TaxTMI 
TaxTMI 
2016 (12) TMI 1712
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...., TPO grossly erred on facts in benchmarking the transactions of the captive services of the Appellant with companies operating as full-fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the Appellant vis-a-vis the comparable companies. i. Infosys Ltd. ii. Wipro Ltd. (Seg) 1.2 The Ld. AO/Ld. TPO also erred on facts in accepting companies without considering the functional comparability. i. Accel Transmatic Ltd. ii. Avani Cimcon Technologies Ltd. iii. Celestial Labs Ltd. iv. E- Zest Solutions Ltd. v. Flextronics Software Systems Ltd. vi. Ishir lnfotech Ltd. vii. KALS Information Systems Ltd. viii. Lucid Software Ltd. ix. Megasoft Ltd. x. Persistent Systems Ltd. xi. Tata Elxsi Ltd. xii. Thirdware Solution Ltd. xiii. Helios & Matheson Information Technology Ltd. 1.3 The Ld. AO/Ld. TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional analysis. i. RPT> 15% ....
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....cial Services Ltd. 2.3 The Ld. AO/Ld. TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional analysis. i. RPT> 15% i. Apollo Healthstreet Ltd. ii. Asit C Mehta Financial Services Ltd. iii. HCL Comnet Systems & Services Ltd -Seg iv. Informed Technologies Ltd. ii. Employee Cost < 25% i. Asit C Mehta Financial Services Ltd. ii. Informed Technologies Ltd. iii. Mold-Tek Technologies Ltd - Seg iv. Spanco Ltd. - Seg v. Vishal Information Technologies Ltd. vi. Accurate Data Convertors Ltd. 2.4 The Ld. AO/Ld. TPO erred on facts in arbitrarily accepting companies without considering the differences in the turnover and size of the Appellant vis-a-vis the comparables. i. Considering the upper limit of 10 times and lower limit of 1I10th times the turnover of the Appellant i. Asit C Mehta Financial Services Ltd. ii. Bodhtree Consulting Ltd. iii. Informed Technologies Ltd. iv. Accurate Data Convertors Ltd. 2.5 The Ld. AO/Ld. T....
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....d in not reducing the freight, telecommunication and insurance expenses and expenses incurred in foreign exchange from both Export Turnover and Total Turnover. 5.4 The Ld. AO has erred in no relying on the decision of the jurisdictional High Court in the case of CIT v. Dell International Services India Private Limited and Others. 6 Disallowance of expenses for non-deduction of tax at source (Rs, 945,963) [This refers to Ground No. 11 of the original Form 36B filed by the Appellant) 6.1 The Ld. AO erred in disallowing expenses of Rs. 945,963 on the grounds that taxes had not been deducted at source, while making payment, though Chapter XVII-B is not applicable to the said payment. 7. Interest under Section 234B of the Act [This refers to Ground No. 13 of the original Form 36B filed by the Appellant) 7.1 The Ld. AO erred in levying interest under Section 234B of the Act amounting to Rs. 37,926,765. The levy of interest under Section 234B is consequential in nature. 8 Interest under Section 234D of the Act [This refers to Ground No. 14 of the original Form 36B filed by the Appellant) 8.1 The Ld, AO erred in levying interes....
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....LP of its international transactions. Out of this 26 comparables, the assessee has no objection with regard to inclusion of following comparables:- (1) Datamatics Ltd. (2) Geometric Ltd. (3) iGate Global Solutions Ltd. (4) L G S Global Ltd. (5) Mediasoft Solutions Pvt. Ltd. (6) Mindtree Ltd. (7) Quintegra Solutions Ltd. (8) R S Software (India) Ltd. (9) R Systems International Ltd. (10) Sasken Communication Technologies Ltd. (11) SIP Technologies & Exports Ltd. 8. With regard to remaining comparables, the ld. counsel for the assessee has raised various arguments and we deal with the arguments comparable-wise. 9. Accel Transmatics Ltd. : The ld. counsel for the assessee has contended that in this case, the Related Party Transactions was 19.29% of the total transactions. Software development revenue was also less than 75% i.e. 27.56% and abnormal growth in sales and margins. It was also contended that this company cannot be taken as a comparable in the light of turnover filter. Turnover of the assessee is 138.51 crores, whereas the turnover of this company is Rs. 9.68 crores, whic....
