2016 (10) TMI 501

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....e assessee's for Assessment Year (AY) 2011-12 based on the Transfer Pricing Officer's (TPO) report/Transfer Pricing study report. 2. The assessee earlier known as Saxo IT India Private Limited is a part of the Initto Group which teamed up with Saxo Bank. It designs and develops customised software applications. Besides, it also provided technical support services during the relevant AY to some unrelated enterprises in India. It reported four international transactions, including provision for software development - for Rs. 20,72,25,235/-. This transaction is the one in controversy. As regards the other three, the revenue did not raise any dispute. 3. In the proceedings before the TPO, the assessee's Transactional Net Margin Method (TN....

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....ue is aggrieved by these as well as exclusion of Wipro Technology Services Limited. 5. It is argued on behalf of the revenue that the rationale adopted by the ITAT with respect to lack of segmental data vis-a-vis four of the comparables is contrary to the records. Learned counsel highlighted that with respect to each of the four companies, i.e. E-Infochips, Larsen and Toubro Infotech Ltd., Persistent Systems & Solutions Ltd. and Saken Communications Technologies Ltd., the documentary evidence pertaining to each of them in the form of annual reports and other material collected from internet resources were analysed elaborately. On the basis of these, the TPO was able to accurately segregate the volume of transactions allocable to software....

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....e taken into consideration while carrying out the ALP determination by the TPO was erroneous. 8. The revenue urges that the figures of sales with respect to software products in respect of some of the comparables was available and was sufficient for their exclusion as comparables. The TNMM method - amongst the other three mandated by the statute requires adoption of appropriate filters. Rule 10B(1)(e) which specifically talks of TNMM, presupposes that when such method is the most appropriate, the TPO would conduct/carry out the exercise of ALP determination. It reads as follows: "10B . (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified do....

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....tional transaction 55c[or the specified domestic transaction];" 9. It is evident, therefore, that the international transactions which are the subject of scrutiny is to be through a filter, and computation is arrived at "in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise". 10. On a comparison with the data available and made available, undoubtedly, the object of the statute is to "pull in transactions which otherwise escaped the radar of tax assessment under one head or the other. The transfer pricing methodology - shorn of its details is an attempt by each nation to locate the incidents of income which would be subjected to levy within its jurisdiction where international transactio....