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Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI INTURI RAMA RAO
Per INTURI RAMA RAO, AM :
This is an appeal filed by the revenue directed against the order of the CIT(A)-IV, Bangalore, dated 21/2/2013 for the IT(TP)A No.595/Bang/2013 Page 2 of 6 assessment year 2005-06. Cross Objections have been filed by the assessee.
The revenue raised the following grounds of appeal:
Ground Nos.1, 5 & 6 are general in nature and do not require to be adjudicated. Ground Nos.2 and 3 challenge the direction of the CIT(A) to allow deduction u/s 10A without set off of losses pertaining to 10A unit located at Pune Unit 2 and IT(TP)A No.595/Bang/2013 Page 3 of 6 Bangalore unit following the decision of the Hon’ble High Court of Karnataka in the case of Yokogawa India Ltd., The CIT(A) allowed the grounds of appeal as follows:
IT(TP)A No.595/Bang/2013 Page 4 of 6
Thus, the CIT(A) allowed the claim of the assessee following the decision in the case Yokogawa India. Since the decision of the CIT(A) was based on the ratio of the Hon'ble jurisdictional High Court, we do not find any reason to interfere with the order of the CIT(A). Accordingly, these grounds of appeal of the revenue are dismissed.
5. Ground No.4 challenges the direction of the CIT(A) to exclude (i) Exencys Software Solutions Ltd., M/s.Flextronics Ltd. M/s.iGate Global Solutions Ltd., M/s.Infosys Technologies Ltd., M/s.L&T Infotech Ltd., M/s.Satyam Computer Services Ltd. and M/s.Thirdware Solutions Ltd., as comparables on the ground that the size and turnover of the comparable companies is more than Rs.200 crore. The CIT(A) held that the companies whose turnover is only between Rs.1 crore and Rs.200 are alone be taken into consideration for the purpose of making TP study following decisions of the Tribunal in the case of Sony India (P) Ltd.,(114 ITD 448)(Del), Genesis Integrating Systems (India) P.Ltd. (53 SOT 159)(Bang.). The relevant finding of the CIT(A) is as under:
IT(TP)A No.595/Bang/2013 Page 5 of 6 An identical issue had come up before the co-ordinate bench of this Tribunal, to which one of us viz., the AM is a party, in the case of M/s.Societe Generale Global Solution Centre Pvt. Ltd. Vs DCIT in IT(TP)A No.1188/Bang/2011 dated 22/04/2016, wherein it has been held as follows: “The submissions of the learned AR of the assessee- company have been considered at length. Though there are decisions to the effect that the companies with the turnover filter of Rs.1 to Rs.200 crores should alone be considered as comparables, this proposition was diluted by the Mumbai bench of the Tribunal in the case of Willis Processing Services (I) P.Ltd. vs. DCIT [TS-49- ITAT-2013(Mum)-TP] wherein it was held that the turnover band of Rs.1 to Rs.200 crores is bereft of any rationality as the application of this rule does not enable comparison of a company with Rs.200 crores with another company having a turnover of Rs.201 crores. It was further observed by the Hon’ble Tribunal
IT(TP)A No.595/Bang/2013 Page 6 of 6 that the turnover was also not a criteria prescribed under rule 10B for selection of comparables. We are also of the considered opinion that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportion to the services rendered. Following this reasoning we hold that the above companies cannot be excluded from the list of comparables. ” Respectfully following the same decision, we hold that the CIT(A) was not justified in adopting turnover filter of Rs.1 crore to Rs.200 crore. Therefore, the ground of appeal filed by the revenue is allowed.
In the result, the appeal filed by the revenue is partly allowed.
The cross objections filed by the assessee are only in support of the CIT(A)’s order, hence, dismissed as such.