TaxTMI 
TaxTMI 
2014 (1) TMI 1815
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....merly known as Juno Online Services Development Pvt. Ltd., is engaged in software development services. The assessee is a wholly owned subsidiary of Juno Online Services, USA, an internet service provider, which is ultimately owned by United Online Inc. USA. The assessee provides software development services only to its AE in USA. Therefore, the assessee can be termed as a captive service provider. For the assessment year under dispute, the assessee filed its return of income declaring nil income after claiming deduction u/s 10A of the Act at Rs. 1,23,49,246/-. During the scrutiny assessment proceedings, the Assessing Officer noticing that the assessee company had earned revenue exceeding Rs. 5 cores from International Transaction with its AE made a reference to the TPO for determining the ALP u/s 92CA of the Act. In course of proceedings before the TPO, the assessee submitted all relevant documents as were called for by the TPO. The TPO on examining the TP study noticed that the assessee has reported a revenue of Rs. 13,87,06,612/- from International transaction with its AE. The assessee for the purpose of determining the ALP has selected TNMM as the most appropriate method and o....
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....specifically objected to selection of seven comparables by the TPO (5 in the main ground and 2 in the additional grounds). Hereinafter we will deal with each of the company that was objected by the assessee. Exensys Software Solutions Ltd. : Objecting to the aforesaid company's selection as a comparable, the ld. AR submitted that it is a product company as it is involved in development of software products which is evident from significant intangibles owned by that company. That apart it is also an exceptional year of operation in case of the said company. There is merger of Holool India with effect from 1.4.2004 which had a material impact on the financial results for the year. He further contended that the TPO has erroneously excluded the deferred revenue expenditure while computing the net margin of the company. In support of such contention, the learned AR referred to the decisions of the co-ordinate Bench of the Tribunal in case of Intoto Software India Pvt. Ltd. (ITA Nos. 1196, 1197/Hyd/2010), ITO vs. Colt Technology Services India Pvt. Ltd. (ITA No. 609/Del/2011), Integrated Decisions & Systems India (P) Ltd. vs. DCIT (TA No. 27/JP/2011) ,ACIT vs. Sonata Software (ITA....
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....n the high operating margin of the company, we deem it fit and proper to remand this issue to the file of the Assessing Officer/TPO for reconsideration. If it is found that there is an amalgamation of Exensys Software Limited and Holool India Limited and formed as one entity viz., Exensys Software Solutions Limited. during the relevant previous year and the financial result is the combined result of these two companies, then, we direct the Assessing Officer/TPO to exclude this company from the list of comparables." 8. The other decisions relied upon by the learned AR also expresses the same view. Therefore, considering the totality of facts and circumstances and respectfully following the view expressed by the co-ordinate Bench in case of Intoto Software India Pvt. Ltd. (supra), we direct the AO/TPO to examine the issue afresh in conformity with the direction given in the case of Intoto Software India Pvt. Ltd. (supra). Accordingly, this issue is remitted back to the file of the AO. Sankhya Infotech Ltd. and Four Soft Ltd.: The learned AR objecting to the aforesaid companies being treated as a comparable, submitted that the annual report as well as other material on record wo....
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....diture towards development of software products. The co-ordinate Bench on that basis directed the AO/TPO to exclude Thirdware Solutions Ltd. from list of comparables. The same view has also been expressed by the Delhi Bench of the ITAT in the case of Colt Technology Services India Pvt. Ltd. (supra) and in case of Sonata Software (supra). Respectfully following the decisions of the co-ordinate Benches, as noted above, we direct the AO/TPO to exclude the aforesaid company from the list of comparables. Infosys Technologies Ltd..: The learned AR objected to the aforesaid company being treated as a comparable in view of its extraordinary high turnover of about Rs. 6,859 crores compared to the total turnover of about Rs. 13.87 crores of the assessee and it was contended by the learned AR that under no circumstances Infosys Technologies Ltd., can be treated as comparable to the assessee as it is a giant in the sector of software development and ITES having considerable brand value, reputation and goodwill in market. It not only owns intangibles but has diversified activities. 13. The learned DR, however supported the orders of the CIT (A) and TPO. 14 We have heard submissions of ....
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....he Addl. CIT (Transfer Pricing), Hyderabad, wherein the concerned Officer has been informed that Tata Elxsi Limited is specialized Embedded Software Development Service Provider and that it cannot be compared with any other software development company. It was submitted that because of the specialization and also because of diverse nature of its business, it is very difficult to scale-up the operations of Tata Elxsi Limited. In view of this, Tata Elxsi Limited has informed that it is not fair to use its financial numbers to compare it with any other company. The communication dated 25th August, 2009 to the TPO is placed before us. As this communication was not before the TPO at the time of transfer pricing adjustment we deem it fit and proper to remand this issue also to the file of the TPO to reconsider adopting this company as the comparable in the light of observations of this company to the TPO in the case of another assessee. In the result, the Assessing Officer/TPO is directed to reconsider the issue in accordance with law, after affording a reasonable opportunity of being heard to the assessee. 18. Respectfully following the decision of the co-ordinate bench as aforesaid,....
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....ies Ltd. In respect of the aforesaid company, the learned AR submitted that the TPO has rejected the aforesaid company solely on the ground that it is a persistent loss making company. The learned AR submitted that the aforesaid company has earned an operating profit for the financial year 2004-05 as per computation made in accordance with TPO's formulae. 22. The learned DR, on the other hand, supported the orders of the CIT (A) as well as TPO. 23. We have heard the parties and perused the materials on record. As can be seen from page-171 of the TPO's order the aforesaid company was proposed as a comparable by the assessee during the TP proceedings. However, the TPO rejected it by stating that it is a persistent loss making company. As would be evident from para 11.9 of the CIT (A)'s order, he has also sustained the view of the TPO. However, it is the specific contention of the assessee before us that the company has earned operating profit for the financial year 2004-05. In view of these submissions of the learned AR, we remit this issue to the file of the Assessing Officer/TPO who after examining the financial position of the aforesaid company for the financial year 2004....