2018 (11) TMI 385

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....td. cannot be taken as comparable, when it satisfies all the qualitative and quantitative filters adopted by the TPO. iii) Whether the Hon'ble DRP is right in applying "onsite revenue filter" without appreciating the fact that the function carried out is "Software Development" irrespective of whether onsite or offshore. iv) Whether the Hon'ble DRP in correct in excluding M/s RS Software Pvt. Ltd. and M/s Acropetal Technologies and M/s L&T Infotech ltd on the ground that they have significant onsite revenue without appreciating the fact that onsite development of software entails more cost and thereby results in lower profit margins. v) Whether the Hon'ble DRP was right in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies. vi) Whether the Hon'ble DRP has erred on fact in deleting M/s Einfochips as a comparable on the ground that it fails the filter of service income less than 75% of the sales, when the said company has service income being 100% of the sales. vii) Wheth....

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....onal dissimilarity 4. The Ld. DRP while rejecting Infosys Ltd. on functional dissimilarity has grossly erred in not adjudicating on the following grounds: * Economies of scale * Presence of brand 5. The Ld. DRP while rejecting L&T Infotech Ltd. on onsite filter has grossly erred in not adjudicating on the following grounds: * Functional dissimilarity * No segmental details available * Sales turnover filter 6. The Ld. DRP while rejecting Mindtree Ltd. on the ground of onsite filter and presence of extraordinary events has grossly erred in not adjudicating on the following grounds: * Engaged in Intellectual property licensing * Sales turnover filter 7. The Ld. DRP erred in rejecting Evoke Technologies Ltd. only on the ground of having low margin when the said company passes all other filters adopted by the Ld. TPO. 8. The Ld. DRP erred in not rejecting Persistent Systems & Solutions Ltd., when the said company ought to be rejected on the following grounds: * Functional dissimilarity 9. The Ld. DRP erred in not rejecting Persistent Systems Ltd., when the said company ou....

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....n the case of CIT vs. Tata Elxsi Ltd., 349 ITR 98. 7. We have considered the rival submissions. First of all, we reproduce paras 4 and 5 from the Tribunal order rendered in the case of ACIT Vs. Broadcom Communication Technologies (P.) Ltd. (supra). The same are as under. "4. At the very outset, it was pointed out by the bench that as per ground no. 10 of the appeal of the revenue, it is the grievance of the revenue that the DRP was not correct in applying onsite filter in software development segment in the case IT(TP)A Nos. 347 & 501/Bang/2015 of M/s. RS Software India Ltd. As per ground no. 9, this is the grievance of the revenue as to whether the application of new filter (Onsite filter) is within the purview of the DRP. The bench observed that this Tribunal is taking a consistent view that if a new filter is applied, it should be applied to all comparables and not to particular comparables on pick and choose basis and therefore, in that situation where new filter is applied, the matter has to go back to examine all comparables in the light of the new filter. In reply, it was submitted by ld. AR of assessee that regarding only one comparable i.e. M/s. RS Software Ind....

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.... to the file of DRP for fresh decision." 8. While going through these paras from the Tribunal order rendered in the case of ACIT Vs. Broadcom Communication Technologies (P.) Ltd. (supra), it is seen that in that case, onsite filter was applied by DRP to only one comparable i.e. R S Software (India) Ltd. whereas in the present case, the said filter was applied by DRP to three comparables i.e. 1) R S Software (India) Ltd., 2) Acropetal Technologies Ltd. and 3) Larsen and Toubro Infotech Limited. But it makes no difference because this is true that this filter was not applied by TPO and the same was applied by DRP for the first time to only 3 comparables out of 13 comparables selected by the TPO. There are some comparables which are not disputed by the assessee as they are having low profit margin such as Evoke tech 8.11%, Mindtree limited (Seg.) 10.66%. It may so happen that if these comparables are examined in the light of this filter, it may or may not pass through this filter. Hence, when a filter is applied for selection of comparables, it should be applied at the level of selecting the comparables itself and not after the comparables were selected because application of a fil....