QUANTIUM ANALYTICS PRIVATE LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD 16(3), HYDERABAD

ITA 1336/HYD/2024Status: DisposedITAT Hyderabad30 September 2026AY 2021-2231 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Quantium Analytics Private Limited, engaged in providing IT-enabled services (ITeS) to its associated enterprises (AEs), filed its return for Assessment Year 2021-22. The Assessing Officer (A.O.) referred the case to the Transfer Pricing Officer (TPO) for determination of arm's length price (ALP) of international transactions. The TPO rejected the assessee's transfer pricing study, which used the TNMM method and OP/OC as a profit level indicator, and made an adjustment of Rs. 1,72,90,923/- for ITeS and Rs. 1,00,43,008/- for interest on delayed receivables. The A.O. also disallowed Rs. 1,80,62,939/- claimed as deduction under Section 10AA for foreign exchange gain. The Dispute Resolution Panel (DRP) upheld these additions. The final assessment order was passed on 29.10.2024.

What did the Tribunal hold?

The Tribunal decided the following: For Issue 1: The assessee stated that this issue is pending before the Supreme Court and requested it be kept open. Accordingly, Ground No. 2 of the appeal was not adjudicated and was kept open for decision at an appropriate stage. For Issue 2: The judgment snippet provided does not contain the Tribunal's decision on the exclusion of comparables. The arguments of the assessee regarding Infosys BPM Limited and Integra Software Services Limited are recorded, along with reliance on case laws, but the Tribunal's finding and reasoning are not present in the provided text. For Issue 3: The Tribunal upheld the denial of deduction under Section 10AA for foreign exchange gains. The reasoning was based on the Supreme Court's decision in *Shah Originals Vs. CIT*, which held that income derived from export activity requires a direct, immediate, and proximate nexus. The Court clarified that export transactions conclude upon payment, and subsequent currency fluctuations in accounts like EEFC arise from independent financial transactions, not directly from export activity. The Tribunal found the assessee's reliance on *CIT Vs. Cognizant Technology Solutions India (P.) Ltd.* misplaced as the facts were different, with the Madras High Court finding a direct nexus in that case. Therefore, the Tribunal concluded that foreign exchange gains on reinstatement of trade payables and receivables cannot be considered income derived from the export of goods for Section 10AA purposes. The findings of the Ld. TPO/Ld. DRP were upheld. Operative Directions: The appeal was partly allowed for statistical purposes.

What were the issues?

1. Whether the final assessment order was passed within the prescribed limitation period under Section 153 of the Income Tax Act, 1961? 2. Whether certain companies, specifically Infosys BPM Limited, Integra Software Services Limited, Vitae International Accounting Services Private Limited, and MPS Limited, should be excluded from the list of comparables for transfer pricing purposes due to functional dissimilarities? 3. Whether the foreign exchange gain derived from trade receivables and trade payables is eligible for deduction under Section 10AA of the Income Tax Act, 1961? Assessee's Contentions: For Issue 2: The assessee argued that Infosys BPM Limited is a diversified company with a large scale of operations and significant intangibles, failing the RPT filter, making it incomparable. Integra Software Services Limited is engaged in integrated solutions for the publishing market and does not provide segmental information, thus incomparable. Reliance was placed on decisions in *Parexel International India Private Limited Vs. ACIT* and *PCIT Vs. Future First Information Services Private Limited* for Infosys BPM, and *Infor India Private Limited Vs. DCIT*, *Rage Frameworks India Private Limited Vs. ACIT* for Integra. For Issue 3: The assessee contended that foreign exchange gains arising from the reinstatement of export payables and receivables are eligible for deduction under Section 10AA as they are derived from export activity, citing *CIT Vs. Cognizant Technology Solutions India (P.) Ltd.*, affirmed by the Supreme Court. Revenue's Contentions: For Issue 3: The revenue relied on the decision in *Shah Originals Vs. CIT* to argue that foreign exchange gains do not have a direct, immediate, and proximate nexus with export activity and are not derived from it.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA(3),Section 10AA,Section 153

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad

For Respondent: DR Waseem UR Rehman

PER MANJUNATHA G., A.M :

This appeal filed by the assessee company is directed against the final assessment order passed by the Assessing Officer (A.O.) under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (i

The order continues below.

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