TaxTMI 
TaxTMI 
2018 (4) TMI 1614
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....operation from various undertakings registered with the Software Technology Parks of India (STPI) scheme at Bangalore, Gurgaon and Chandigarh. The return of income for the assessment year 2008-09 was filed electronically on 30/09/2008 declaring total income of Rs. 4,73,84,630/-. The assessee-company also reported the following international transactions in Form 3CEB: 3. The assessee sought to justify the consideration received for the above international transactions to be at arm's length. The assessee-company also submitted TP study report adopting TNMM which was considered to be the most appropriate method for the purpose of transfer pricing study and operating profit to operating cost as the Profit Level Indicator (PLI). The assessee-company's profit margin was computed at 7.62% and the same was claimed to be at arm's length with other companies rendering software development services. For the purpose of TP study, the assessee-company had chosen 16 comparables. The arithmetical average mean of the operating margin of the said comparable was computed less than 12%. According to the assessee-company, its PLI was within +/-5% of the arithmetical mean of the comparabl....
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....8. Being aggrieved, the assessee preferred an appeal before the learned CIT(Appeals), who vide impugned order had deleted the following 14 companies by applying the turnover filter of range of Rs. 200 cr. to Rs. 2000 cr.: The ld. CIT(A) held that the application of employee cost filter and diminishing revenue or persisting loss making or different year ending filters are not appropriate. The ld. CIT(A) further held that gain on account of fluctuation of foreign exchange should be treated as operating nature. 9. Being aggrieved, the revenue is in appeal in IT(TP)A No. 1070/Bang/2013 against that part of the order of the ld. CIT(A) which is against the revenue and the assessee is in appeal in IT(TP)A No. 981/Bang/2013 against that part of the order of the ld. CIT(A) which is against the assessee. 10. Now we shall take up revenue appeal. The revenue raised the following grounds of appeal: 1. The order of the learned CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to exclude the reimbursement of expenses incurred in foreign currency both from the export turnover as we....
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.... which was excluded in the software development services segment by using this filter. 8. On the facts and in the circumstances of the case the learned CIT(A) has erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 9. On the facts and in the circumstances of the case the learned CIT(A) failed to appreciate that the different year ending filter applied by the TPO is necessary to exclude companies which do not have the same or comparable financial cycle as the tested party. 10. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that foreign exchange loss/gain is operating in nature when, such loss/gain though linked to the operating activity is not derived from operating activity. 11. On the facts and in the circumstances of the case the learned CFT(A) erred in holding that domestic transaction should be excluded from the TP adjustments, in view an aggregate approach is adopted by the TPO wherein the transactions are so inextricably intermixed that the segregation of revenue and appropriate costs are impossible and the approach of the assessee to allocate c....
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...., the Hon'ble Judicial Member is a party wherein it was held as under: "24. We have perused the orders and considered the rival contentions. The claim of assessee with regard to additional wages paid to new workman was denied for a reason that engineers who were newly employed by the assessee were not considered as workers by the lower authorities. However, in a similar situation in the case of Texas Instruments India P. Ltd, (supra), it was held by the coordinate bench at para 6 and 7 of its order, as under : 6. We have heard the rival submissions and carefully perused the records. Considering the factual position after referring to the various documents filed by the assessee, the learned CIT(A) held as under : "According to the AO if an employee or workman is getting a salary of more than Rs. 1,600 per month he is not covered by the definition of workman. However as per cl. (iv) of s. 2(s) of the Industrial. Disputes Act a worker, employed in supervisory capacity and getting a salary of more than Rs. 1,600 per month only be excluded from the definition of workman. In appellant's case the software engineers in respect of whom deduction under s. 80JJAA has be....
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....A. In the circumstances, the AO is directed to allow the relief under s. 80JJAA of Rs. 1,09,52,012 and Rs. 3,46,44,722 for asst. yrs. 2001-02 and 2002-03 respectively." 7. As stated earlier the assessee had filed the details of the software engineers employed during the years under consideration containing the names of the employees, designation and date of joining. Further, in the same list the details of total number of employees joined during both the assessment years, number of employees without supervisory roles, workmen joined, number of supervisors joined and workmen joined and relieved during the years under consideration. A cursory perusal of this list shows that the assessee had claimed deduction in respect of employees, who had joined as engineers in their respective field such as systems engineer, test engineer, software design engineer, IC design engineer, lead engineer etc. A cursory perusal of those lists establishes that the assessee had claimed deduction in respect of the engineers employed not in the category of supervisory control. All these details were filed before the AO during assessment proceedings. These facts were not properly considered by the AO. Furt....
