TaxTMI 
TaxTMI 
2019 (1) TMI 1128
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.... convenience, they are heard together and are being disposed of by way of this consolidated order. ITA no.631/Mum./2011 Revenue's Appeal - A.Y. 2005-06 3. In grounds no.1 and 2, the Revenue has challenged the decision of the learned Commissioner (Appeals) in accepting assessee's plea that international transaction with AEs should be benchmarked separately and the AE should be treated as tested party instead of the assessee. 4. Brief facts are, the assessee, an Indian company, is a wholly owned subsidiary of WNS Mauritius Ltd., which in turn, is a wholly owned subsidiary of WNS Holdings Ltd., U.S.A. In the relevant previous year, the assessee has provided Information Technology Enabled Services (ITES) in the nature of management and marketing services to clients through its Associated Enterprises, WNS Global Services (U.K) Ltd., U.K., and WNS North America (NA) Inc., U.S.A. For the assessment year under dispute, the assessee filed its return of income on 30th October 2005, declaring loss of Rs. 81,35,80,754. Noticing that in the relevant previous year the assessee has entered into a number of international transactions with its AEs, the Assessing Officer made a reference to ....
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....the international transactions with AEs for assessment year 2004-05 was rejected by the Transfer Pricing Officer by holding that instead of AEs the assessee has to be treated as the tested party. He observed that in assessment year 2004-05, the Transfer Pricing Officer has aggregated all the international transactions with AEs for benchmarking purpose. Following the approach adopted by him in assessment year 2004-05, the Transfer Pricing Officer held that the foreign AEs cannot be treated as tested party as they are not performing least complex functions. Accordingly, he treated the assessee as the tested party for functional analysis. Further, the Transfer Pricing Officer aggregated all the international transactions for benchmarking purpose. Being aggrieved with the aforesaid approach of the Transfer Pricing Officer the assessee preferred appeal before the first appellate authority. 5. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record as well as the appeal order passed for the assessment year 2004-05, held that the contract revenue earned by the assessee from a third / independent / unaffiliated pa....
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.... due to different financial year ending. Referring to the observations of the Transfer Pricing Officer in Para-5.1.3 of his order, he submitted, the Transfer Pricing Officer has not disputed the comparable but has only applied their margin by selecting the assessee as the tested party. He submitted, the assessee has considered the margin of comparables selected separately for both the AEs. He submitted, the Transfer Pricing Officer having not raised the issue of different financial year ending of the comparables, learned Departmental Representative cannot raise such issue and request for restoring the issue to the Assessing Officer after lapse of so many years. In this context, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s M/s. Maersk Global Services Centre (India) Pvt. Ltd., ITA no.692 and 693/2012, dated 22nd August 2015. The learned Sr. Counsel submitted, in the subsequent assessment years the Transfer Pricing Officer himself has not only accepted the AEs as the tested party but has also accepted the foreign comparables proposed by the assessee for benchmarking purpose. In this context, he drew our attention to the Transfer Pricing Officer's....
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.... in Business Model 2. iv. Each international transaction has to be benchmarked separately and the assessee has different functional profiles for the two business models, one as an entrepreneur and the other as a captive service provider. v. Such different transactions cannot be clubbed together as laid down in : a. Aztec Software and Technical Services Ltd v/s ACIT, (107 ITD 141) b. Development Consultants Pvt. Ltd. v/s DCIT, {115 TTJ 577) c. Star India Pvt. Ltd. v/s ACIT, ITA no.3585/Mum./2006) 16. In view of the above findings of CIT(A), we accept assessee's contention that the foreign AE should be considered as the tested party, accordingly all other grounds of appeal in the Department's appeal with respect to transfer pricing related issues become academic in nature." 9. As regards the issue relating to separate benchmarking of international transactions with the AEs, the Tribunal has held as under:- "21 We have considered rival contentions and find from the nature of the transactions mentioned above that they are not interlinked as the various transactions form part of different business models adopted by the assessee. Thus, the learned TPO's approach....
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....endered by them. 11. As regards the contention of the learned Departmental Representative that the learned Commissioner (Appeals) has not properly considered the comparability of the foreign comparables on account of different financial years, it is relevant to observe, the Transfer Pricing Officer never rejected the foreign comparables proposed by the assessee on the issue of different financial year ending. In fact, the Transfer Pricing Officer has not at all gone into far analysis of the foreign comparables proposed by the assessee since he treated the assessee as the tested party and, therefore selected separate sets of comparables. Therefore, we are unable to accept the submissions of the learned Departmental Representative for restoring the issue to the Assessing Officer / Transfer Pricing Officer for reconsideration. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on these issues by dismissing the grounds raised. 12. In ground no.3, the Department has challenged the decision of the learned Commissioner (Appeals) in holding that the contract migration cost should not be considered for calculating the operating margin. 13. Brief facts are....
