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TMI Blog2017 (4) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... business, in other words, export turnover and domestic turnover. Therefore if the amount is reduced from the Export turnover it is bound to be reduced from the total turnover of the undertaking. As the order of the CIT(A) is in conformity with the order of jurisdictional High Court therefore this ground of the revenue is dismissed. TP Adjustment - ALP computation - standard deduction of 5% from the arithmetical mean of the profit margin of the comparables under the proviso to section 92C(2) - HELD THAT:- After following the SAP Labs Ltd. judgment [ 2010 (8) TMI 676 - ITAT, BANGALORE] in our view these issues are required to be allowed as the amendment was brought into force in the Act with retrospective effect in section 92C(A)(2) of the Act. Further this issue is also covered by the judgment of coordinate bench in the matter of Acusis Software India (P.) Ltd. [ 2016 (11) TMI 1566 - ITAT BANGALORE] - Even the special bench in the case of IHG IT Services (India) (P.) Ltd. v. ITO [ 2013 (5) TMI 309 - ITAT DELHI] held that after the amendment by the Finance (No. 2) Act, 2009 with effect from 1.10.2009, such benefit of 5% tolerance margin was restricted to the cases where v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither the temporarily availability of fund was proved nor temporarily non requirement of funds was proved nor it was set up by the assessee when the funds were temporarily available and when the FDRs were made on temporary basis. We deem it appropriate to remand the matter to the file of the CIT(A) to decide this issue fresh after giving opportunity to the assessee. The assessee shall be at liberty to file all relevant documents in support of its claim to prove that the funds were temporarily available and the FDRs were temporarily made with the view to optimize the profit of the business. - IT(TP)A No. 606/Bang/2011, IT(TP)A No. 609/Bang/2011 - - - Dated:- 28-4-2017 - SHRI A.K. GARODIA And SHRI LALIET KUMAR, J. ORDER Laliet Kumar, Judicial Member These are the two appeals filed by the revenue as well as the assessee against the order of the CIT(A) dated 01.03.2011 passed on section 143(3) of the I.T. Act, 1961 for the assessment year 2004-05. The grounds raised by the revenue and the assessee are as under. 1. The order of the Learned CIT(Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO s order for the selection of such companies as functionally comparable companies following an elaborate search process and application of appropriate filters. 9. The Learned CIT(Appeals) has erred in following the order of the ITAT, Bangalore Bench in the case of SAP Labs Ltd. for the assessment year 2003-04 in ITA No. 398 and 418/Bang/2008 dated 30.08.2010 without examining the facts and circumstances of the assessee s case in detail and without appreciating that the assessee company is not a risk mitigated company and that in the above mentioned ITAT decision, no bench marks have been laid down for categorizing a company as a super profit or low profit case. 10. The Learned CIT(Appeals) has erred in relying on the above mentioned ITAT, Bangalore Bench decision in the case of SAP Labs Ltd. without pointing out any peculiar economic conditions attributable to the so called super profit or low profits of the concerned companies. 11. The Learned CIT(Appeals) has erred in arriving at the adjusted mean PLI of 21.72% on page 11 of the appellate order after deducting working capital adjustment of 2.0% as worked out by the TPO which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 92C(A)(2) of the Act. Further this issue is also covered by the judgment of coordinate bench in the matter of Acusis Software India (P.) Ltd. [2016] 76 taxmann.com 121 (Bangalore - Trib.) 23. Ground Nos 5 to 7 challenges the direction of CIT (A) to grant the benefit of the proviso to sub-section (2) of section 92C of IT Act as a standard deduction. This issue is covered against the assessee by the decision of Bombay Bench in the case of Bayer Crop Science Ltd. v. Addl. CIT [2012] 25 taxmann.com 575/[2014] 62 SOT 109 (Mum. - Trib.) wherein it has been held as follows: Last ground of the assessee's appeal is against the rejection of benefit of 5% % margin as prescribed in proviso to section 92C(2) in determining the Arm's Length Price (ALP) of its export transactions. Filtering out unnecessary details it is observed that the assessee's international transactions were referred to the TPO for determination of ALP. The TPO proposed adjustment of ₹ 19,23,948, for which addition was made by the A.O. It was argued before the ld. first appellate authority that the TPO ought to have allowed standard adjustment of 5% before making addition as per prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is as under 4.4(i) Is comparison of the appellant company with companies involved in software development and service providing companies correct. Before zeroing on only 11 companies the TPO has done exhaustive search. She picked up 24 companies from Capital Line , Prowess and NASSCOM website. Out of the 24 companies selected, applied filters and rejected 13 companies to short list only 11 companies. More or less, they are almost in the same line of business but the most similar companies to the appellent s business were selected. Accordingly, it is held that the AO is correct in zeroing in on only 11 companies out of 24 selected. However, based on the judgment of SAP Labs, the super profit companies or the companies having abnormal results are excluded for the purpose of re-determining the average. Since the average margin is determined at 27.92% by the TPO, the super profits companies like I-power Solutions India Ltd., which had made 80.87% OP to total cost and VMF Softech which had made 72.38% OP to total cost are to be excluded. Also for the reason that Gold Stone Tech Ltd. which had an OP to total cost of only 12.18%, Lanco Global Systems Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll reach to the inescapable conclusion that the order of ld CIT is a cryptic / non-speaking order and the ld. CIT(A) has not examined profile of each company on the touch stone of functional similarity, relating party filters, turn over filter etc. In our view these aspects of the comparable companies are required to be considered in view of rule 10B(2) of the IT rules. 10. In the light of the above we are left with no other option but to remand the matter to the file of the ld. CIT(A) for the purposes of exercising his jurisdiction and to determine fresh about the inclusion and exclusion of the comparables based on the rules and regulations framed for that purposes and also on the basis of judgment of the Tribunal. 11. The ld. AR for the assessee has submitted that M/s. Bodhtree Consulting Ltd., M/s. iPower Solutions India Limited, M/s. Infosys Technologies Limited, M/s. Larsen Toubro Infotech and M/s. Satyam Computers Services Limited are required to be excluded being functionally different than that of the assessee . Furher Ld AR had also pointed out that these companies are liable to be excluded if turnover filter is applied, as these companies turnover are either bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for the adjudication grounds raised by the assessee/ revenue. 16. The second ground is not pressed by the assessee, therefore the same is rejected being not pressed. 17. The third ground raised by the assessee is with respect to interest income amounting to ₹ 4, 34,000 as income from other sources. The ld. AR, has submitted that the issue of interest income being part of the business income and the claim of the assessee for deduction falls under section 10A of the Act has been adjudicated by the tribunal in the case of the assessee in ITA No. 1353/Bang/2011 vide order dated 31.10.2013. The Para 14 at Page 565 of the Paper Book provides as under. 14. The ld. Counsel for the assessee drew our attention to page 16 of the paperbook (PB) which contains the details of the interest income. He pointed out that surplus business funds not immediately required had been temporarily parked in FDs. In this regard, he drew our attention to the fact that the FDs were made for periods ranging from 6 days to 53 days, which itself would go to show that business funds temporarily not required were parked temporarily in FDs. It was his submission that the conclusions of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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