TaxTMI 
TaxTMI 
2016 (2) TMI 1163
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....er price of the Appellant in respect of its software development services by Rs. 76,95,410 and in the information technology enabled services by Rs. 20,31,990. 3. That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in; (a) Upholding the rejection of comparability analysis of the Appellant in the TP documentation and accepting the comparability analysis performed by the learned TPO in the TP Order. (b) Performing his own comparability analysis by modifying some of the filters applied by the learned TPO in the TP Order, without providing an opportunity of being heard to the Appellant. (c) Arbitrarily arriving at a set of companies as comparable to the software development and information technology enabled services of the Appellant, on rejecting companies that are otherwise functionally comparable to the Appellant and on inclusion of companies that otherwise fail the test of comparability. (d) Rejecting the segmental companies in the information technology enabled services segment only for the reason that the software development service segment of these companies were not comparable to that of the Appellant. (e) Disregarding application....
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....ake up the software development services segment. 5. The assessee selected 18 comparables for bench marking its international transactions and arrived at Mean Margin of 11.30% as under : Sl. No Comparable Company Without Adjs. Markup on Total Cost 1. Bodhtree Consulting Limited (Seg) 18% 2. F C S Software Solutions Ltd. 14% 3. Goldstone Technologies Ltd. 3% 4. Larsen & Toubro Infotech Ltd. 11% 5. Melstar Information Technologies Ltd. 0% 6. Orient Information Technology Ltd -6% 7. Powersoft Global Solutions Ltd 19% 8. SIP Technologies & Exports Ltd 25% 9. Sonata Software Ltd. 9% 10. Synetairos Technologies Limited 11% 11. Trident Info-Tech Corpn.Ltd 66% 12. VJIL Consulting Ltd 7% 13. Akshay Software Technologies Ltd. 7% 14. Cambridge Technology Enterprises Ltd. 21% 15. I C R A Techno Analytics Ltd. 15% 16 Mindtree Consulting Limited 11% 17 Computech International Limited 7% 18 Karuturi Networks 4% 6. Thus the assessee claimed its international transactions in software development services segment at arm's length having operating profit at 13%. The TPO rejected the TP analysis of the assessee on various grounds in....
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....0535.05 2. KALS Information Systems Ltd. (Seg.) 30.55 22.47 3. Lucid Software Ltd. 19.37 16.11 Mean Margin After Working Capital Adjustment 73.63/3 24.54 7. Thus the CIT (Appeals) has deleted/excluded all the companies selected by the TPO against which the assessee raised objections except KALS Information Systems (seg.) and Lucid Software Ltd. The assessee did not raised any objections against eJust Solutions. Accordingly the CIT (Appeals) recomputed the Mean Margin of three companies after working capital adjustment at 24.54% and confirmed the TP adjustment to the extent of 77, 410 as against the original 1,39,53,888. The CIT (Appeals) granted part relief to the assessee in respect of the TP adjustment in software development services segment. While rejecting the 23 companies from the list of comparable companies, the CIT (Appeals) applied filter of 0% revenue from Related Party Transactions (RPT). Therefore, the revenue as well as the assessee are aggrieved by the impugned order of the CIT (Appeals) and filed the respective appeals before the Tribunal. 8. First we will deal with the issue of adopting filter of 0% revenue from RPT whereby the C....
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....iew that when good number of comparables are available, then the threshold limit of RPT shall not be more than 15% of total revenue. In view of the facts and circumstances of the case when good number of comparables available, then we are of the considered opinion that the RPT filter of 15% is proper in the case of the assessee. Consequently, the impugned order of the CIT (Appeals) whereby applied filter of 0% RPT is set aside. Hence we direct the Assessing Officer/TPO to apply the RPT filter of 15% and then select the comparables. 10. Now we will take up the functional comparability of the other companies selected by the TPO/A.O. 10.1.1 Accel Transmatic Ltd. (Seg.) : This company was selected by the TPO for determining the ALP. Though the assessee has not contested the inclusion of this company in the list of comparables by the TPO however, this company was excluded by the CIT (Appeals) by applying 0% RPT filter. In view of our finding on the issue of RPT filter, we find that the assessee has claimed that this company is having 19.29% of revenue from RPT. On the other hand as it is clear from the details reproduced by the CIT (Appeals) in para 2.10 of the impugned order that the....