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....ed under any other provision of the Act. Assessee had claimed deduction of its income u/s. 10A of the Act in respect of its units 2, 3 and 4. As per the assessee even if deduction under section 10A of the Act is allowed for these units, a further deduction u/s. 80JJA of the Act, is also allowable. Argument of the assessee's counsel is that the limitation put in by Section 80A(4) of the Act, would apply only to profit linked deductions. There can be no dispute that deduction under Section 10A of the Act, is profit linked. In so far as deduction u/s. 80JJA is concerned, a look at sub-section (1) of the said section is required, which is reproduced below : 80JJAA(1) : Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture of production of article or thing, there shall, subject to the conditions specified in sub-section (2)m be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year i....
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....ecision of the Hon'ble Bombay High Court in the case of CIT v. Sonana Software Ltd.( 343 ITR 397). 18. We heard rival submissions and perused material on record. This issue is covered in favour of the assessee by the decision of this Tribunal for the assessment year 2007-08 cited supra wherein it has been held as follows: "42. We have perused the orders and heard the rival contentions. It is not disputed that the Chandigarh unit came to the assessee through a slump sale. M/s. Virsa had given this undertaking to the assessee as a going concern. That such transaction was a slump sale has not been disputed by any of the lower authorities. It is also not disputed that the said M/s. Virsa was eligible for deduction u/s. 10A of the Act and was claiming such deduction in the earlier years for such unit. Hon'ble Bombay High Court in the case of Sonata Software Ltd., (supra) in a similar situation had held as under : 8. The issue before the court is whether the two requirements, cast in negative terms, have been fulfilled. Clause (ii) of sub-section (1) of section 10A stipulates that the industrial undertaking must not be formed by splitting up or reconstruction of a ....
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....re would be little scope for describing what emerges as a reconstruction of the business. Thus, for instance, if the ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction or if the very nature of the business is changed, that again would not be reconstruction. On the other hand, reorganization of the business on sounder lines or alter actions in the mode or method or scope of the activities of the business or in its personnel or infusion of new blood in the management or control of the business which may even be by some changes in the constitution of persons interested in the undertaking would certainly be no more than reconstruction of the business if it is substantially the same business carried on by substantially the same persons." Reconstruction, the Division Bench held, means that substantially the same business is carried on and substantially the same persons carry it on (page 671) : "The emphasis, it will be noticed, is on two things--when substantially the same business was carried on and substantially the same persons were carrying it on. It is also to be noticed that the learned judge....
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.... of section 10A was held to have attached itself to the STP unit of the software division which was owned by IOCL till October 19, 1994, and it was owned by the assessee subsequent to that date. What is material, according to the Tribunal, is not who owns the undertaking but whether the undertaking is entitled to the benefit available under section 10A. As regards the issue of transfer by IOCL to the assessee, the Tribunal noted that section 10A(9) was substituted by the Finance Act, 2000, with effect from April 1, 2002. Section 10A(9) provided that where during any previous year the ownership or beneficial interest in an undertaking of the business is transferred by any means, the deduction under sub-section (1) shall not be allowed to the assessee for the assessment year relevant to such previous year and the subsequent years. The Tribunal noted that if a transfer between IOCL and the assessee were to be effected after April 1, 2001, that would result in the undertaking being disentitled to the benefit under section 10A. This was a pointer to the fact that prior to the substitution a transfer of ownership or beneficial interest in the undertaking would not disentitle an assessee ....
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.... whose functions are broadly similar and whose profile - in respect of the activity in question can be viewed independently from other activities-cannot be subject to a per se standard of loss making company or an "abnormal" profit making concern or huge or "mega" turnover company. As explained earlier, Rule 10B (2) guides the six methods outlined in clauses (a) to (f) of Rule 10B(1), while judging comparability. Rule 10B (3) on the other hand, indicates the approach to be adopted where differences and dissimilarities are apparent. Therefore, the mere circumstance of a company - otherwise conforming to the stipulations in Rule 10B (2) in all details, presenting a peculiar feature - such as a huge profit or a huge turnover, ipso facto does not lead to its exclusion. The TPO, first, has to be satisfied that such differences do not "materially affect the price...or cost"; secondly, an attempt to make reasonable adjustment to eliminate the material effect of such differences has to be made." This ratio was followed by this Tribunal in several cases, for example, NTT Data Global Delivery Services Ltd. v. Ass. CIT (69 taxmann.com 7)(Bang) and Societe Generale Global Solution Centre (P....
