E GAIN COMMUNICATION PVT LTD Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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Vimal Gandhi, President -
(1.) THIS appeal by the Taxpayer E-Gain Communication Pvt. Ltd., a nonresident company, is directed against the order of the ld. Commissioner of Income Tax (A) (CIT(A) in short), confirming addition of Rs. 1,08,62,537 on account of adjustment in the Arm's length price tinder the provisions of Section 92CA(3) of the Act for services rendered by the taxpayer to its parent company in USA.
(2.) The assessee company is engaged in the business of software product development and is 100% E.O.U. unit approved by Software Technology Park of India under STPI Scheme. It is also taken as leading provider of customer service and contact center software based on integrated communication platform. The taxpayer has further claimed exemption Under Section 10A of the I.T. Act. As per the audited accounts filed by the taxpayer, it has shown the total export turnover of Rs. 10,25,68,917 from which it derived profit of Rs. 46,95,254.
The Assessing Officer, after noticing the details of transactions of the taxpayer with its associated concerns, referred the case to the Transfer Pricing Officer (T.P.O.) for computation of Arm's length Price as per his letter dated 5.6.06. The T.P.O., on examination of Form 3CEB i.e. the audit report filed by the taxpayer, found that the taxpayer had claimed that the transactions with its associated concern were carried at arm's length and had relied on TNMM in support of its claim as under:
(3.) THE Transfer Pricing Officer further found that the taxpayer had claimed net profit margin on cost at 5.16% against average profit of 16.12% on similar uncontrolled transactions carried by independent concerns being similarly computed.;
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