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....he TPO. Even before the CIT (Appeals) the assessee did not raise any objection for inclusion of this company. However, the CIT (Appeals) has excluded this company by applying 0% RPT filter. Thus the revenue is aggrieved by the order of the CIT (Appeals) on the issue of applying 0% RPT filter. As regards the functional comparability of this company, this issue does not emanate as the assessee did not raise any objection against the comparability of this company. Further the assessee has not filed any additional ground for exclusion of this company from the list of comparables. We find that the revenue from RPT of this company is 6.40% and therefore it is much below the threshold of 15% as discussed in the foregoing paragraphs. Thus in the absence of any objections on the functional comparability of this company by the assessee either before the authorities below or before us by way of additional ground, we restore this company to the list of comparables. 10.2.1 Avani Cincom Technologies Ltd. : The assessee objected the inclusion of this company in the list of comparables on the ground of functional dis-similarity. The CIT (Appeals) instead of deciding the functional dis-similarity ....
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....s company is in the diversified activity is not found support from the record and therefore it is contrary to the record. The decisions relied upon by the assessee also does not give any finding of fact on functional dissimilarity but the earlier order of the Tribunal in some other cases has been followed in these decisions. There is no independent finding by analysing the facts on record in these decisions. Therefore when we analyse the relevant record and details as given in the annual report, profit and loss account and auditor's report, we find that this company has earned revenue from only one source which is software exports in foreign currency. Accordingly, we do not find any merit in the objections raised by the assessee in this appeal. As regards the high profits, the same itself is not a ground for exclusion of this company or treating the same as not comparable until and unless any extra ordinary event occured during the year which has resulted abnormal profit. Therefore, only the extra ordinary event which could have resulted in abnormal results or income of the comparable company can be considered as a reason for exclusion but if the company is earning comparably h....
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....d as software development company and therefore the main activity is similar to that of assessee. 10.3.3 We have considered the rival submissions as wellas relevant material on record. The business activities of this company has been examined and analysed by the Mumbai Bench of the Tribunal in the case of Teva Pharma (P.) Ltd. (supra) wherein the tribunal has observed as under: "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 discovery and protected the IPR by filing under the copy if sic (of) right/patent act. (Apprised and funded by Department of Science and Technology New Delhi) based on our insilico expertise (applying bio-informatics tools). The Company has developed a molecule to treat Leucoderma and multiple cancer and protected the IPR by filing the patent. The patent details have been discussed with Patent officials and the response is very favorable. The cloning and purification under wet lab procedures are under progress with our collaborative Insti....
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....gh the CIT (Appeals) has deleted this company from the list of comparables on the ground of related party transactions. We find that the revenue from RPT of this company is 13.1% and therefore it is much below the threshold of 15% as discussed in the foregoing paragraphs. Thus in the absence of any objections on the functional comparability of this company by the assessee either before the authorities below or before us by way of additional ground, we restore this company to the list of comparables. 10.5 E-zest Solutions Ltd. : This company is not disputed or contested by the assessee, the CIT (Appeals) has also found that it is a comparable, accordingly, there is no specific finding is called for on this company. 10.6.1 Flextronics Software Ltd. (Seg.) : The assessee objected against the inclusion of this company in the list of comparables on the grounds that it fails the R&D filter as well as having diversified segments. The CIT (Appeals) excluded this company on the ground of RPT. Before us, the learned Authorised Representative of the assessee has submitted that this company is engaged in the R&D activities giving raise to Intellectual Property Rights (IPR). Therefore this co....