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.... For securing this contract, it was agreed by the American AE as well as the assessee that till the time all processes are fully migrated to India, whatever costs are incurred by Travelocity would be reimbursed. The learned Commissioner (Appeals) observed, since the reimbursement of cost was a pre-condition of the contract, the assessee and the AE had to take a commercial decision to agree to such term in order to secure the contract. The learned Commissioner (Appeals) observed, though initially the assessee had to incur the migration cost, however, in subsequent years, the contract generated good profit for the assessee. Thus, the learned Commissioner (Appeals) relying upon his decision on identical issue in assessment year 2004-05, held that the migration cost relating to Travelocity contract being an exceptional and onetime cost, should not be treated as part of operating cost for computing the profitability of the assessee. 15. The learned Departmental Representative relying upon the observations of the Transfer Pricing Officer submitted, learned Commissioner (Appeals) without properly analysing the issue has held that the migration cost will not form part of the operating cos....
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....ning the details, he found that the loan was provided to the AE at the interest rate of 5%. He also noticed that all the subsidiaries of the WNS group had individually given subsidiary guarantee to Travelocity for the loan. The Transfer Pricing Officer noticed that the main purpose of loan was to make adequate cash flow available to WNS India i.e., the present assessee to execute the services outsourced to it by Travelocity. When the Transfer Pricing Officer called upon the assessee to explain why no commission was charged for providing guarantee against the loan, it was submitted by the assessee that since the assessee itself is the end user of the loan and no service client was involved, guarantee commission was not charged. However, the Transfer Pricing Officer did not accept the claim of the assessee and made an adjustment of Rs. 65,59,545 on account of guarantee commission computed @ 1.5% of the guarantee amount. Being aggrieved of the aforesaid Transfer Pricing adjustment, the assessee preferred appeal before the first appellate authority. 20. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts on record, restricted th....
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.... other documents available before him, the Transfer Pricing Officer noticed that an amount of Rs. 156,12,05,562, was appearing as sundry debtors in the name of WNS U.K. and WNS N.A., two AEs of the assessee. Noticing this, the Transfer Pricing Officer called upon the assessee to explain why interest should not be charged for extended credit period allowed to the AEs, since, according to the Transfer Pricing Officer an independent enterprise would have charged interest for such extended credit period. He also called upon the assessee to furnish month-wise figures of the balance in the hands of both the AEs. In response, the assessee furnished the details called for and also submitted that no interest should notionally be charged as neither any loan nor any advance was given to the AEs. It was submitted by the assessee that it receives money from the AEs as and when they receive money from the third party. It was submitted, the delay in making payment on some instances may be for the reason that the AEs must not have realised money from the clients in time. It was submitted, no extended credit period was granted to the AEs apart from those arising in course of business. It was submit....
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....perused materials on record. It is evident from the facts on record, not only the assessee receives payment from AEs towards services rendered but the AEs also receive payment from the assessee on account of provision of marketing support services. It is a fact on record that in some instances there is a delay in receiving payments from the AEs. The assessee has explained such delay to be on account of late receipt of payment by the AEs from the overseas customers. It is also evident, the assessee has also made delayed payment to AEs towards marketing support services rendered by them. Therefore, there is delay in making payments from both sides. As observed by the learned Commissioner (Appeals), after factually verifying the outstanding creditor and debtor position on account of payment / receipts relating to the AEs there is no loss to the assessee in real terms. As could be seen, the Transfer Pricing Officer while charging notional interest on the extended credit facility to the AEs has completely ignored the delayed payment made by the assessee to the AEs. Thus, as could be seen, no extra benefit has been provided to the AEs on account of extended credit facility. Further, it i....
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....g the decision of the learned Commissioner (Appeals) submitted, the issue stands settled in favour of the assessee by virtue of the decisions of the Co-ordinate Bench in assessee's own case for assessment year 2003-04 and 2004-05. 34. We have considered rival submissions and perused materials on record. It is evident, the Assessing Officer referring to the provisions of section 10A(9) of the Act has disallowed assessee's claim of deduction under section 10A of the Act. Whereas, learned Commissioner (Appeals) relying upon certain judicial precedents as referred to above, has allowed assessee's claim of deduction by holding that the omission of section 10A(9) of the Act will operate retrospectively as if the said sub-section never existed in the statute. It is relevant to observe, when identical issue came up for consideration before the Tribunal in assessee's own case in assessment year 2003-04, the Tribunal in the order passed in ITA no.4520/Mum./2013, dated 17th February 2016, has held that the omission of sub-section (9) of section 10A of the Act, would effectively mean that the said provision never existed in the statute and accordingly allowed assessee's claim under section 10....
