TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1399
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....y as a comparable, and accordingly erred in excluding M/s Infosys Technologies Ltd. as a comparable. 5. In the facts and circumstances of the case the learned CIT(A) erred in holding that foreign exchange loss or gain is a part of operating cost or operating income, as the case may be, when the TPO has excluded this data from that of the comparables. 6. The learned CIT(A) erred in holding that the assessee is eligible for a standard deduction of 5% from the Arm's Length Price (ALP) determined by the TPO/AO. 7. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 8. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." 2. The assessee has also filed Cross Objection assailing the order of CIT(Appeals) on certain grounds which are as under:- "On the facts and circumstances of the case and in law: 1. The learned CIT(A) has erred, in law and in facts, by not accepting the Respondent's plea in entirety and confirming with the Learned Assessing Officer ("A....
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....r a period other than 12 months) should not be rejected. 5. The learned CIT(A) has erred in law by upholding the TPO's approach of exercising his powers under section 133(6) of the Act to obtain information which was not available in public domain and relying on the same for comparability purposes. 6. The learned CIT(A) has erred, in law and in facts, by accepting/rejecting certain comparable companies using unreasonable comparability criteria. 7. The learned CIT(A) has erred, in law and in facts, by rejecting a company having margin less than the margin of the Respondent company. 8. The learned CIT(A) has erred, in law and facts, by not making suitable adjustments to account for differences in the risk profile of the Respondent vis-a-vis the comparables. The Respondent submits that each of the above grounds is independent and without prejudice to one another. The Respondent craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of Cross-objections at any time before, or at the time of, hearing of the appeal, so as to enable the Appellate Tribunal to decide this response according to law." 3. Through the appeal and the CO, the part....
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.... Ltd. 9. Sasken communication Technologies Ltd. (Seg.) 10. Flextronics Software Systems Ltd. (Seg.) 11. iGate Global Solutions Ltd. 12. L & T Infotech Ltd. 13. Thirdware Solutions Ltd. 14. Exensys Software Solutions Ltd. 15. Four Soft Ltd. 16. Sasken Network Systems Ltd. 17. LGS Global Ltd. (Lanco Global Solutions Ltd.) 9. Out of the 17 comparables, the CIT(Appeals) has directed the AO to exclude the following comparables, to which assessee has no objection:- 1. Sasken Network Systems Ltd. 2. Four Soft Ltd. 3. Thirdware Solutions Ltd. 4. R S Software (India) Ltd. 5. Geometric Software Solutions Co. Ltd. 6. Tata Elxsi Ltd. (Seg.) 7. Sasken Communications Technologies Ltd. (Seg.) 8. iGate Global Solutions Ltd. 9. Flextronics Software Systems Ltd. 10. L&T Infotech Ltd. 11. Satyam Computer Services 12. Infosys Technologies Ltd. The CIT(Appeals) also excluded LGS Global Ltd. on the basis of margin lesser than the tested party's margin and the ld. counsel for the assessee has requested for the inclusion of this comparable with the submission that on the basis of lesser margin than the tested party's margin, comparable cannot be excluded. 10. T....
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....e Assessee that Sankhya is engaged in the business of development of software products & services and training. The company focuses on the development of niche products for the transport and aviation industry. However, segmental information in relation to the above mentioned activities is not available in public domain. Therefore, as Sankhya engages itself in products and services as well as software training, it cannot be considered as a comparable of the Appellant. The products developed and owned by Sankhya are listed below: (1) SILICONTM Training Suite of Products: The products are a comprehensive enterprise wide training platform that covers the entire spectrum of training in a paperless environment. It comprises of four products:- - SILICONTM LMS (Training Management Information - SILICONTM QT (Online Assessment System) - SILICONTM LCMS (Learning Content Management System) - IRMAQTM : This is an integrated resource planning, management tracking system exclusively developed for Airline operations. It is an end-to-end solution for all Flight Operations. - Sakai CLE : This is a widely used and popular open source LMS used in many leading educational institutions and ....