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....the material on record. It is not disputed that the Related Party revenue is 19.98% of total sale of this company. Therefore, this company fails the filter of threshold limit of 15% RPT. Accordingly, we do not find any reason to interfere with the finding of the CIT (Appeals) to exclude this company from the list of comparables. 10.8 Helios & Matheson Information Technology and I gate Global Solutions Ltd. : The assessee did not object to the inclusion of these two companies before CIT (Appeals) or even before this Tribunal. The revenue is aggrieved only on account of applying the 0% RPT filter by the CIT (Appeals). In view of our finding of tolerance range of RPT, these two companies are restored to the list of comparables of TPO. 10.9.1 Infosys Technologies Ltd. : The assessee objected to this company before the TPO on the ground of brand value having tangibles, research and development expenses, software products, etc. The CIT (Appeals) deleted this company from the list of comparables on the ground of RPT. 10.9.2 Before us, the learned Authorised Representative of the assessee has submitted that this company owns brands and intangibles and also having diversified operations ....
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.... Ltd. : The assessee objected to the inclusion of this company on the ground of RPT at 22%. The CIT (Appeals) excluded from the list of comparables by applying the filter of RPT. 10.10.2 We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. At the outset we note that the RPT revenue earned by this company is 21.97% as stated by the TPO as well as by the CIT (Appeals). In view of our finding on this issue the RPT of this company exceeds the threshold limit of 15%. Accordingly this company fails the RPT filter and is directed to exclude from the list of comparables. 10.11.1 KALS Information Systems Ltd. (Seg.) : The assessee objected the inclusion of this company on the ground of functional dis-similarity and absence of segmental data. The CIT (Appeals) upheld the functional comparability of this company and inclusion of this company as comparable by the TPO. 10.11.2 Before us, the learned Authorised Representative has submitted that this company is not functionally comparable to the assessee as this company is a software product company. He has referred to Annual Report of this company an....
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.... 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 behalf of the assessee that KALS Information Systems Limited should be rejected as a comparable. We have given a careful consideration to the submission made on behalf of the Assessee. We find that the TPO has drawn conclusions on the basis of information obtained by issue of notice u....
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....d 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. 50. We have considered the submissions and are of the view that the plea of the assessee that the aforesaid company should not be treated as comparables was considered by the Tribunal in Capgemini India Ltd. (supra) where the assessee was software developer. The Tribunal, in the said decision referred to by the ld. counsel for the assessee, has accepted that this company was not comparable in the case of the assessees engaged in software development services business. Accepting the argument of the ld. counsel for the assessee, we hold that the aforesaid company should be excluded as comparables." 13. The facts and circumstances under which the aforesaid companies were considered as comparable is identical in the case of the Assessee as well as in the case of Triology E-Business Software India Pvt.Ltd. (supra). Respecfully following the decision o....
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....DE Shaw India Software (P.) Ltd. (supra). This Tribunal ruling has been upheld by the high court for the State of Telangana and Andhra Pradesh - ITTA No. 433 of 2014 dated 22 July 2014 Huawei Technologies India (P.) Ltd. (supra) 10.13.3 On the other hand, the learned Departmental Representative has submitted that the functional comparability of this company has been examined by the TPO as well as by the CIT (Appeals) and it was found that this company is functionally comparable with that of the assessee. He has relied upon the orders of the authorities below. 10.13.4 We have considered the rival submissions as well as the relevant material on record. At the outset we note that the functional comparability of this company has been examined by this Tribunal in assessee's own case for the Assessment Year 2006-07 wherein the Tribunal has held in paras 14 & 15 are as under : "14. The learned counsel for the Assessee brought to our notice that the comparable company chosen by the TPO viz., Lucid Software Limited, has to be excluded as functionally not comparable with that of the assessee in view of the decision of the Mumbai Bench of the Tribunal in the ca....
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.... is identical in the case of the Assessee as well as in the case of Logica Private Ltd. (supra). Respectfully following the decision of the Tribunal referred to above in the case of Logica Pvt. Ltd. (supra), we direct that the company viz., Lucid Software be excluded from the list of 20 comparable arrived at by the TPO." Similar view has been taken by the co-ordinate benches of this Tribunal in the other cases cited supra. Accordingly, following the earlier orders of this Tribunal in assessee's own case for the Assessment Year 2006-07 as well as in the other cases, we direct the A.O./TPO to exclude this company from the list of comparables to determine the ALP. 10.14 Mediasoft Solutions Ltd. : The assessee did not object the inclusion of this company in the list of comparables. However, the CIT (Appeals) has excluded this company from the list of comparables on functional dis-similarity. Since neither the assessee nor the revenue contested against the exclusion or inclusion of this company, therefore, no specific finding is required in respect of this company and the finding of the CIT (Appeals) is upheld. 10.15.1 Megasoft Ltd. : The assessee objected the inclusion of this c....