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....ntract is an intangible asset and accordingly allowed assessee's claim of depreciation. 38. The learned Departmental Representative, though, fairly submitted that the issue has been decided in favour of the assessee by the Tribunal in assessment year 2004-05, however, he relied upon the observations of the Assessing Officer. 39. The learned Sr. Counsel for the assessee relied upon the findings of the learned Commissioner (Appeals). 40. We have considered rival submissions and perused materials on record. Insofar as factual aspect of the issue is concerned, there is no dispute that by virtue of acquisition of M/s. Town and Country Assistance Ltd., various contracts executed by the said concern with third party clients were assigned to the assessee. It is also a fact that such acquisition took place by virtue of an agreement executed on 13th January 2004. It is also a fact on record that in assessment year 2004-05, the assessee for the first time claimed depreciation by treating the capitalized value of the amount paid towards acquiring M/s. Town and Country Assistance Ltd., as an intangible asset and claimed depreciation @ 25%. Notably, the Assessing Officer while completing asse....
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....e disallowance before the first appellate authority. 43. Learned Commissioner (Appeals) after examining the provisions of Double Taxation Avoidance Agreement (DTAA) between India and U.SA. as well as India and U.K. held that the payment made cannot be treated as fees for technical services under the respective tax treaties. Further, he observed that in assessee's own case for assessment year 2004-05 he has decided the issue in favour of the assessee by holding that the provisions of section 195(1) of the Act is not applicable to the payments made, as, such payment cannot be treated as fees for technical services. Accordingly, he deleted the disallowance made under section 40(a)(i) of the Act. 44. The learned Departmental Representative, though, fairly submitted that the issue has been decided in favour of the assessee by the Tribunal in assessment year 2004-05, however, he relied upon the observations of the Assessing Officer. 45. The learned Sr. Counsel for the assessee relying upon the observations of the learned Commissioner (Appeals) submitted that the issue stands decided in favour of the assessee by the Tribunal in assessee's own case for assessment year 2004-05. 46. We h....
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....isallowed assessee's claim of deduction under section 10A of the Act on the ground that the assessee has shown a profit of Rs. 1.29 crore, in respect of one eligible unit under section 10A of the Act, whereas, there are losses in respect of all other units and the net effect after grossing of income of all the units, there is loss, hence, no deduction under section 10A of the Act is allowable. 49. When the assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority, the learned Commissioner (Appeals) held that if the assessee has more than one unit, deduction under section 10A of the Act is to be computed for different undertakings separately and not by grossing up the income / loss of all the units. He also held that deduction under section 10A of the Act is to be granted at the source and not after computing gross total income. Accordingly, he allowed assessee's claim of deduction u/s 10A of the Act without setting-off the losses of other units. 50. The learned Departmental Representative relied upon the observations of the Assessing Officer. 51. The learned Sr. Counsel for the assessee submitted, the issue has now been settled by t....
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.... 58. Having considered rival submissions and perused material on record, we find that while deciding identical issue in assessment year 2004-05, the Tribunal has restricted the disallowance to 10% of the total expenditure claimed by the assessee. Facts being identical, following the aforesaid decision of the Tribunal in ITA no.2318/Mum./ 2009, dated 4th May 2018, we restrict the disallowance to 10% of the total expenditure claimed by the assessee under the head "Others". 59. Ground no.2, the assessee has challenged the decision of the learned Commissioner (Appeals) in determining the arm's length price of guarantee commission @ 0.5%. 60. This ground raised by the assessee is corresponding to ground no.4 of Revenue's appeal in ITA no.631/Mum./2011. In view of our decision therein in the earlier part of the order, separate adjudication of the ground raised by the assessee is not required. Accordingly, learned Commissioner (Appeals)'s decision on this issue is upheld. 61. In the result, assessee's appeal is partly allowed. ITA no.7378/Mum./2012 Assessee's Appeal - A.Y. 2008-09 62. Ground no.1, relates to disallowance of deduction claimed under section 10A of the Act by ....
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....lier assessment years, as referred to above. 73. Ground no.9, being general in nature is not required to be adjudicated independently. 74. Ground no.10 is identical to grounds no.1 and 2 raised by the Revenue in ITA no.631/Mum./2011. In terms of our decision given in the earlier part of the order, we direct the Assessing Officer to treat the AEs as the tested party and benchmark the international transactions separately without aggregating them. 75. In grounds no.11 and 12, the assessee has challenged selection / rejection of certain comparables by the Transfer Pricing Officer and upheld by the DRP. 76. Before we deal with the issues relating to each comparable disputed before us by the assessee, it is necessary to briefly discuss the factual background relating to the issue. 77. As stated earlier, in the relevant previous year, since, the assessee had entered into international transactions, the Assessing Officer made a reference to the Transfer Pricing Officer for determining the arm's length price of the international transaction. During the proceedings before him, the Transfer Pricing Officer on examining the transfer pricing study of the assessee found that the assess....
