TaxTMI 
TaxTMI 
2015 (9) TMI 1612
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.... Hon'ble Apex Court would not be a reason for not following the judgment. We find no error in the order of AO in this regard. Ground. 1 is dismissed. 4. Vide its ground 2, grievance of the Revenue is that DRP directed exclusion of comparables having turnover of more than Rs. 200 crores from the list of comparables selected by the TPO for making ALP analysis of the international transactions undertaken by the assessee. 5. Ld. DR submitted that there was no correlation between the turnover and profits and therefore application of turnover limit rule was not proper. 6. Ld. AR on the other hand supported the order of DRP. 7. We have perused the orders and heard the rival contentions. Appropriateness of the application of turnover filter had come up before this Tribunal in the case of Genisys Integrating Systems (India) (P.) Ltd. v. Dy. CIT [2012] 53 SOT 159 (Bang.). The Tribunal held as under : '8. According to learned counsel of for the assessee size is an important facet of an enterprise level difference. He Submitted that comparables should have something similar or equivalent and should possess same or almost the same or almost the same characteristics. To use a simil....
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....r and seller and therefore comparability." 8.2 The learned counsel for the assessee submitted that similar observations were also made by ICAI in para 15.4 of TP guidance note. He submitted that TPO's range of Rs. 1 crore to infinity has resulted in selection of companies like M/s Infosys which is having a turnover of Rs. 9,028 crores which is 1,1007 times bigger than the assessee company which has a turnover of Rs. 8.15 crores. He further submitted that NASSCOM has also categorized the companies based on the turnover as follows : 1. Greater than USD 1 billion (approx. Rs. 50,000 crores) 2. Between USD 100 million to USD 1 billion (Rs. 500 crores to Rs. 5,000 crores) and 3. Others having less than USD 100 million (Rs. 500 crores). Thus, the learned counsel for the assessee submitted that an appropriate turnover range should be applied in selecting a comparable of uncontrolled companies and the assessee has accordingly, applied the turnover range of Rs. 1 crore to Rs. 200 crores based on Dun and Bradstreet's analysis. He submitted that in the alternative, the categories recognized by NASSCOM may also be applied in selecting comparables. 8.3 The learned Departmenta....
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..... 200 crores. We do not find any reason to interfere. Ground 2 is dismissed. 9. Vide its ground 3 (erroneously mentioned as no.2), grievance raised by the Revenue is that DRP directed the TPO to exclude Larsen & Toubro Infotech Ltd. Persistent Systems Ltd. R S Software (India) Ltd, on a premise that companies having any RPV transactions could not be considered as proper comparables. 10. Ld. DR submitted that this Tribunal in the case of 24/7 Customer.com (P.) Ltd. v. Dy. CIT [2013] 140 ITD 344 (Bang.), had given a clear finding that RPT filter had to be applied at 15% and only those comparable which had RPT in excess of 15% should be excluded. 11. Ld. AR fairly admitted that RPT @ 15% could be applied. 12. We have perused the orders and heard the rival contentions. In the case of 24/7 Customer.com (P.) Ltd. (supra), it was held as under : 'In respect of the ground raised at S.No. l regarding acceptance of comparable companies having related party transactions as proposed by the TPO, the learned counsel for the assessee argued that the transfer pricing regulations do not stipulate any minimum limit of related party transactions which form the threshold for exclusion as a c....
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....s reproduced hereunder: "The learned Transfer Pricing Officer has grossly erred by arbitrarily rejecting the companies selected by the Appellant as comparables on unjustifiable grounds and the Hon'ble Dispute Resolution Panel has erred in confirming the same." 15. Though in the above ground assessee assails rejection of comparables selected by it, Ld. AR submitted that he was particularly peeved by exclusion of Akshay Software Technologies Ltd. As per Ld. AR, this was one of the eight companies considered by the assessee in its TP study. Ld. AR submitted that Akshay Software Technologies Ltd. was rejected by the TPO for the sole reason that RPT data was not available in the public domain. As per the Ld. AR it was not disputed that Akshay Software Technologies Ltd. was having the same functional profile as that of the assessee. Ld. AR submitted that though it had brought this to the notice of the DRP the DRP also was of the opinion that RPT details being not available, Akshay Software Technologies Ltd. could not be considered. 16. Ld. AR submitted that audited annual report of Akshay Software Technologies Ltd for F. Y. 2010-11 was available in public domain. According to him....
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....pany. Ground 2 of the assessee is therefore treated as partly allowed. 19. Assessee's ground 3 is reproduced hereunder : "The learned Transfer Pricing Officer has grossly erred by disregarding the functional and risk profile of the Appellant and comparing it with companies, which have an entirely different functional and risk profile and the Hon'ble Dispute Resolution Panel has erred in confirming the same." 20. Ld. Counsel for the assessee submitted that though the ground was generic in nature, he was aggrieved by inclusion of two companies, namely, Kals Information Systems Ltd, and ICRA Techno Analytics Ltd (seg) in the list of comparables. As per the Ld. AR, Kals Information System Ltd. and ICRA Techno Analytics Ltd. (seg), would come back into the list of comparable once RPT filter of 15% was applied. Vis-a-vis, Kals Information System, Ld. AR.submitted that assessee had specifically objected before the TPO dissimilarity. As per the Ld. AR, Delhi Bench in the case of Qualcom India (P.) Ltd. v. ACIT [IT Appeal 5239 (Delhi) of 2010, dt.10.06.2013] had held that Kals Information Systems Ltd was into development of software products and services and was not comparable w....
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....d subsidiary of Continuous Computing Corporation, USA (CCPU) and the taxpayer company is engaged in the development and support of software for CCPU. It is also stated that the taxpayer company is a captive service provider to CCPU and renders all its services to CCPU." From the above profile it is clear that the assessee was doing development and support of software falling within the category of software development services. The question before us is whether for the relevant previous year ending 31.03.2010 Kals Information System was also engaged in similar software development services or not. Concern of the assessee is that audited annual report of the said company had not bifurcated its revenue into different streams. Assessee is relying on the following notes appearing in Schedule 14 of the said company, for the year ending 31.03.2010 of the said company : "1. Background The company was incorporated under the Companies Act, 1956 as a Private Limited Company in the year 1993. Subsequently the company was converted into a public limited company in the year 2000. The company is engaged in development of Software and Software products since its inception. The company consis....
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....g 31.03.2010 has been placed at Annexure-D. Profit and Loss account of the said company shows total income from service of Rs. 1,18,98,000/-. Segmental results are not coming out from any of the schedules, forming integral part of the profit and loss account. Only mention regarding the nature of income appears at schedule 14, being significant accounting policies. Relevant paras read as under: "BACK GROUND:- The Company was incorporated on July 27, 1992 as Computer Exchange Private Limited (CEPL) and subsequently became wholly owned subsidiary of ICRA Limited on August 25, 2005 and was renamed as ICRA Techno Analytics Limited (ICTEAS). The company is engaged in the software development & consultancy, engineering services, web development & hosting and subsequently diversified itself into the domain of business analytics and business process outsourcing. (c) Revenue Recognition:- (i) Revenue from services consists of revenue earned from services performed for software development & consultancy, licensing & sub-licensing fee web development and hosting which is recognized to the extent services are performed. (ii) Revenue from Sales is recognized as and when delivery of the b....