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....segmental margin of 23.11% alone should be taken for comparability. The DRP has not given any specific finding on the above plea of the Assessee. Perusal of the order of the TPO shows that 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 (developing 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 (software developed) would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, boarding and lodging expense. Based on the above reply, the TPO proceeded to hold that the comparable company was mainly into customization of so....
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....ment and therefore we direct the A.O./TPO to consider only segmental data relating to providing software services of this company i.e. Megasoft Ltd. 10.16 Mindtree Consulting Ltd. : The assessee has not objected to this company to be included in the list of comparables. The CIT (Appeals) has excluded this company from the list of comparables on the ground of on-site revenue filter. Since neither the assessee nor the revenue has seriously objected to the inclusion or exclusion of this company from the list of comparables, therefore, no specific finding is required in respect of this company. The order of the CIT (Appeals) is upheld on this issue. 10.17 Persistent Systems Ltd. : Neither the assessee nor the revenue has contested the inclusion of this company, therefore, no specific finding is required. 10.18 Quintegra Solutions Ltd., R.S. Software (India) Ltd. and R.S. International (Seg.) : The assessee has not contested in respect of these companies. In case of Persistent Systems Ltd., the CIT (Appeals) has excluded this company by applying 0% RPT filter. In view of our finding on this issue, this company is restored back to the list of comparables as the assessee has not raised....
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....een examined by this Tribunal in assessee's own case for Assessment Year 2006-07. He has relied upon the following decisions : Cases pertaining to Asst. year : 2007-08 Cases pertaining to other Asstt. years Systech Integrators India (P.) Ltd. v. ITO [2014] 44 taxmann.com 324 (Bang. - Trib.). Ariba Technologies India (P.) Ltd. (supra). 3DPLM Software Solutions Ltd. v. Dy. CIT [2014] 42 taxmann.com 333, (Bang. - Trib.) 10.20.3 On the other hand, the learned Departmental Representative has relied upon the order of the TPO and submitted that the predominant activity of this company is software development services and therefore this company is functionally comparable. 10.20.4 Having considered the rival submissions and relevant material on record, we note that this company is not in the activity of pure software development services but engaged in the diversified product development which includes multi media and Imaging process. Further this company is also engaged in the activities such as hardware design, engineering design and mutual computing. Therefore in view of the diversified activities as mentioned above, we find that this company is not comparable ....
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.... the list of comparables for the purpose of computing the ALP. The assessee did not contest inclusion of this company in the list of comparables before the TPO as well as before the CIT (Appeals). However, the CIT(A) excluded the company from the list of comparables. assessee is seeking exclusion of this company from the list of comparables on the ground that this company is functionally dis-similar to the assessee. 10.21.2 We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. At the outset, we note that when the assessee did not raise any objection against the inclusion of this company by the TPO either in the proceedings before the TPO or before the CIT (Appeals), then, without seeking the leave of the Tribunal to raise a new plea/ground, the assessee cannot be permitted to raise this issue in the present appeal. Since there is no finding of the authorities below on the functional comparability of this company as the assessee did not raise any objection, therefore, in the absence of additional ground raised by the assessee and further in the absence of any leave of the Tribunal to raise ....
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....engaged in the R&D activities. Therefore this company is having huge brand value as well as bargaining power in comparison to the other companies who are engaged in the software services providing activity. The comparability of this company was also considered by the Hon'ble Delhi High Court in the case of Agnity India Technology Pvt. Ltd. and the Hon'ble High Court while confirming the finding of the Tribunal has observed that since this company is having the brand value and bargaining power, therefore, cannot be compared with the companies which are not having brand value and working only as captive service provider. Thus in view of the fact that this company is having various patents across product engineering, enterprise business and quality, this company cannot be considered as a good comparable of the assessee for the purpose of determining the ALP. Hence we direct the Assessing Officer/TPO to exclude this company from the list of comparables. 10.23.5 Since we have directed the inclusion and exclusion of certain companies from the list of comparables, therefore, the TPO is directed to recompute the ALP on the basis of the remaining comparables and also consider the b....
