TaxTMI 
TaxTMI 
2017 (11) TMI 1725
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....elhi (hereinafter referred to as "Ld. TPO") for computation of arm's length price ("ALP') 2. That on the fact of the case and in law, the Ld. TPO / Hon'ble Dispute Resolution Panel ("Hon'ble DRF') has erred by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules'), and conducting a fresh comparability analysis for the determination of the ALP of the Appellant's international transaction pertaining to provision of contract software development ("CSD") services by the Appellant and holding that the said international transaction is not at arm's length. 3. That on the facts and circumstances of the case and in law, the order passed by Ld. AO/Ld. TPO in pursuance to the directions of the Hon'ble DRP under section 143(3) read with section 144C of the Act, is bad in law and void ab-initio as the same has been passed in contravention of specific direction of Hon'ble DRP to include Akshay Software Technologies Limited, Infomile Technologies Limited and SQS India BFSI Limited as comparable companies if these companies meet the filters approved ....
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....ng the operating cost of the Appellant for provision of CSD services to associated enterprise and thereby has inadvertently applied the TP provisions on the cost base of third party segment of the Company. Corporate Tax Grounds 12. 12. That on the facts and circumstances of the case and in law, the Ld. AO has erred in holding that liquidated damages of INR 55,35,88,892/- incurred by the Appellant pursuant to breach of its contractual arrangements are penal in nature and are thus, not allowable u/s 37(1) of the Act. 12.1 That the Ld. AO failed to follow the spirit and intent of the directions of the Hon'ble DRP as he failed to appreciate the correct facts and evidences brought on record for verification in accordance with the directions of Hon'ble DRP and further erred in making several allegations, observations and inferences in the assessment order which are both factually incorrect as well as legally untenable. 13. That on the facts and circumstances of the case and in law, the Ld. AO is not justified in making a disallowance of Rs. 12,81,270 by applying Rule 8D read with Section 14A of the Act, having regard to the accounts of the assesse, without recording his d....
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....nature of fees for technical services amounting to sums chargeable u/ s 9(l)(vii) and under the relevant clause of the tax treaty of the country from where the employees are seconded and thereby liable to TDS u/s 195 of the Act. 17.2. Without prejudice, on the facts and circumstances of the case and in law the Hon'ble DRP / Ld. AO has erred in summarily rejecting the contentions of the appellant and the detailed argument made for differentiating the facts of the appellant's case from the ruling of Hon'ble Delhi High Court in the case of M/s Centrica India Offshore Pvt. Ltd. 18. That on facts in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(l)(c) of the Act mechanically and without recording any adequate satisfaction for its initiation. 3. The assessee company is engaged in the business of digital switching equipment and related software, cellular exchange / transmission equipment and provides related services, intelligent network and broadband solutions, equipment and related services. Software development services comprising of the wireless network group, project management service for the teleco....
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....t u/s 92CA 114.29 5. The AO passed the draft assessment order u/s 144C(1) r.w.s 143(3} of Income Tax Act 1961on 30.03.2016 at an income of Rs. 225,65,85,440/- after making various additions and addition made by TPO amounting to Rs. 114,29,00,000/-. Against the draft order, the assessee company filed objection before Hon'ble DRP-I, New Delhi. The DRP passed the order dated 22.12.2016 u/s 144C(5) of the IT Act. Thereafter, fresh notice u/s 142(1} of the IT Act was issued on 28.12.2016 by the Assessing Officer. Pursuant to the directions of the DRP, a letter dated 28.12.2016 was sent to Transfer Pricing Officer for recomputation of the Arm's Length Price in this case. The response from DCIT, TPO was received by the Assessing Officer on 23.01.2017 with the following observations:- "8 The cumulative adjustment made in this case is as under:- International Transaction Adjustment (INR) On account of ALP of the comparables 130.10 On account of Receivables Nil Total Adjustment 130.10 The Assessing Officer will enhance the income of the taxpayer by Rs. 130.10 cr u/s 92CA(5) after giving effect to the directions of Hon'ble DRP". Accordingly, in view of the detailed reasons....
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....rt vide order dated 18.07.2017 for A.Y. 2003-04, 2004-05 and 2006-07. The Ld. AR submits that Infosys offers software products, platforms, diversified services like software consulting and systems integration, design development, re-engineering and maintenance, integration etc. Infosys Turnover is 31,254 Crore which is 54 times of assessee company (573.54 Crore). Infosys also owns its software products such as Finacle/Infosys active desk/Infosys Iprowe/Infosys mConnect. Infosys is engaged in research and development in relation to software engineering, enterprise technology, patenting new technologies. The company is having ownership of intangibles and also have presence of brands. There is extra-ordinary events occurred during the year as Infosys Consulting Inc. was merged with the Infosys Ltd. Thus, this company has to be excluded as per the submissions of the Ld. AR. The Ld. AR relied upon the various decisions of this Tribunal wherein this company was excluded from the comparables. 10.2. The Ld. DR submitted that the TPO has rightly selected this comparable and relied upon the order of the TPO. 10.3. We heard both the parties and perused the records. This company has set up a....
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....the assessee company is engaged in the business of digital switching equipment and related software, cellular exchange / transmission equipment and provides related services, intelligent network and broadband solutions, equipment and related services. Thus, the functions of both the companies are different. In fact in earlier Assessment Year the ITAT already excluded this company as comparable in assessee's own case on account of functional difference which was confirmed by the Hon'ble High Court. We, therefore, direct TPO to exclude this company from comparable. 10.7 Persistent Systems & Solutions Ltd. The Ld. AR submits that this comparable was rejected by the ITAT in assessee's own case for AY 2011-12 on account of functional difference and the same has been confirmed by the Hon'ble Delhi High Court vide order dated 18.07.2017. The Ld. AR submits that financials for the relevant Assessment Year is not available as the company has merged with its parent company Persistent Solutions Limited and both of these companies were adjudicated to be functionally non comparable by the ITAT in assessee's own case for A.Y. 2011-12. Besides, the Ld. AR submits that the TPO has not given any ....
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....arable. 10.13 e-Zest Solutions The Ld. AR submits that this company fails the service income filter applied by the TPO i.e. Service Income / Total Income < 75%. This company is engaged in providing diverse services like BPO, product engineering, software product development and KPO. The segmental data is also not available. The inventory ratio to total revenue is 19.90% , whereas the assessee company does not hold any inventory. Besides this, E-zest is into professional services and full risk bearing entrepreneur, whereas the assessee company is limited risk capital company dealing in software development and is performing limited functions like coding, testing. 10.14 The Ld. DR submitted that the TPO has rightly selected this comparable and relied upon the order of the TPO. 10.15 We heard both the parties and perused the records. The functions of both the companies are different. There is no segmental data available in the annual report of the company. The service income filter which was applied by the TPO clearly has not been followed by the TPO in this company while selecting as comparable. Therefore, this company has to be excluded. We, therefore, direct TPO to exclude this....