TaxTMI 
TaxTMI 
2018 (7) TMI 1878
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....e same was not at arm's length price. For this assessee has raised the following grounds: - "Re.: Adjustment of Rs. 1,98,33,679/- on account of the software development services: 1.1 The Assessing Officer the Dispute Resolution Panel/ the Transfer Pricing Officer has in making an upward adjustment of Rs. 1,98,33,679/- to the total income of the Appellant by holding that the international transaction relating to the software development services entered into by the Appellant with its Associated Enterprise was not at an arm's length. 1.2 The Appellant submits that considering the facts and circumstances of its ease and the law prevailing oil subject the international transaction relating to the software development services entered into by the Appellant with its Associated Enterprise was at an arm's length and hence no adjustment in respect thereof was called for and the stand taken by the Assessing Officer/the Dispute Resolution Panel the Transfer Pricing Officer in this regard is misconceived, erroneous and incorrect. 1.3 The Appellant submits that the Assessing Officer be directed to delete the upward adjustment of Rs. 1,98,33,679/- made....
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....TNMM and accepted the PLI i.e. OP/TC used by the assessee. The assessee has worked out Operating Margin at 9.13%. The assessee has given 11 comparable but the TPO has rejected 10 out of 11 comparables, which were selected by the assessee and undertaken a fresh search on the database Prowess and capitaline. The TPO has shortlisted a set of following 23 companies as comparables, out of which one company is common with the assessee's set and worked out operating margin of comparable at 24.99% and thus made an addition of Rs. 1.98 Cr. Sr. No. Name of the Company Margins % OP/TC 1. Aarman Software Pvt. Ltd 1.41 2. Accel Transmatics Ltd. 15.72 3. Acropetal Technologies Ltd. 32.45 4. Aricent Technologies (holdings) Ltd. 7.57 5. AvaniCincom Technologies Ltd. 21.65 6. Bodhtree Consulting Ltd. 19.14 7. Celestal Labs Ltd. 87.94 8. E-Infochips Ltd. 30.32 9. E-Zest Solutions Ltd. 28.58 10. Igate Global Solutions Ltd. 13.12 11. Infosys Technologies Ltd. 28.58 12. Kals nformation systems ltd. 41.94 13. LGS Global solutions Ltd. 26.46 14. Mindtree Ltd. 15.34 ....
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....Technologies Ltd. 21.65 Infor (Bangalore) ITA 1550 6. Bodhtree Consulting Ltd. 19.14 Infor (Bangalore)ITA 1550 & Dialogic ITAT order AY 2009-10 7. Celestial Labs Ltd. 87.94 Infor (Bangalore) ITA 1550 8. E-Infochips Ltd. 30.32 Product company, rejected by TPO AY 2011-12 9. E-Zest Solutions 28.58 INfor (Bangalore) ITA 1550 10. Igate Global Solutions Ltd. 13.12 Dialogic ITAT Order aY 2009-10 11. Infosys Technologies Ld. 39.62 Infor (Bangalore) ITA 1550 12. KALS information System Ltd. 41.94 Infor (Bangalore) ITA 1550 13. LGS Global Solutiosn Ltd. 26.46 26.46 26.46 14. Mindtree Ltd. 15.34 15.34 15. Persistent System Ltd. 27.7 Infor (Bangalore) ITA 1550 16. Quintegra Solutiosn Ltd 9.75 Infor (Bangalore) 1550 17. R System International Ltd. 15.3 15.3 18. Sasken Communication Technologie....
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....Life cycle Management), Manufacturing CPG and retail (R&D, New Product Development, Global Supply chain management), Enterprise development. Product development and Enterprise business services. Hence, it was vehemently argued that not only the company fails two of the initial filters applied by the TPO himself, however it is also functionally not comparable to the assessee. 7. The second company was Avani Cincom Technologies Ltd. which is the company into production of products such as D-Exchange, I-Trak, Law firm Solution suite, hotel and restaurant booking engines etc as per Page 56, 57 & 58 of the assessee paper book. No revenue bifurcation between Software Development Services and products is given. The assessee relied on the Tribunal decisions for rejection of this company on the basis of being functionally non comparable to a software development service provider. 8. The third company is Bodhtree Consulting Ltd., which is engaged in providing Data management and Data warehousing services which are classified as lTES. Hence it is functionally not comparable. Further, segmental data is not available. Thus, it is difficult to identify the software services provided by Bod....
