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2018 (12) TMI 198
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....961 ('Act') read with the Income Tax Rules, 0/ 1962 ('Rules') and making an adjustment of Rs. 12,85,58,406 to the international transactions with Associated Enterprises (' AE's'). Aggregating market research business and ITES transactions 2. a) Aggregating Market Research ('MR') business with Information Technology Enabled Services ('ITES') business of the Appellant which are distinct and separate, for determining the ALP of the services to the AE's. b) Rejecting the segmental financials of the Appellant for MR services and ITES transactions. Rejection of Internal Transactional Net Margin Method ('TNMM') for determining ALP 3. Without prejudice to Ground 2, not applying TNMM to the internal uncontrolled transactions of the Appellant for determining the ALP. ALP for management fees and license fees 4. Determining the ALP of management fees and license fees paid to its AEs as 'Nil'. Rejection of use of multiple year data 5. Rejecting the use of multiple year data and using data for FY 2009-10 only. Use of additional filters 6. Inter....
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....licence fee 14. (a) Disallowing the expenditure of Rs. 3,45,18,636 on software license fees, by considering the same as capital in nature; and (b) Without prejudice to the above, in granting depreciation on software licence fees at 25% instead of 60%. Disallowing advances written off 15. Disallowing the amount of Rs. 2,07,53,684 claimed as advances written off. TDS credit 16. Allowing credit of TDS of Rs. 6,54,93,323 instead of Rs. 6,87,39,406 as claimed in the Return of Income. Imposition of interest 17. Calculation of interest u/s 234D of the Act on the excess refund issued u/s 143(1). Initiating penalty proceedings 18. Initiating penalty proceedings u/s 271(1)(C) of the Act". 2. In addition to the above, the assessee has also raised the following additional grounds of appeal: "Ground No.19. Without prejudice to ground No.14, the learned AO erred in law and on facts in not allowing deduction u/s 10A of the Act on the expenditure towards software license fees disallowed in the assessment order of Rs. 2,14,19,008 relating to the STPI Unit of the Company. 3. At the time of ....
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.... vii) Crossdomain Solutions Pvt Ltd. 6. While the learned Counsel for the assessee reiterated the submissions made before the authorities below, the learned DR supported the orders of the authorities below. We are therefore, now proceeding to discuss the comparability of each of the companies as under: 6.1 Accentia Technologies Ltd: The assessee had objected to consider this company as comparable to the assessee on the ground that it is engaged in 4 stream of services (medical transcription, medical coding, medical billing and receivable management) and no segmental information was available. It was also submitted that it possesses significant intangible assets and therefore, is functionally different. It is also submitted that there was an extra ordinary event of amalgamation with Assent Infoserve Ltd which had an impact on the financial margin of this company and hence this company should be excluded. 6.2 The learned Counsel for the assessee has placed reliance upon the decision of the Coordinate Bench of the Tribunal in the case of M/s. Hyundai Motor Engineering Ltd in ITA No.1743/Hyd/2014 and ITA No.1917/Hyd/2014 for the A.Y 2010-11 wherein vide orders dated 13.1....
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....ourt vide orders dated 6th February, 2010. This event would definitely have an effect on the profit margins of the said company and therefore, has to be excluded from the list of comparables as rightly done by the DRP. Therefore, we do not see any reason to interfere with the order of the DRP on this company also. Accordingly, ground No.3 of the Revenue is dismissed". 6.3 Since the facts and circumstances in the case before us are the same, respectfully following the above decision, we direct the TPO to exclude this company from the final list of comparables. 7. Similarly, we find that the other comparables which are challenged by the assessee were also taken by the TPO in the case of Hyundai Engineering Motor India (P) Ltd and the table with regard to it is reproduced by the ITAT at page 8 of the order which is also reproduced hereunder for the sake of ready reference: S. No Name of the company OR OP/OC 1 Accentia Technologies Ltd 93,12,44,808 49.02 2 Acropetal Technologies Ltd (Seg.) 46,39,36,810 10.12 3 Axis-I.T&T Ltd 20,29,67,892 11.89 4 Cosmic Global Ltd 5,86,37,419 16.59 5 Eclerx Services Ltd 2,57,0....
