TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2248
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....ies and upholding in part (Rs.5,805,299) the enhancement effected to the income of the appellant on account of the initial Transfer Pricing (UTPU) adjustment u/s 92CA(3) of the Income Tax Act, 1961 ("Act") made by the Learned Additional Director of Income-tax, Transfer Pricing Officer - 11(2) ("Ld. TPO") amounting to Rs. 8,409,662 and holding that the price charged by the appellant varies more than 5% from the value of international transactions in the contract software development segment and thus does not satisfy the arm's length principle envisaged under the Act. In doing so the Ld. DRP and consequently the Ld. AO (following the directions of the Ld. DRP) have grossly erred in; 2. disregarding the ALP as determined by the appellant in the Transfer Pricing ('TP') documentation maintained by it in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('Rules') as well as fresh search; and in particular modifying/ rejecting the filters applied by the appellant. 3. disregarding multiple year and prior years' data as used by the Appellant in the TP documentation and holding that current year (i.e. FY 2007-08) data for comparabl....
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....aedic implants, and also provides outpatient rehabilitative health services in the United States of America (USA). The Group operates through various products and sales divisions and has manufacturing facilities in Europe, USA, Latin America, etc. while all other entities of the Group are essentially engaged in distribution of these products in their respective territories. 4. During the relevant assessment year, the Stryker Global Technology Centre Private Limited rendered software development and IT Enabled Services (ITES) to its various Associate Enterprises (AEs). For this, it was compensated based on the terms of agreements entered between the entities on cost plus 17%. As per the transfer pricing document furnished for the assessment year 2008-09, the taxpayer has entered into the following international transactions with its AEs :- S.N. Nature of transaction Method 1. Provision of CAD/Engineering Design services TNMM 2. Provision of Contract Software Development Services TNMM 3. Provision of IT enabled back office support services. TNMM 4. Reimbursement of expenses CUP 5. The Arm's Length Price (ALP) of the international transaction representing software dev....
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....racts software development services wherein the TPO has ordered addition while computing arms length price. 6. Thereafter, the DRP vide order dated 20.09.2012 held the adjustment made by the TPO, however, added one more comparable, M/s. VMF Softech Limited as a comparable and directed the TPO to recompute the mean margin of comparables. Pursuant to the DRP order, the final list of comparable companies are as under :- Company OP/TC (%) 1 Akshay Software Technologies Ltd. 9 2 FCS Software 71 3 Goldstone Technologies 34 4 Mindtree Consulting 14 5 PSI Data Systems 6 6 Bodhtree Consulting Ltd. 21 7 Lanco Global Systems 28 8 VMF Softech Ltd. 1 Mean Margin 23 % The TPO vide order dated 18.10.2012 recomputed the mean margin of comparables at an upward adjustment of Rs. 58,05,299/-. Accordingly, the Assessing Officer made the assessment vide order dated 26.10.2012 passed u/s 143(3) read with section 144C of the Act assessing the total income of the assessee at Rs. 2,05,44,662/- after making transfer pricing adjustment of Rs. 58,05,299/-. 7. During the course of hearing, the ld. Counsel for the assessee, Shri Rohit Tiwari submitted that ....
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....er no segmental break up is available from the annual report, therefore, it needs to be excluded. The Ld counsel took our attention to Page 275 of P.B. to buttress his point that this company is functionally dissimilar and contented that FCS software is engaged in software consultancy, technical support and other e-learning services. And it is also engaged in diversified activities like management of hardware, network, LAN/WAN etc. The relevant extract from the Annual Report is reproduced below: "P.2.4 Quantitative Details, The company is engaged in the software consultancy, technical support services, e-learning and other related allied services. These services cannot be expressed in any generic unit. Hence it is not possible to give the quantitative details of sales and the information as required under paragraphs 3, 4C and 4D of part II of schedule VI of the companies Act 1000." And took our attention to Page 230 of P.B. where it is stated as below:- "Infrastructure Management Services: Our clients now also depend on us to manage their servers based either on client sites, or at data Centre or in our premises. Our engineers remotely or onsite manage all Hardware, Network, ....
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....ed that FCS Software is involved in providing not only software development but also in IT enabled services. He took our attention to page 275 P.B. of the annual report which is reproduced above, which states that the said company is engaged in software consultancy, technical support services, e-learning and other related allied services and it is recorded in the annual report that it is not possible to give the quantitative details of sales; and a perusal of page 229 reveals that the assessee is engaged in E-Learning and Digital Consulting which constitutes 30% of its functions; application support is 11%, infrastructure management service is 15% and IT consulting is 44%; and thus contended that the said company is engaged in different activities and so is not a comparable with the functional profile of the assessee. The ld. DR could not point out from the annual report of the said company the segmental breakup which is essential to work out the PLI, because admittedly this company operates in different segments. In such circumstances, we deem it fit to remand the matter back to the file of the TPO to examine whether the segmental data relating to software development are availabl....
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.... management, sales and customer care etc., in the BPO sector, custom development and took our attention to the chart wherein the segment wise and product wise performance has been discussed to show that the revenue yielding during the relevant assessment year from IT, ITES and Telecom is only 15.8% and the rest of it mainly from consulting i.e. consulting 28.4% and healthcare is 17.8%, manufacturing is 13.3% etc. So, according to the ld. Counsel, this company by no stretch of imagination can be termed as a comparable. So, it should be excluded. Further, the Ld. Counsel took our attention to page 575 of the paper book wherein the TPO in assessee's own case for assessment year 2009-10 has stated that the company is in the process of launching a local search business YReach and the software and system to manage the business was largely built in-house and observed that since the company has started a different business of local search by developing its own product YReach, the company cannot be said to be merely a software developer, hence, it cannot be taken as a comparable. 17. On the other hand, the ld. DR stated that assessee had not contested the exclusion of this company before D....