Capgemini India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Facts- Assessee filed its return of income on 7 October 2010 declaring income of ₹113,19,82,875/-. As the assessee has entered into several international transactions, reference was made to the Learned Additional Commissioner of Income-Tax, Transfer Pricing, 1(3), Mumbai for determination of arm’s length price of those transactions.
The draft assessment order was passed on 13th March, 2014 where several additions were made and total income was determined at ₹144,06,06,540/-.
Assessee did not file any objection before the learned DRP against the draft assessment order and therefore final assessment order under section 143(3) read with section 144C(13) of the Act was passed on 26th May, 2014. Learned AO over and above the transfer pricing adjustment made various other additions.
The assessee aggrieved with the above order-preferred appeal before the learned CIT (A), who passed an order on 8 February 2016 allowing the appeal of the assessee partly. Therefore, the assessee is aggrieved with that order and has preferred this appeal raising several grounds as per grounds of appeal. Some are highlighted here –
- Whether TPO was wrong in adding 12% markup to reimbursement of out-of-pocket expenses incurred by assessee on behalf of AE.
- Whether the loss incurred by eligible unit u/s 10 A at Chennai can be set-off against the profits of other eligible units or not.
Whether telecommunication expenses of eligible units should be reduced from the export turnover of the eligible unit. - Whether expenditure in foreign currency be reduced from the export turnover of the assessee while computing deduction u/s 10A.
- Conclusion-
- 12% markup on reimbursement of amount by AE –
- Expenses are reimbursed by AE to the assessee on cost to cost basis. The same was accepted by the revenue in earlier years. Held that if the expenditure is out-of-pocket expenditure, the assessee is justified in not charging any markup thereon.
- Set-off loss of eligible unit against profits of other eligible units –
- Held that identical issue has been decided by the Bombay High Court in the case of the assessee in ITA number 2501 of 2011 dated 30 April 2014 wherein the order of the coordinate bench dated 25th of May 2011 for assessment year 2006 – 2007 is upheld.
- Reduction of telecommunication expenses of eligible units from the export turnover of eligible unit –
Bombay High Court in ITA number 2501 of 2011 dated 30 April 2014 in paragraph number 5 – 7 has considered the above issue. The High Court in paragraph number 7 leaving aside the wider controversy or a larger question held that assessee is in business of software development and the charges, which are claimed to have been incurred, are in relation to the business of software development within India. Therefore, there could not be said to be cost deductible from the export turnover for the purposes of Section 10 A of the act.
