TaxTMI 
TaxTMI 
2018 (12) TMI 1071
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....nsfer Pricing Grounds 3. Ld.TPO/A.O. failed to appreciate and apply the clear directions of Hon'ble DRP and grossly erred on facts and in law by not rejecting EInfochips Limited from the final set of comparable companies. 4. Ld.TPO/A.O. failed to appreciate and apply the clear directions of Hon'ble DRP and grossly erred on facts and in law by not rejecting Acropetal Technoloiges Ltd. from the final set of comparable companies. 5. Ld.TPO/A.O./DRP erred on facts and in law in making an upward adjustment of arm's length price of the Appellant's international transactions with its A.Es. 5.1. Ld.TPO/A.O./DRP erred on facts and in law in rejecting the applicability of functional filters applied in the search process by the Appellant and challenged the same. 5.2. Ld.TPO/A.O./DRP erred on facts and in law in concluding that the Appellant bears various risks without providing any logical justification of the same. 5.3. Ld.TPO/A.O./DRP erred on facts and in law in not demonstrating the basis for concluding that the comparability analysis conducted in the TP Report of the Appellant is inappropriate and inadequate. ....
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....hether on the facts and circumstances of the case & in law, the Dispute Resolution Panel-It has erred in reducing the Transfer Pricing adjustment from Rs. 1,83,28,563/- to Rs. 1,52,76,175/- 2.Whether on the facts and circumstances of the case and in law, whether the order of the Ld. DRP was right in not appreciating the functional analysis of comparable based on the TP study, submission made by the assessee and information available in public domain. 3. Whether on the facts and circumstances of the case and in law the Ld. DRP was right in rejecting Infosys Technologies Ltd. as a being an industry giant. 4.That the order of the Ld. DRP is erroneous and is not tenable on facts and in law. 5. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. 2. Brief facts of case are as under: Assessee filed its return of income on 19/09/11 declaring total income of Rs. 2,03,120/-. The return was processed under section 143(1) of Income Tax Act, 1961 (the Act) and case was selected for scrutiny. Notice under section 143(2) was issued along with questionnaire and notice ....
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.... Spry Resources India Pvt.Ltd. 27.54 11. CCE Software Pvt.Ltd. 15.46 12. Allied Digital Services Ltd. 13.38 13. Octant Industries Ltd. 1.38 14. Techprocess Solutions Ltd. 10.16 15. Maximaa Systems Ltd. 5.05 Arithmetic mean 11.94% 2.6. Ld.AO upon analysing TP report, rejected certain comparables, finalised list of 11 comparables with average margin of 24.30% by using OP/TC as PLI. 2.7. Ld.AO, thus computed arm's length price of international transaction undertaken by assessee at Rs. 25,48,01,757/-, thereby making adjustment of Rs. 1,83,28,563/-. 3. Aggrieved by order of Ld.TPO, assessee preferred objections before DRP. Only objection raised before DRP was in respect of comparables finally considered by Ld.TPO. DRP upon verifying relevant details filed by assessee, directed Ld.TPO to verify 'Wipro Technology Services Ltd', and to exclude, 'Infosys Technologies Ltd'. 3.1. Ld.AO thus passed impugned final assessment order wherein 'Wipro Technology Services Ltd' was retained, excluded 'Infosys Technologies Ltd' and computed adjustment at Rs. 1,52,76,175/-. 4. Aggrieved by final assessment order passed....
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....es its input in requirement analysis phase of software development process. It is observed that assessee assists in development of certain modules, which it undertakes in coding and documentation function, with respect to software module it develops. Assessee also undertakes quality-control procedures, with respect to services undertaken by it, which is in line with overall quality standards followed by its AE. It is observed that qualitycontrol activities involved establishing and enforcing minimum standards to ensure that inferior goods/services are not sold to consumers. This process involves testing and analysing finished products/services. Quality-control can be perused by employing combination of automated quality-control equipment and qualified inspectors. In TP study it has been recorded that assessee is responsible for day-to-day project management and end deliverables with respect to modules of software being developed by it, and technical personnel performance test with software that has been developed. Assessee also maintains and generates documentation for the codes. 8.II. Assets employed: In TP study, at page 999 of paper book volume 3, it is submitted ....
