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TMI Blog2019 (4) TMI 2156X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions of assessee. The ground of appeal No.8 raised by assessee is thus, allowed. Computation of PLI in the hands of assessee - grievance of assessee is that TPO/AO/DRP have included items of revenue relating to DTA activity which were excluded while allowing 10A deduction AND including service tax refund as part of revenue item, despite same being operating income and also despite directions of DRP - HELD THAT:- From the PLI working of TPO/AO, it transpires that the TPO had recognized the sales and service and payout income as revenue items, against which it had debited expense items of personnel expenses, payout cost, administrative expenses, expenses relating to DTA, Forex loss, asset written off and depreciation. One of the grievances of assessee is inclusion of payout income but from the perusal of working of TPO, it transpires that he had debited payout cost of the same value as included on account of payout income and hence, it has no effect on the PLI income. Thus, we find no merit in the plea of assessee in this regard. Item of expenses relating to DTA unit which have been included by the TPO as part of expenses item - We find merit in the plea of assessee that in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - and assessing total income of the appellant to the tune of Rs.1,65,32,084/- instead of returned income of (Rs.16,10,082/-) 2. The learned AO and learned DRP erred in law and on facts in not appreciating that, no any opinion, as so envisaged in section 92C(3), as regards profit passing, etc. was reached by the AO, before making a reference to the TPO for benchmarking of the international transactions of the appellant. 3. The learned AO / TPO / DRP erred in computing PLI of appellant in an erroneous manner by a. including items of revenue and items of expenses relating to DTA activity which were excluded while allowing 10A deduction b. not including service tax refund, despite the same being an operating income and despite the direction of the learned DRP 4. Alternatively without prejudice to Ground No.3, the learned I-T authorities erred in law and on facts in not treating compensation for facilities as operating income eligible for computation of profit level indicator of the appellant company. 5. The learned I-T authorities erred in law and on facts in proposing that PLI of appellant is 4.07% by considering the payout cost as operating cost for computing PLI. The learned I-T aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Exchange and Nasdaq, both situated in USA. For the year under consideration, the assessee had furnished return of income declaring total loss of ₹ 16,10,082/-. The assessee had entered into international transactions with its associated enterprises aggregating ₹ 19,71,22,387/-. The Assessing Officer made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) to determine the arm's length price of international transactions. The assessee in TP study report at the time of filing the return of income had adopted TNMM method for benchmarking the transactions pertaining to rendering of services to its associated enterprises. The assessee had taken 9 comparable companies from ITES segment extracted from Prowess data line basis to benchmark the transactions, after applying permissible filters under TNMM method. During transfer pricing proceedings, the assessee filed revised transfer pricing audit report and to explain the arm's length price of all international transactions under Comparable Uncontrolled Method (CUP), TNMM method and also profits split method but finally relied on CUP method for justification of its arm's length price. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horized Representative for the assessee referring to modified grounds of appeal pointed out that not all the grounds are pressed. He then pointed out that the primary issue was against inclusion of one concern i.e. Accentia Technologies Ltd. and the second issue was raised vide grounds of appeal No.3 and 4 i.e. computation of PLI. The learned Authorized Representative for the assessee further pointed out that the DRP had given directions to the Assessing Officer to re-compute PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. However, the said directions have not been followed and hence, the Assessing Officer/TPO needs to be directed in this regard. This is the issue raised vide ground of appeal No.7. Vide ground of appeal No.8, the issue is against exclusion of Accentia Technologies Ltd., wherein the plea of assessee was that it was functionally not comparable. The assessee was engaged in ITES services, whereas Accentia Technologies Ltd. was engaged in healthcare and other activities of KPO services. Our attention was drawn to the ratio laid down by Pune Bench of Tribunal in Aptara Technologies Pvt. Ltd. Vs. DCIT in ITA No.291/PUN/2016, relating to assessment year 2011-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned Authorized Representative for the assessee has referred to the PLI working placed at page 304 of Paper Book and has pointed out that working done by Assessing Officer suffers from infirmity. The learned Authorized Representative for the assessee pointed out that the assessee had owned DTA unit and expenses relating to DTA unit i.e. ₹ 36,70,199/- have been included for working out the PLI of assessee. He first proposed that the said expenses of DTA unit should not be considered as operating cost of the assessee and should be excluded. In the alternate, he pointed out that in case the said expenses are included, then income relating to DTA unit of ₹ 9,41,905/- should also be considered as part of revenue items. The second plea raised by assessee was that service tax refund needs to be added as revenue item in the hands of assessee. The learned Authorized Representative for the assessee then referred to written note filed by Revenue and pointed out that the issue raised in ground of appeal No.3(b) has been accepted by Revenue. He then referred to ground of appeal No.4 raised by assessee i.e. alternate ground of appeal No.4 and pointed out that both income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, the TPO is directed to re-compute the PLI of assessee, which as per the calculation of assessee works out to 5.20% and compare the same with mean margins of comparable companies after giving effect to our directions in respect of comparables and determine the arm's length price of international transactions, if any, in the hands of assessee. The grounds of appeal No.3 and 4 are thus, allowed. 17. The ground of appeal No.7 raised by assessee is against re-computation of PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. The DRP has already directed the Assessing Officer / TPO to carry out re-working which has not been carried out by the Assessing Officer/TPO. Hence, direction is issued to re-compute the PLI of Informed Technologies Ltd. and Jindal Intellicom Ltd. as per directions of DRP. 18. Now, the last issue vide ground of appeal No.10 against allowance of working capital adjustment. The assessee claims that it was in better financial position as it had received advances from associated enterprises and had no debtors. We find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer / TPO to allow working capital adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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