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TMI Blog2020 (9) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by assessee with its associated enterprise. DRP shall then pass a reasoned order by granting proper opportunity of being heard to assessee in accordance with law. Disallowance of employee contribution to PF belatedly - HELD THAT:- This issue now stands settled in favour of assessee by decision of Hon ble Karnataka High Court in case of CIT vs Sabari Enterprises [ 2007 (7) TMI 169 - KARNATAKA HIGH COURT ] wherein held that, in view of statutory provisions of section 2(24)(x), section 36(1)(va) and section 43B(b), contributions made by assessee to PF and ESI are allowable deductions, even though made beyond stipulated period, as contemplated under mandatory provisions of section 36(1)(va), read with section 2(24)(x), provided such contributions are paid by assessee on or before due date for furnishing return of income as per section 139(1). This ratio has been upheld by Hon ble Supreme Court in CIT vs Alom Extrusion Ltd reported in [ 2009 (11) TMI 27 - SUPREME COURT ]. We therefore remand this issue to Ld.AO to verify whether, employee contributions were made by assessee before due date of furnishing of return, as per section 139 (1) of the Act. - Shri A.K Garodia, Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les: i. Genesys International Corpn. Ltd. ii. Infosys Ltd. iii. Larsen Turbo Infotech Ltd. iv. Persistent Systems Ltd. d. Not making proper adjustment for enterprise level and transactional level differences between the Appellant and the comparable companies; e. Not properly computing the working capital adjustment; and f. Not recognizing that the Appellant was insulated from risks, as against comparables, which assume these risks and therefore have to be credited with a risk premium on this account; 5. Assuming without admitting that the adjustment is to be made, the lower income tax authorities erred in law in not allowing he benefit of +1- 5% the variation as per the proviso to Section 92C(2) of the Act. GROUND RELATING TO CORPORATE TAX 6. The learned AO has erred in disallowing employee contribution to PF paid late amounting to ₹ 11,25,151/- and the Honourable DRP has erred in confirming the action of the learned AO. On facts and circumstances of the case and law applicable, the impugned disallowances of ₹ 11,25,151/- should be deleted. 7. The learned AO has erred in not allowing the set off of brought forward business loss and unabsorbed depreciation relating to AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent authentication and processing, solutions, and focused on global growth market in prepaid, online and mobile payments. Ld.TPO noted that, assessee undertook analysis selecting cost plus method as most appropriate method. Ld.TPO noted that, assessee selected 11 comparables with average margin of 19.04%. Assessee computed its margin to be at 19.23%, and since it was within +/-5% of arms length margin of comparables, the price charged by assessee in software development service segment was considered to be at arms length. 4. Ld.TPO rejected comparables selected by assessee. It is also been noted that Ld.TPO noted that assessee incurred profit of 15.79% from its associated enterprise, whereas, it had net loss of 43% from its non-AE transaction. Ld.TPO called upon assessee to furnish basis of allocation of costs. Ld.TPO noted that, assessee has not reported segment wise revenue in profit and loss account and the segmentation is given only in Transfer Pricing study for benchmarking. Ld.TPO, therefore rejected segmental information provided by assessee subsequently. He also noted that assessee did not substantiate cost allocation basis to the segments being AE non-AE and domestic segme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f additional ground dated 12.01.2018, wherein, assessee challenges cost allocation made by Ld.TPO to AE and non-AE segment, thereby reworking margin of assessee in respect of international transaction. He submitted that, this issue was inadvertently missed out while filing original grounds before this Tribunal. However this issue has been raised and considered before DRP. He thus submitted that, no new facts needs to be looked upon to adjudicate this issue as it emanates from the records placed before us. Placing reliance on decision is of Hon ble Supreme Court in case of NTPC Ltd. Vs. CIT reported in 229 ITR 383, he submitted that, grounds raised in application for additional grounds may be admitted in the interest of natural Justice. 13. Ld.CIT.DR could not controvert the submissions advanced by Ld.AR. 14. We have perused submissions advanced by both sides in light of records placed before us. 14.1 We are convinced that additional ground of appeal emanate from the facts available on record and has been raised and considered by authorities below. The Admission of ground does not require any further investigation into the facts. Nothing contrary had been brought to our notice by Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions advanced by both sides in light of records placed before us. 17.5 We have also referred to decision relied upon by Ld.AR in case of CGI Information s (supra), wherein 4 comparables which are being sought for exclusion by assessee before us, was dealt with. We also note that, functional profile of assessee before us and assessee in case of (CGI Information (supra) is identical in as much as the company was involved in providing software development services to its AE. It is also noted that the comparables chosen by Ld. TPO in case of CGI Information (supra) are same as in present case for the same year under consideration. 