9911796707
TMI Blog2024 (7) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... gly dismiss the appeal of the assessee on these three issues. In our opinion the Ld. CIT(A) failed to appreciate the grounds raised by the assessee properly on merits, before passing the order. Hence, we set aside the issues and restore the same to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. These grounds are accordingly treated as allowed for statistical purposes. Comparable selection - HELD THAT:- It is not in dispute that the assessee had raised many issues i.e. selection of comparables ( grounds No. 7 to 9), erroneous computation of income of margins of comparable companies ( ground No. 10), computation of TP adjustments ( ground No. 11 12), corporate guarantee ( ground no. 13), use of single year data ( ground no. 14) and benefits of +/- 5 percent (ground no. 15) before the Ld. CIT(A) through the ground no. 7 to 15 . However, the Ld. CIT(A) adjudicated the grounds no.7 to 15 on the basis of only single issue i.e. whether the comparables are valid or not and dismiss the grounds on all the different issues. In our opinion the Ld. CIT(A) failed to appreciate the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PER MADHUSUDAN SAWDIA, A.M: These cross-appeals have been filed by Computer Sciences Corporation India Private Limited ( the Assessee ) and the Revenue against the order(s) passed by the learned Commissioner of Income Tax (Appeals)-1, Hyderabad ( Ld. CIT(A) ), relating to the assessment years (AYs) 2012-13 2013-14. For the sake of convenience, we decide these appeals by way of this common order. Assessee s appeal for the A.Y.2012-13: 2. Brief facts of the case as culled out from the records are that the assessee M/s. AppLabs Technologies Private Limited, (Now merged with Computer Sciences Corporation India Private Limited) was a company, engaged in software development. For the AY. 2012-13, the assessee filed its return of income on 29/11/2012, declaring loss at Rs. 10,66,78,673/- under the normal provisions and declared book profits at (-)Rs. 17,67,52,300/- u/s 115JB of the Income Tax Act, 1961 (for short the Act ). The case of the assessee was selected for scrutiny and accordingly notices were issued to the assessee. The Learned Asessing Officer ( Ld. AO ) completed the assessment under section 143(3) of the Income Tax Act, 1961 (for short the Act ) by order dated 02/05/2016, det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extra-ordinary expense to be nonoperating in nature. 6. The learned TPO and the learned AO have erred, in not considering the unrealized forex exchange loss incurred in relation to forex loss on forward contracts and other items as non-operating in nature. Adjudication by Ld.CIT(A): 6. Ground No. 4 to 6 : Cancellation of Employee Stock Option Plan (ESOP) 6.1. During the appeal proceedings, the appellant submitted that they filed rectification petition u/s.154 before the Assessing Officer. They have received the order and hence the issue is not being pressed before the first Appeal. In this light, the grounds are dismissed. 4.2. The Ld. AR also submitted that the assessee had raised three issues which are related to i.e. a) Employees Stock Option Plan (ESOP), b) Professional fees and c) forex exchange loss before the Ld. CIT(A) through the aforesaid grounds No. 4 to 6. After filing the said appeal before the Ld. CIT(A), the assessee had filed a rectification application before the Ld.TPO on the issue related to Professional fees only. However the Ld. CIT(A) adjudicated the ground No. 4 to 6 on the misconception that the assessee had filed the rectification application before the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as comparables which are not functionally comparable to the appellant. 9. The learned TPO and the learned AO have erred, in law and facts, by rejecting certain functionally comparable companies identified by the Appellant. Erroneous computation of income of margins of comparable companies. 10. The learned TPO and the learned AO have erred, in law and facts, by making erroneous computation with respect to operating margins of comparable companies Computation of TP adjustment 11. The learned TPO and the learned AO have erred, in law and facts, by not restricting the value of adjustments to the global profits earned by the Appellant from the international transactions. 12. The learned TPO and the learned AO have erred, in not considering the rectification petition filed by the Appellant in relation to mistake apparent from record in considering the professional fees incurred pursuant to acquisition expenses as non-operating in nature. Corporate Guarantee 13. The learned TPO and the learned AO have erred, in law, facts and circumstances of the case in making a TP addition to the transactions relating to provision of corporate guarantee, without appreciating the fact that the said tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intelligence, business process quality, engineering and product lifecycle management, and infrastructure services. iii. Spent sizable amount towards R D in e-Iearning space and other areas iv. Significant intangible assets - 92% of total fixed assets TPO's contention: i. As per annual report, CTIL is in the' business of information technology Services Company. It is only its subsidiary companies engaged in infrastructure, BPO services, e-governance, information technology and the company development and not CTIL itself. So there is no requirement of CTIL to have separate segments. ii. No document which contradicts has been placed on record for non-accepting the CTIL as a comparable before the TPO. Decision : I accept the view of the TPO and uphold the view that this is a valid comparable. 3) Igate Global Solutions Limited Appellant's contention: i. Fails related party transactions filter (RPT = 83% of sales) ii. Information technology and IT enabled services iii. Segmental information is not available. iv. Extra-ordinary event - Acquisition of equity share capital TPO's contention: i. As per prowess database, the company is classified under Software category. