AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 1187
X X X X Extracts X X X X
X X X X Extracts X X X X
....erred in by resorting the issue back to the file of AO/TPO and directed AO to rework addition after excluding the aforesaid 2 companies without going to merits and facts of the case?" 2. On 5.7.2016, after recording the submissions of the counsel for the revenue that the Tribunal, while remanding the issue of transfer pricing to the Assessing Officer, directed that the Assessing Officer should exclude two of the companies while working out comparability analysis, we had issued notice indicating that we may dispose of the Tax Appeal finally at the admission stage itself. In response to such notice, learned Senior Counsel, Mr.S.N.Soparkar appeared for the respondent - assessee. 3. We have perused the orders on record with the assistance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction (or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprise entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realized by the enterprise and referred to in sub-clause (I) is established to be the same as the net profit mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 FY 12-13 OP/TC 13.87% 80.15% 19.89% 62.27% 33/42% -4.46% 3.29% -11.53% 7. Term 'OP' stands for operation profit and 'TC' stands for total cost. It can thus be seen that this ratio has fluctuated widely from -11.53% to 80.15% in a span of about 7 years. From year to year also, this ratio has fluctuated between 13.87% to 80.15%, back to 19.89% up again to 62.27% and so on. Therefore, on account of such widely fluctuating and erratic results of the company, the Tribunal found that it would be unsafe to assess arm's length price based on TNMM taking into account the results of this company. We do not find the decision of the Tribunal give....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vices, as mentioned below : I. Chip Designing and system verification by using complex systems languages like Specmen, Vera, Verilog. The major customers here comprise of IT / Semiconductor companies located abroad. II. Embedded technologies which involve system integrations and system porting using the correct language for scripting. The major customers in tis segment are designing new products and are in system development phase. III. Application software development for various projects using the languages like C, C++, Java, Net and Android. The major customers in this segment are spread across all sorts of industries who need software for their support functions or integrations of their various systems. Fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yer. From perusal of the agreement between the assessee and its AE, it can be seen that the following are the scope of work to be provided by the assessee to its AE, the relevant portions of the agreement are reproduced below : xxx xxx xxx Thus, it can be seen that the comparable as well as the tested party are engaged in providing similar software development services and consequently there is no reason why this entity should not be considered as comparable." 9. The Tribunal in the impugned judgment observed as under : "10. Before us, Revenue has not brought any contrary binding decision in its support. With respect to E-Infochip Bangalore Ltd., we find that in the annual accounts of the company, with respect to the segment inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contention to the contrary was not borne out from the record. If the Tribunal had perused the material on record and come to a conclusion different from that of the TPO by giving reasons, the situation would stand on a different footing. In the present case, the Tribunal merely considered whether in absence of segmental information available with respect to E-Infochip Bangalore Ltd., the margin of such company could have been considered by the TPO. This issue completely ignores the fundamental question whether E-Infochip Bangalore Ltd. was engaged in any services other than software development services. Only if answer to the question was in the affirmative, the question of availability or non-availability of segmental information would ar....