Tribunal Adjusts Comparables & Interest, Orders Fee Reconsideration

Infor (India) Private Limited, Versus. The Assistant Commissioner of Income Tax, Circle-2 (1), Hyderabad

Infor (India) Private Limited, Versus. The Assistant Commissioner of Income Tax, Circle-2 (1), Hyderabad - TMI Issues Involved:

1. Inclusion/Exclusion of comparables in the software development services segment.
2. Levy of interest on receivables.
3. Adjustment on account of management fee.
4. Non-grant of credit of tax deducted at source (TDS) and advance tax.

Issue-wise Detailed Analysis:

1. Inclusion/Exclusion of Comparables in the Software Development Services Segment:

The primary grievance of the assessee was against the consideration of certain entities as comparables in the software development services segment. The assessee argued that the entities retained by the Ld. DRP were not comparable due to differences in the scale of operations or the nature of functions performed. The entities in question included Infosys Limited, Larsen & Toubro Infotech Limited, Tata Elxsi Limited (seg), Persistent Systems Limited, Mindtree Ltd, Cybage Software Private Limited, and E-Info Chips Pvt. Ltd., among others. The assessee emphasized that these entities were previously found non-comparable in earlier years. The Tribunal reviewed the findings of the Ld. TPO and Ld. DRP and noted the consistent exclusion of these entities in prior years due to functional dissimilarity, scales of turnover and profits, or lack of segmental information. Consequently, the Tribunal directed the exclusion of these entities from the list of comparables for the current assessment year as well.

2. Levy of Interest on Receivables:

The assessee contended that interest on receivables should only be calculated for the period exceeding the credit period stipulated in the agreement, which was 90 days. The Tribunal upheld this view, referencing the assessee's case for previous assessment years, and remanded the issue to the file of the learned Assessing Officer/ Ld. TPO to calculate interest only for the period exceeding the agreed credit period or 90 days/industry average credit period if no agreement existed.

3. Adjustment on Account of Management Fee:

The assessee argued that the details regarding the management fee were submitted to the Ld. DRP but were not considered. The Tribunal noted that similar issues in earlier years were remanded for verification of facts and directed the learned Assessing Officer/ Ld. TPO to consider the material filed by the assessee and take a view accordingly.

4. Non-grant of Credit of Tax Deducted at Source (TDS) and Advance Tax:

The assessee's grievance was that the learned Assessing Officer failed to grant credit for TDS and advance tax attributable to the transferor companies amalgamated with the assessee. The Tribunal directed the learned Assessing Officer to verify the material and grant the appropriate credits.

Conclusion:

The appeal was treated as allowed for statistical purposes, and the Stay Application was dismissed as infructuous. The Tribunal's directions included the exclusion of certain entities from the list of comparables, recalculation of interest on receivables based on the credit period, reconsideration of the management fee adjustment, and verification of TDS and advance tax credits.