9911796707
TMI Blog2018 (7) TMI 2074X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 140 ITD page 540 even when the said decision has not reached finality and without appreciating the fact that the forex/gain is not an operating expenditure/income to be eligible for inclusion while calculating the PLI in transfer pricing analysis and Foreign Exchange Gain or loss does not form part of profits realized from international transactions as the billing by the taxpayer is done in foreign currency (for example US Dollars) and not following the rules prescribed under the I.T Rules? (2) Whether on the facts and in the circumstances of the case the Tribunal is right in law in accepting the claim of assessee to adopt turnover filter of Rs. 200 Crores following the decision of Co-ordinate Bench in the case of M/s. Genisys Pvt. Ltd v. DCIT reported in 64 DTR page 225 even when said decision has not reached finality and without appreciating that the turnover is not a relevant filter in the software industry, as the size of the turnover and margins are not linked and the Economics of scale are relevant factor only in capital intensive companies which have substantive fixed assets in the form of plant and machinery? (3) Whether on the facts and in the circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Dy. CIT [2013] 29 taxmann.com 310/140 ITD 540 (Bang. - Trib.) has been considered by this Court in ITA No.171/2013 and the same has been dismissed on 10.07.2018 as no substantial questions of law arose for consideration. Regarding substantial question of law No.2: "20. We have to hold that assessee can seek exclusion of comparables which were a part of its own list, at a later stage, and therefore, we are constrained to reject the line of argument of the learned DR. Coming to the arguments of the learned AR that M/s Tata Elxsi Ltd., M/s Sasken Communication Ltd., M/s Persistent Systems Ltd., M/s L & T Infotech and M/s Infosys Ltd., had turnover in excess of Rs. 200 Crores and were to be excluded, we are of the opinion that turnover filter can be applied for selection of comparables. This has been the view consistently taken by the Co-ordinate Benches of this Tribunal in a number of cases. In the case of M/s Genisys (P.) Ltd. v. DCIT [2011] 64 DTR 225 it was held by this Tribunal as under at paras-8 to 09 of its order: 8. According to learned counsel for the assessee size is an important fact of an enterprise level difference. He submitted that comparables should have someth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lter. 9. Having heard both the parties and having considered the rival contentions and also the judicial precedents on the issue, we find that the TPO himself has rejected the companies which are making losses as comparables. This shows that there is a limit for the lower end for identifying the comparables. In such a situation, we are unable to understand as to why there should not be an upper limit also. What should be upper limit is another factor to be considered. We agree with the contention of the learned counsel for the assessee that the size matters in business. A big company would be in a position to bargain the price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, the turnover also would come down reducing profit margin. Thus, as held by the various Benches of the Tribunal, when companies which are loss making are excluded from comparables, then the super profit making companies should also be excluded. For the purpose of classification of companies on the basis of net sales or turnover, we find that a reasonable classification has to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 as no substantial questions of law arose for consideration. 4. The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 Pr. CIT v. Softbrands India (P.) Ltd. [2018] 94 taxmann.com 426/406 ITR 513 (Kar.) wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the Judgment is quoted below for ready reference: "Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
