TaxTMI 
TaxTMI 
2018 (10) TMI 1361
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed DRP/A.O. erred in making an addition of Rs. 21,85,13,439/- by recomputing the transfer price of the international transactions relating to software development services provided by the appellant to its AEs. 1.1] The learned DRPIA.O. erred in rejecting the various companies considered as comparable entities by the assessee company while determining the ALP in respect of the provision of software development services without appreciating that the companies selected by the assessee were comparable as per the FAR analysis and hence, there was no reason to reject them. 1.2] The learned DRP/A.O. erred in including various companies as comparable with the appellant without appreciating that the said companies were not comparable wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee had applied TNMM method. In the TP study report, the assessee while applying the TNMM had identified 25 companies as comparables and it had taken the average operating margin of 3 years at 6.29%. The operating margin of assessee for the year was computed at 3.91% and the international transactions were claimed to be at arm's length price. 5. The TPO rejected the CUP method applied by the assessee with regard to the transactions with Dimension Data Management Services (PTY) Ltd. and Dimension Data Advanced Infrastructure Ltd. The TPO further accepted that TNMM was the most appropriate method for determining the arm's length price and carried out fresh search and thereby arrived at five concerns as comparables. The Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of Rs. 21,85,13,439/- under the transfer pricing provision. It is the plea of the assessee that though the Assessing Officer was directed to grant working capital adjustment to the assessee but in the final assessment order no such adjustment was allowed. Further even PSI Data Systems Ltd. was excluded from the final set of comparables. In respect of adjustment on account of forex loss, the ld. AR for the assessee before us points out that no issue has been raised against the said directions of the DRP before the Tribunal. 7. The assessee is in appeal against the order of DRP/Assessing Officer. The first issue raised is in respect of exclusion of two concerns i.e. Bodhtree Consulting Ltd. and Kals Information Systems Ltd. being funct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn providing software development services to its AEs. 8. In respect of second issue of non-granting of working capital adjustment the ld. AR for the assessee pointed that the Assessing Officer while passing the final assessment order does not grant the same and only directions are to be given for allowing working capital adjustment. He further pointed that in case the above two issues are decided then the inclusion of PSI Data Systems Ltd. or not, would become academic. 9. The learned Departmental Representative for the Revenue on the other hand placed reliance on the orders of DR/ TPO. 10. We have heard the rival contentions and perused the records. The assessee is providing software development services to its AEs. The to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of John Deere India Pvt. Ltd. in ITA No. 2236/PN/2012 for assessment year 2008-09 it was held that the said concern was not functionally comparable since it was engaged in the product engineering and content engineering services, which were in the nature of ITES services and was not comparable with the assessee's activity of providing software development services. The relevant findings of the Tribunal are in para 19 at pages 25 to 28 of the order, which are being referred but not being reproduced for the sake of brevity. 12. Further, Pune Bench of the Tribunal in the case of John Deere India (P.) Ltd. Vs. Deputy Commissioner of Income Tax (supra) while deciding the appeal for assessment year 2009-10 vide order dated 27.10.2016 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....engaged in sale of software product and providing software services and no segmental details were available. Therefore, the said concern had to be excluded while benchmarking the arm's length price of international transactions of a concern engaged in software development services. 15. The Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Principal Global Services (P.) Ltd. (supra) while deciding the appeal in the case of Principal Global Services (P.) Ltd. have held that Kals Information Systems Ltd. was engaged in developing software products, development of software services and was also engaged in running a training centre for software professional on online projects. It was held that the margins of Kals ....