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....g the transfer pricing study report proceeded to select comparables independently. Out of the 16 comparables selected by the assessee, the Transfer Pricing Officer retained seven while rejecting the rest of the comparables. In addition to the aforesaid seven comparables from the assessee's list of comparables, the Transfer Pricing Officer himself added 10 more comparables. Thus, the total comparables finally selected by the Transfer Pricing Officer was 17 with average PLI of 22.90%. Since, the assessee has shown the margin of 9.62%, the Transfer Pricing Officer made an upward adjustment of Rs. 44,46,046. On the basis of transfer pricing adjustment made by the Transfer Pricing Officer, the Assessing Officer made addition to the income of the assessee. Though, the assessee challenged the aforesaid addition before the DRP contesting them on various ground, however, it did not get the desired result and in pursuance to the directions of the DRP, the Assessing Officer completed the final assessment order. 78. Before us, the major issue relating to transfer pricing adjustment is, with regard to selection / rejection of comparables under both the segments. At first, we will deal with ass....
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....reby exceeding the threshold limit of 25% fixed by the Transfer Pricing Officer, but, the company has a different accounting year ending which is 30th June. It is noticed that in case of H&S Software Development and Knowledge Centre Pvt. Ltd. (supra), the Tribunal, Delhi Bench, taking note of the fact that the RPT of the company exceeds the threshold limit of 25% fixed by the Transfer Pricing Officer himself and further it has a different financial year ending has held that it cannot be treated as a comparable. The Tribunal, Mumbai Bench, in Dialogic Network India Pvt. Ltd. (supra) has also rejected this company as a comparable since it has a different financial year ending. Since, the aforesaid decisions of the Tribunal pertain to the very same assessment year, respectfully following the ratio laid down therein, we exclude this company from the list of comparables. ii) GENESYS INTERNATIONAL CORPORATION LTD. 82. Objecting to the selection of this company learned Sr. Counsel for the assessee submitted that it is engaged in engineering (CAD/CAM) and geographic Information Services (GIS) which are in the nature of Knowledge Process Outsourcing (KPO) services. Further, he submitted....
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....ompany, learned Sr. Counsel for the assessee submitted, the company is functionally different from the assessee as it provides data analytics and data process solution which are in the nature of KPO services. In this context, he drew our attention to the information given in the annual report of the company. He submitted, considering the nature of services provided by this company, not only different Benches of the Tribunal but also the Hon'ble Delhi High Court in Rampgreen Solution Pvt. Ltd. v/s CIT, [2015] 377 ITR 533 (Del.) has held that since this company provides KPO services, it cannot be a comparable to ITE service provider. In support of such contention, he relied upon the following decisions:- i) Rampgreen Solutions Pvt. Ltd. v/s CIT, ITA no.102/2015 (Del.), dated 10.08.2015; ii) Maersk Global Centres India Pvt. Ltd. v/s ACIT, ITA no.7466/ Mum./2012, dated 07.03.2014; iii) Accenture Services Pvt. Ltd. v/s ACIT, IT(TP)A no.7686/ Mum./2012, dated 20.07.2018; iv) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; v) Goldman Sachs (I) Securities Pvt. Ltd. v/s ACIT, ITA no.6912/ Mum./2012, daed 29.07.2016; vi) HSBC Electronic Data ....
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....Aptara Technology Pvt. Ltd., [2018] 92 taxmann.com 240; ii) PCIT v/s BNY Mellon International Operations India Pvt. Ltd. ITA no.1226/2015, dated 23.04.2018; iii) Rampgreen Solutions Pvt. Ltd. v/s CIT, [2015] 60 taxmann. com 355; iv) PCIT v/s New River Software Services Pvt. Ltd. ITA no.924/ 2016, dated 22.08.2017; v) CIT v/s Mercer Consulting India Pvt. Ltd. ITA no.101/2015, dated 21.08.2016; vi) Maersk Global Services Pvt. Ltd. v/s ACIT, ITA no.7466/ Mum./2012, dated 07.03.2014; vii) Goldman Sachs (I) Securities Pvt. Ltd. v/s ACIT, ITA no.6912/ Mum./2012, daed 29.07.2016 viii) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; ix) M/s. Capital IQ Information Systems Pvt. Ltd. v/s DCIT, ITA no.196/Hyd./2011, dated 23.11.2012; x) Symphony Marketing Solutions India Pvt. Ltd. v/s ITO, ITA no.1316/Bang./2012; dated 14.08.2013; xi) Stream International Services Pvt. Ltd. v/s ACIT, [2015] 53 taxmann.com 19 (Mum.); xii) Willis Processing Services India Pvt. Ltd. v/s ACIT, [2017] 83 taxmann.com 198; xiii) H&S Software Development and Knowledge Management Centre Pvt. Ltd., ITA no.436 and 496/Del./2013, dated 20.03.2018; and xiv) B.P. ....
