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TMI Blog2017 (4) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find any reason to interfere with the impugned order and directions of the DRP as by applying the filter of 10 multiples all these six companies are required to be excluded from the set of comparables. Risk adjustment allowed by the DRP - HELD THAT:- When the assessee has not given any details and computation for risk adjustment then the claim of the assessee is purely hypothetical in nature. The co-ordinate bench of this Tribunal in the case of Zyme Solutions Pvt. Ltd. Vs. ITO [ 2016 (1) TMI 1436 - ITAT BANGALORE] has considered an identical issue. When the assessee has not made any attempt to quantify the risk or furnish the details for computation of risk adjustment then by following the decision of the co-ordinate bench, we decide this issue in favour of the revenue and set aside the directions of the DRP. Deduction under section 10A - Exclusion of expenditure incurred towards telecommunications, insurance and travel in foreign currency both from export turnover and total turnover - HELD THAT:- Respectfully following the aforementioned decision of the Hon ble High Court of Karnataka in the case of Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] we uphold the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparables having turnover more than ₹ 200 crores in the absence of Turnover criterion prescribed in Rule 10B of Income Tax Rules and also there being no correlation between turnover and profit margin. 4. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in stating that there is no reliable method to make adjustment on account of risk level and has erred in directing to give 1% risk adjustment to the average margin. 5. On the facts and in the circumstances of the case, the Dispute Resolution Panel erred in directing the AO to reduce the expenditure incurred towards telecommunication, insurance and travel expenses incurred in foreign currency both from the Export Turnover and as well from Total Turnover for the purpose of computation of deduction u/s IOA of the Income tax Act without appreciating the fact that the statute allows exclusion of such expenditure only from the Export Turnover by way of specific definition of export turnover as envisaged by sub clause (4) of explanation 2 below sub section 8 of Section IOA by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/S Tata Elxsi Ltd., which has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The learned Departmental Representative has submitted that the assessee has not furnished any computation or details as to how the risk adjustment has to be calculated therefore the directions of the DRP are not sustainable. In support of his contention, he has relied upon the decision of coordinate bench of this Tribunal dt.22.1.2016 in the case of Zyme Solutions Pvt. Ltd. Vs. ITO in IT(TP)A No.465/Bang/2015. 8. On the other hand, the learned Authorised Representative has not disputed this fact that the assessee did not furnish any detail in respect of risk adjustment claim. 9. Having considered the rival submissions and relevant material on record, when the assessee has not given any details and computation for risk adjustment then the claim of the assessee is purely hypothetical in nature. The co-ordinate bench of this Tribunal in the case of Zyme Solutions Pvt. Ltd. Vs. ITO (supra) has considered an identical issue in para 23 as under : " 23. We have perused the orders and heard the rival contentions. No doubt, DRP had followed a coordinate bench decision in the case of Inellinet Technologies India P. Ltd v. ITO [ITA No.1237/Bang/2007], in taking a view that single cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'total turnover' in the context of section 10A, in the case of CIT Vs. Gem Plus Jewellery India Ltd. (2011) [330 ITR P. 175 (Bom)] (2010-TIOL-456-HC-MUM-IT). Interpreting sub-section (4) of section 10A, it is held as under : "Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits of the business of the undertaking in computing the profits derived from export. In other words the profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and divided by the total turnover of the business carried on by the undertaking. The formula which is prescribed by sub-section (4) of section 10A is as follows : Profits derived from export of articles or things or computer software. Profits of the business of the undertaking. Export turnover in respect of the articles or things or computer software. Total turnover of the business carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided." The Special Bench of the Tribunal, in the case of ITO Vs. Sak Soft Ltd. (2009) 313 ITR (AT) 353 (Chennai) (SB) (2009-TIOL- 187-ITAT-MAD-SB) also had an occasion to consider the meaning of the word 'total turnover'. After referring to the various judgments of the High Court as well as the Supreme Court held as under : "53. For the above reasons, we hold that for the purpose of applying the formula under sub-section (4) of section 10-B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded, both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula….." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes 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 adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover means, then, when the total turnover includes export turnover, themeaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover. Therefore the formula for computation of the deduction under section 10A, would be as under : Profits of the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to make the submissions against the said rejection of export turnover. Further the figure taken by the Assessing Officer is not a correct amount in respect of foreign exchange loses while computing the deduction under Section 10A. Thus the learned Authorised Representative has submitted that this issue requires a proper verification and fresh adjudication at the level of the Assessing Officer. 14. On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below. 15. Having considered the rival submissions and perused the relevant material on record, we note that the foreign exchange loss has to be considered only arising from the sale proceeds and pertaining to the period relevant to the assessment year under consideration. Since the assessee has contended that it was not given an appropriate opportunity to make submissions therefore, in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of the Assessing Officer for proper verification and adjudication of this issue as per law. We make it clear that foreign exchange loss is reduced from the export turnover, the same has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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