TaxTMI 
TaxTMI 
2017 (11) TMI 1473
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....red to as "TPO") erred in computation of Arm's Length Price (hereinafter referred to as "ALP") which has resulted in a proposed addition of Rs. 1,07,20,111/- and the Hon'ble DRP in confirming the same. In doing so, they have grossly erred: a) by not appreciating the fact that none of the conditions set out in Section 92((3) of the Income Tax Act, 1961 (hereinafter referred to as "Act") are satisfied; b) by making a reference without recording any reasons based on which he reached the conclusion that it was 'expedient and necessary' to refer the matter to the learned TPO for computation of the arm's length price, as required under section 92CA(1) of the Act; c) by ignoring the fact that the Appellant is entitled to tax holiday under section 10A of the Act on its profits and therefore would not have any untoward motive of deriving a tax advantage by manipulating transfer prices of its international transactions; d) by undertaking the fresh search for comparability analysis as on November 25, 2010, which is beyond the date of compliance resulting in 'Impossibility of performance' and against the premise of maintenance of 'contemporaneous doc....
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....company. The taxpayer provided services at an agreed cost plus mark up. During the year under assessment, the taxpayer entered into international transactions as under :- Provision of courseware development services 15,44,23,557 Cost recharges 12,11,863 5. The taxpayer in its TP study adopted Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM), Operating Profit / Total Cost (OP/TC) as the Profit Level Indicator (PLI) and computed its OP/TC at 12.36% by using current year data and found its international transactions qua provision of contract content / online courseware development services at arm's length. Ld. TPO selected 21 comparables for benchmarking the international transactions out of which the ld. DRP has rejected two comparables and computed the OP/OC at 22.16% and made transfer pricing adjustment at Rs. 1,07,20,111/-. In compliance to the order passed by TPO/directions issued by ld. DRP, AO computed the assessment. 6. The taxpayer carried the matter by way of filing objections before the ld. DRP, which have been rejected. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeal. 7. We have heard the ld.....
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.... Rs.171,970,580 Price charged in the international transaction Rs.154,423,557 Shortfall being adjustment u/s 92CA Rs.17,547,023 The above shortfall of Rs. 17,547,023 is treated as transfer pricing adjustment u/s 92CA." 12. Now, we would examine the suitability of comparables viz. Infosys Technologies Limited, Kals Information Systems, Tata Elexi Ltd. and Wipro Limited for benchmarking the international transactions qua provision of contract content/online courseware development services one by one. 13. Ld. AR for the taxpayer contended that all the four comparables now sought to be excluded for benchmarking the international transactions were ordered to be excluded by the coordinate Bench of the Tribunal in taxpayer's own case for AY 2007-08 order dated 14.11.2014 by following the order passed by Toluna India Pvt. Ltd. in ITA No.5645/Del/2011 dated 26.08.2014. However, the ld. DR relied upon the order of the TPO. 14. Undisputedly, the taxpayer is a low risk captive IT service provider in the field of software services development to its parent company. INFOSYS TECHNOLOGIES LIMITED (INFOSYS) 15. When we examine the profile of the taxpayer vis-à-vis Infosys, it is....
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....R&D expenses account for 3.39% of sales which does not pass the R&D filter applied by the taxpayer in its TP study. The TATA is having turnover of Rs. 4015.51 crores and net fixed assets of Rs. 9881.91 crores which is 246% of the size of the taxpayer. TATA also come up for scrutiny as a comparable in taxpayer's own case for AY 2007-08 and the coordinate Bench of the Tribunal ordered to exclude the same from the final list of comparables on account of its distinct activities as it is into development of hardware and software for embedded products, such as multi media and some other electronic etc.; and it is also engaged into making some programmes developing technology and is having huge intellectual property. So, keeping in view the distinct activities being carried out by the TAT, it cannot be a suitable comparable, hence we order to exclude the same form the final set of comparables. WIPRO LIMITED (SEG.) (WIPRO) 20. The taxpayer sought to exclude WIPRO on the grounds inter alia that it is a global company having significant investment in R&D for development of IP and products to the extent of 11% of the revenue and it is having huge turnover of Rs. 11955.6 crores for FY 2007-....