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....ces Pvt. Ltd. v/s ACIT, [2015] 55 taxmann.com 150 (Mum.). 92. The learned Departmental Representative relied upon the observation of the DRP and the Transfer Pricing Officer. 93. We have considered rival submissions and perused material on record. From the information furnished in the annual report of the company, a copy of which is placed in the factual paper book, it is seen that the company has categorized itself as a KPO service provider. It is also seen that it offers services in the area of civil and structural engineering, mechanical product design, plant engineering and GIS service. These services certainly cannot be categorized as routine BPO service as they require different skill set. Thus, from the aforesaid facts it is evident that the company is functionally different from the assessee as it provides high end services which are in the nature of KPO services. The decisions cited by the learned Sr. Counsel for the assessee, many of which pertain to the impugned assessment year, expresses similar view. Thus, respectfully following the consistent view expressed by the different benches of the Tribunal in the decisions referred to above, we hold that this company cannot ....
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....aged in the software development / software product development. However, no segmental details are available. Further, the annual report reveals that in the relevant financial year there are mergers / acquisitions which might have impacted the financial results of the company. Considering the aforesaid aspects, different benches of the Tribunal have held that this company cannot be treated as comparable to an ITE service provider. Since, majority of the aforesaid decisions of the Tribunal pertain to the impugned assessment year, respectfully following them, we hold that this company cannot be treated as comparable. vii) ACROPETAL TECHNOLOGIES LTD. (SEGMENT) 97. Objecting to the selection of this company learned Sr. Counsel for the assessee submitted, as per the information available in the annual report, the company is engaged in the development of computer software. Further, it is also engaged in the business of engineering design services and information technology services. He submitted, the Transfer Pricing Officer has selected the engineering design segment as comparable to the assessee which is totally incorrect. Further, he submitted, about 71% of the total expenditure o....
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....ng services, infrastructure set-up and management, consulting services, architecture, configuration and installation, etc. Thus, it was submitted, the company being functionally different cannot be treated as comparable to the assessee. Further, the learned Sr. Counsel submitted, the financials of the company provided by the Transfer Pricing Officer do not contain the director's report, management discussion and analysis. He submitted, these information are also not available in the public domain. He submitted, in the absence of complete annual report, the assessee cannot verify comparability of this company, hence, it should be rejected. In support of his contention, the learned Sr. Counsel relied upon the following decisions:- i) PCIT v/s Aptara Technology Pvt. Ltd., ITA no.1209 of 2015, (Bom.); ii) PCIT v/s BNY Mellon International Operations India Pvt. Ltd., [2018] 93 taxmann.com 363 (Bom.); iii) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/ Mum./2012, dated 27.07.2018; iv) Accenture Services Pvt. Ltd. v/s ACIT, IT(TP)A no.7686/ Mum./2012, dated 20.07.2018; v) H&S Software Development & Knowledge Management Centre Pvt. Ltd. v/s DCIT, ITA no.436 & 496/Del./2013,....
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....any has been granted 40 patents and has 62 pending patents application which shows that it is into high end activity. He submitted, the company undertakes significant research and development activities which is evident from the financials. Finally, he submitted, that as per the director's report, there is merger of three companies during the relevant previous year. Thus, he submitted, the aforesaid factors make this company non-comparable to the assessee. In support of such contentions, he relied upon the following decisions:- i) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; ii) Hinduja Global Solutions Ltd.v/s DCIT, [2017] 78 taxmann.com 199 (Mum.); iii) Capgemini India Pvt. Ltd. v/s ITO, [2016] 66 taxmann.com 163 (Mum.); iv) B.P. India Services Pvt. Ltd. v/s ACIT, [2015] 55 taxmann.com 150 (Mum.); v) Sunquest Information Systems India Pvt. Ltd. v/s JCIT, [2017] 80 taxmann.com 42 (Bang.); vi) CIT v/s Pentair Water India Pvt. Ltd., ITA no.18 of 2015, dated 16.09.2015; and vii) PCIT v/s New River Software Services Pvt. Ltd., ITA no.924 of 2016, dated 22.08.2017. 104. The learned Departmental Representative relied upon the observati....
