TaxTMI 
TaxTMI 
2017 (9) TMI 569
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....was maintained in good faith and with due diligence; ii. rejecting the search process followed by the Appellant in the TP documentation and carrying out a fresh comparability analysis for determining the arm's length price; iii. using the data available at the t*ime of assessment proceedings instead of those available as on the date of preparing the TP documentation; iv. rejecting multiple year data and using data for the financial year 2009-10 alone; v. including companies in the comparability analysis which are different from the Appellant in functions, asset base and risk profile; vi. not considering companies similar to the Appellant in functions, asset base and risk profile while performing comparability analysis; vii. selecting companies that are earning super normal profits; and viii. not granting risk adjustment. 3. On the facts and in the circumstances of the case and in law, the Learned AO/Hon'ble Dispute Resolution Panel ("DRP") have erred in making an addition of Rs. 20,87,598 to the interest paid on the external commercial borrowings. 4. On the facts and in circumstances of the cas....
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....ken Communication Technologies Ltd and Thinksoft Global Services Ltd. Thereafter, including these three companies, the TPO suggested 19 companies as final comparables to the assessee. After discussing the acceptability of the objections of the assessee on the filters and the other factors such as working capital adjustment, risk adjustment etc., the TPO discussed on the assessee's specific objections on each of the comparables. Finally, the TPO adopted 18 companies as comparable to the assessee and arrived at the average margin of the comparables at 22.69% and after giving the working capital adjustment of 2.33%, he arrived at the adjustment to be made u/s 92CA of the Act at Rs. 5,28,16,043. 8. In addition to the above, the TPO also considered the international transaction of interest paid on ECB Loan. He observed that the assessee has availed loan of US$ 1,32,00,000 from its AE in USA and Rs. 2,82,00,000 by way of four separate agreements during financial year 2005-06 and the rate of interest paid on all the loans was at 4.59%. He observed that the assessee has compared this rate of interest with the average PLR in India at 12.08% and thus considered it to be at Arm's Length....
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....d company had also acquired the assets in Paxonic Inc, and therefore, it should not be taken as a comparable. The TPO however, rejected the assessee's contention by holding that the said company is providing software support services to the product developing companies rather than developing a product on its own and therefore, assessee's objections are not sustainable. The DRP has confirmed comparability of this company to the assessee. 14. The learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below and has drawn our particular attention to the page Nos 523, 524 572 and 615 of the paper book filed by the assessee before us to demonstrate that the said company's "outsource software product development" activity is different from "I.T. services". He has drawn our attention to Page 524 of the paper book wherein it is stated by Persistent Systems & Solutions Ltd that there are releases of 3000 plus products and around 300 customers in the last 5 years and has also outlined the difference between the outsource product development and outsourced I.T. Services. He has also drawn our attention to page No.606 of the Paper Book wherein....
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....lly following the said decision, we direct that this company should be deleted from the final list of comparables. For the sake of ready reference, the Tribunal's order at para 16 is reproduced hereunder: "16. We have considered the rival submission and perused the material on record. A co-ordinate Bench of the Delhi Tribunal in the case of Ciena India Pvt. Ltd. v. DCIT in ITA Nos. 2948, 3324/Del/2013, has held as under: "9.2. We have heard the rival submissions and perused the relevant material on record. It can be seen from the information supplied by this company u/s 133(6) of the Act, a part of which has been reproduced in the TPO's order, that this company 'has developed a few of its own products in the area of identity management connectors.' Revenue from product licences stands at Rs. 288.93 million as against the revenue from software development services at Rs. 4829.57 millions. Though this company is more engaged in software development services, but, is also a software product company, which is evident from the information supplied by it to the TPO. Thus, the total profits of the company on entity level also, inter alia, include revenue from....
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....or the assessee submitted that the said company, in its annual report (at Para 16) has reported that it is primarily engaged in software development and I.T. enabled services which is considered as the only business segment as per A.S. 17. Thus, according to the learned Counsel for the assessee, the said company is also engaged in I.T. enabled services and the reporting is of aggregate of both the segments and hence it should be excluded from the final list of comparable. 19. The learned DR, however, relied upon the decision of the Hon'ble Gujarat High Court in the case of Pr.CIT vs. Allscripts (India) (P) Ltd reported in (2016) 72 Taxmann.com 305 (Guj.) wherein for the very same A.Y, the Hon'ble Gujarat High Court has held that the question of whether E-Infochip Bangalore Ltd was engaged in any services other than software development services needs verification. 20. Having regard to the rival contentions and the material on record, we find that at Para 16 of the Annual Report, though the said company has reported that it is into software development services as well as I.T. enabled services, no separate income has been reported from I.T. enabled services. Schedule-7....
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....itted that there is no specific case for the A.Y 2010-11 wherein E-Zest Solutions Ltd has been directed to be excluded. 24. Having regard to the rival contentions and the material on record, we find that the said company is offering services in product development life cycle including product design and development and product feature enhancement, product platform migration, software product testing product maintenance and support, product release and license management, SAAS/SOA services and Web 2.0 services. The assessee has not filed any document to show that the said company owns intangible assets or that it has any products in its inventory. Therefore, we are unable to accept the assessee's contention that E-Zest Solutions Ltd is a product development company. In the cases relied upon by the learned Counsel for the assessee, we find that the Tribunal had observed that E-Zest Solutions Ltd was rendering product development services and high end technical services which come under the category of KPO which should not be compared that the company which is rendering software development services and therefore, directed the exclusion of the said company from the final list of co....