TaxTMI 
TaxTMI 
2015 (6) TMI 67
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.... "The learned DRP has erred on facts and in law in directing the Assessing Officer to exclude the case of M/s. KALS Information Systems Ltd. from the set of comparables adopted by TPO without appreciating the factual and legal matrix as brought out by the Transfer Pricing Officer (TPO) in the order dated 19.11.2012 under section 92A(3) of the Income-tax Act, 1961." 2. The facts in brief are that, assessee company is engaged in the business of creating and providing 3D animation software contents as a captive service provider to its associate enterprise (AE), Prana Holdings Inc., USA. During the relevant previous year the assessee has entered into following international transaction with the PLI of 14.49%:- S.N. Nature of Transa....
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.... Technologies Ltd. 15.99 11 Tata Elxsi Ltd. 20.29 12 Thirdware Solutions Ltd. 22.37 13 Wipro Ltd. (Seg) 26.64 14 Silverline animation 8.48 15 DQ entertainment (Seg) 27.89 16 Laser Infomedia 17.00 Arithmetic Mean 21.03 Finally the adjustment of Rs. 4,17,85,681/- was made in the following manner:- Particulars Amount Sale of services as per Form 3CEB (export sales) (A) Rs.73,15,04,989/- Operating Cost (B) [(73,15,04,989/114.49)*100] Rs.63,89,24,787/- ALP (C=Bx1.2103) Rs.77,32,90,670/- 105% of transaction value Rs.76,80,80,238/- 95% of transaction value Rs.69,49,29,739/- Difference bet....
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....pany included by the Ld. TPO into the final set. It is a fact that Hon'ble ITAT have held KALS to be engaged in software products and not into software services. Hon'ble ITAT, in the case of Trilogy E-business, at para 47 have held as follows: "we also find that in the decision referred to by the Ld. Counsel for the assessee, the Mumbai bench of ITAT has held that this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the assessee that this company is not comparable", 6.3 With these directions, it is apparent that KALS Information Systems Ltd. is not a comparable company and the same needs to be excluded from the set of comparables. It is furth....
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....ot be taken as a comparable to the software service companies as it is purely engaged in the sale of software products. She thus, strongly relied upon the order of the DRP. 8. We have heard the rival submissions and also perused the relevant finding of the TPO as well as the order of the DRP on this score. The assessee is a captive service provider, providing purely software services in the context of 3D animation to it's A.E. The sole dispute before us is, whether Kals Information System Ltd. should be taken as a comparable or not for the purpose of comparability analysis and bench making of the margin. From the perusal of the objections filed by the assessee before the DRP, as well as annual report of Kals, it is seen that the said com....