, ITA No.333/Del/2013 (Del-Trib); ii) Opera Solutions Management Consulting Services Pvt. Ltd. vs. ITO, ITA No.5761/Del/2014 (Delhi-Trib.); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income from operations at ₹ 4,05,61,280/-, the revenue from software development and consulting services is ₹ 3,39,89,551/-, training income is only ₹ 12,14,225/- and medical transcription receipts is ₹ 53,57,504/-. We, therefore, find merit in the argument of the ld. counsel for the assessee that this company is primarily a software development company and, therefore, in absence of segmental information, this cannot be compared with the assessee company as a comparable. The various decisions relied on by the ld. counsel also supports his case. Under these circumstances, we do not find any infirmity in the order of the CIT(A) in excluding this company from the list of comparables. So far as the ground raised by the Revenue that ld.CIT(A) has not given any opportunity to the TPO before admitting the additional evidence in case of Accentia Technologies Ltd., regarding acquisition, etc., we find the same is without any merit. All these details are very much available in the audited accounts in the form of Notes to Accounts, therefore, there was no necessity of giving any opportunity to the Assessing Officer. Therefore, the ground No.2 raised by the Revenue i ..... 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