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....sidered rival submissions and perused material on record. From the material available on record we find that this company is not only rendering a variety of services but it also owns significant intangibles. Further, being part of Infosys Group it enjoys the goodwill and the brand value of the group which gives it more bargaining power and advantageous position with regard to pricing compared to a captive service provider like the assessee. Considering the aforesaid aspects, the Tribunal in a number of decisions, as cited by the learned Sr. Counsel, has held that this company cannot be a comparable to a routine ITE service provider. Following the consistent view of the Tribunal in the decisions referred to above, we hold that this company cannot be a comparable to the assessee. xi) DATAMATICS FINANCIAL SERVICES LTD. 109. Objecting to the selection of this company the learned Sr. Counsel for the assessee submitted, it is engaged as a registrar to the public issue and carries out registration and share transfer works. He submitted, as per the revenue details in the Profit & Loss Account it earns revenue through processing and printing, export of ITES and other income. Drawing our....
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.... ii) Stream International Services Pvt. Ltd. v/s ACIT, ITA no. 8290/ Mum./2011, dated 10.10.2014; and iii) B.P. India Services Pvt. Ltd. v/s ACIT, [2015] 55 taxmann.com 150 (Mum.). 112. The learned Departmental Representative relied upon the observations of the DRP and the Transfer Pricing Officer. 113. We have considered rival submissions and perused material on record. From the material on record it is evident that the promoters of this company were indicted for fraud and misappropriation. Moreover, as per the working submitted by the assessee, the revenue earned from export of ITES works out to 52.80% which is less than export revenue filter of more than 75% applied by the Transfer Pricing Officer. For the aforesaid reasons, this company cannot be treated as comparable to the assessee. The decisions relied upon by the learned Sr. Counsel also support this view. Accordingly, we exclude this company as a comparable. COMPARABLES UNDER SOFTWARE DEVELOPMENT SERVICES SEGMENT i) LGS GLOBAL LTD. (FORMERLY - LANCO GLOBAL SYSTEMS LTD. 114. The learned Sr. Counsel for the assessee submitted, this is one of the companies selected by the assessee also. He submitted, while exam....
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....fy the more than 75% service income filter applied by the Transfer Pricing Officer. Thus, he submitted, the company cannot be treated as comparable. In support of his contention, the learned Sr. Counsel for the assessee relied upon the following decisions:- i) PCIT v/s Barclays Technology Centre India Pvt. Ltd., ITA no. 1384 of 2015, dated 07.08.2018; ii) Adobe Systems India Pvt. Ltd. v/s JCIT, ITA no.5963/Del./ 2012, dated 29.10.2014; iii) PTC Software India Pvt. Ltd. v/s ACIT, ITA no.2546/Pn./2012, dated 11.09.2017; and iv) Barclays Technology Centre v/s ACIT, ITA no.2279/Pn./2012, dated 28.01.2015. 118. The learned Departmental Representative submitted, since this comparable is selected by the assessee himself and the Transfer Pricing Officer has accepted it, assessee's contention for rejecting the company as comparable should not be accepted. 119. In rejoinder, the learned Sr. Counsel for the assessee submitted, even if the assessee has selected it as a comparable in the transfer pricing study, however, it cannot be precluded from seeking removal of the company as a comparable if there are valid reasons for doing so. In support of such contention, he relied upon the f....
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....Tree, Apps Scale and MIDAS. He submitted, due to the aforesaid factors this company is not comparable to the assessee as it is functionally different. The learned Sr. Counsel submitted, though the assessee had selected this company as comparable in the transfer pricing study, however, it is not precluded from seeking removal of this company as a comparable if there are valid reasons to do so. In support of his contention, the learned Sr. Counsel relied upon the following decisions:- i) PCIT v/s Barclays Technology Centre India Pvt. Ltd., ITA no. 1384 of 2015, dated 07.08.2018; ii) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; iii) John Deere India Pvt. Ltd. v/s DCIT, ITA n o.827/Ph./2014, dated 27.10.2016; iv) UCB India Pvt. Ltd. v/s ACIT, ITA no.7691/Mum./20112, 29.07.2016, [2016] 73 taxmann.com 389 (Mum.); v) Nihilent Technologies Pvt. Ltd. v/s ITO, ITA no.2428/Pn./2012, dated 10.05.2018; vi) Aircom International India Pvt. Ltd. v/s DCIT, ITA no.6402/ Del./2012, dated 02.08.2017; vii) 3DPLM Software Solutions Ltd. v/s DCIT, ITA no.1303/Bang./ 2012, dated 28.11.2013; viii) NTT DATA india Enterprise Application Services Pvt. Ltd. ....
