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2016 (3) TMI 1269
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....aised the following grounds of appeal:- 1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner of Income-tax (Appeals) grossly erred in directing the Assessing Officer to exclude the following companies from the list of comparables for the reason that the turnover of these companies exceeded Rs. 200 Crs. : Bodhtree Consulting Ltd., Infosys Technologies Ltd., Larsen & Toubro Infotech Ltd., Sonata Software Ltd., Tata Elxi Ltd. and Persistent Systems Ltd. 3. The learned Commissioner of Income-tax (Appeals) grossly erred in directing as above by relying on the decision of the Bangalore Bench of the Hon'ble Tribunal in the case of Genesis Integrating Systems Ltd. and in not following the decision of the Hon'ble Income-tax Appellate Tribunal, Mumbai Bench 'K', in the case of Capgemini India Pvt. Ltd. Vs. ACIT (ITA No.7861/Mum/2011, A.Y. 2 007-08) wherein the Hon'ble Tribunal rejected the argument for applying turnover filter for selection of comparables for the purpose of comparing their margins in the case of service companies. ....
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....T Technologies, Exensys Software Solutions Ltd., Kirtee Software Technologies Ltd., Netripples Softwares Ltd., Silverline Technologies, Spry Resources India Pvt. Ltd., should be included in the list of comparable companies cases if these companies are part of accept-reject martrix inspite of the facts that the assessee company in its Transfer Pricing Report has itself rejected these companies from the list of comparable. 3. For these and such other grounds as may be urged at the time of hearing, the order of the learned CIT (Appeals) may be vacated and that of the Assessing Officer be restored. 6. The Revenue is in appeal in ITA No.1800/PN/2013 against the order of CIT(A) in directing the Assessing Officer / Transfer Pricing Officer (TPO) to exclude certain companies where the turnover of the companies exceeded Rs. 200 crores. 7. Further, the assessee is in appeal in ITA No.299/PN/2015 against the order of CIT(A) passed under section 154 of the Act and the Revenue has filed cross appeal in ITA No.399/PN/2015 against the said order passed under section 154 of the Act by the CIT(A). The learned Authorized Representative for the assessee at the outset pointed out that t....
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....ving financial data for the period ending 31.03.2010 and (iii) companies engaged in similar service line. The Assessing Officer was of the view that criteria applied for selecting the companies with similar service line were very vague and the assessee had failed to apply quantitative criteria like turnover, volume of export business, extent of R&D expenses, etc. for benchmarking its international transaction and hence, it affected the reliability of entire process of selection of comparables. Relying on the provisions of section 92C(3)(c) of the Act, the Assessing Officer came to the conclusion that modified and additional filters had to be allowed for selecting appropriate comparables functionally similar to that of the assessee. Show cause notice in this regard was issued to the assessee, which is enlisted at page 14 of the TPO's order and finally 11 companies were selected by the TPO whose arithmetic mean of OP/TC worked out 27.71%. The assessee was thus, confronted as to why arm's length price should not be computed in the case of assessee by taking PLI of comparables at 27.71% as against PLI shown by the assessee at 9.57%. The objection of the assessee to the said exercis....
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....laimed that its total turnover was Rs. 3.34 crores and the Assessing Officer had compared the margins of assessee with companies having turnover of more than Rs. 200 crores. In this regard, the claim of assessee was that certain companies having turnover more than Rs. 200 crores had to be excluded from the final list of comparables, which are as under:- Name of the Company Turnover from software development services (Amount in crores) Bodhtree Consulting Limited 225.68 Infosys Technologies Limited 22,050.00 Larsen & Toubro Infotech Limited 1,776.76 Sonata Software Limited 236.09 Tata Elxi Limited 376.37 Persistent Systems Limited 504.20 11. It was further claimed by the assessee that the TPO had selected Bodhtree Consulting Ltd. and Compucom Software as comparable. However, these companies did not fulfill the filter of having minimum 75% of export revenue, which filter was applied by the Assessing Officer himself. Accordingly, both these companies should be excluded from final set of comparables. 12. The CIT(A) vide para 2.3.6 noted that the Assessing Officer had not applied turnover filter at all. He further was of the view....
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....ized Representative for the assessee placed reliance on the ratio laid down by Bangalore Bench of Tribunal in DCIT Vs. Trident Microsystems India (P.) Ltd. (2015) 60 taxmann.com 218 (Bangalore - Trib.), wherein the turnover was Rs. 8.15 crores and the range was selected between Rs. 1-200 crores. The CIT(A) had directed exclusion of said six comparables whose turnover was more Rs. 200 crores and also excluded two more concerns Bodhtree Consulting Ltd. and Compucom Software on failing to comply with the filter of having minimum 75% of export revenue. It was further pointed out by him that the Revenue is not in appeal against exclusion of the said two concerns, one of which i.e. Bodhtree Consulting Ltd. was also excluded for high turnover. Referring to the ratio laid down by the Mumbai Bench of Tribunal in Capgemini India (P.) Ltd. Vs. ACIT (supra), the learned Authorized Representative for the assessee pointed out that turnover of the said company was more than Rs. 500 crores and had in turn, selected Infosys and Wipro. However, the Tribunal itself vide para 5.3.9 had directed that the companies with turnover of Rs. 3.6 crores had to be excluded and two more companies were rejected h....
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....rom the final list of comparables. The said ratio has been laid down by several Tribunals, one such decision is as applied by CIT(A) in Genesis Integrating Systems Limited (supra) and other relied upon by the learned Authorized Representative for the assessee in DCIT Vs. Trident Microsystems India (P.) Ltd. (supra). We also find that the Tribunal while deciding the appeal in Capgemini India (P.) Ltd. Vs. ACIT (supra) i.e. the decision relied upon by the learned Departmental Representative for the Revenue, where the turnover of the said concern was more than Rs. 500 crores had in turn, selected Infosys and Wipro as comparables. Further vide para 5.3.9had rejected the concerns with lower turnover since the minimum size of turnover could not be compared with well established placed in the field. The Tribunal held that minimum turnover of Rs. 100 crores had to be fixed and considering the same, the concerns with lesser turnover were rejected. In this regard we hold that higher turnover filter has been applied in Capgemini India (P.) Ltd. Vs. ACIT ( supra) and we find no merit in the stand of Revenue that no filter is to be applied. Upholding the order of CIT(A), we dismiss the grounds ....
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.... final set of comparables. Accordingly, we direct the Assessing Officer to consider the results of the said concerns and in case, they fulfill the conditions of filters applied by Assessing Officer while benchmarking the international transaction of the assessee, then the said two concerns may be so selected in the final set of comparables. Accordingly, ground of appeal No.1.2 raised by the assessee is allowed for statistical purposes. As admitted by the learned Authorized Representative for the assessee, grounds of appeal Nos.1, 1.2, 2, 3 and 4 are dismissed as not pressed, 23. The Revenue on the other hand has also filed an appeal against the rectification order passed by CIT(A) and is aggrieved by the directions of CIT(A) in considering exclusion of the said companies in the final list of comparables in case the said companies are part of accept - reject matrix. The case of the Revenue before us is that the assessee in its transfer pricing report itself has rejected these concerns from the final list of comparables. We find merit in the claim of the Revenue in this regard. However, it may be put on record that the filters to be applied for picking up the comparables has been ....