TaxTMI 
TaxTMI 
2016 (1) TMI 1132
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....dered withdrawn. 3. We have heard the Ld. Counsel and Ld. D.R. and perused the paper book placed on record running to pages 706. 4. Briefly stated, assessee is engaged in business works as contract IT and ITES provider which aid the clinical trials business and other commercial or marketing intangibles owned by Paraxel group. Assessee has various international transactions with the group including provision of services and all are clubbed and adopted TNMM as Most Appropriate Method (MAM). TPO did not dispute the method. The profit level indicator OP/cost ratio for above services was at 15.29%. Assessee in its T.P. study, based on 16 comparables justified the ALP as the PLI of 16 comparables was at 13.18%. TPO rejected the T.P. document as it suffers from defects such as selection of inappropriate comparables, rejection of companies that are appropriate etc., TPO made independent analysis by segregating transactions under software/IT services and ITES under TNMM. Fresh search resulted in 18 and 11 comparables chosen respectively and the resultant PLI was worked out at 22.69% and 27.90% respectively. After allowing working capital adjustment TPO finally determined the PLI at 20....
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.... did not accept Assessee's documents by referring to the schedules like research and development, inventories, sales and other incomes. He also reported that company in the notes to the accounts has stated that it is engaged in the development and maintenance of computer software. The production and sales of software cannot be expressed in any generic unit. Thus, TPO rejected Assessee's objections and retained it as a comparable. DRP also agreed with TPO. 8.1. It was contended that AO relied on the annual report of FY. 2010-11 and used the information applicable to FY. 2009-10 from that report, as the information for FY. 2009-10 was not available in public domain. It is also submitted that this company was never selected either by TPO in earlier year or in later year. It was also submitted that profitability varies from year to year and in this year, there was abnormally very high margin, the reasons of which could not be analysed in the absence of annual report. It was further contended that segmental information was not available. On the argument that the said company is providing both software development and IT enabled services Ld. Counsel placed the disclosures in ann....
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....cuments placed on record, TPO relied on later year's annual report in extracting the information. Variation in profitability over the years alone cannot be a reason to exclude the company from comparability analysis but as rightly pointed, the absence of segmental information, how much profit earned was on the software development or ITES cannot be examined. In the absence of clarity on operational details and comparable company having diversified activities, we are of the opinion that this company cannot be chosen as a comparable company in Assessee's case in this assessment year. We are also aware of the decision of the Co-ordinate Bench given in earlier assessment year on the reason that segmental reporting was not available. Be that as it may, since the said company is functionally different from Assessee's activities and in the absence of segmental information, we direct AO/TPO to exclude the above while working out the comparability analysis. We uphold the plea of Assessee in this regard. Kals Information Systems Ltd : 10. Assessee objected to the above company before TPO stating that the above said company is functionally different as it is engaged in the d....
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....s including software development services and revenue from software development services is Rs. 33,649 Crores out of total turnover of Rs. 37,637 Crores, which is at 89.52%. This signified the fact that company is predominantly into software development services. TPO rejected the objections of Assessee so as DRP. 12.1. It was the objection of Assessee that above company is predominantly into product design services, Innovation Design Engineering and visual computing labs division which are specialized services. He referred to the order of ITAT in AY. 2009-10 in the case of Planet Online Pvt. Ltd., in ITA No. 464/Hyd/2014 (supra), wherein this company was rejected on the reason that it is engaged in multiple segments. There is no break-up in the annual report and data on which margin from software services activity only can be computed is also not available. Moreover, the company itself has indicated that it cannot be compared with any other software service company because of its complex nature. Similar view was taken by many of the Co-ordinate Benches in earlier years that Tata Elxsi Ltd., cannot be selected as comparable company. Consistent with the above view, we are of....
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....ing of the words used in the notes on accounts are not defined. Based on certain ITAT decision, the earlier directions of this panel and other panels, the huge turnovers involved, huge brand value, their predominant presence in the market, in view of incomplete details etc., this panel is of the view that the following comparables selected by TPO should be excluded from the list of final comparables chosen by TPO in the ALP computation. i) Infosys Technologies Ltd., ii) L&T Infotech Ltd., We direct TPO to exclude the above referred comparables from the list of final comparables chosen by TPO in the ALP computation and recompute the ALP accordingly". 14.2. It was the submission that once DRP has accepted the objections of Assessee whereas in Assessee's case DRP did not exclude L&T Infotech while excluding Infosys Technologies Ltd., it was the submission that similar facts exist for both the companies and DRP has excluded only Infosys Technologies and not L&T Infotech Ltd., 14.3. After considering the objections of Assessee and perusing the order of DRP in the case of M/s. Sumtotal Systems India Pvt. Ltd., (supra), as extracted above, we a....