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....m the facts on record, including the financial statement of the company, it is evident that the employee cost of the company works out to 8.2% of the total revenue. Therefore, it fails the employee cost filter of 25% applied by the Transfer Pricing Officer himself. For this reason alone, the company cannot be treated as comparable to the assessee. Even otherwise also, the company owns substantial intangible asset which makes it functionally different from the assessee. For the aforesaid reasons, the Tribunal in the decisions cited by the learned Sr. Counsel has excluded this company as a comparable. Following the consistent view of the Tribunal in the aforesaid decisions, we exclude this company as a comparable. v) E-ZEST SOLUTIONS LTD. 127. Objecting to the selection of this company the learned Sr. Counsel for the assessee submitted, as per the information available in the website of the company it is engaged in product engineering, software development, CRM product development, ERP, web designing, wireless application, e-business solutions, total development, etc. Whereas, segmental details are not provided. He submitted, due to the aforesaid activities carried out by the com....
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.... by the Transfer Pricing Officer. In support of such contentions, he relied upon the following decisions:- i) CIT v/s PTC Software India Pvt. Ltd. v/s ACIT, ITA no. 732/ 2014, dated 26.09.2016; ii) PTC Software India Pvt. Ltd. v/s ACIT, ITA no.2546/Pn./2012, dated 11.09.2017; and iii) Nihilent Technologies Pvt. Ltd. v/s ITO, ITA no.2428/Pn./ 2012, dated 10.05.2018. 131. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and the DRP. 132. We have considered rival submissions and perused materials on record. The primary ground on which the assessee objects to selection of this company is, it is involved in development of products. Notably, in case of CIT v/s PTC Software India Pvt. Ltd. (supra), the Hon'ble High Court upheld the decision of the Tribunal rejecting this company as a comparable on the ground that it is involved in development of software products. The same view has been expressed by the Tribunal in various other decisions as cited by the learned Authorised Representative. Since, the majority of the aforesaid decisions, including the decision of the Hon'ble Jurisdictional High Court, pertain to the impugne....
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....re, it cannot be compared to a captive service provider like the assessee. In support of his contention, the learned Sr. Counsel relied upon the following decisions:- i) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; ii) CIT v/s Agnity India Technologies Pvt. Ltd. ITA no.1204/2011, dated 10.07.2013; iii) UCB India Pvt. Ltd. v/s ACIT, ITA no.7691/Mum./2012, dated 29.07.2016, [2016] 73 taxmann.com 389 (Mum.); iv) Net Cracker Technology Solutions India Pvt. Ltd. v/s ACIT, ITA no.86/Hyd./2013, dated 17.06.2015; v) Capgemini India Pvt. Ltd. v/s ITO, ITA no.7099/Mum./2012, dated 10.12.32015; vi) Invensys Development Centre India P. Ltd. v/s ACIT, ITA no. 1692/Hyd./2012, dated 12.11.2014; vii) M/s. NTT Data India Enterprise Application Services Pvt. Ltd. v/s DCIT, ITA no.1862/Hyd./2012, dated 02.01.2015; viii) 3DPLM Software Solutions Ltd. v/s DCIT, ITA no.1303/Bang./ 2012, dated 28.11.2013; and ix) John Deere India Pvt. Ltd. v/s DCIT, ITA no.827/Ph./2014, dated 27.10.2016. 134. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and the DRP. 135. We have considered rival submissions an....
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....tware segment. Thus, he submitted, in absence of adequate segmental break-up of software development services, the company cannot be considered as a comparable. Further, he submitted, as per the information available in the website of the company it owns proprietary products such as CMSS, EDMS, Shine ERP, Virtual Insure. He submitted, as per the website, the company offers different products such as Virtual Insure, LA-Vision, Consultant Management Sales System, Docuflo, Shine ERP etc. He submitted, since it is also a product company it cannot be treated as comparable to the assessee. In support, he relied upon the following decisions:- i) Dialogic Network (I) Pvt. Ltd. v/s CIT, ITA no.7820/Mum./ 2012, dated 27.07.2018; ii) Accenture Services Pvt. Ltd. v/s ACIT, IT(TP)A no.7686/Mum./ 2012, dated 20.07.2018; iii) UCB India Pvt. Ltd. v/s ACIT, ITA no.7691/Mum./20112, 29.07.2016, [2016] 73 taxmann.com 389 (Mum.); iv) Net Cracker Technology Solutions India Pvt. Ltd. v/s ACIT, ITA no.86/Hyd./2013, dated 17.06.2015; v) Invensys Development Centre India Pvt. Ltd. v/s ACIT, ITA no. 1692/Hyd./2012, dated 12.11.2014; vi) CIT v/s PTC Software India Pvt. Ltd., ITA no. 732/2014, date....
