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TMI Blog2021 (1) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... tter dated 9.11.2020, wherein it is stated that the ground No.7 relating to claim of additional depreciation is being withdrawn. Accordingly, the ground relating to the above said issue are dismissed as withdrawn. 4. The facts relating to the case are stated in brief. The assessee herein is a subsidiary of M/s. Maxim International Holdings Inc., USA. The assessee is registered as 100% export-oriented unit in India. Hence it was claiming deduction u/s 10A of the Act. It has got 3 distinct operating divisions, viz., Software development services, ITES services & Marketing services. Since the assessee had entered into international transactions with its Associated Enterprises (AEs), the AO referred the matter of determination of Arms Length Price (ALP) of the international transactions to the Transfer Pricing Officer (TPO). 5. The first issue is relating to the addition made on account of transfer pricing adjustment made by the A.O. The transfer pricing adjustment relates to the Software development segment of the assessee. The turnover of the assessee from this segment for assessment year under consideration is Rs. 25.66 crores. The assessee followed TNM method as most appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee seeks exclusion of following 5 comparable companies also from the list of comparable companies confirmed by Ld DRP:- 1. Acropetal Technologies Ltd. (seg) 2. e-Zest Solutions 3. e-Info Chips Ltd. 4. ICRA Techno Analytics Ltd. 5. Persistent Systems & Solutions Ltd. The Ld. A.R. submitted that all the above said companies have been held to be not good comparable companies for Software Development segment by various decisions of the Tribunal. The Ld A.R furnished copies of various case laws relied upon by him. 9. On the contrary, the Ld. D.R. submitted that all the above said companies should be examined independently by the Tribunal without having recourse to the past decisions rendered by the Tribunal. 10. We heard the parties on this issue. The Ld A.R submitted that M/s. Acropetal Technologies Ltd, E-zest Solutions, E-infochips Ltd and ICRA Techno Analytics Ltd have been excluded by the co- ordinate bench in the case of M/s Commscope Networks (India) Private Limited (IT(TP)A No.166/Bang/2016 dated 22-02-2017). 11. The Ld D.R, however, made detailed arguments in respect of the above said four comparable companies. The Ld A.R rebutted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that the assessee had advanced arguments before the Tribunal in the case of Applied Materials India P Ltd (supra) both on employee filter and revenue filter. However, the Tribunal chose to exclude this company by applying revenue filter. 11.3 We heard rival contentions on this comparable company and perused the record. We notice that the co-ordinate bench has excluded this company in the case of M/s Applied Materials India P Ltd (supra) with the following observations:- "15. The revenue is also seeking inclusion of some of the companies in the list of comparables which were reflected by the DRP. We will deal with the issues one by one as under : (i) Acropetal Technologies Ltd.(Seg.) 16.1 The DRP rejected this company on the ground of employee cost filter. The ld. DR has submitted that the TPO has applied the employee cost filter and this company satisfies the same. 16.2 On the other hand, the learned Authorised Representative of the assessee has submitted that the total employee cost of this company is 11.51% of the total operating revenue therefore it fails the employee cost filter of 25%. Further he has pointed out that this company also fails the software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. v. DCIT, ITA No.614/Mds/2016, this company was held to be engaged in Knowledge Process Outsourcing (KPO) and cannot be regarded as a SWD services company. However, in the case of Applied Materials India P Ltd (supra), the co-ordinate bench has expressed the view that the question of BPO and KPO is relevant only in ITES segment and not for software development services segment. (d) In the case of AMD India P Ltd vs. ACIT (IT(TP)A 1487 & 1496/Bang/2015 dated 06-04-2017), the Tribunal apparently followed the decision rendered in the case of Saxo India P Ltd (supra), but finally it excluded E Zest Solutions Ltd. We noticed earlier that the Tribunal has retained this company in the case of Saxo India P Ltd. Hence, there is an error in the order passed in the case of AMD India P Ltd (supra). (e) In the case of Electronic Imaging India P Ltd (supra), the decision rendered in the case of AMD India P Ltd (supra) was followed. In view of diverse of opinions expressed in various cases, we are of the view that comparability of this company requires fresh examination as held in the case of Applied Materials India (P) Ltd. Accordingly, we restore this company to the file of AO/TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les." Following the decision rendered in the case of Saxo India P Ltd (supra), we direct exclusion of the above said comparable company. (d) ICRA Techno Analytics Ltd:- 11.8 The Ld D.R submitted that the TPO has applied Related Party Transactions (RPT Filter) of more than 25%. In the case of Applied Materials India P Ltd (supra), the Tribunal has applied RPT filter of 15%. 11.9 The Ld A.R invited our attention to page 879 of the paper book and submitted that this company is having Related Party Transactions to the tune of 22.38%. He further submitted that the Tribunal in the case of Applied Materials India P Ltd (supra) has excluded this company on both RPT filter and functionality difference. 