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....or engineers) - training services in hardware and networking, enterprise system management, embedded system, VLSI designs, CAD/CAM/BPO (iv) Accel Animation Studies software services for 2D/3D animation, special effect, erection, game asset development. 4.3 On careful perusal of the business activities of Accel Transmatic Ltd. DRP agreed with the assessee that the company was functionally different from the assessee company as it was engaged in the services in the form of ACCEL IT and ACCEL animation services for 2D and 3D animation and therefore assessee's claim that this company was functionally different was accepted. DRP therefore directed the Assessing Officer to exclude ACCEL Transmatic Ltd. from the final list of comparables for the purpose of determining TNMM margin." 49. Besides the above, it was pointed out that this company has related party transactions which is more than the permitted level and therefore should not be taken for comparability purposes. The submission of the ld. counsel for the assessee was that if the above company should not be considered as comparable. The ld. DR, on the other hand, relied on the order of the TPO. ....
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....pany has developed a software product by name "DXchange", it was submitted that this company would have revenue from software product sales apart from rendering of software services and therefore is functionally different from the assessee. It was further submitted that the Mumbai Bench of the Tribunal to the decision in the case of Telcordia Technologies Pvt. Ltd. v. ACIT - ITA No.7821/Mum/2011 wherein the Tribunal accepted the assessee's contention that this company has revenue from software product and observed that in the absence of segmental details, Avani Cincom cannot be considered as comparable to the assessee who was rendering software development services only and it was held as follows:- "7.8 Avani Cincom Technologies Ltd. ('Avani Cincom'): Here in this case also the segmental details of operating income of IT services and sale of software products have not been provided so as to see whether the profit ratio of this company can be taken into consideration for comparing the case that of assessee. In absence of any kind of details provided by the TPO, we are unable to persuade ourselves to include it as comparable party. Learned CIT DR has pro....
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....reated as deferred revenue expenditure and the same has been written off in 10 years equally yearly installments from the year in which it is incurred." An amount of Rs. 11,692,020/- has been debited to the Profit and Loss Account as "Deferred Revenue Expenditure" (page 30 of PB-II). This amounts to nearly 8.28 percent of the sales of this company. It was therefore submitted that the acceptance of this company as a comparable for the reason that it is into pure software development activities and is not engaged in R&D activities is bad in law. 43. Further reference was also made to the decision of the Mumbai Bench of the Tribunal in the case of Teva Pharma Private Ltd. v. Addl. CIT - ITA No.6623/Mum/2011 (for AY 2007-08) in which the comparability of this company for clinical trial research segment. The relevant extract of discussion regarding this company is as follows: "The learned D.R. however drew our attention to page-389 of the paper book which is an extract from the Directors report which reads as follows: 'The Company has developed a de novo drug design tool "CELSUITE" to drug discovery in, finding the lead molecules for drug discover....
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....e ITAT concluded that this company is owner of IPR, it has software for discovery of new drugs and has developed molecule to treat cancer. In the ultimate analysis, the ITAT did not consider this company as a comparable in clinical trial segment, for the reason that this company has diverse business. It was submitted that, however, from the above extracts it is clear that this company is not into software development activities, accordingly, this company should be rejected as a comparable being functionally different. 45. From the material available on record, it transpires that the TPO has accepted that up to AY 06-07 this company was classified as a Research and Development company. According to the TPO in AY 07- 08 this company has been classified as software development service provider in the Capitaline/Prowess database as well as in the annual report of this company. The TPO has relied on the response from this company to a notice u/s.133(6) of the Act in which it has said that it is in the business of providing software development services. The Assessee in reply to the proposal of the AO to treat this as a comparable has pointed out that this company provides softw....
