TaxTMI 
TaxTMI 
2017 (5) TMI 530
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....e assessee. In response to the notice, the AR of the assessee company appeared and furnished the information called for. 2.1 During the year under consideration, the assessee filed 3CEB report for the year under consideration wherein the international transactions involved were more than Rs. 15 crores, hence, the case was referred to the TPO to determine the arms' length price after obtaining the approval of the CIT - II, Hyd. 2.2 During the relevant PY, as per the 3CEB report/TP document, the international transactions of the assessee reflected as under: A.E. Nature of transaction Amount (Rs.) Electronic Arts Ltd. Purchase of fixed assets 20,71,242 Electronic Arts Inc. Contract software research and development services 57,18,55,399 Electronic Arts Inc. Corporate IT Services 3,82,62,985 Electronic Arts Inc. Back office support services. 7,83,75,725 Electronic Arts Asia Pacific Pte Ltd. Marketing support services 2,40,70,176 EA Swiss SARL Corporate IT support services 1,91,31,493 EA Swiss SARL Back office support services 4,18,90,474 EA Swiss SARL Reimbursement of expenses 11,50,988 ....
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....TP document, the TPO noted the search process is not in confirmity with the TP regulations as also the choice of filters which resulted in selection of inappropriate comparables. In view of the same, the TP document of the taxpayer was rejected and an independent analysis had been made by aggregating all the transactions under TNMM. 2.7 The final comparables selected by Transfer Pricing Officer (TPO) with OP to OC are as under: Sl.No. Name of the company OP/OC 1. Acropetal Technologies Ltd. (seg.) 19.17 2. Akshay Software Technologies Ltd. 9.87 3. CTIL 15.61 4. Evoke Technologies Ltd. 11.60 5. I Gate Global Solutions Ltd. 15.52 6. L&T Infotech Ltd. 24.34 7. Mindtree Ltd. (seg.) 16.21 8. Persistent Systems Ltd. 28.73 9. RS Software India Ltd. 15.41 10. Sasken Communication Technologies Ltd. 17.00 11. Zylog Systems Ltd. 30.37 12. Spry Resources India Pvt. Ltd. 35.98 13. Third ware Solutions Ltd. 31.08 270.90 20.84 2.8 After comparing the average margins of the comparables to the financials of the as....
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.... learned TPO have erred in law and on facts in making an adjustment of INR 4,14,20,080 to the Arm's Length Price determined by the Appellant in respect of the international transactions with its Associated Enterprise ('AE'). In doing so, the learned AO / Hon'ble DRP / learned TPO have erred in law and in facts as follows: 3.1. Rejecting the detailed transfer pricing analysis undertaken by the Appellant without giving cogent reasons. 3.2. Rejecting the comparable companies identified by the Appellant in the transfer pricing report, despite of it meeting the test of comparability. 3.3. Selecting new companies while determining the ALP which were failing the test of comparability. 3.4. Rejecting / modifying the filters adopted by the Appellant and proposing additional filters while conducting a fresh benchmarking analysis during the course of the transfer pricing assessment proceedings. 3.5. Computing incorrect margin of the companies selected while determining the ALP. 3.6. Rejecting the adjustment for differences in working capital as claimed by the Appellant. 3.7. Rejecting the adjustment for differences in risk profile. 3.8. Ignoring the pro....
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....rnover or economical activities of the companies are irrelevant as it has no bearing on the profitability. She supported the views of the DRP. 1.3. Considered the submissions of both the parties and perused the material facts on record. The assessee raised other objections and decided to drop the turnover filter before us. Accordingly, we cannot adjudicate on the turnover filter at the moment. We find that the coordinate bench in the case of M/s Electronic Arts Games (India) Pvt. Ltd., (supra) has held as under: 6. As regards the comparability of L&T InfoTech Ltd, this Tribunal in the above case of Virtusa India Pvt. Ltd has observed that the L&T InfoTech Ltd has no segmental data and therefore, was rejected by the TPO in earlier years on this ground. Therefore, the Tribunal has directed the exclusion of L&T InfoTech Ltd also from the final list of comparables in the case of Virtusa India (P) Ltd. For the sake of ready reference, Para 7 to 9 of the said are reproduced hereunder: "7. Coming to the Revenue's appeal against the directions of the DRP to exclude Infosys Technology Ltd., L & T InfoTech Ltd., and Tata Elxsi Ltd., from the final list of comparables, we find th....
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....products namely eMee & KLISMA for which significant R&D is also being incurred. It is submitted that this company is also involved IP-led business (software products). It is submitted that this company derives significant revenue from export of software services and products, for which no segmental is available and the company is also owning significant intangible assets. He submitted that in the following cases this company was rejected as comparable: 1. CIT Vs. Intoto Software India Pvt. Ltd., IITTA No. 233 of 2014, High Court of Telengana and AP. 2. Alcatel Lucent India Ltd. Vs. DCIT, ITA No. 6856/Del/2015 3. Symantec Software and Services India Pvt. Ltd. Vs. DCIT, ITA No. 614/Mds/2016 2.2 Ld. DR relied on the orders of revenue authorities and further submitted that it is observed by DRP, this company has not charged the R&D expenses to P&L a/c. She also submitted that "IP" led businesses are similar to software services and also similar to the business carried on by the assessee. She submitted that the presence of IP's will not have any impact. 2.3 Considered the submissions of both the parties and perused the material facts on record. We find that the coordinate....
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....r page 1047 of paper book). 2.7 In continuation of the above submissions, ld. AR also brought to our notice that this company has declared segmental report based geographical location of customers instead of industrial vertical segmentation i.e. based on services and product. 2.8. After considering the facts on record, in our view, this company i.e. Persistent Systems Ltd. cannot be a comparable company to the assessee company. Accordingly, this company is directed to be removed from the list of comparable companies. 6. Ld. AR raised ground No. 3.4 praying for inclusion of the company i.e. Evoke Technologies Pvt. Ltd. as the same is a comparable company to the assessee company as its profile is similar to the other companies retained by DRP. 7. The facts are, this company was selected by TPO after rejecting TP study of assessee. However, assessee objected to inclusion of this company as comparable company before the TPO by making a submission that this company is into provision of various other services including software development services. This company does not have segmental information in respect of all the services. However, TPO rejected the submissions of the as....