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....al report of this company on page 86 of paper book the Company earns income from Software services and products. The representative of the assessee argued that as per page 8 of the TPO's order, the TPO himself rejected Lucid software on the basis of it dealing in software products. Further as per annual report of this company on page 87 of the paper book the company has only one reportable segment which is into software services as well as IT enabled services. No separate segmental data is available for software development services. This Company was rejected by the TPO in its order for AY 2011-12 for being functionally not comparable to Dialogic by observing as under on page 4 point no 4:- "The company provides hardware designing services rendering it functionally different from the assessee. Further there is a mention of inventory in its balance sheet (1.24 crores). Further, as there is no separate reportable business segments, attribution of income cannot be performed among the diversified business activity." Hence, She vehemently argued that E-infochips should be rejected for being a product company and hence functionally non comparable. 11. The sixth company is ....
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.... its order for AY 2011-12 for being functionally not comparable to Dialogic. 13. The eighth company is Infosys Technologies Ltd. and it stated that Infosys's turnover is approximately 1160 times more than that of Dialogic's turnover. Considering a number of economic factors and market dynamics, Dialogic having a turnover of Rs. 13.5 crores as against that of Infosys having a turnover of around 15,653 Crores (1160 times), lacks comparability based on scale of operations. Infosys has 52 global development centers, of which 26 are located in India, 11 are in North America, 9 are in the Asia-Pacific region and 6 are in Europe. Infosys also has revenue of Rs. 597 crores from the sale of products as can be seen from page 117 of paper book. Infosys provides comprehensive end-to-end business solutions that leverage technology. There service offerings include custom application development, maintenance and production support, package enabled consulting and implementation, technology consulting and other solutions, including business process management and solutions, product engineering solutions, infrastructure maintenance services, operations and business process consulting, tes....
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....turnover of around 406.98 Crores, lacks comparability based on scale of operations. It was also submitted that the company is engaged in four types of business segments, namely lSVs, Telecom, Enterprises and VLSI and others. The company is also engaged in the sale of products and as indicated in the annual report does not show sale of goods and income from services separately at Page 148 of Paper book. Further, the company has disclosed segment information only on the basis of the consolidated financial statements which shall be presented together with the unconsolidated financial information. The company is engaged in producing Laboratory information systems (LIMS), Device monitoring Systems (DMS), etc. Further submitted that this Company has been rejected by the ITAT in assessee's own case vide order for AY 2009-10 as it is functionally dissimilar to the assessee for which attention was drawn to para 3.4. of the order. She relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 16. The eleventh company is Quintegra Solutions Ltd., which is engaged in product engineering and ext....
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....ossesses brand value. For a branded service, a customer is usually willing to pay a premium. Thus, rendering the company non comparable to the assessee. It was further submitted the company's turnover is approximately 835 times that of Dialogic's turnover. Considering a number of economic factors and market dynamics, Dialogic having a turnover of Rs. 133 crores as against that of having a turnover of around Rs. 11,276 Crores, lacks comparability based on scale of operations. In this regard, she relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 20. The fifteenth company is Softsol India Ltd., and assessee pointed out that as per page 10 of the TP Order the TPO has made a mathematical error in computing the margins of Soitsol India Ltd. Softsol has a revenue of Rs. 18,99,40,746 and a cost of Rs. 16,51,65,066. Accordingly the net profit is Rs. 2,47,75,680 resulting into OP margin of 15%. The correct margin is therefore 15% and not 42.33% as has been incorrectly taken by the TPO. The same is also depicted on page 3 in the case of PlC Software (India) Private Limited Vs ....
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....submission and carefully considered the same along with the order of the authorities below as well as the material and the documents referred to us during the course of hearing. We have also gone through the various case laws referred to during the course of hearing from both the sides. The only issue in this ground relates to the selection of comparable by TPO while computing the operating margin in the case of the assessee. The uncontroverted facts before us are that the AO made an adjustment of Rs. 1.98 crores to the international transaction of software development services rendered by the assessee to its associated enterprises to the tune of Rs. 13,53,11,573. The assessee is a 100% subsidiary of Dialogic Inc (Erstwhile Veraz Networks Ltd, USA). It set up an unit for development of telecommunication software for its group entities and which also provides marketing and customer services and back office support services (ITES) to its group companies. One of the segments is provision of software development services to its AEs based in Israel and USA. In consideration of the services provided, the assessee received compensation at cost +12% markup during the year amounting to Rs. ....