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....arable on the ground that it was functionally different from the assessee. The TPO had rejected the objections raised by the assessee on the ground that as per the information received in response to notice under section 133(6) of the Act, this company is engaged in software development services and satisfies all the filters. 14.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It is submitted by the learned Authorised Representative that this company is engaged in 'e-Business Consulting Services', consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Representative submits that since the Annual Report of the company does not contain detailed descriptive inf....
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....he set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the assessee on the grounds that turnover and brand aspects were not materially relevant in the software development segment. 12.2 Before us, the assessee contended that this company is not functionally comparable to the assessee and in this context has cited various portions of the Annual Report of this company to this effect which is as under :- (i) The company has an Intellectual Property (IP) Cell to guide its employees to leverage the power of IP for their growth. In 2008, this company generated over 102 invention disclosures and filed an aggregate 10 patents in India and the USA. Till date this company has filed an aggregate of 119 patent applications (pending) in India and USA out of which 2 have been granted in the US. (ii) This company has substantial revenues from software products and the break-up of the software product revenues is not available. (iii) This company has incurred huge research and development expenditure to the tune of approximately Rs. 200 Crores. (iv) This company has a....
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.... the case of Bindview India Private Limited v. DCI, ITA No. ITA No 1386/PN/1O wherein KALS as comparable was rejected for AY 2006-07 on account of it being functionally different from software companies. The relevant extract are as follows: "16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspect, assessee succeeds." Based on all the above, it was submitted on b....
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.... The learned DR however objected to the exclusion of these two companies from the list of comparables. On a careful perusal of the material on record, we find that the Tribunal in the case of Mercedes Benz Research & Development India Pvt. Ltd. (cited supra) has taken a note of dissimilarities between the assessee therein and Lucid Software Ltd. As observed therein Lucid Software Ltd. company is also involved in the development of software as compared to the assessee, which is only into software services. Similarly, as regards Ishir Infotech Ltd., the Tribunal has considered the decision of the Tribunal in the case of 24/7 Co. Pvt. Ltd to hold that Ishir Infotech is also out-sourcing its work and, therefore, has not satisfied the 25% employee cost filter and thus has to be excluded from the list of comparables. As the facts of the case before us are similar, respectfully following the decision of the co-ordinate bench, we hold that these two companies are also to be excluded. 21. Respectfully following the decision of the Tribunal referred to above, we direct the AO/TPO to exclude the aforesaid companies from the final list of comparable companies for the purpose of determ....
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....who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the coordinate bench of the Tribunal i.e. 24/7 Customer.Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration." (9) Avani Cimcon Technologies Ltd. "39. As far as this company is concerned, the plea of the Assessee has been that this company is functionally different from the assessee. Based on the information available in the company's website, which reveals that this company has developed a software product by name "DXchange", it was submitted that this company would have revenue from software product sales apart from rendering of software services and therefore is functionally different from the assessee. It was further submitted that the Mumbai Bench of the Tribunal to the decision in the case of Telcordia Technologies Pvt. Ltd. v. ACIT - ITA No.7821/Mum/....
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....(TP)A.1231/Bang/2011 Page - 22 Pvt. Ltd. v. ACIT (supra) also supports the plea of the assessee. We therefore accept the plea of the Assessee to reject this company as a comparable." (10) Flextronics Software Systems Ltd (seg) : 26. Now taking up the question of exclusion of Flextronics Software Systems Ltd (seg), it is true that the decision of Motorola Solutions (India) P. Ltd (supra) also was for the very same year and also on software development services sector. This Tribunal held as under : "97.2 For a company to be included in the list of comparables, it is necessary that credible information is available about the company. Unless this basic requirement is fulfilled, the company cannot be taken as a comparable. It is true that ld. TPO is entitled to obtain information us/133(6), the object of which is primarily only to supplement the information already available on record, but not, as rightly submitted by ld. Counsel for the assessee, to replace the information. If there is a complete contradiction between the information obtained u/s 133(6) and annual report then the said information cannot be substituted for the information contained in annual r....
