TaxTMI 
TaxTMI 
2016 (1) TMI 306
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.... is not pressed and accordingly it is dismissed as not pressed. 5. Ground No. 4, 5 & 6 relate to the Transfer Pricing Adjustment made by the TPO. 5.1. The TPO alleged that the assessee engaged in providing contract research and development service to its associated enterprises, though the claim of the assessee is that it is engaged in contract software development service. The entire dispute revolves around this issue relating to the nature of business as claimed by the assessee and as concluded by the TPO. With its nature of business, the assessee has selected 19 comparables in its TP study report whose arithmetic mean comes to 11.47%. The assessee has shown its operating margin for the contract R&D services at 15.11%. Since the OPM of t....
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....xchange loss 56,62,994 Depreciation 36,93,991 Fringe Benefit tax 16,00,000 Prior period expenses 32,29,614 Less: Non operating expense (1,36,988) Total Operating Expenses 14,25,58,269 Operating Profit 2,15,41,376 OP/OC(%) 15.11 5.4. During the course of the proceedings before the TPO, the assessee was asked to explain why the comparable companies selected by it should not be rejected and why the comparable companies selected by the TPO should not be adopted to benchmark the international transactions. The bone of contention was what was mentioned in Form No. 3CEB and after the perusal of the Research & Development Services Agreement, it appears that the international transactions are in the nature of R&D services pro....
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....imple reason that in Form No. 3CEB as well as in the agreement, the assessee has stated its services as Research & Development Services. Further drawing support from the Annual Financials of the assessee, the TPO was convinced that the assessee is rendering R&D services to the AE and as per the agreement, the assessee is an economic owner of such IP development. 5.7. The comparable selected by the assessee were outrightly rejected by the TPO who proceeded by taking his own comparables. Sl. No. Name of the Comparable OP/TC 1. Acropetal Technologies Ltd. 71.92% 2. Coral Hubs Ltd. 38.69% 3. Eclerx Services Ltd. 50.43% Arithmetic Mean 53.68% 5.8. Based on the above comparable companies, the TPO concluded by makin....
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....nsfer Pricing proceedings and also before the DRP. The Ld. Counsel straightaway drew our attention to the copies of Softex form filed by the assessee with the STPI authorities. It is the say of the Ld. Counsel that this evidence clearly show that the services are merely in the nature of Software Development Services. In support of his contention, the Ld. Counsel filed a complete set of documents to substantiate his claim of Software Development Services provider. 9. Per contra, the Ld. Departmental Representative strongly stated that the claim of the service provided by the assessee is actually embedded in the software itself. The Ld. DR strongly relied upon the decision of the Tribunal Delhi Bench in the case of ST Microelectronics (P) Lt....
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....ent. The TPO is directed to decide the issue on the basis of Softex Form filed with the STPI authorities and related orders of the STPI authorities. The assessee is directed to furnish necessary details and the TPO is directed to examine the same after giving reasonable opportunity of being heard to the assessee. Needless to mention, the TPO shall also decide all other related issues with the TP adjustments relating to working capital adjustments and differences in the risks. Ground No. 4,5 & 6 are treated as allowed for statistical purpose. 11. Ground No. 7,8 & 9 are taken together relate to the Transfer Pricing Adjustments. Since we have restored the determination or otherwise of TP adjustment qua ground No. 4,5 & 6 hereinabove, the asse....