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....uded from the list of comparables. This Tribunal in a number of decisions held that exceptional circumstance is a reasonable filter to exclude a company from the list of comparables. Therefore, we direct the A.O./TPO to exclude this company from the final list of comparables. 11.2.1. As regards TCS e-Serve Limited is concerned, we find that it possesses brand value as is evident from the Schedule-N (Operation and Other expenses) to the P & L A/c of the annual report for the financial year 2009-10 of Rs. 46,065 thousands and also that it possesses intangibles in the form of software licenses which have not been taken note of by the authorities below while adopting its margin. It is also the case of the assessee that this company has a turnover of Rs. 1405.10 crores which is 25 times of the turnover of the assessee and hence, is not comparable to the assessee. The Ld. Counsel for the assessee had also placed reliance upon the TPO's order in the case of M/s. IGS Imaging Services India Ltd., to hold that there are exceptional circumstances during the relevant financial year due to which this company is not comparable to the assessee. The Ld. Counsel for the assessee also s....
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....he decision of ITAT in assessee's own case for the A.Y. 2009-2010 on the ground that it is a KPO. The Ld. Counsel for the assessee has drawn our attention to the annual report of the said company to demonstrate that the facts and circumstances and the nature of the activities carried on by the said company in the A.Y. 2010-11 are also same. 17. Ld. D.R. has not been able to rebut this factual aspects of the said company with any evidence to the contrary. The only ground relied on by the Revenue is that in the case of Agilent Technologies International P. Ltd., the ITAT, Delhi Bench has upheld selection of M/s. Eclerx Services Ltd. A copy of the said order is filed before us. Assessee's contentions therein that the KPO services are distinct from BPO services and are not comparable, has been rejected by the Tribunal. However, since a uniform and consistent stand has to be taken in the case of the same assessee on similar facts and circumstances, we, respectfully following the decision of the Coordinate Bench in assessee's own case, do not see any reason to interfere with the order of the DRP. Ground No.2 is accordingly rejected. 18. As regards M....
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.... any reason to interfere with the order of the DRP on this company also. Accordingly, ground No.3 of the Revenue is dismissed". 7.2 Further, in the assessee's own case for the A.Y 2009- 10, the Tribunal has considered the comparability of Acropetal Technologies Ltd and has held as under: "(5) Acropetal Technologies Ltd. (Seg.) 20. The objection of assessee with reference to this company is that the company is involved in engineering design services and high end services and has products in its inventory. It is also involved in R&D activity and developing sophisticated delivery system. It was further submitted that this company is not functionally comparable at segment level also, as engineering design services are high end services, as considered in other cases. It is further submitted that allocation of expenses between segments is not possible and depreciation was not allocated between the segments. There are extra-ordinary events which impact profit also, as can be seen from the Annual Reports. It is further submitted that this company is not selected in the list of comparables selected in the case of Mercer Consulting (India) Pvt. Ltd. and therefore, select....
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....aim processing services, which are classified under ITES/BPO services. Therefore, the company has been correctly selected as a comparable. 12. We have heard the submissions of the parties and perused the material on record with regard to the aforesaid company. As can be seen from the website extract of the aforesaid company, it is engaged in providing services which are in the nature of KPO. Further, on perusal of the annual report of the company, furnished in the paper-book, it is seen that the said company is engaged in providing Niche services, as well as developed its own brand 'Exdion' to target the insurance industry in US. The Annual Report further reveals that the company has been running marketing campaigns in the US for expanding its plant base in relation to the brand developed by it. The assessee however, is only providing IT Enabled Services to its AE and does not have the diversified activities like the aforesaid company. The Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions India (P.) Ltd. (supra), while considering the issue of aforesaid company as a comparable accepted the assessee's contention that Crossdomain cannot ....
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....decision that the expenditure incurred is capital in nature, but, directed AO to allow depreciation at appropriate rate. The AO while completing final assessment in pursuance to the directions of ld. DRP, allowed depreciation @ 25% on the software licence fee by mentioning that it falls in the block of intangible assets. 23. We have considered the submissions of the parties and perused the materials on record. It is very much evident from record that the software licence fee has been paid towards operation as well as application software. That being the case, the rate of depreciation applicable is 60% (as applicable to computer) and not 25% as allowed by AO. Moreover, this issue is more or less covered in favour of assessee by the decision of the coordinate bench in assessee's own case for the AY 2009-10. The coordinate bench in ITA No. 604/Hyd/14 while deciding the issue held as under: 37. We have considered the submissions of the parties and perused the materials on record as well as the decisions relied upon by ld. AR. As far as assessee's claim that the expenditure claimed has to be treated as revenue expenditure, we are of the view that as per the ITA....