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....esaid concerns are engaged in development and sale of software products which is functionally different from the services undertaken by the assessee in its IT-services segment. 17. As per the discussion in para 6.3.2. of the order of the TPO, the reason advanced for including KALS Information Systems Ltd., is to the effect that the said concern's application software segment is engaged in the development of software which can be considered as comparable to the assessee company. The said concern is engaged in two segments namely application software segment and Training. As per the TPO, the application software segment is functionally comparable to the assessee as the said concern is engaged in software services. The stand of the assessee is that a perusal of the Annual Report of the said concern for F.Y. 2006-07 reveals that the application software segment is engaged in the business of sale of software products and software services. The assessee pointed out this to the TPO in its written submissions, copy of which is placed in the Paper book at page 420.3 to 420.4. The assessee further pointed out that there was no bifurcation available between the business of sale o....
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....either is there any argument put forth by the Revenue and nor is there any discussion emerging from the orders of the lower authorities as to in what manner the functional profile of the said concern has undergone a change from that in the immediately preceding year. Therefore, having regard to the factual aspects brought out by the assessee, it is correctly asserted that the application software segment of the said concern is not comparable to the assessee's segment of IT services. 20. With regard to the inclusion of Helios & Matheson Information Technology Ltd., the assessee has raised similar arguments as in the case of KALS Information Solutions Ltd. (Seg). We have perused the relevant para of the order of the TPO i.e., 6.3.21, in terms of which the said concern has been included as a comparable concern. The assessee pointed out that as in the case of KALS Information Solutions Ltd. (Seg), in the instant case also for A.Y. 2006-07 the said concern was found functionally incomparable by the assessee in its Transfer pricing study and the said position was not disturbed by the TPO. The relevant portion of the Transfer pricing study, placed at page 432 of the Paper boo....
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....s into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Representative support the action of the TPO in including this company in the list of comparables. 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Therefore, following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (supra) that in the absence of segmental details/information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of compara....
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....etails for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company as fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded from the list of comparable portion." As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly. (15) Thirdware Solutions Ltd. (Segment) : "15.1 This company was proposed for inclusion in the list of comparables by the TPO. Before the TPO, the assessee objected to the inclusion of this company in the list of comparables on the ground that its turnover was in excess of Rs. 500 Crores. Before us, the assessee has objected to the inclusion of this company as a comparable for the reason that apart from software development services, it is in ....
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....e two segments in this company viz., (i) software development segment, and (ii) software product segment. The Assessee is a pure software services provider and not a software product developer. According to the Assessee there is no break up of revenue between software products and software services business on a standalone basis of this comparable. The TPO relied on information which was given by this company in which this company had explained that it has two divisions viz., BLUEALLY DIVISION and XIUS-BCGI DIVISION. Xius- BCGI Division does the business of product software. This company develops packaged products for the wireless and convergent telecom industry. These products are sold as packaged products to customers. While implementing these standardized products, customers may request the company to customize products or reconfigure products to fit into their business environment. Thereupon the company takes up the job of customizing the packaged software. The company also explained that 30 to 40% of the product software would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, boarding and lodging expe....
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....margins of only the software service segment for comparability purposes. Consistent with such stand, it was submitted that the margins of the software segment only should be adopted in the case of Megasoft also, in contrast to the entity level margins. 28. Computation of the net margin for Mega Soft Ltd. Is therefore remitted to the file of the TPO to compute the correct margin by following the direction of the Tribunal in the case of Trilogy E- Business Software India Pvt.Ltd." 23. Respectfully following the decision of the Tribunal referred to above, we direct the AO/TPO to compute the correct margin of Mega Soft Ltd., as directed by the Tribunal in the case of First Advantage Offshore Services Pvt. Ltd. (supra). Accordingly we hold that Megasoft Ltd can be considered as a good comparable after segmentation as directed in the above order is done. 14. Accordingly, following the above order we direct exclusion of Celestial Labs Ltd, E-Zest Solutions Ltd, Infosys Technologies Ltd, Kals Information Systems Ltd (seg), Lucid Software Ltd, Wipro Ltd (seg), Accel Transmatic Ltd (seg), Avani Cimcon Technologies Ltd, Flextronics Software Systems Ltd (seg....
