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TMI Blog2020 (6) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases on which he has placed reliance upon and whether thedistinguishable factors for exclusion of the comparables in those cases also existed in the assessee s case. If it is found that the assessee s case is similar and the distinguishing factors exist, then the TPO shall exclude such companies from the final list of comparables and the TPO shall be free to adopt any other comparable companies if they are so comparable to the assessee. Provisions for bad debts being considered as non-operating expenditure in computing the margin of only 3 companies - HELD THAT:- We direct the AO/TPO to reconsider the same and bring out the reasons for considering the same as nonoperating in the case of these three companies only, because the AO/TPO have to follow a uniform and consistent manner in adopting a filter and cannot deviate from the same in respect of some companies. Foreign exchange loss - Whether an extraordinary item for the year and hence adjustment should be provided for the same? - HELD THAT:- We are not convinced that the foreign exchange loss is an extra-ordinary item in the year to the assessee alone. Similar foreign exchange loss would have been incurred by the comparable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enterprises ("AEs") Rejection of transfer pricing documentation maintained 1. Rejection of the transfer pricing documentation maintained by the applicant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ('Rules') and making an adjustment of ₹ 3,22,58,649 to the international transactions relating to provision of software services to its AE by undertaking a fresh economic analysis during the course of assessment proceedings. Rejection of use of contemporaneous data and multiple year data 2. Using the single year data (FY 2009-10) of comparable companies selected which was not available at the time of complying with the transfer pricing documentation requirements and rejecting the use of multiple year data in computing the arm's length price of international transactions. Use of additional filters 3. Inter-alia use of the following additional/modified filters in undertaking the comparative analysis and rejecting comparable companies having: a) Diminishing revenues; b) Persistent losses; c) Different financial year-end; and d) Export sales less than 75% of the sales. Selection of comparables 4. Not u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Selection of comparables 13. Not undertaking an objective comparative analysis and inter alia selecting the following companies as comparable to the software services of the Appellant: a) Persistent Systems Ltd; b) Sasken Communication Technologies Ltd; c) E - Zest Solutions Ltd; d) Mindtree Ltd; and e) Zylog Systems Ltd; f) Evoke Technologies private Limited; g) Kuliza Technologies private Limited"; 4. The Revenue in its appeal has raised the following grounds of appeal: Grounds of Appeal for ITA No.419/Hyd/2015: 1. Whether on the facts and in the circumstances of the case, the DRP is justified in rejecting the comparable companies on the ground of exceptionally large scale of operations and thereby ignoring the fact that high or low turnover do not influence the margins of the comparables? 2. Any other grounds that may be urged at the time of hearing the appeal". 5. At the time of hearing, the learned Counsel for the assessee, Shri Ravi Bharadwaj, submitted that the assessee is not pressing grounds 1, 2, 3 & 9 and these grounds are accordingly rejected as not pressed. 6. The learned Counsel for the assessee prayed for admission of the additional gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, with regard to the maintainability of the appeal before the Hon'ble High Court as the Hon'ble High Court's jurisdiction u/s 260A is mainly on substantial questions of law. Therefore, this decision is not strictly applicable to the admissibility of the additional ground by the Tribunal as the ITAT is the final fact finding authority and the facts relating to most of these companies are already on record. Therefore, there is no prejudice caused to the revenue by admitting the additional ground. 10. In the case of CIT vs. Begum Noor Banu (Supra), the Hon'ble A.P High Court was considering whether the Appellate Tribunal has jurisdiction to grant relief on consideration of an additional ground raised before it by the assessee for the first time although such ground related to an item of assessment which was not disputed at any of the earlier stages and whether the assessee who returned income from capital gains voluntarily for assessment and never objected to inclusion of that part of income before the AAC. The Hon'ble High Court held that an assessee could not dispute the assessment of tax on capital gains before Tribunal in such circumstances. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguishable factors for exclusion of the comparables in those cases also existed in the assessee's case. If it is found that the assessee's case is similar and the distinguishing factors exist, then the TPO shall exclude such companies from the final list of comparables and the TPO shall be free to adopt any other comparable companies if they are so comparable to the assessee. 14. As far as the Revenue's appeal is concerned, we find that the DRP has directed exclusion of these two companies not only by applying the turnover filter but has also held them to be not comparable due to brand value. The TPO shall examine this fact also and if these two companies have brand value, then they shall not be considered as comparable to the assessee. 15. As regards Ground No.6 relating to provisions for bad debts being considered as non-operating expenditure in computing the margin of only 3 companies mentioned in Ground No.6, we direct the AO/TPO to reconsider the same and bring out the reasons for considering the same as nonoperating in the case of these three companies only, because the AO/TPO have to follow a uniform and consistent manner in adopting a filter and cannot deviate from the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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