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....total employee cost is Rs. 45130,804 and total operating revenue is Rs. 603.148,486 (Employee cost ratio of 7.48%). Also, the total Onsite Development Charges is Rs. 314.591.271 and total operating cost is Rs. 432,400,427 (Onsite development ratio of 73%). Acropetal has been rejected on the basis of failing the similar filter applied by TPO in the case of Ness Technologies (India) Private Limited Vs ACIT (ITA 7016/MUM/2012) (AV 2008-09) wherein under Para 6 (iv), it was held: "In case of Acropetol Technologies Limited, we found that the total employee cost of the company is only 8.20% of the total turnover and hence the company foils the employee cost to sales filter of 25% applied by the TPO himself. The relevant extracts of annual report are provided in page 339 & 352 of the paper book. We also found that in case of this company 73% of the total expenditure was in foreign currency under the head "onsite development expenses". 25. Not only this, we noted that as per the annual report of this company on page 35 of paper book, the Company has inventory worth Rs. 1.1 Crores as on 31 March 2008 and is into the business of sale of products. As per page 8 of the TP order, th....
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....r, we noted that during the year the company has undergone restructuring activity by hiving off its e-paper business. Thus, it is functionally non comparable. We also noted that segmental data is not available in the case of this company. Thus, it is difficult to identify the software services provided by Bodhtree which is apparent from Pg 69 of the paper book. We noted that this Company has been rejected by the ITAT in the assessee's own case for AY 200910 as it is functionally dissimilar to the assessee (Para 8). In this regard, We noted that Banglore bench of this tribunal in the case of MIs Mindteck (India) Ltd Vs DCIT IT(TP) 70fBangJ2014 (Para 16) also held as under: "In the light of the aforesaid decision of the Special 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 Boclh tree from FY 2003 to 2008 excluding F)' 2007 as given by the learned counsel for the assessee were also perused. Perusal o....
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....at this company has been regarded to be non comparable to a software development service provider on the basis of being functionally by the coordinate bench of this tribunal and hence respectfully following the same, we exclude this company also from comparable as selected by TPO and direct the AO accordingly. 29. The fifth comparable which has been disputed before us is E- Infochips Ltd. Appearing at Sr. No.8 in the above table. This is undisputed fact that this Company is engaged in the development and maintenance of computer software and also manufacturing EVM and VDB Electronic Board (Hardware Division). The company earns income from software services and products as is apparent from annual report at page 86 of paper book. Further, we noted as contended by the Id. counsel as per annual report of this company at page 87 of the paper book, the company has only one reportable segment which is into software services as well as IT enabled services. No separate segmental data is available for software development services. This is a fact that TPO himself as per page 8 of TP Order rejected Lucid software on the basis of it dealing in software products under the similar facts. This ....
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....have heard the rival submissions and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the list of comparables only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give o finding whether the services performed by this company ore similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the case of Capital IC Information Systems (Indio) (P) Ltd. Supra) that KPO services are not comparable to software development services and ore therefore not comparable, Following the aforesaid decision of the coordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e- Zest Solutions Ltd. be omitted from the set ....
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....ed before us is lnfosys Technologies Ltd. as Appearing at serial No. 11 of the above table. This is a fact that Infosys's turnover is approximately 1160 times more than that of assessee's turnover. The assessee is having a turnover of Rs. 13.5 crores as against that of Infosys having a turnover of around 15,653 Crores - Infosys has 52 global development centers, of which 26 are located in India, 11 are in North America, 9 are in the Asia- Pacific region and 6 are in Europe. lnfosys also has a revenue of Rs. 597 crores from the sale of products as is apparent from page 117 of paper book. Inlosys provides comprehensive end-to-end business solutions that leverage technology. Its service offerings include custom application development, maintenance and production support, package enabled consulting and implementation, technology consulting and other solutions, including business process management and solutions, product engineering solutions, infrastructure maintenance services, operations and business process consulting, testing solutions, and systems integration services. These offerings are provided to clients across multiple industry verticals including banking and capital ....