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....T filter. 19. Having carefully examined the orders of lower authorities in the light of rival submissions, we find that in assessee's own case it was restored to the AO for reconsideration. The issue of RPT was not examined by the TPO. Therefore, we are of the view that in the interest of justice, this comparable be re-examined by the TPO/AO again in the light of the order of the Tribunal in the case of Meritor LVS India (P) Ltd. (supra) and the RPT filter. Accordingly, we direct the AO/TPO to examine the comparability of this company in the terms indicated above. ITES Segment 20. With regard to ITES segment, the TPO has taken 27 comparables, which are as under;- (1) Accentia Technologies Ltd. - Seg. (2) Aditya Birla Minacs Worldwide Ltd. (3) Allsec Technologies Ltd. (4) Apex Knowledge Solutions Ltd. (5) Apollo Healthstreet Ltd. (6) Asit C Mehta Financial Services Ltd. (7) Bodhtree Consulting Ltd. (8) Caliber Business Solutions Ltd. (9) Cosmic Global Ltd. (10) Datamatics Financial Services Ltd. - Seg. (11) Eclerx Services Ltd. (12) Flextronics Software Systems Lt....
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....al Services (P) Ltd. (supra) and it was held that Accentia Technologies Ltd. cannot be a good comparable and accordingly directed exclusion of this company from the final list of comparables. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- "(iv) Accentia Technologies Ltd.:- The OP/TC of this company is 38.26%. The ld. Counsel for the assessee stated that this company amalgamated with two of its subsidiaries pursuant to the order of the court because of which the immediate effect of the amalgamation/merger is reflected on the operating income, expenses and PBIT. This amounts to extraordinary events and therefore the company needs to be excluded. The Co-ordinate Hyderabad Bench of the Tribunal in the case of Capital IQ Information Systems (India) Pvt. Ltd. in ITA No. 1964/Hyd/2011 and in the case of Zavata India Private Limited in ITA No. 1781/Hyd/2011 has taken a view that extraordinary events like merger and de-merger will impact profitability of companies and therefore should be excluded. We also find that the segmental data is not available and therefore where there is no segmental data, the overall result declared by a compa....
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....e assessee is in the ITES segment which was also accepted in the case of Ariba Technologies India (P.) Ltd. (supra). We further find that most of the comparable companies are required to be excluded by applying the filter of RPT at 15%. Therefore, to the extent of the exclusion of the companies on the ground of RPT filter. We need not go into the functional comparability of those comparables." 30. Since it has been repeatedly held by the Tribunal that if the RPT filter is more than 15%, the comparable has to be excluded from the list of comparables and in the instant case the RPT was 22.90% which is more than 15%, therefore it deserves to be excluded and we accordingly direct the AO/TPO to exclude this comparable from the list of comparables. 31. Asit C. Mehta Financial Services Pvt. Ltd. : In this case, the assessee has contended that this company should be excluded by applying the RPT filter and employee cost filter. On the other hand, the ld. DR has contended that RPT is 15.17% of total sales and employee cost is also 24% of sales, whereas it has been repeatedly held by the Tribunal that RPT filter should apply when it is more than 15% and employee cost filter will apply w....
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.... available on record. The Tribunal has restored the matter to the AO/TPO to verify the contention of the assessee that the company is in ITeS and whether segmental data are available or not and decide afresh whether this company needs to be compared with the final list of comparables. Since segmental datas are not available, this company requires to be re-examined by the AO/TPO. We, however, for the sake of reference, extract the observations of the Tribunal with regard to this comparable while adjudicating the issue in the case of Stream International Services (P) Ltd. (supra) :- "(ix) Bodhtree Consulting Ltd.:- The OP/TC of this company is 29.58%. The ld. Counsel for the assessee stated that this company has extraordinary profit due to hiving off of e-paper business and web based assessment services to separate companies. The ld. Counsel for the assessee further stated that this company is finally not comparable as the company is in the software development. Further, this company has no segmental reporting. On perusal of the accounts of this company, we find that the company has earned extraordinary profit during the year due to hiving off of e-paper business and web bas....