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....and one from the additional comparables submitted before the TPO by the assessee. The set of comparables selected by the TPO are as under :- Sl. No. Comparable Company Name OP to Total Cost % as per TP Order OP to Total Cost % after exclusions of comparables as urged before ITAT 1. Accentia Technologies Limited 25.43 25.43 2. Aditya Birla Minacs Worldwide Limited (Transworks Information Services Ltd) 10.37 10.37 3. AllSec Technologies Limited 24.99 24.99 4. Apex Knowledge Solutions Limited 12.38 12.38 5. Apollo Health Street Limited -22.62 -22.62 6. Asit C Mehta Financial Services Limited 22.08 22.08 7. Bodhtree Consulting Ltd. (Seg) 28.86 0.00 8. Caliber Point Business Solutions Ltd 19.51 0.00 9. Cosmic Global Ltd (Tulsyan Technologies Ltd) 10.70 10.70 10. Datamatics Financial Services Limited (Seg) 3.66 3.66 11. Eclerx Services Ltd. 85.22 0.00 12. Flextronics Software Systems Limited (Seg) 5.42 0.00 13. Genesys International Corporation Ltd 7.90 7.90 14. HCL Comnet 43.28 0.00 15. ICRA Techno Analytics Ltd (Seg) 10.78 10.78 16. Informed Technologies Ltd 34.07 0.00 17. Infosys BPO Ltd 27.90 0.00 18. IServices....
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....2.40 10.70 5. IServices India Pvt. Ltd. 49.47 47.80 6. Maple Esolutions Ltd. 34.05 29.48 7. Triton Corp Ltd. 34.93 26.93 8. Vishal Information Technologies Ltd. 51,19 41.57 14. Accordingly, the mean margin was reworked by the CIT(A) after capital adjustment at 27.89%. Thus both the assessee as well as the revenue are aggrieved by the order of the CIT (Appeals) and filed cross appeals. 15. We shall deal with each and every comparable which has been challenged by the assessee and exclusion of some of the comparables has been challenged by the revenue one by one as under : (i) Accentia Technologies Limited : Inclusive of this company is in the list of comparables has not been contested by the assessee either before the TPO or before the CIT (Appeals) or even before this Tribunal. Therefore there is no dispute regarding the comparability of this company for the purpose of ALP. Accordingly, no adjudication is required on this comparable. (ii) Aditya Birla : This company was part of T.P. analysis of the assessee and also selected by the TPO/A.O. The assessee did not contest the inclusion of this company in the list of comparables. However, the CIT (Appeals) excluded ....
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....38.54% and therefore this company fails the RPT filter. The CIT (Appeals) retained this company in the list of comparables. Before us the learned Authorised Representative of the assessee has reiterated its contention and submitted that there is an extra-ordinary profit of this company during the year and further the RPT fails the filter applied by the TPO/A.O as well as CIT (Appeals). He has referred draft order dt.9.12.2010 and submitted that the A.O./TPO has reproduced the particulars regarding RPT which show that during the F.Y. 2006-07, relevant to the assessment year under consideration this company has RPT to the extent of 38.54% of revenue. Thus this company cannot be considered as uncontrolled comparable company. On the other hand, the learned Departmental Representative has submitted that the TPO/A.O as well as CIT (Appeals) examined the records of this company and did not find the objection raised by the assessee as acceptable. He has relied upon the orders of the authorities below. We have considered the rival submissions as well as the relevant material on record. As regards the objection of the learned Authorised Representative that this company has reported abnorm....