17.6 We note that this Tribunal, while considering 4 comparables, which assessee is seeking to exclude, observed and held as under: 28. The learned counsel for the Assessee submitted before us that the comparability of the 3 companies out of the aforesaid 4 companies which the Assessee seeks to exclude from the list of comparable companies chosen by the TPO viz., Infosys Ltd., Larsen Toubro Infotech Ltd. and Persistent Systems Ltd., were considered by the ITAT Delhi Bench in the case of Agilis Information Technologies India (P.) Ltd. v. Asstt. CIT [2018] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Delhi Bench of ITAT in the case of Saxo India (P.) Ltd. v. Asstt. CIT [2016] 67 taxmann.com 155 (Delhi - Trib.). The discussion is contained in paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that L T Infotech Ltd., was a software product company and segmental Information on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal's order was dismissed by the Hon'ble Delhi High Court in ITA No.682/2016. ( c) Persistent Systems Ltd., was excluded from the list of comparable companies on the ground that this company was a software product company and segmental Information on SWD services was not available. The Tribunal in coming to the above conclusion referred to the decision rendered by ITAT Delhi Bench in the case of Cash Edge India (P.) Ltd. v. ITO ITA No.64/Del/2015 order dated 23.9.2015 and the decision of Hon'ble Delhi High Court in the case of Saxo India Pvt. Ltd. (supra). The findings in this regard are contained in Paragraphs 4.14 to 4.16 of its order. 30. Respectfully following the decision of the Tribunal we hold that the aforesaid 3 companies be excluded from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and geospatial services and operates a few development centres in India. The company is predominantly into software development services. The intangibles in the possession of the company are only the GIS database which is only depreciation. It does not add significant value to the company. 33. The objections as put forth before the TPO were reiterated before the DRP. The DRP in paragraphs 6.2.2 6.2.3 of its directions dealt with this issue as follows: 6.2.2 The functions of the Assessee company have been examined in detail. A financial product on which the settlement system of bank runs is a real time system. It is very complex. Any bug or problem in it can crash the entire banking system of several nations. The Assessee's claim of providing only basic software services is rejected. 6.2.3 The Panel holds that the software for financial product is much more complex than a geospatial software. Therefore, the panel holds that the Genesys is a valid comparable. 34. The learned counsel for the Assessee submitted that the DRP has completely proceeded on wrong facts which does not either emanate from the order of the TPO or the submissions of the Assessee. He reiterated submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of international transaction and therefore we would adjudicate this ground 1st before proceeding further. In additional ground, assessee challenges cost allocation by Ld. TPO to determine margin of assessee at 2.95%. It has been submitted by Ld.AR that, as per statement of work entered into by assessee with its associated enterprise, assessee would be charging cost +15% of services provided. The cost includes direct cost specifically identified for the work as well as indirect cost allocated to the work. It is also submitted that, assessee was maintaining separate records for this work and other segments, and hence captured specific cost for each segment and pricing for AE company at 15% on the cost so incurred. 18.1 Ld.AR submitted that, assessee is also into establishing domestic business of undertaking card payment authentication and software operations and support services to 3rd parties. He submitted that Ld.TPO erred in computing profit level indicator based on overall statement of profit and loss account of assessee. It is also submitted that, operating profit by operating cost of assessee from software development and support services comes to 15.79%, which is as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of statutory provisions of section 2(24)(x), section 36(1)(va) and section 43B(b), contributions made by assessee to PF and ESI are allowable deductions, even though made beyond stipulated period, as contemplated under mandatory provisions of section 36(1)(va), read with section 2(24)(x), provided such contributions are paid by assessee on or before due date for furnishing return of income as per section 139(1). 19.4 This ratio has been upheld by Hon ble Supreme Court in CIT vs Alom Extrusion Ltd reported in (2009) 298 ITR 141. We therefore remand this issue to Ld.AO to verify whether, employee contributions were made by assessee before due date of furnishing of return, as per section 139 (1) of the Act. In the event assessee satisfies this condition, no addition could be made in the hands of assessee. Accordingly this ground raised by assessee stands allowed for statistical purposes. 20. Ground No. 7 raised by assessee is in respect of not allowing set off and brought forward losses and unabsorbed depreciation. 21. Ld.A.R. submitted that, rectification application filed by assessee is pending before Ld. AO and therefore, we do not wish to express our view. 22. Ground No. 8 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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