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is predominantly into software development. ii. Brand value doesn't have any impact on profitability of the company. Decision: I accept the view of the TPO and uphold the view that this is a valid comparable. 7) M/s.Spry Resources Limited Appellant's contention: i. Company substantially undertakes the central and state government projects ii. The company is mainly into software product development iii. Exceptional year of operations iv. High Working capital loan (percentage of interest to EBITDA47.21 % and percentage of borrowings to fixed assets 105.71 %). TPO's contention: The company is mainly engaged in software development services Decision: I accept the view of the TPO and uphold the view that this is a valid comparable. 8) M/s.Thirdware Solutions Limited Appellant's contention: i. Provides information technology and information technology enabled services ii. Is into multiple verticals iii. Segmental information is not available TPO's contention: i. The company is engaged in software development. In the ROC, both IT ITeS companies are filed under one code and hence the same cannot be considered as basis for rejection. ii. Sale of license cannot be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss in software segment based on annual report of the company. Decision: I accept the view of the TPO and uphold the view that this is an invalid comparable. E) M/s. R Systems International Limited Appellant's contention : i. The company is engaged in software development activity ii. The quarterly results of the company is available in website TPO's contention: i. The company's yearend is 31st March as that of the company is 31st Dec. ii. The TPO has power to reject such comparable, which falls yearend filter. Decision: I accept the view of the TPO and uphold the view that this is an invalid comparable. F) M/s. Bluestar Infotech Limited Appellant's contention: i. The company satisfies all the filters adopted by the TPO ii. The reason for rejection by TPO is export earnings filter, which is 62.88% of sales. TPO's contention: i. The company forex earnings are 62.88%. The forex earnings adopted by the TPO for SDS transactions is forex earnings greater than 75% of the sales, but not 25%. ii. This company fails forex filter is correct. Decision: I accept the view of the TPO and uphold the view that this is an invalid comparable. G) M/s. Cigniti Technologies Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate guarantee ( ground no. 13), use of single year data ( ground no. 14) and benefits of +/- 5 percent (ground no. 15) before the Ld. CIT(A) through the ground no. 7 to 15 . However, the Ld. CIT(A) adjudicated the grounds no.7 to 15 on the basis of only single issue i.e. whether the comparables are valid or not and dismiss the grounds on all the different issues. In our opinion the Ld. CIT(A) failed to appreciate the grounds raised by the assessee on merits, before passing the order. Hence, we set aside the issues and restore the same to the file of Ld.CIT(A) with a direction for fresh consideration of the matter in accordance with law, by giving an opportunity of being heard to the assessee. These grounds are accordingly treated as allowed for statistical purposes. 8. In the result, the appeal of the assessee for the A.Y.2012-13 is treated as allowed for statistical purposes. Revenue s cross appeal for the A.Y.2012-13: 9. Revenue filed this cross-appeal on the issue of deleting the disallowances by the Ld.CIT of Rs. 4,32,07,981/-. 10. It was the submission of the Ld. DR before the Bench that before invoking the provisions u/s 14A r.w. rule 8D of the Act, Ld.CIT(A) ought to have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as allowed for statistical purposes. Assessee s appeal for the A.Y.2013-14: 14. Brief facts relevant to A.Y. 2013-14 as culled out from the records are that the assessee filed its return of income on 29/11/2013, declaring total income at Rs.NIL under the normal provisions of the Act and declared book profits at Rs. 33,24,01,104/- u/s 115JB of the Act. The case of the assessee was selected for scrutiny and accordingly notices were issued to the assessee. The Ld. AO completed the assessment under section 143(3) of the Act by order dt. 31/01/2017, determining the total income under the normal provision of the Act at Rs. 6,56,30,425/- and book profit at Rs. 33,93,42,457/-after considering the order dated 31/10/2016 passed by the Ld. TPO. 15. Aggrieved, assessee preferred appeal before the Ld.CIT(A), who dismissed the appeal of the assessee accepting the ply of the Ld. AO contending that the assessee failed to furnish any evidences/documents before him. Hence, the assessee is in appeal before the Tribunal against the order of CIT(A). 16. During the course of arguments, summarizing all their grounds raised before us, the Ld. AR submitted that, the Ld. CIT(A) dismissed the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced as under for the sake of convenience : 6. I have carefully considered the facts of the case, assessment order and submissions of the appellant. As per assessment order, The AO mainly considered the disallowance u/s. 92CA(3) and u/s.14A. 6.1. The TPO has clearly analysed using filters which were already provided to the appellant. The Assessing Officer also asked to furnish objections, if any, for TPO order but the appellant has not filed any explanation against the TPO order even after giving opportunity. Therefore, the total income of the appellant analysed by the AO of Rs. 5,86,89,072/- u/s. 92CA(4). And the appellant not filed any appeal before the DRP against TPO order and filed appeal only after completion of assessment by the assessing Officer before the CIT(Appeals). 6.2. During the course of appeal proceedings, the appellant neither furnished any fresh evidence nor any fresh submissions. Therefore, in view of detailed reasons mentioned by the TPO which were clearly followed by the Assessing Officer, I am in agreement with the Assessing Officer. Hence, the addition made by the AO is confirmed. 20.1. From the perusal of page No. 5 to the page no. 154 of the above refe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
