TaxTMI 
TaxTMI 
2017 (12) TMI 921
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....on of market support services Rs. 44294086/- 2. In the transfer pricing documentation of software development services assessee was selected as the tested party and Transaction Net Margin Method (TNMM) was adopted as the Most Appropriate Method (MAM). The assessee selected 13 comparables whose average profit margin was 9.80% on the cost and therefore, the margin earned by the assessee of 10.24% on Profit Level Indicator (PLI) of operating profit to total cost and therefore, international transactions of software development was treated at arm‟s length. 3. In market support services the assessee selected 5 comparables whose average margin was 7.27% as against taxpayers margin of 9.24% and therefore, the international transaction of market support services was stated to be a arm‟s length. 4. The ld Transfer Pricing Officer rejected the transfer pricing study report. For software development services he carried out fresh search applying different filters and accordingly selected five new comparables and rejected six comparables of the assessee and thus a set of 12 comparables whose arithmetic mean of the margin was 24.44% as against the taxpayer‟s margin ....
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....) The order u/s 144C resulting in enhancement of income is illegal as it is in breach of principles of natural justice and it is contrary to the provisions of section 144C(II) of the Act. 3. The Ld. AO/Ld. TPO erred on facts and in law in the assessment of the arm's length price of the Appellant's international transaction by wrongly computing the margins of comparable companies and wrong selection of comparables for both Software Development Segment ("SDS") and Market Support Services ("MSS") segments. 4. a) The Ld. AO/ Ld. TPO erred in rejecting the filters and comparables selected by the Assessee in the TP documentation by applying new additional/modified quantitative filters for both SDS and MSS segments, which lacked valid and cogent reasoning. b) The DRP has incorrectly assumed that assessee had applied 30% RPT filter, whereas THE assessee had applied filter of RPT transactions of 10% of total turnover. c) While applying the floor filter of turnover of Rs. 1 crore, the DRP has erred in not applying filter of appropriate upper ceiling upper ceiling which is contrary to the decision of Special Bench of the Tribunal in the case of Quar....
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....respect to exclusion of the above comparable as submitted before ld Transfer Pricing Officer. It was the contention of the assessee that it has a huge brand value, it has huge turnover, and its „Finacle‟ Software is a leading product in banking industry. Therefore, it was submitted that it is functionally different and has significant R&D. The ld Transfer Pricing Officer and the ld Dispute Resolution Panel rejected the above contention. Before us, the ld AR submitted that this comparable should be excluded in view of the decision of Hon'ble Delhi High Court in case of Agnity India Technologies Ltd 262 CTR 291. He further stated that this comparable has been excluded in the case of the assessee for AY 2007-08 by the coordinate bench. The ld DR relied upon the orders of the lower authorities. The ld DR could not point out that why we should not follow the decision in the assessee‟s own case Page | 5 without there being any change pointed out, hence, we respectfully follow the decision of the coordinate bench in assessee‟s own case for AY 2007-08 and directs the ld Transfer Pricing Officer to exclude the above comparable. ii. Bodhtree Cons....
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.... is functionally different however, the ld Assessing Officer/ TPO included the same stating that the above company is a software developer and passed all filters and hence, it is a suitable comparable. Before the ld TPO assessee objected stating that its related party transactions are more than the filters adopted by the TPO. The TPO rejected the same. Before the ld DRP assessee reiterated the above claim. The ld DRP held that the RPT of the comparable is 14.65%, within the overall limit of 25%. The assessee has given us a chart at page No. 1345 wherein, according to the assessee out of total revenue of Rs. 2435768787/- consist of revenue of Rs. 974395270/- pertaining to related party resulting into 40% transactions of Revenue with the related party. Further, with respect to the expenses it agrees that it has only 13.44% of expenses with related parties. The ld DR vehemently contested and stated that related party chart submitted by the assessee is incorrect as it also includes the receivables. We have carefully considered the rival contentions. The assessee has shown us page No. 1149, which is the annual accounts of the Sonata Software Ltd for the year ended on 3....
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....rospectively. 10. We have carefully considered the above contentions and also perused CBDT Circular No. 5 dated 03.06.2010 wherein, it has been specifically mentioned that the above amendment by introduction of section 92CB which empowers the board to make safe harbour rules could be applicable in respect of Assessment Year 2010-11, Further corrigendum No. 5/ 2010 dated 30.09.2010 was issued wherein, it has been stated that in para No. 38.03 for the date "1October 2009" the following date shall be read "1April 2009". However, despite this it has not amended that safe harbor rules shall be applicable for AY 2009-10. Circular No 5 dated 3/6/2010 states as under :- "38. Power of Board to make Safe Harbour Rules 38.1 In India, Transfer pricing rules were introduced in 2002, since then the number of cases identified for audit and the transfer pricing adjustments locked up in disputes have increased. 38.2 In order to reduce the number of transfer pricing audits and prolonged disputes a new section 92CB has been inserted to provide that the determination of arm's length price under section 92C or section 92CA shall be subject to safe harbour rules. Freesc....