TaxTMI 
TaxTMI 
2016 (7) TMI 1331
X X X X Extracts X X X X
X X X X Extracts X X X X
....earned AO in pursuance of the directions of the Honourable DRP. A. Software services- Transfer Pricing: The grounds mentioned hereinafter are without prejudice to one another. 1.The learned DRP and the learned TPO grossly erred in law and facts of the case in determining the ALP of the international transaction of the Appellant on account of provision of software services and proposing a transfer pricing adjustment of Rs. 20,362,735. 2.That on the facts and circumstances of the case, the learned DRP and the learned AO erred in upholding the rejection of Transfer Pricing ('TP') documentation by the learned TPO without appreciating the contentions, arguments, and evidentiary data put forward by the Appellant during the course of the proceedings before them, and in doing so have grossly erred: 2.1 in upholding the rejection of comparability analysis carried in the TP documentation and conducting a fresh comparability analysis for determining the arm's length price by the learned TPO. 2.2 in adopting the arm's length mark up to be 28.44 % [working capital adjusted margin] in respect of international transactions of the Appellant. 2.3 in upholding the actio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tech Limited, E-zest Solutions Limited, Persistent Systems Limited and R Systems International Limited which are functionally not comparable to the assessee's business. 2.11 in upholding the actions of the learned TPO in accepting Celestial Labs Limited as a comparable company even though it is a contract research company which also engaged in bio-informatics and hence functionally dissimilar to the assessee. 2.12 in upholding the actions of the learned TPO in accepting companies like Megasoft Limited, Flextronics Software Systems Limited and Helios & Matheson Information Technology Limited which have abnormal/fluctuating profit margins. In doing so the learned DRP and learned AO have disregarded the jurisdictional IT AT ruling in the case of SAP LABS India Pvt. Ltd. V s. ACIT (reference ITANo. 398/Bang/2008) and E-Gain Communication Private Limited (reference: ITA No. 16851PN/07 - Pune). 2.13 in upholding the actions of the learned TPO in rejecting Thinksoft Global Services Limited by stating that it is not functionally comparable, 2.14 in upholding the actions of the learned TPO in concluding that Maars Software International Limited is not functionally comparable wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame should not be reduced from the export turnover of the Company. B. Reduction of expenses incurred in foreign currency from the export turnover * The learned AO and the Honourable DRP erred in reducing expenses incurred in foreign currency amounting to Rs. 1,639,970 from the export turnover for the purposes of computing deduction u/s 1OA. * The learned AO and Honourable DRP erred in disregarding the submission made by the Appellant that no part of the expenses incurred in foreign currency was incurred towards providing technical services outside India and hence, the same should not be reduced from the export turnover of the Company. C. No corresponding reduction of expenses from the total turnover * Without prejudice to the above, the learned AO and the Honourable DRP erred in reducing sums of Rs. 3,160,668 towards lease line charges and Rs. 1,639,970 towards expenses incurred in foreign currency only from export turnover without reducing the same from total turnover in computing deduction under section 1OA of the Act. * The learned AO has erred in not relying upon the decision of the jurisdictional Income Tax Appellate Tribunal in the case of KPIT Cummins Infosystems....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all or a grounds of appeal. 3. It was submitted by the ld. AR of the assessee that the assessee is pressing only ground no.2.8, 2.10, 2.11 and ground no.10 and the remaining grounds are not pressed. Accordingly, remaining grounds are rejected as not pressed. 4. Regarding ground no.10, he submitted that this issue is covered in favour of the assessee by the judgment of the Hon'ble Karnataka High Court rendered in the case of M/s Tata Elxsi Ltd., reported in 349 ITR 98. Respectfully following this judgment, ground no.10 of the assessee's appeal is allowed because learned DR of the revenue could point out any basis on which, this issue is not covered in favour of the assessee. 5. Regarding remaining grounds being pressed, it was submitted that these grounds are in respect of TP issue. He submitted a chart, as per which, the assessee is requesting for exclusion of 12 comparable companies and in support of this contention, reliance has been placed on the Tribunal order rendered in the case of M/s Hewlett-Packard (India) Globalsoft Pvt.Ltd., Vs DCIT in IT(TP)A No.1031(Bang)/2011 (M/s HPPLtd.,). He submitted a copy of this Tribunal order. He also submitted that in this case, the Tribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therefore, this is functionally different from assessee company. In the present case also, the assessee company is rendering only software services and not engaged in software product as such and therefore, by respectfully following this Tribunal order, we direct the AO/TPO to exclude this company i.e. M/s Avani Cimcon Technologies Ltd., from the final list of comparables. 10. The next company for which exclusion is being requested is M/s Celestial labs Ltd. and the relevant discussion regarding this company is available on pages 16 to 19 of the Tribunal's order rendered in the case of M/s HPPLtd., (Supra). The Tribunal has noted on these pages that this company was basically/admittedly in clinical research and manufacture of bio-products and other products. Under these facts, we find no reason to have a contrary view in the present case, and therefore, by respectfully following this Tribunal's order, we direct the AO/TPO in the present case also to exclude this company i.e. M/s Celestial Labs Ltd., (Supra) from the final list of comparables. 11. The third company for which exclusion is being requested is M/s E-Zest Solutions Ltd, and the discussion about this company is availabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing this tribunal order, we hold that this company i.e. M/s Infosys Ltd., (Supra) also should be excluded from the list of final comparables. 14. The next company for which exclusion is being requested is M/s Ishir Infotech Ltd. and the discussion about this company is available on pages 23-24 of the tribunal's order rendered in the case of M/s HPOP Ltd., (Supra). It is noted by the Tribunal on these pages that M/s Ishir Infotech Ltd., is outsourcing its work and has not satisfied 25% employee cost filter and thus has to be excluded from the list of comparables. Respectfully following this Tribunal order, we direct the TPO/AO in the present case also to exclude this company from the list of final comparables. 15. The next company for which exclusion is being requested is M/s Kals Information Systems Ltd., Regarding this company, it was submitted by the ld. AR of the assessee that relevant discussion is on page 25 to26 of the Tribunal order rendered in the case of M/s HPP Ltd., (Supra). On these pages, it is noted by the Tribunal that this company was developing software products and not purely or mainly software development service provider. Therefore, respectfully following th....