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.... IT(TP)A no.292/ Bang./2013, dated 06.04.2018. 140. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and the DRP. 141. We have considered rival submissions and perused materials on record. The primary and fundamental reason on the basis of which assessee seeks rejection of the aforesaid comparable is, it is also engaged in the development of product and segmental details are not available. Notably, in case of Dialogic Networks (India) Pvt. Ltd. (supra), the Co-ordinate Bench while examining the comparability of the aforesaid company to a software development service provider, has rejected this company as a comparable considering the fact that it is engaged in product development and product design services. The same view has been reiterated by the Tribunal in the other decisions cited by the learned Sr. Counsel. Since, many of these decisions pertain to the impugned assessment year, respectfully following the aforesaid decisions of the Tribunal, we direct the Assessing Officer to exclude this company from the list of comparables. ix) TATA ELXSI LTD. 142. Objecting to the selection of this company the learned Sr. Counsel for ....
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....f the Transfer Pricing Officer and the DRP. 144. We have considered rival submissions and perused materials on record. On a perusal of the documents placed in the paper book it appears that this company is engaged in various activities including development of niche product and development services. Thus, the company is functionally different from the assessee. Considering the aforesaid aspect, the Co-ordinate Bench in case of Dialogic Networks (India) Pvt. Ltd. (supra), which is for the very same assessment year, has excluded this company as a comparable. Similar view has also been expressed in the other decisions cited by the learned Sr. Counsel. Thus, keeping in view the decisions of the Tribunal referred to above, we hold that this company cannot be a comparable to the assessee. ix) THIRDWARE SOLUTIONS LTD. 145. Objecting to the selection of this company the learned Sr. Counsel for the assessee submitted, the annual report of the financial year 2007-08 does not provide a clear picture of the functional profile of the company. He submitted, as per the information available in the annual report, the company is engaged in implementation and consulting services of software bas....
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....a comparable to the assessee. x) WIPRO LTD. 148. Objecting to the selection of this company the learned Sr. Counsel for the assessee submitted, it is engaged in diversified operations. He submitted, the company is a leading provider of information technology, business process outsourcing and product engineering services to customers globally. It provides integrated business technology and process solution on a global delivery platform and employs over 94,000 people across 56 nations. He submitted, as per information available in the annual report, the company offers consulting, package implementation, application development and maintenance, testing services, technology infrastructure, business process outsourcing and product engineering services. He submitted, in absence of suitable segmental details, the company cannot be considered as a comparable as software development and non-software development services cannot be compared for benchmarking purposes. Further, he submitted, the turnover of Wipro Ltd. from I.T. services segment for financial year 2007-08 is Rs. 11955.06 crore as against Rs. 2.59 crore of the assessee. He submitted, the company with such a huge turnover cann....
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.... 151. Objecting to the rejection of this company the learned Sr. Counsel for the assessee submitted, the only reason on which the Transfer Pricing Officer rejected this company is, its on-site information is not available. He submitted, during the Transfer Pricing proceedings, in the show cause notice the Transfer Pricing Officer has not explained the rationale adopted by him to exclude this company. He submitted, in any case of the matter, the Transfer Pricing Officer has not applied the on-site revenue filter. Therefore, for that reason alone the company cannot be rejected as a comparable. 152. The learned Departmental Representative submitted, no details were provided with regard to on-site revenue earned by the company. He submitted, since there will be difference in cost between on-site and off-site development, relevant information is necessary for considering the comparability of this company. 153. We have considered rival submissions and perused material on record. As could be seen from Para-3 of the Transfer Pricing Officer's order, he has rejected this company on the reasoning that on-site revenue information is not available in the annual report. It is a fact on recor....
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....to the AEs is on account of reimbursement of actual expenditure incurred by the AEs on behalf of the assessee without any profit element, in our view, it should not be considered for computing RPT. Only for the limited purpose of verifying this aspect, we restore the issue to the Assessing Officer / Transfer Pricing Officer for deciding afresh after due opportunity of being heard to the assessee. xiii) SIP TECHNOLGIES AND EXPORTS LTD. 157. Objecting to the rejection of this company the learned Sr. Counsel for the assessee submitted, the only reason on which this company has been rejected by the Transfer Pricing Officer is, it is a loss making company. The learned Sr. Counsel submitted, the reasoning of the Transfer Pricing Officer is factually incorrect as the net cost plus margins of the company for financial year 2005-06 is 21.14% and for financial year 2006-07 is (-17.60%). Thus, he submitted, since the company has not incurred loss consistently in the impugned assessment year as well as the preceding two years, it cannot be rejected as a comparable. He submitted, since the Transfer Pricing Officer has not made any adverse comment with regard to functional similarity of the ....