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....ny should be excluded from the list of comparables. On the other hand, the learned Departmental Representative has submitted that the CIT (Appeals) as well as the TPO/A.O has reported only 13.69% RPT and therefore this company does not fail the filter of 15% RPT. We have considered the rival submissions as well as the relevant material on record. We note that the TPO/A.O as well as the CIT (Appeals) has mentioned the RPT of this company at 13.69%. therefore the claim of having more than 15% RPT is disputed by the revenue. We further note that the relevant record has not been produced before us to show that the company has earned the revenue of more than 15% from RPT as claimed by the assessee as 23%. In the absence of relevant record, even the issue of functional comparability cannot be decided. Accordingly, in view of the facts and circumstances of the case when the relevant record has not been produced before us in support of the rival claims of the parties the comparability of this company is set aside to the record of the A.O./TPO for considering the objection of the assessee regarding RPT as well as functional dis-similarity on account of R&D activity as well as other functi....
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....ailable in the form of annual report for financial year 2007-08 placed at page 166 to 183 of the paper book. A perusal of the same shows that the said company provides data analytics and data process solutions to some of the largest brands in the world and is recognized as experts in chosen markets-financial services and retail and manufacturing. It is claimed to be providing complete business solutions by combining people, process improvement and automation. It is claimed to have employed over 1500 domain specialists working for the clients. It is claimed that eClerx is a different company with industry specialized services for meeting complex client needs, data analytics KPO service provider specializing in two business verticals - financial services and retail and manufacturing. It is claimed to be engaged in providing solutions that do not just reduce cost, but help the clients increase sales and reduce risk by enhancing efficiencies and by providing valuable insights that empower better decisions. M/s eClerx Services Pvt. Ltd. is also claimed to have a scalable delivery model and solutions offered that include data analytics, operations management, audits and reconciliation, m....
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....partmental Representative as well as learned Authorised Representative. Ld. D R has relied upon the order of the TPO/A.O and submitted that the TPO has examined the the functional similarity of this company. At the outset, we note that the functional comparability of this company has been examined by this Tribunal in a number of decisions. The learned Authorised Representative has relied upon the decision of the Hyderabad Benches of Tribunal Dt.27.11.2013 in case of DE Shaw India Software (P.) Ltd. v. Asstt. CIT [2014] 42 taxmann.com 74 (Hyd. - Trib.) wherein the Tribunal has held in para 27 as under :- "27. Flextronics Software Ltd. and Thirdware Software Solutions Ltd. : The assessee has objected to these two companies to be treated as comparable mainly on the ground that both these companies are into product development. We find that in case of Intoto Software India Pvtg. Ltd. (supra) the co-ordinate bench of this Tribunal having found that these two companies are functionally different as they are into product development has directed excluding these companies for comparability analysis. Respectfully following the decision of the co-ordinate bench of this Tribunal in case of M....
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....ny on the ground of 0% RPT filter. Before us, the learned Authorised Representative of the assessee has submitted that the assessee had opposed inclusion of this comparable before the TPO on the ground that this company has substantial intangible assets, profits earned predominantly due to brand value and has large focus on R&D apart from substantial selling and marketing expenses. This company has a finance BPO and there is no sub-segment in the ITES segment. The learned Authorised Representative has referred to the Annual Report of this company and submitted that this company has brands and intangibles having diversified operations at large scale. Further this company is engaged in the development of mixed products like Finacle. This company is carrying out a large scale R&D activities and therefore cannot be considered as a good comparable with the assessee. The learned Authorised Representative has relied upon the following decisions :- CASES PERTAINING TO ASST. YEAR : 2006 - 07 CASES PERTAINING TO OTHER ASSTT. YEARS Cypress Semiconductor Technology India (P.) Ltd. v. Dy. CIT [2015] 57 taxmann.com 69 (Bang. - Trib.) Triology E-Business Software India (P.) Ltd. (supra) Agn....
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.... 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 (developing 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 (software developed) would constitute packaged product and around 50% to 60% would constitute customized capabilities and expenses related to travelling, boarding and lodging expense. Based on the above reply, the TPO proceeded to hold that the comparable company was mainly into customization of software products developed (which was akin to software development) internally and that the portion of the revenue from development of software sold and used for customization was less than 25% of the overall revenues. The TPO therefore held t....