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....arly diminishing revenue cannot be relevant criteria and therefore the ground of appeal filed by the revenue is dismissed. 23. Ground No. 9 challenges the finding of the ld. CIT(A) in rejecting different year ending filter. The provisions of sub-section (4) of 10B provide that the data to be used in analyzing comparability of uncontrolled transactions with an international transaction shall be the data relating to the financial year in which international transaction had been entered into. In the light of the plain provisions of the law, we do not see any reason to differ from the finding of the ld. CIT(A). Hence the ground of appeal filed by the revenue is dismissed. 24. Ground No. 10 challenges the finding of the ld. CIT(A) that the gain arising out of variations in foreign exchange currency is operating in nature. The only issue in the ground of appeal pressed, relating to TP adjustment is whether Foreign Exchange gain made an account of sale proceeds can be treated as operating in nature. The Hon'ble Delhi High Court in the case of Pr. CIT v. Ameriprise India Pvt. Ltd. in ITA No. 206/2016 dated 23/03/2016 has categorically held that foreign exchange gain earned by ....
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....d) That the learned AO and the learned CIT (Appeals) erred in concluding that, incomes referred to in sections under Heading "C - Deductions with respect to certain incomes" are arrived at after setting off all expenditure against revenue and a further deduction under section 80JJAA of identical expenditure or of a part would amount to double claim of deduction. (e) That the learned CIT (Appeals) has not appreciated the Appellant's contention that, deduction under section 80JJAA is limited only to the residual profits forming part of the gross total income of the assessee, i.e. after the claim of deduction under section 10A of the Act. 3. (a) That the learned CIT (Appeals) erred in confirming the disallowance made by the learned AO in re- allocating the interest expense to the extent of Rs. 12,980,367 relating to Unit-1 (non 10A unit) to Unit-2 (10A unit). (b) That the learned CIT (Appeals) erred in not appreciating the fact that, loan was taken for construction of campus housing Unit-i and accordingly, no interest was to be apportioned to Unit-2. (c) That the learned CIT (Appeals) erred in not considering the Appellant's submissions and holdin....
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....ta Elxsi (Seg) in the comparability analysis which are different from the Appellant in functions, asset base and risk profile; 8.7. Not granting risk adjustment based on actual differences in the risk profile between the Appellant and the comparable companies. 9. On the facts and circumstances of the case and in law, the Ld. CIT(A)/AO/TPO erred in including cost-to-cost reimbursement of expenses received, as part of the operating cost and operating income in computation of arm's length price. 10. On the facts and in the circumstances of the case and in law, the TPO erred in introducing E-zest Solutions Limited in its comparability analysis which is functionally dissimilar to the Appellant. It is prayed that E-zest Solutions Limited be excluded from the set of comparables considered by the Ld. TPO for comparability analysis. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 29. Ground No. 1 is general in nature and does not require adjudication. 30. Ground No. 2 challenges restric....
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....ying 10A benefit by holding as under: The floors bonded by Unit-1(non-10A) at RMZ were same as floors de-bonded by Unit-2(10A) at RMZ. The Company had shifted bonded floors from Unit-2(10A) to Unit-1(non-10A) in order to shift the expenditure of STP unit to non STP Unit. The action of the AO came to be confirmed by the ld. CIT(A). Being aggrieved, the assessee is before us in the present ground of appeal. 33. It was contended before us that there was no shifting of private custom bonded warehouse from unit II (10A unit to unit I i.e. non-10A unit) and the date of de-bonding of private warehouse by 10A unit was later than the date of bonding by unit I i.e. non-10A unit and even the floor space of the premises bonded and de-bonded are different. It was further submitted that the AO had re-allocated the rent based on presumptions and assumptions which is not permitted. 34. We heard rival submissions and perused material on record. From the perusal of the chart placed at page 28 of the written submissions placed before us, it is clear that there was no shifting of bonded warehouse from unit II to unit I. No addition can be made based on presumptions/assum....
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....O as a comparable in spite of the objections of the assessee to the exclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee only provides software development services to its AEs. The TPO rejected the assessee's objections on the ground that this company had categorised itself as a pure software developer, like the assessee and hence selected this company as a comparable. In coming to this conclusion, the TPO relied on information directly submitted by the company in response to enquiries under Section 133(6) of the Act. 5.2 Before us, the learned Authorised Representative reiterated the assessee's objections to inclusion of this company on the ground that it is not functionally comparable to the assessee as it is into software products. In support of this contention, the learned Authorised Representative placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09. 5.3 Per contra, the learned Departmental Representative supported the order of the TPO in including this c....
