AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 1265
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....onally different without appreciating the fact that these companies qualify all the qualitative and quantitative filters applied by the TPO. 3.The DRP erred in holding that M/s. Infosys Ltd cannot be taken as comparable, being functionally different, big brand by relying on various decisions of the 'TAT without appreciating the fact that the company qualify all the qualitative and quantitative filters applied by the TPO. 4. The DRP erred in holding that M/s Persistent Systems & Solutions Ltd cannot be taken as comparable for the reason that it does not have segmental results pertaining to Software Development Service without appreciating the fact that the taxpayer was not raised any objection during TP proceeding and the company qualify all the qualitative and quantitative filters applied by the TPO. 5. The DRP erred in directing the TPO to apply Onsite filter on Software development segment and to exclude M/s. R. S. Software (India) Ltd as comparables without appreciating that the directions to the AO amounts to setting aside the issue which is outside the purview of the DRP under the provision of Section 144C as the DRP is not empowered to set aside....
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....d and R S Software (India) Limited, as comparable upon application of the onsite revenue filter. d) The Ld. AO I Ld. TPO had erred on facts and in law in rejecting Powersoft Global Solutions Limited ('Powersoft') as a comparable on the application of the employee cost filter. The Ld. Panel erred in confirming the same without considering the submissions of the Respondent. e) The Ld. Panel erred on facts in rejecting LGS Global Limited ('LGS') upon application of the export earnings filter. 2 Non-allowance of appropriate adjustments to the comparable companies, by the AO/TPO The Ld. Panel erred in upholding the action of the Ld. AO/the Ld. TPO in not allowing appropriate adjustments under Rule 1OB to account for, inter alia, differences in differences in (a) Marketing expenditure adjustment, (b) Research and development expenditure adjustment; and (c) risk profile between Respondent and the comparable companies. 3 Reduction of expenses from export and total turnover for computation of deduction under section 10A of the Act a) The Ld. Panel erred in upholding the action of the Ld. AO in reducing communicat....
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....ld. AR of the assessee. For the sake of ready reference, we reproduce para-13 to 33 of this Tribunal order:- "13. We shall deal with each comparable which has been disputed by the Revenue one by one as under:- (1) ICRA Techno Analytics Ltd. (seg) 14. At the outset, we note that apart from having the related party revenue at 20.94% of the total revenue, this company was also found to be functionally not comparable with software development services segment of the assessee. The DRP has given its finding at pages 13 to 14 as under:- "Having heard the contention, on perusal of the annual report, it is noticed by us that the segmental information is available for two segments i.e., services and sales. However, it is evident from the annual report that the service segment comprises of software development, software consultancy, engineering services, web development, web hosting, etc. for which no segmental information is available and therefore, the objection of the assessee is found acceptable. Accordingly, Assessing Officer is directed to exclude the above company from the comparables." 15. We find that the facts recorded by the DRP in respe....
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....s technical consultancy, consulting, re-engineering, maintenance, systems integration as well as products for banking industry. 20. In view of the above facts that Infosys Ltd. having a huge brand value and intangibles as well as having bargaining power, the same cannot be compared with the assessee who is providing services to its AE. (3) KALS Information Systems Ltd. 21. The assessee raised objections against this company on the ground that this company is engaged in the development of software and software products. Further, this company consists of STPI unit and also having a training centre engaged in training of software professionals on online products. Thus, when this company is having revenue from software services as well as software product, the same cannot be considered as comparable with software development service providing company. 22. The DRP has directed the AO to exclude this company from the list of comparables by taking note of the fact that there were inventories in the books of accounts of this company which shows that this company is in the software product business. Further, by following the decision of this Tribunal in t....
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....nd any error or illegality in the findings of the DRP that this company cannot be compared with the assessee and the same is directed to be excluded from the set of comparables. (5) Sasken Communication Technologies Ltd. 27. The assessee raised objection that this company has revenue from software services, software products and other services. The DRP has come to the conclusion that this company earned revenue from 3 segments. However, no segmental information is available. Accordingly, the DRP directed the AO to exclude this company from the comparables. 28. We have heard the ld. DR as well as ld. AR and considered the relevant material on record. The DRP has reproduced the break-up of revenue in the impugned order as under:- Amount in Rs. lakhs Year ended March 31, 2010 Year ended March 31, 2019 Software Services 37,736.22 40,531.20 Software products 2,041.00 6,146.43 Other services 372.77 1,297.05 Total revenues 40,150.89 47,974.68 29. Thus, there is no dispute that this company earns revenue from 3 segments. However, the segmental operating margins are not available. Therefore,....
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....rated in para 6.6 above. Even the segmental details for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company as fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded from the list of comparable parties." 33. No contrary view has been brought to our notice regarding comparability of this company with that of a pure software development service provider. Accordingly, in view of the decision of the Mumbai Bench of the Tribunal in the case of Telcordia Technologies Pvt. Ltd. (supra), we do not find any reason to interfere with the finding of the DRP". 6. From the above paras of the Tribunal order, it is seen is that it was held by the Tribunal in that case that the following companies i.e. a) M/s ICRA Techno Analytics Ltd (Seg.) b)Infosys Ltd., c) M/s Kals Information Systems Ltd., (Seg.), d) M/s Persistent Systems & Solutions Ltd., e) M/s Persistent Systems Ltd., and f) M/s Tata Elxsi Ltd., (Seg.) should be excluded from the list of final comparables. As per para....