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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
IT(TP)A Nos.112 & 210/Bang/2015 &CO No. 106/Bang/2015 Page 2 of 6 O R D E R Per Bench
The two appeals are cross appeals by the revenue and the assessee against the order passed by the AO u/s. 143(3) r.w.s. 144C of the Income-tax Act, 1961 ["the Act"]. Cross objection is filed by the assessee arising out of the revenue’s appeal.
IT(TP)A 210/Bang/2015
During the course of hearing, the ld. counsel for the assessee submitted that the assessee has filed Mutual Agreement Application (MAP) pursuant to Article 25 of Indo-US Double Avoidance Agreement with respect to the transfer pricing adjustments from its Associated Enterprise (AE) in US, which is the subject matter of this appeal filed by the assessee. Consequently the assessee has agreed the terms mutually agreed between the competent authorities of India and US and accordingly the Jt. CIT(OSD), Circle 5(1)(1) has passed the order dated 02.06.2016 giving effect to the MAP order, which is filed on record. In view of the above, the ld. counsel for the assessee prayed for withdrawal of appeal before the Tribunal. The ld. DR did not controvert the submissions of the assessee. In the above facts and circumstances, we dismiss the assessee’s appeal as withdrawn.
IT(TP)A Nos.112 & 210/Bang/2015 &CO No. 106/Bang/2015 Page 3 of 6 IT(TP)A No.112/Bang/2015
The revenue has raised the following grounds of appeal:-
“1. The learned DRP members erred in holding that the size and turnover of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding M/s Tata Elxsi Limited, Sasken Communication Technologies Limited, Persistent Systems Limited, Zylog Systems Limited, Mindtree Limited, L & T Infotech and Infosys Limited as comparables.
2. The learned DRP Members erred in excluding uncontrolled comparables having turnover more than RS.200 crores in the absence of Turnover criterion prescribed in Rule 10B of Income Tax Rules and also there being no correlation between turnover and profit margin.
3. The learned DRP members erred in holding that expenditure on the qualified manpower is the defining outflow in the costs incurred by software companies and excluding Jeevan Scientific Limited from the IT enabled sector.
4. Whether on facts and in circumstances of the case, the DRP was justified in directing the Assessing Officer to reduce the expenditure of Rs.2,90,05,643/- on leased line and Rs.1,77,03,288/- on travelling expenses, incurred in foreign currency, both from the Export Turnover and Total Turnover for the purpose of computation of deduction u/s 10A of the IT Act without appreciating the fact that the statute allows exclusion of such expenditure only from the ETO by way of specific definition of export turnover as envisaged in the Act. On the other hand, there is no specific provision in section 10A warranting exclusion of above expenses from the total turnover also.
5. These and any other grounds that may be urged at the time of hearing, the Hon'ble ITAT is pleaded to quash the directions of Dispute Resolution Panel.”
IT(TP)A Nos.112 & 210/Bang/2015 &CO No. 106/Bang/2015 Page 4 of 6
Ground Nos. 1 to 3 pertains to TP adjustments and in view of the revenue having passed the order dated 02.06.2016 giving effect to the MAP order as observed in para 2 hereinabove, the grounds raised by the revenue in this regard are infructuous and as such, these grounds are dismissed.
Ground No.4 is on the issue whether the DRP was justified in directing the Assessing Officer to reduce the expenditure of Rs.2,90,05,643 on leased line and Rs.1,77,03,288 on travelling expenses incurred in foreign currency, both from the export turnover and total turnover for the purpose of computation of deduction u/s. 10A of the Act. The issue raised by the revenue is squarely covered by the judgment of the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd., 349 ITR 98 (Karn)wherein it has been held that whatever is excluded from export turnover should also be excluded from the total turnover. In view of the aforesaid decision of the Hon’ble High Court of Karnataka, we find no infirmity in the order of DRP on this issue. Thus, this ground is dismissed.
Ground No.5 is general in nature and calls for no adjudication.
In the result, the appeal of the revenue stands dismissed.
CO No.106/Bang/2015
The assessee in its cross objection has raised the following grounds:-
IT(TP)A Nos.112 & 210/Bang/2015 &CO No. 106/Bang/2015 Page 5 of 6 “1. On facts and circumstances of the case and in law, the Ld. Assessing officer ("AO")/ Ld. Transfer Pricing Officer ("TPO") erred in objecting to the upper limit for sales turnover filter without providing any empirical analysis. In doing so, the Ld. AO / Ld. TPO erred in not appreciating that the Information Technology Enables Services ("ITES") industry is clearly demarcated based on size.
2. On facts and circumstances of the case and in law, the Hon'ble DRP Panel erred in not adjudicating that Infosys BPO Limited is functionally dissimilar to the respondent. The respondent craves leave to add, alter, amend and/or delete any of the ground mentioned above.”
Since the issues relate to transfer pricing matter on which the revenue having passed the order dated 02.06.2016 giving effect to the MAP order as observed in para 2 hereinabove, these grounds raised by the assessee are infructuous and as such, these grounds are dismissed.
In the result, both the appeals and the CO are dismissed.
Pronounced in the open court on this 8th day of September, 2016.