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....decisions of the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No. 845/Bang/2011 dt. 22.2.2013, and in the case of Trilogy E-Business Software India Pvt. Ltd. (ITA No. 1054/Bang/2011), we direct the A.O./TPO to omit this company from the list of comparables." 5.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09, we direct the Assessing Officer/TPO to exclude this company, i.e. Avani Cincom Technologies Ltd. from the list of comparables in the case on hand." 36.3 Respectfully following the ratio of the decision of the co- ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Avani Cimcon Technologies Ltd., from the list of comparables. Bodhtree Consulting Limited ('Bodhtree'): 37. This company was selected by the TPO, but not contested by the assessee-company before the TPO. However, inclusion of this company was challenged before the ld. CIT(A) on the grounds of functional differences. 37.1 On appeal, the ld. CIT(A) deleted this company from....
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....inate bench of this Tribunal in the case of NXP Semi-Conductors India P. Ltd. (supra) for A.Y. 2008-09 and the decision of the Mumbai Bench of the ITAT in the case of Nethawk Networks India Pvt. Ltd. (supra) for A.Y. 2008-09 wherein Bodhtree Consulting Ltd., was excluded from the list of comparable companies on account of being functionally different from a provider software development services to its AE as it has software products and a hybrid service business model. 6.2 Per contra, the learned Departmental Representative supported the orders of the TPO in including this company in the list of comparable companies. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements relied upon by the assessee. We find that this company; i.e. Bodhtree Consulting Ltd. has been excluded from the list of comparables for providers software development services in the judicial decisions cited by the assessee (supra at para 6.1.2 of this order). The relevant portion at para 15 of the order in the case of NXP Semi-conductors India (P) Ltd. (supra) is extracted hereunder :- "15. Bodhtree Consulting Ltd. 1....
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....ial Bench and in view of the admitted position that the assessee follows Fixed Price Project model where revenues from software development is recognized based on software developed and billed to clients, there is a possibility of the expenditure in relation to the revenue being booked in the earlier year. The results of Bodhtree from FY 2003 to 2008 excluding FY 2007 as given by the learned counsel for the assessee were also perused. Perusal of the same shows, that there has been a consistent change in the operating margins. The chart filed by the assessee in this regard is given as an annexure to this order. It appears to us that the revenue recognition method followed by the assessee is the reason for the drastic variation in the profit margins of this company. In the given circumstances, we are of the view that it would be safe to exclude Bodhtree Consulting from the final list of comparables chosen by the assessee. We hold and direct accordingly." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude M/s. Bodhtree Consulting Ltd. Ltd., from the l....
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.... to the assessee. It was submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09, has held that this company is to be excluded from the list of comparables to a provider of software development services as it is rendering product development services and high and technical services which come under the category of KPO services. 8.3 Per contra, the learned Departmental Representative supported the order of the TPO including this company in the list of comparables. 8.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited. We find that a coordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables to a provider of software development services as it is into product development services and high end technical services which come under the category of KPO Services; holding as under at para 14.4 thereof :- "14.4 We have heard the rival submissions and perused and carefully considered the material on record....
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....usiness performance including technical consulting, design, development, re-engineering, maintenance, systems integration, package evaluation and implementation, and testing and infrastructure management services. The Director Report states that Income is from software service and products. However, no segmental information is available as regards profits earned on account of software services and software products. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 39.3 We heard rival submissions and perused the material on record. The comparability of Infosys Technologies Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "23. Vis-a-vis M/s. Infosys Technologies Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 9 which is reproduced hereunder : 9. Infosys Technologies Ltd. 9.....
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.... revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly." 9.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer to omit this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Infosys Technologies Ltd. from the list of comparables. Kals Information Systems Ltd. (Seg.) 40. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different. 40.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this, revenue was in appeal before us in....
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....ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra). 10.3 Per contra, the learned Departmental Representative supported the TPO's action in including this company in the final list of comparables. 10.4.1 We have heard both parties and perused and carefully considered the material on record, including the judicial decision relied on by the assessee. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables as it was into development of software products and hence not comparable to a provider of software services; observing as under at para 10.4 of the order :- "10.4 We have heard both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s. 133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as p....
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....t life cycle services from end to end. No bifurcation is available between the two activities of the company, being sale of software services and products. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 41.4 We heard rival submissions and perused the material on record. The comparability of Persistent Systems Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "25. Vis-a-vis M/s. Persistent Systems Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 12 which is reproduced hereunder : 12. Persistent Systems Ltd. 12.1 This company was selected as a comparable by the TPO overruling the objections of the assessee that this company, being into development of software products engaged in product design and analytic services is functionally different from the assessee who is only a pr....