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....ly provides software services, but also engages in manufacturing and trading of printed circuit electronic boards. In support of his argument Ld.AR placed reliance upon decision of Coordinate Bench of this Tribunal dated 02/04/18, in case of Cadence Design System (I) Pvt. Ltd., vs. ACIT in ITA No. 6315/del/2015. 10.2. On the contrary ld.DR submitted that assessee is also having income from software development and ITES services which includes maintenance and information technology considered consultancy is a part of the services rendered by assessee to its AE. He submitted that the comparables selected is only having one segment which is software development and the revenue generated under the segment is about 86% which satisfies the filters. 11. We have perused submissions advanced by both sides in the light of records placed before us. 11.1. From Schedule of income at page 182 of paper book volume 1, wherein break-up of revenue earned by this company, during year is listed, it is observed that this company receives revenue from software development, hardware maintenance, information technology consultancy, information technology services. It is also observed that this co....
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....ary 2009. On 21 January 2009, Wipro signed master service agreement (MSA) with Citigroup Inc. for delivery of technology infrastructure services, application development and maintenance services After acquisition by Wipro, name of Company was changed to Wipro Technology Services Limited ('WTS' or 'the Company') on 16 March 2009." 13.3. It is observed from the above that, Wipro Technology Services Ltd., which was earlier Citi Technology Services Ltd., was held by Citi Corp. Banking Corporation, USA upto 20th January, 2009. Wipro Ltd., parent company of which executed agreement with Citi Group Inc., for acquiring Citi Technology Services Ltd., now called Wipro Technology Services Ltd. On 21.1.2009, Wipro Ltd. signed master agreement with Citi Group Inc., for delivery of Technology Infrastructure Services and application development and maintenance services for the period of six years, which also includes year under consideration. This shows that income from software development support and maintenance services was earned by Wipro Technology Services Ltd., from Citi Group Inc., by means of master service agreement entered into between Wipro Ltd., its parent company and Citi Group I....
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....ed enterprises, it ceases to be an 'uncontrolled transaction' and, thereby, goes out of reckoning under Rule 10B(1)(e)(ii). Adverting to the facts of the instant case, we find that Wipro Technology Services Ltd. earned revenue from Master services agreement with Citigroup Inc. for the delivery of technology infrastructure services. This agreement was, in fact, executed between the assessee's AE, Wipro Ltd., and Citigroup Inc., a third person. This unfolds that the transaction of earning revenue from software development support and maintenance services by Wipro Technology Services Ltd., is an international transaction because of the application of section 92B(2) i.e., there exists a prior agreement in relation to such transaction between Citigroup Inc. (third person) and Wipro Ltd. (associated enterprise). In the light of this structure of transaction, it ceases to be uncontrolled transaction and, hence, Wipro Technology Services Ltd., disqualifies to become a comparable uncontrolled transaction for the purposes of inclusion in the final list of comparables under Rule 10B(1)(e)(ii). We, therefore, direct removal of this company from the list of comparables." 13.5. R....
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....(say 01/01/2010 to 31/12/2010), following the filter adopted by Ld.TPO, one would reject all companies with financial year ending 31st of March 2011 and only consider companies with financial year ending 31/12/2010. The number of comparable companies available after using such a filter would be very limited and therefore, in such cases net margin earned by comparable companies would be different from one that would be computed without using this filter. This view is supported by Coordinate Bench of this Tribunal in the case of DCIT vs. McKinsey knowledge Centre India Private Limited in ITA No. 2195/Del/2011, wherein it has been held that if a company is functionally comparable, it cannot be rejected merely on ground that, data for entire financial year was unavailable, in case data can be reasonably extrapolated. This Tribunal further observed that Rule 10 B (4) cannot be interpreted in such a rigid manner so as to defeat its basic objective. The relevant extract of the ruling are reproduced below: " 23. ..... However, in our considered opinion, if a comparable is functionally same as that of the tested party then the same cannot be rejected merely on the ground that data ....