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....Information Systems (India) Pvt. Ltd. (supra) and Textron Global Technology Centre Pvt. Ltd. (supra) [copies of the orders are placed on record] and we find that this company was examined by the Tribunal and following the order of the Hyderabad Bench of the Tribunal in the case of CNO IT Services (India) Pvt. Ltd. [formerly Conseco Data Services (I) Pvt. Ltd.] v. DCIT, Cir. 1(2), in IT(TP)A No.1280/Hyd/2010 for the AY 2005-06, the Tribunal directed the TPO for its exclusion from the list of comparables. The relevant observations of the Tribunal are extracted as under:- "21. The learned counsel for the Assessee submitted before us that two of the comparable companies out of the 10 excluded by the CIT(A) by applying RPT filter and which gets included in the comparable companies because of 15% RPT being adopted as threshold limit for excluding companies for the purpose of comparability , viz., Four Soft Ltd., and Thirdware Solutions Ltd., will have to be excluded as these companies were considered as not comparable. These companies according to him, will however, have to be excluded as these two companies were held to be not comparable with an Assessee such as the Assessee in the pr....
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....figure as segmental margin of the company and has taken these companies as comparables. He submitted that by taking the proportionate expenditure, the correct financial results would not emerge. He submitted that nothing prevented the Assessing Officer/TPO from obtaining the segmental details from the respective comparable companies before adopting them as comparable companies and before taking the operating margin for arriving at the arms length price. He submitted that wherever the segmental details are not available, then the said companies should not be taken as comparables. For this purpose, he placed reliance upon the decision of the Bangalore Tribunal in the case of First Advantage Offshore Services Pvt. Ltd. vs. The DCIT in ITA.No.1252/Bang/2010 wherein these companies were directed to be excluded from the list of comparables. 23. The learned D.R. however, supported the Orders of the authorities below. 24. Having heard both the parties and having gone through the material on record, we find that the TPO at page 37of his order has brought out the differences between a product company and a software development services provider. Thus, it is clear that he is aware of the ....
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.... and reasonable. Wherever, the Assessing Officer/TPO cannot make suitable adjustment to the financial results of the comparable companies with the assessee company to bring them on par with the assessee, these companies are to be excluded from the list of comparables. Therefore, we direct the Assessing Officer/TPO to exclude these three companies from the list of comparables." 17. Similarly, its exclusion was also examined in the case of Textron Global Technology Centre Pvt. Ltd. (supra). Since the Tribunal has taken consistent view with respect to this comparable by holding that it is functionally different, we find no justification to readjudicate it again. We accordingly following the aforesaid orders of the Tribunal, hold that this company cannot be called to be a good comparable and we accordingly direct the TPO/AO to exclude this company viz., Thirdware Solutions Ltd., from the list of comparables. 18. With regard to Exensys Software Solutions Ltd., the ld. counsel for the assessee has contended that this company is also functionally different as there was amalgamation of this company with Holool International Ltd. during the impugned assessment year. It was also engaged in....
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.... (supra) in para 14 of its order. 21. Since the Tribunal has taken a consistent view that this company is not a good comparable, we find no justification to take a contrary view, where the profile of assessee company and Exensys Software Solutions Ltd. are almost same and we accordingly hold that Exensys Software Solutions Ltd. is not a good comparable and we direct the AO/TPO for its exclusion from the list of comparables. 22. With regard to Four Soft Ltd., the ld. counsel for the assessee has contended that this company was rejected by the CIT(Appeals) by applying RPT filter. In the case of this comparable RPT was 19.89%, whereas the Tribunal has repeatedly held that comparable which has more than 15% RPT transaction has to be excluded from the list of comparables. In this case, RPT was 19.89%, therefore the CIT(Appeals) has rightly excluded the same from the list of comparables by following the RPT filter. 23. The ld. counsel for the assessee has also invited our attention that this comparable was also excluded by the Tribunal in the case of Sunquest Information Systems (India) Pvt. Ltd. (supra) on the ground of functional difference; whereas this company can also be excluded....