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....ccount for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year under consideration. It is ordered accordingly." 12.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Persistent Systems Ltd. from the list of comparables. Quintegra Solutions Ltd. 42. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that the company is having peculiar economic circumstances and as an extraordinary event of acquisition of another company. 42.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this revenue was in appeal before us in I....
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....ly different as it is engaged in product engineering services and not in software development services. It was also submitted that this company was engaged in developing proprietary software products and has IPR's and is functionally different from a provider of software development services, as is the assessee in the case on hand. In support of its contentions, the assessee relied on the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 where it was held that this company was to be omitted from the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the orders of the authorities in including this company in the list of comparables. 13.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied on by the assessee. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company, being engaged in product engineering services, having substantial R&D activity resulting in the c....
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....n P. Ltd (supra) we direct the AO/TPO to exclude Quintegra Solutions Ltd. from the list of comparables. Tata Elxsi Ltd.(seg) 43. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different and possess significant R&D activity and posses intangible assets and also fails the onsite filter. 43.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 43.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company operates into two segments: 1) System Integration services and 2) Software Development services. Software Development services segment is further diversified into sub-services/activities being, 'Product Development services', 'Design Engineering services', 'Visual Computing Labs' for which no segmental information is available. Business Units of compa....
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....see. The learned Authorised Representative also submitted that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) has held that this company is to be omitted from the list of comparables for providers of software development services, like the assessee in the case on hand. 15.3 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company in the list of comparable companies. 15.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables to a provider of software development holding as under at paras 13.4.1 and 13.4.2 of its order extracted hereunder :- "13.4.1 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely ....
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....ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 44.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is engaged in implementation and consulting services of software based on ERP and Business Intelligence. M/s. Thirdware also earns revenues from sale of user licenses and subscription. Software development services rendered by the company comprise of implementation and consulting services of developed and traded software. There are no segmentals for software development services and product development services and the financials indicate that the production and sale of developed and traded software cannot be expressed in any generic unit and therefore, segmental data is not available. Reliance in this regard was placed on the decision of the coordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A....
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....velopment are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications Pvt. Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decision of the Pune Tribunal (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand." 16.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Thirdware Solutions Ltd., from the list of comparables. Wipro Ltd.(seg) ....
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....ot functionally comparable to the assessee as it owns significant intangibles; both in the nature of customer related and technology related intangibles. It was submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) has held that this company be omitted from the list of comparables for providers of software development services since it is into product development, owns significant IPR's, has immense brand value, etc. 17.3 Per contra, the learned Departmental Representative supported the TPO's action in including this company in the final list of comparables. 17.4.1 We have heard both parties and perused and carefully considered the material on record; including the judicial pronouncements cited and relied upon. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables for providers of software development services for the following reasons as laid out at paras 12.4.1 and 12.4.2 of its order which is extracted hereunder :- "12.4.1 We have heard both parties an....
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....leted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 46.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company it has related party transactions (RPT) of 18.3%; thereby failing the RPT filter of 15%. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 46.3 We heard rival submissions and perused the material on record. The comparability of Softsol India Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: 30. Vis-a-vis M/s. Softsol India Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 14 which is reproduced hereunder : ....
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.... for Assessment Year 2008-09, we direct the Assessing Officer/TPO to exclude this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Softsol India Ltd., from the list of comparables. Lucid Software Ltd. 47. This company was selected by the TPO. On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs. 200 crores to Rs. 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 47.1 Hence, the assessee-company is challenging the inclusion of this company on the ground that the company is a provider of software products and services to the global NDT (Non Destructive Testing) and material sciences industry. Lucid has developed proprietary software known as 'Mullam'. Lucid amortizes expenditure in relation to this software on a deferment basis. Approximately 28% of total capital employed is inve....
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....list of comparables observing that this company, being into development of software products, is functionally different from a provider of software development services, as is the assessee's in the case on hand and therefore ought to be excluded from the list of comparables. At para 16.3 of this order the co-ordinate bench held as under :- "16.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid Software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A No. 845/Bang/2011), LG Soft India Pvt. Ltd. (supra), CSR India Pvt. Ltd. (supra); the ITAT, Mumbai Bench in the case of Telecordia Technologies India Pvt. Ltd. (supra) and the Delhi ITAT in the case of Transwitch India Pvt. Ltd. (supra) have held, that since this company, is engaged in the software product development and not software development services, it is functionally different....