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.... Ltd. (supra), the Tribunal held this company to be non-comparable. For the sake of reference, we extract the relevant portion of the order of the Tribunal:- "(xi) Eclerx Services Ltd. & Mold-Tek Technologies Ltd.:- For both these companies, the ld. Counsel for the assessee stated that these companies are functionally different, therefore, cannot be considered as comparables. We find that the Mumbai Special Bench of the Tribunal in the case of Maersk Global Centres (India) Pvt. Ltd. in ITA No. 7466/Mum/2012 has rejected eClerx Services Limited because solutions offered by this company included data analytics, operations, management, audits and reconciliation, metrics management and reporting services. The Special Bench opined that if these functions actually performed by the assessee company for its AEs are compared with the functional profile of M/s eClerx Services Limited and Mold-Tek Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparable for the purpose of determining ALP of the transactions of the assessee company with its AEs. Facts being identical, respectfully following....
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....comparable because the financial data for the Financial Year 2007-08 were not available in the public domain and hence, if was held that this company is not a suitable comparable. There is no dispute that the data furnished by the assessee are regarding the financial results as on 30.6.2007. Therefore, as far as the financial year 2007-08 is concerned, the data available were only for 3 months. 10.1 As per Rule 10B(4), the data to be used in analysing the comparability of or uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Therefore, it is mandatory for the purpose of comparing the data of an uncontrolled transaction with an international transaction that the same should relating to the financial year in which the international transaction has been entered into. The information, data and documents should be contemporaneous. 10.2 Undisputedly, the final accounts of Arix Consultants Pvt Ltd are prepared on 30th June; therefore, the objection raised by the TRO has merits. The Rune Benches of the Tribunal in the case of Honeywell Automation India Lt....
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..... Accordingly, we direct the AO/TPO to exclude this company from the list of comparables. 43. Informed Technologies Ltd. : In this regard, the ld. counsel for the assessee has contended that this company can be excluded by applying the employee cost filter. The TPO has applied the filter of employee cost to operating revenue less than 25% for the IT segment, but the same filter was not applied for ITeS segment. In this case, the employee cost was 21.77% of sales. Since it is less than 25%, the said comparable should be excluded. Besides, it was also contended that RPT was 15.72% of sales, therefore, it should also be excluded by applying the RPT filter. In support of his contentions, the ld. counsel for the assessee has placed reliance upon the order of Tribunal in the case of Stream International Services (P.) Ltd. (supra) and AOL Online India (P.) Ltd. (supra). 44. On the other hand, the ld. DR has contended that the RPT transactions have just crossed the benchmark of 15%, therefore it cannot be excluded by applying the RPT filter. So far as low employee cost is concerned, the ld. counsel for the assessee has not stated how much is the employee cost of the assessee. If ther....
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....ommands premium in the market, therefore, this company should be excluded from the list of comparables. It is an undisputed fact that Infosys is a brand and commands premium in the market. It is also a fact that the turnover for the year of this company was Rs. 649.56 crores as against that of the assessee of Rs. 54.17 crores which is almost 12 times of the assessee. Infosys BPO Ltd. is a joint company and it assumes significant business risks unlike the assessee who does not assume significant risks therefore deserves to be excluded from the final list of comparables. We direct accordingly. A similar view was taken by the Hyderabad Bench of this Tribunal in the case of C3i Support Services Pvt. Ltd. in ITA No. 2183/Hyd/2011." 48. Since the Tribunal has examined this issue under similar set of facts, we find no reason to take a contrary view. Accordingly, following the same, we hold that this company should be excluded from the list of comparables. 49. I-Services India Pvt. Ltd. : In this regard, ld. counsel for the assessee has contended that the relevant data was not in public domain at the time of adjudication by the TPO. Now it is available, therefore the matter may be re....