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....e's turnover is only 13.5 Crores i.e. this company's turnover is approximately 30 times that of assessee's turnover. Thus this company lacks comparability based on scale of operations. This company is engaged in four types of business segments, namely ISV5, Telecom, Enterprises and VLSI and others. The company is also engaged in the sale of products and as indicated in the annual report does not show sale of goods and income from services separately as is apparent from Page 148 of Paper book. This company has disclosed segment information only on the basis of the consolidated financial statements which shall be presented together with the unconsolidated financial information. This company is engaged in producing Laboratory information systems (LIMS), Device monitoring Systems (DM5), etc. We noted that this Company has been rejected by the ITAT in assessee's own case videorder for AY 2009-10 held as it is functionally dissimilar to the assessee by observing as under:- 3.4 So however, the other pleas of the assessee that the said concern is non comparable due to difference in functions is quite potent. Ostensibly, the said concern is involved in not only rendering so....
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....bjections holding that this company qualifies all the filters applied by the TPO. On the issue of acquisitions, the TPO rejected the assessee's objections observing that the assessee has not adduced any evidence as to how this event had an any influence on the pricing or the margin earned. 18.1.2 Before us, the assessee objected to the inclusion of this company for the reason that it is functionally different and also that there are other/actors for which this company cannot be considered as a comparable. It was submitted that, (i) Quintegro solutions Ltd., the company under consideration, is engaged in product engineering services and not in purely software development services. The Annual Report of this company also states that it is engaged in preparatory software products and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendered by the company are described as under : " Leveraging its proven global model, Quintegro provides a full range of custom IT solutions (such as development, testing, maintenance, SAP, product engineering and infrastructure management services), proprietary software products and consultancy servi....
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....possesses or owns intangibles or lPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted from the list of comparables, as in the case on hand. 18.3.2 We also find from the Annual Report of Quintegro Solutions Ltd. that there have been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect an the performance of the company, then that company shall be removed from the list of comparables. 18.3.3 Respectfully following the decision of the co-ordinate bench of the Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (supra), we direct that this company i.e. Quintegra Solutions Ltd. be excluded from the list of cam parables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider." Although the Ld. Counsel has referred various other decision but no contrary decision was brought to our knowledge by Id. Dr. We therefore, respectfully following the decision of coordinate bench hold that this company cannot b....
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....comparable to the assessee in the case on hand. (iii) Taro Elxsi Ltd. is predominantly engaged in 'product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment 'software development services' relates to design services and are not to software services provided by the assessee. (iv) Tara Elxsi Ltd. invests substantial funds in research and development activities which has resulted in the 'Embedded Product Design Services Segment' of the company to create a portfolio of reusable software components, ready to deploy frameworks, licensable lPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd. is clearly functionally different I dis-similar from the assessee and therefore ought to be omitted from the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4.2 We have heard both parties and carefully perused and considered the material an record. From the details an record, we find that this company is predomi....
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.... in the annual report. We therefore agree with the contention of the assessee's counsel that this company is functionally different and cannot be taken to be comparable to assessee. Our aforesaid view is duly supported by the decision of Bangalore Bench of this Tribunal in the case of Infor (Bangalore) P. Ltd Vs ACIT (ITA 1550/Rang/2012) (AY 2008-09) wherein it was held as under:- "31 Coming to Thirdware Solutions Ltd (seg), findings of the Tribunal in the above mentioned case of 3DPLM Software Solutions Ltd(supra), appear at Para nos. 15.1 to 15.3 which is reproduced hereunder: 15. 1 This company was proposed for inclusion in the list of comparables by the TPO. Before the TPO, the assessee objected to the inclusion of this company in the list of comparables on the ground that its turnover was in excess of Ps. 500 Crores. Before us, the assessee has objected to the inclusion of this company as a comparable for the reason that apart from software development services, it is in the business of product development and trading in software and giving licenses for use of software. In this regard. the learned Authorised Representative submitted that:- (i) Th....
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....gmental data for the above services is however not available. The company also possesses brand value. For a branded service, a customer is usually willing to pay a premium. This company's turnover is approximately 835 times that of assessee's turnover as its turnover is Rs. 11276 crores as compared to assessee's turnover of Rs. 13.5 crores. Thus this company lacks comparability based on scale of operations. Our aforesaid view is duly covered by the decision of Banglore bench of this tribunal as relied on by assessee's counsel not disputed by Id. DR in the case of Infor (Bangalore) P. Ltd Vs ACIT (ITA 1550/Bang/2012) (AY 2008-09) wherein it was held as under:- 32. On comparability of Wipro Ltd, in the case of 3DPLM Software solutions Ltd (supla), f:nd:ngs of the Tribunal appear at Para nos. 12.1 to 12.4.2 of the order which reads as under 12. 1 This company was selected as a comparable by the TPO. Before the TPO. The assessee had objected to the inclusion of this company in the list of comparables on several grounds like functional dis-similarity, brand value, size, etc. The TPO, however, brushed aside the objections of the assessee and included thi....