11.10 We heard the parties on this issue and perused the record. We notice that the co-ordinate bench has excluded M/s ICRA Techno Analytics Ltd in the case of Applied Materials India P Ltd (supra0 with the following observations:- "(ii) ICRA Techno Analytic Ltd. 17.1 We have heard the learned D.R. as well as learned A.R. and considered the relevant material on record. The DRP has rejected this company by recording the fact as under : We examined the annual report from which it is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal are not IT(T.P)A Nos.17 & 39/Bang/2016 correct. Accordingly, in view of the decision of the co-ordinate bench of this Tribunal in the case of DCIT Vs. Electronics for Imaging India Pvt. Ltd. (supra), we do not find any error or illegality in the order of the DRP on this issue." 11.11 We find merit in the submissions made by Ld A.R. Accordingly, following the decision rendered by the co-ordinate bench in the case of Applied Materials India P Ltd (supra), we direct exclusion of this company. 12. With regard to the prayer of the Ld A.R for exclusion of M/s Persistent Systems and Solutions Ltd, the Ld D.R supported the order passed Ld DRP. On the contrary, the Ld A.R relied upon the case laws in support of his contention that this company is not a good comparable company. 12.1 We heard the parties on this comparable company. We notice that this company has been excluded by the co-ordinate bench in the case of DCIT vs. Electronics for Imaging India P Ltd (IT(TP)A Nos. 227 & 285/Del/2013). For the sake of convenience, we extract below the observations made by the Tribunal in respect of this comparable company:- "Persistent Systems & Solutions Ltd. 60. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n actual basis as held in the case of Zyme Solutions P Ltd (supra). 13.2 In view of the foregoing discussions, the ALP of the transactions relating to Software segment requires to be re- determined. Accordingly, we restore this issue to the file of AO/TPO with the direction to re-compute the ALP of Software development Services segment in the light of discussions made supra. 14. The next issue relates to the disallowance of interest paid on ECB loans. The interest claimed by the assessee on the ECB loan has been disallowed by the AO on the ground that the loan has been taken for purchase of an immovable property and the interest has to be capitalized till the asset is put to use as per the proviso to section 36(iii) of the Act. 14.1 The Ld A.R submitted that the AO had made identical disallowance in AY 2009-10 in the assessee's own case and the Tribunal, vide its order dated 05-07-2019 passed in IT(TP)A No. 287/Bang/2014, has deleted the disallowance. 14.2 We heard Ld D.R on this issue and perused the record. We notice that the co-ordinate bench has dealt with an identical issue in the assessee's own case in AY 2009-10 (supra). The relevant discussions made by the co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of existing business, then interest is not allowable till the date on which such asset was first put to use. The objection of the assessee is this that in the present case, the land was not acquired for extension of business but it was acquired for expansion of business and therefore, this proviso is not applicable. In this regard, para no. 18 of the Tribunal order rendered in the case of AT & T Global Network Services (India) Pvt. Ltd. Vs. DCIT (supra) is relevant and hence, the same is reproduced hereinbelow from page no. 690 of the paper book. "18. Undisputedly assessee is engaged in telecommunication business. It has commenced its business operation on April 07, 2007. The present situation deals with the case where in the assessee has purchased capital goods for its existing telecommunication business. The question that arises for consideration here is that whether the proviso to Section 36(1)(iii) which disallows the interest paid on acquisition of an asset for extension of existing business is applicable to the present case or not. In the present case, whether the assets were acquired for extension of business or not. The word -extension has not been defined in the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and therefore, the proviso to section 36(1)(iii) is not applicable in the present case because the amendment in this proviso was made by the Finance Act, 2015 w.e.f. 01.04.2016 as per which the words "for extension of" were omitted and therefore in our considered opinion, up to Assessment Year 2015-16, the proviso is applicable only in those cases where borrowed funds was used for acquisition of asset for extension of existing business. In the present case, the Assessment Year involved is Assessment Year 2009-10 and therefore, in the facts of present case, in the present year, this proviso is not applicable and hence, we delete this disallowance by respectfully following this Tribunal order rendered in the case of AT & T Global Network Services (India) Pvt. Ltd. Vs. DCIT (supra). Accordingly, ground no. 4(b) is allowed." 14.3 Following the above said decision of the co-ordinate bench rendered in assessee's own case on an identical issue, we direct the AO to delete this disallowance. 15. The Last issue relates to re-computation of deduction u/s 10A of the Act. It is the submission of the Ld A.R, the amount, if any, disallowed while computing business income of the und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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