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....eceived under Section 133(6), the TPO has concluded that this company is comparable with the assessee. The co-ordinate bench of this Tribunal in the case of e4e Business Solutions India Pvt. Ltd. (supra) has considered this issue in para 30 as under : "30. The assessee has not raised any specific ground on adopting this company as a comparable before the DRP. Before us, the learned counsel for the assessee has submitted that the TPO did not furnish the information obtained from this company in exercise of his powers u/s.133(6) of the Act. It was further pointed out that even as per the TPO, the annual report of this company for F. Y. 2006-07 was not available. The TPO has gone by the data available on capita line data base. The learned counsel for the assessee therefore made a prayer that the question of considering the aforesaid company as a comparable should be remanded back to the TPO/Assessing Officer for fresh consideration and the issue decided in the light of the published annual report for F. Y. 2006-07 and also on the basis of the information furnished by this company to the Assessing Officer in response to notice u/s.133(6) of the Act. We have considered the subm....
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....Tribunal for the AY 2007-08 and the Tribunal excluded the same on the ground that this company was under serious indictment in fraud cases. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- "Maple Esolutions Ltd.:- The OP/TC of this company is 34.32%. It is the say of the ld. Counsel for the assessee that this company was under serious indictment in fraud cases. A perusal of the order of the Tribunal for A.Y. 2006-07 in ITA No. 8997/Mum/2010 show that this company was excluded from the list of comparables. Respectfully following the precedent, we direct the exclusion of this company from the final list of comparables." 56. We, therefore, following the same, direct the AO/TPO to exclude this company from the list of comparables. 57. Mold-Tek Technologies Ltd. : In this regard, the ld. counsel for the assessee has contended that this company's function is dissimilar, therefore it should be excluded from the list of comparables. The ld. counsel further contended that in this case the employee cost is 7.6% of sales, therefore this company can also be excluded by applying employee cost filter as the benchmark fixed by the TP....
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....aid order of Tribunal, direct the AO/TPO to exclude this comparable from the final list of comparables. 60. Triton Corp Ltd. : In this regard, the ld. counsel for the assessee has contended that this company's financials are totally unreliable as the directors of the company were involved in fraud. This company was examined by the Tribunal in the case of Stream International Services (P.) Ltd. (supra) and the Tribunal has directed the AO/TPO to exclude this company from the list of comparables for the same reasons. 61. The ld. DR simply placed reliance upon the order of AO/TPO. 62. Having carefully examined the order of Tribunal, we find that the Tribunal has examined this company and directed the AO/TPO to exclude this company from the list of comparables as directors of this company were involved in fraud and financial results of the company are not reliable. However, for the sake of reference, we extract hereunder the relevant observations of the Tribunal :- "(ii) Triton Corp. Ltd.:- The OP/TC of this company is 32.36%. It is the say of the ld. Counsel for the assessee that this company also deserves to be excluded as the Directors of this company were invo....
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....2006- 07 by the Tribunal in ITA No. 8997/Mum/2010. The issue has been discussed by the Tribunal at para 19, 20 & 21 of its order. As no distinguishing fact has been brought on record before us, respectfully following the findings of the co-ordinate Bench of this Tribunal in assessee's own case in A.Y. 2006-07, we direct for the exclusion of this company from the final list of comparables." 67. Following the aforesaid order of the Tribunal, we direct the TPO/AO to exclude this company from the list of comparables. 68. Wipro Ltd. : In this regard, the ld. counsel for the assessee has further contended that this company is also functionally dissimilar, as the company is a giant company with different risk profile and nature of services and also has brand value. It provides wide range of services. The annual report discloses only consolidated segmental data.. There is no mention of profits/revenues attributable to segments on stand alone basis. Therefore, this company cannot be held to be a good comparable. This company was examined by the Tribunal in the case of Stream International Services (P.) Ltd. (supra) and in para 13 of the order for similar reasons, this company was ....