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....pment sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by Vic TPO is that lie adopted comparison of the consolidated financial statements of WIPRO with She standalone financials of the assessee: which is not an appropriate companies. 12 4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the co-ordination bench of this Tribunal in the case of 24/7 Customer, Corn Pvt. Ltd. (I TA No. 227/Bang/2010 has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the co-ordinate bench of the tribunal i.e. 24/7 customer Coin Pvt. Ltd. (supra). we hold that this company cannot be considered as a comparable to the assessee. we, therefore, direct the Assessing officer / TPO to omit this company from the set of comparable companies in the case on hand for the year under ....
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....us, however, the Ld counsel differentiated this by arguing that the assessee has analysed all the comparables identified by the TPO in detail and even filed a written submission for inclusion or exclusion of the same. Hence, in our considered opinion and on the basis of the argument of the Id counsel the above case can be differentiated since in the case before us as submitted by the Ld counsel that all the comparables have been subject to the same rigorous test of comparability analysis as demonstrated from the submission filed by the assessee. Finally. We are of the opinion that in fact it is now well established by various judgements, that the representative of the argues for exclusion of a few comparables from the set identified by the TPO and if the assessee's margin falls within 5% range he need not argue further on other comparables. We have heard both the parties on the issue of comparables and we are of the opinion that in the present case if there is exclusion of the comparables mode by the TPO following the decision of coordinate bench of this tribunal in the case of Symphony Marketing Solutions India Pvt ltd (supra), the assessee will be within +/-5% range and hence ....
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....lutions Ltd. 10.97 6. Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd.) 50.68 7. Cosmic Global Ltd. 23.3 8. Crossdomain Solutions ltd. 26.96 9. Datamatics Financial Services 34.87 10. E4e Healthcare solutions Ltd. 16.72 11. Eclerx Services Ltd. 65.88 12. Genesys International Corporation Ltd. 47.4 13. HCL Comnet System & Services Ltd. 32.9 14. Infosys BPO Ltd 20.01 15. Iservices India Pvt. Ltd 9.58 16. Paple eSolutions Ltd. 20.43 17. Mold-Tek Technologies Ltd. 96.66 18. R System International Ltd. 4.3 19. Spanco Ltd. 11.04 20. Troton CorpLtd. 23.81 21. Wipro Ltd 30.5 22. Arithmetic Mean 29.25% 42. The Id representative again submitted that in the interest of time, she would restrict her arguments for exclusion of only 11 out of the 21 comparable selected by the TPO. For the same, assessee's representative filed a detailed table giving submissions for inclusion or exclusion of all of the comparable selected by the TPO. However, detailed discussion was restricted by her to rejecting 11 out of the 21 companies identifi....
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....ics Technologies 1559 18. R System International Ltd. 4.3 4.3 4.3 4.3 19. Spanco Ltd. 11.04 11.04 11.04 11.04 20. Troton CorpLtd. 23.81 23.81 23.81 21. Wipro Ltd 30.5 Flextronics Technologies 1559 Mean Margins 29.25 9.18 13.18 16.63 Within +/- 5% Range Yes Yes Yes She further filed detailed submissions on these 11 comparables during the course of hearing. 43. The first comparable taken up by Ld Counsel for assessee is Accentia Technologies Ltd. We find that assessee's counsel statedthe facts that Accentia has undergone reconstruction in the relevant Assessment year. It acquired Oak Technologies Inc. & Trans Services which in turn has an impact on the profits of the company. Further it was highlighted that Accentia's major revenue is from Medical transcription business (64%), Medical billing & coding (17%) & software devel & implementation (19%) as per Page 208 of Paper book. It operates in a single segment (Healthcare receivable management) as per page 209 of Paper ....