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.... (xviii) I Services India Ltd. : This company was selected by the TPO/A.O and assessee did not contest the inclusion of this company in the list of comparables. Even before the CIT (Appeals) as well as before this Tribunal, the assessee has not contested against the inclusion of this company. The CIT (Appeals) has retained this company as a good comparable. Therefore no specific adjudication or finding was sought in respect of this company either by the assessee or by the revenue. (xix) Maple ESolutions Ltd. : This company was selected by the TPO/A.O and assessee did not contest the inclusion of this company in the list of comparables. Even before the CIT (Appeals) as well as before this Tribunal, the assessee has not contested against the inclusion of this company. The CIT (Appeals) has retained this company as a good comparable. Therefore no specific adjudication or finding was sought in respect of this company either by the assessee or by the revenue. (xx) Mold Tek Technologies Ltd. (Seg.) : This company was selected by the TPO and included in the list of comparables. The assessee objected to the inclusion of this company in the list of comparables before the TPO as well as....
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.... the TPO/A.O or before the CIT(A) even not before this Tribunal. However, the CIT (Appeals) excluded this company by applying 0% RPT filter. In view of our finding of proper RPT tolerance range at 15%, this company having 0.58 % of RPT is restored back to the set of comparables. (xxii) Spanco Systems Ltd. : This company was selected by the TPO/A.O but was not objected by the assessee either before the TPO/A.O or before the CIT(A) even not before this Tribunal. However, the CIT (Appeals) excluded this company by applying 0% RPT filter. In view of our finding of proper RPT tolerance range at 15%, this company having only 5.03% of RPT is restored back to the set of comparables. (xxiii) Triton Corp Ltd. : This company was selected by the TPO/A.O and the assessee did not contest the inclusion of this company in the list of comparables. Even before the CIT (Appeals) as well as before this Tribunal, the assessee has not contested against the inclusion of this company. The CIT (Appeals) has retained this company as a good comparable. Therefore no specific adjudication or finding was sought in respect of this company either by the assessee or by the revenue. (xxiv) Vishal Information Tec....
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....e outsourcing service charges are increased during the year to Rs. 13,12,00,000 from Rs. 11,49,00,000 in the earlier year. This Tribunal in the assessee's own case for Assessment Year 2006-07 has held in paras 24 to 25 as under : "24. We have considered the rival submissions. As far as comparable companies chosen by the TPO at S.No.1,3,6,7 & 8 viz., Maple ESolution Ltd., Datamatics Financial Services Ltd., Vishal Information Technological Services Ltd., Asit C. Mehta Financial Services Ltd., and Gold Stone Infratech Ltd., in the list of comparable companies chosen by the TPO, we find that the Hyderbad Bench of the ITAT in the case of HSBC Electronic Data Processing India Ltd. v. ACIT, ITA No.1624/Hyd/2010 by order darted 28.6.2013 considered comparability of these companies in the case of a company engaged in rendering IT enabled services to its AE similar to that of the Assessee in the present case. The tribunal held that the aforesaid companies are not comparable. The following were the relevant observations of the Tribunal. 8. The first objection is with reference to selection of comparable data by the TPO with reference to the following five companies- (a) Vishal Informa....
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.... ITAT, Mumbai in the case of Maersk Global Service Centre (supra) has analysed and rejected this company as comparable, due to the reason that it has outsourced a considerable portion of its business and it is functionally different. This factor was also approved by the DRP in assessee's own case in the later year, as can be seen from the copy of the order placed on record, for assessment year 2008-09. In view of this, we direct the Assessing Officer to exclude this company from the list of comparables. ** ** ** 14. In view of the foregoing discussion, we agree with the assessee's objection that the above five comparables should be excluded. 25. The facts and circumstances and the Assessment year for which the aforesaid companies were not considered as comparable are identical to the case decided by the Hyderbad Bench of ITAT and that of the case of the Assessee. Respectfully following the decision of the Hyderbad Bench of ITAT, we direct the TPO to exclude the aforesaid companies from the list of comparable while arriving at the arithmetic mean of comparable. Th....