TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 281
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....l transactions in Form No.3CEB. For the purposes of transfer pricing analysis, the assessee divided its business into three broader categories, viz., (i) Software Development; (ii) Software Deployment, Training, Consultancy and Equipment Rental; and (iii) Support Services which include licence fee paid and support and maintenance fees paid. In respect of 'Software Development Services', the assessee used Transactional Net Margin Method (TNMM) as the most appropriate method with Profit Level Indicator (PLI) of Operating Profit to Total Cost (OP/TC). The assessee computed its own PLI at 10.16% as against that of comparables at 12.13% and claimed that the international transaction of 'Provision of software development services', transacted at Rs. 4,20,56,439/-, was at arm's length price (ALP). The Assessing Officer (AO) made reference to the Transfer Pricing Officer (TPO) for the determination of the arm's length price of the international transactions. The TPO did not dispute the categorywise accounts drawn up by the assessee in the above referred three segments and went on to analyze the same. As regards the international transactions relating to 'Software Development Services', the....
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....ment was entered into between the assessee and its AE for the provision of software development services. Making a reference to the Transfer pricing study report, the ld. AR brought to our notice that Aircom was established in 1995 in UK by a group of leading cellular communication specialists to satisfy the demands of network operators and infrastructure suppliers for expert mobile network engineering services and software tools. Aircom group provides solutions for three key areas viz., Consulting, Software and Training. Aircom 'ENTERPRISE suite' is a PC based solution for all aspects of network engineering. It includes tools for radio planning, backhaul/core planning and performance engineering and configuration management. ENTERPRISE suite offers the advantage of seamless working management between disciplines throughout the organization and avoids the data transfer problems. Aircom has a total of almost 150 software customers of which nearly 75 are leading network operators coming from 50 countries around the world. The assessee develops software as per the requirements of Aircom, UK, which is done on the server of Aircom, UK. Software developed by the assessee act as inputs fo....
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.... of comparison should be excluded and the situation in which the Revenue does not accept a particular company chosen by the assessee as comparable. The underlying object of the entire exercise is to determine the arm's length price of an international transaction. Simply because a company was wrongly considered by the assessee as comparable, cannot, act as a deterrent from challenging the fact that this company is, in fact, not comparable. The Special Bench of the Tribunal in DCIT vs. Quark Systems Pvt. Ltd. (2010) 132 TTJ (Chd) (SB) 1 has held that a case which was included by the assessee and also by the TPO in the list of comparables at the time of computing ALP, can be excluded by the Tribunal, if the assessee proves that the same was wrongly included. Similar view has been upheld by the Hon'ble Delhi High Court in Xchanging Technology Services India Pvt Ltd [TS-446- HC-2016(DEL)-TP]. The Hon'ble Bombay High Court in Tata Power Solar Systems Ltd [TS-1007-HC-2016(BOM)-TP] and the Hon'ble Punjab & Haryana High Court in CIT VS. Mercer Consulting (India) P. Ltd. (2017) 390 ITR 615 (P&H) have also approved similar view. In view of the foregoing discussion, we do not find any sub....
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....the readymade object laboratories is only to the tune of maximum 3%. By no imagination this can be construed as revenues from software products. When we peruse the Annual report of this company, which is available in the paper book, it can be seen that there is no such mention of software products revenue limited to 3%. On the contrary, it has been mentioned in the Notes to the financial statement that: "the company is engaged in development of software and software products since its inception." The company consisting of STPI unit is engaged in software products and development of software and is also undertaking training activity of software professionals on online projects. Not only the revenues of the segment considered by the TPO also include the revenue from software products, but also from training imparted on commercial basis. It is clear that the assessee is not providing any training under this segment, which has been rather included by the assessee in the second category of the assessee's business, namely, 'Software Deployment, Training, Consultancy and Equipment Rental.' Since the assessee's activity under this segment does not include any revenue from training, but the....
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....al results taken by the TPO of this company have been influenced by the mergers and acquisitions taking place during the year, thereby making such financial results as incomparable. 10.3. The Mumbai Bench of the Tribunal in Petro Araldite (P) Ltd. Vs. DCIT (2013) 154 TTJ (Mum) 176, has held that a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers. Similar view has been bolstered by the Delhi Bench of the Tribunal in several cases including Ciena India Pvt. Ltd. Vs. DCIT (ITA No.3324/Del/2013) vide its order dated 23.4.2015. In view of the fact that there were mergers during the year, we hold that this company cannot be considered as comparable due to these extra-ordinary financial events. Accordingly, the same is directed to be excluded from the final list of comparables. 11. The next issue raised in this appeal is against the transfer pricing adjustment in relation to intra-group services. The assessee paid a sum of Rs. 67 lac and odd as Management fees, which was claimed as payment to AEs on cost to cost basis. On being called upon to furnish the details of such expenses, the assessee submitted that this include IT char....
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....hes, Microwave, Radio, Camera, Cable, Port and Connectors, etc., were in the nature of computer peripherals not having a stand-alone application. He held such items as eligible for depreciation @ 60%. However, as regards Printers, Scanners and NT servers, the Assessing Officer held them as not Computer peripherals. Bifurcation was made of the total amount of depreciation claimed by the assessee on computers. The first part treated by him as computer peripherals, was subjected to depreciation @ 60% and the other part consisting of Printers, Scanners and NT servers was allowed depreciation @ 15%. This led to an addition of Rs. 16,92,047/-. The assessee is in appeal against this addition. 15. We have heard the rival submissions and perused the relevant material on record. It can be seen that the Assessing Officer himself allowed depreciation @ 60% on certain items by treating them as Computer peripherals. The test for the higher depreciation seems to have been the non stand-alone application of the items. The Hon'ble Delhi High Court in CIT vs. BSES Yamuna Powers Ltd. (2010) TIOL-636-HCDEL- IT, has held that routers and switches can be classified as computers and, hence, entitled....