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....ny is to be excluded from comparables as selected by the TPO. We direct the AO accordingly. 45. The third comparable which is under dispute is Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd). Before us, the learned counsel for the assessee stated the facts that the company is rejected by TPO in assessee's own case for AY 2009-10. It is engaged in data digitization, print on demand, e-Publishing as per page 215-217 of paper book. It Incurred negligible employee cost of 2.92% of operating revenue, signifying that it is engaged in trading of services instead of providing services. It has an outsourcing of services model, hence non comparable to assessee. In this regard the learned Counsel for the assessee relie don the decision of co-ordinate Bench of this Tribunal In the case of Flextronics Technologies (India) Pvt Ltd v DCIT (IT(TP)A No.1559/Bang/2012, wherein it is held as under:- In case of Maersk Global service Centre India (P.) Ltd.(supra), the ITAT Mumbai Bench has also directed for exclusion of the aforesaid company, by observing in the following manner "Insofar as the cases of tulsyan Technologies Limited and Vishol Information Technologies Limited ....
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....of Rs. 26.6 crores as compared to that of the assessee which is Its 1.43 crores. Thus a company having 19 times the turnover of the assessee lacks comparability based on scale of operations.IN THIS regard she relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. We find from the above facts and the case law relied on by the learned Counsel for the assessee that this issue is covered by the decision of co-ordinate bench in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/Bang/2012 (Para 15) & Symphony Marketing Solutions India Pvt. Ltd. Vs ITO ITA No. 1316/Bang/2012 (Para 18). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 47. The fifth comparable under dispute is Datamatics Financial Services Ltd. Before us the learned Counsel for the assessee stated the facts that Datamatics is engaged in providing registrar & transfer agency services. Fur....
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....d Rs. 122.19 crores, which is around 85 times that of the assessee. Also From the annual reports of the company it is depicted that the company has related party transactions of Rs. 29.107 crores. The operating revenue of the company is Rs. 116.9 crores. Hence, related party transactions is 25% of operating revenues. The assessee relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/BangJ2012 (Para 16), Lionbridge Technologies Pvt. Ltd. vs ITO - 8(2)(2) - ITA No. 7498/Mum/2012- AY 2008-09 (Para 8) & Symphony Marketing Solutions India Pvt. Ltd, Vs ITO ITA No. 1316/Bang/2012 (Para 20). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 49. The seventh comparable under dispute is Gensys Int....
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....l filters one of which is yearend being March 2008. Therefore, technically it is not possible to identify and select a comparable which has a yearend different from March 2008, since it will automatically get rejected while undertaking the search on the databases. Hence, HCL Comnet having year end of June 2008 ought to be rejected ion these grounds. Further it was submitted that the scale of operation (Rs 495 cr) is very different from the assessee (1.43 cr), hence it should be rejected. After hearing both the sides and going through the facts, we are of the view that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 51. The ninth comparable under dispute is Infosys BPO ltd. Before us, the learned Counsel for the assessee stated that lnfosys BPO has a turnover of Rs. 825.08 Crores as against that of the assessee having a turnover of around 1.43 Crores which is around 577 times that of the assessee, lacks comparability based on scale of operations. It was also submitted that Infosys BPO s.r.o. was incorporated on February 4, 2004 in the Czech Republic as a wholly owned subsidiary to provide business proces....
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....gone restructuring cannot be considered as a comparable. Also with regard to the functional profile it was submitted that Mold-Tek Technologies Ltd. ('Mold-tek') primarily operates under two business segments Plastic division: The plastic division is engaged in the manufacture of plastic containers, pet bottles, blow moulding, tube & oils, paints, pet products, consumer products, etc. IT (KPO) division. The IT division specializes in providing structural engineering and design services for construction of buildings. (Pg 29 of the AR for FY 2007-08). Thus it was submitted that Mold-tek performs a completely different set of functions than those performed by the Appellant. It is engaged in providing Structural Engineering and Design KPO services for construction of building by using design tools like CAD/ CAM, Stadd Pro by employing highly skilled software engineers for the purpose. Thus, the learned Counsel for the assessee requested to drop Mold-Tek as a comparable. In this regard, she relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on ....
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.... of the Appellant. i.e. 1.43 crores lacks comparability based on scale of operations. Further Wipro has been granted 40 registered patents and has 62 pending applications. Hence, the assessee submits that Wipro should not be considered as comparable. In this regard, she relied on the following judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/l3ang/2012 (Para 20) & Symphony Marketing Solutions India Pvt Ltd. Vs ITO ITA No. 1316/Bang/2012 (Para 26). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 54. The next issue in this appeal of assessee is against the order of AO/DRP/ is as regards to disallowing the claim of deduction under section 10A of the Act in respect of expenditure of Rs. 33,95,8....