M/S AFFILIATED COMPUTER SERVICES OF INDIA PRIVATE LIMITED,BANGALORE vs. DCIT, BANGALORE

The learned AO/DRP/TPO erred in law and on facts by identifying incorrect set of comparable companies.

That on the facts and circumstances of the case and in law, the learned AO/DRP/TPO has erred in not accepting consolidated financial statements for potentially comparable companies. 10. The learned AO/DRP/TPO have erred in law and on facts by rejecting the certain comparables considered by the Appellant, on the grounds of functional dissimilarity and by applying the filters of onsite revenue, export earnings, employee cost, different year ending, declining revenue, revenue from relevant segment less than 75 percent of total revenue and persistent loss. 11. The learned AO/DRP/TPO have erred in law and on facts by not applying the sales turnover filter. 12. The learned AO/DRP/TPO have erred in law and on facts by not following the consistent approach while applying filters in software development and ITeS segment. 13. The learned AO/DRP/TPO have erred in law and on facts by Including giant companies in view of their turnover, brand and high profitability as comparable to Appellant. 14. The learned AO/DRP/TPO have erred in law and on facts by not following consistency and adding certain companies as comparables, which fails the qualitative and quantitative filters adopted TPO. 15. That AO/DRP/TPO erred on the facts and circumstances of the case and in law by using only the current year (i.e. financial year 2006-07) data for computation of arm's length price. 16. The learned AO/DRP/TPO has failed to appreciate the Appellant's commercial judgment about the application of arm's length principle which Is tied to the business realities. 17. That AO/DRP/TPO erred on the facts and circumstances of the case and in law by ignoring the provisions of Rule 10B(3) of the Rules, international commentaries and judicial

That AO/DRP/TPO erred on the facts and circumstances of the case and in law by not providing a relief on account of differences in risk profile levels between the Appellant and the potential comparables for both Software and ITeS segments.

The learned AO/DRP/TPO have erred in law and on facts by including certain companies as comparable and in rejecting certain com parables considered by Appellant, based on the information gathered under section 133(6) of the Act, though the same Information was not available in public domain, to the Appellant at the time of conducting its own TP study.

The learned AO/DRP/TPO has erred in by failing to appreciate the fact that transfer pricing is an anti-avoidance mechanism. In the instant case the Appellant is registered as an entity registered under the STPI and has claimed tax benefits under section 10A of the Act and has no reason to suppress its profit from its operations to manipulate the transfer prices.

The learned AO/DRP/TPO have erred in law and on facts, in making several observations and findings which are based on incorrect interpretation of law and contrary to facts of the case.

The learned AO/DRP/TPO has erred, in law and on facts, by not providing the Appellant the benefit of 5 percent range as provided by the proviso of section 92C(2) of the Act.

The learned AO/DRP/TPO has erred by not carrying out the determination of arm's length price as required under section 92C of the Act read with rule 100 of Income Tax Rules, 1962.

The learned collegium of Commissioners comprising the DRP erred in law and on facts, by not adhering to the procedure laid down in section 144C(5), 144C(6) and 144C(7) was not followed.

The learned AO has erred in initiating penalty proceedings under section 271 (1)(c) of the Act.

The learned AO has erred, in law and on facts, in charging interest under section 234B and 244A of the Act. CORPORATE TAX 1. Re computation of deduction allowable under section 10A a) The learned AO has erred in re-computing the deduction under section 10A of the Act after reducing the telecommunication expenses of Rs. 37,073,942 from Export Turnover alone. b) The learned AO has also erred in not accepting the contention of the appellant company that the definition of "Total Turnover" under section 80HHC/80HHE should be used to compute the deduction under section 10A of the Act. c) The learned ACIT has not accepted the assessee's contention that should the telecommunication expenses be reduced from the export turnover, the expenses should also be reduced from the total turnover in arriving at the deduction under section 10A of the Act. d) Further, the learned ACIT has also erred in not relying on the decision of the Special Bench of the Chennai Tribunal in the case of Sak Soft Limited v. ITO (ITA No. 91 & 1953/Mds/2007) wherein it has been held that if the telecommunication, freight and insurance expenses are reduced from the export turnover then the same would also have to be reduced from the total turnover in order to compute the deduction under section 10A. e) Further, the learned ACIT has also erred in not relying on the following decisions of the Honourable ITAT: • CIT v. Gem Plus Jewellery India Limited [2010] 194 TAXMAN 192 (BOM.) • ITO v. D.E. Block India Software (P) Lid, ITA 983 & 984 - Hyderabad Tribunal

Consequential interest levied under section 234D The learned AO has also erred in levying interest under section 234D of Rs. 235,314 which is consequential in nature. Further, in the assessment order the above mentioned amount of interest has been inadvertently mentioned as interest under section 244A instead of section 243D. The above grounds are independent and without prejudice to each other. For the above and any other grounds, which may be advanced at the time of hearing, your Appellant prays that the order of the learned AO may be please set aside.

The ld. counsel for the assessee has moved an application stating therein that the assessee has accepted the MAP Resolution and craves leave to withdraw the grounds of appeal relating to TP adjustments, which was one of the matters pending before the Tribunal for adjudication.

The ld. DR did not dispute these facts. She, however, contended that against the order of the Hon'ble jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd. (supra), the revenue has filed SLP before the Hon’ble Supreme Court and the same has been admitted. Therefore, the judgment of the Hon'ble jurisdictional High Court should not be followed.

Having carefully examined the dispute in these appeals and the assessee’s letter, we find that since the assessee has accepted the MAP Resolution with respect to TP adjustments, the grounds of appeal becomes infructuous. We accordingly dismiss the same.

So far as the objection to deduction u/s. 10A is concerned, we are of the view that since filing of SLP in the Hon’ble Supreme Court against the judgment of Hon'ble jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd. (supra) does not amount to stay of operation of the judgment of the Hon’ble High Court, we being in the jurisdiction of the Hon'ble jurisdictional High Court, are bound to follow the judgment of the Hon'ble jurisdictional High Court. Therefore, following the same, we deice the issue of computation of deduction u/s. 10A of the Act in favour of the assessee.

In the result, the appeal of the assessee is partly allowed.