TaxTMI 
TaxTMI 
2019 (1) TMI 1194
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....n the submissions made before him and proceeded to make transfer pricing adjustment on the basis of TPO's order. 4. The Ld. Transfer Pricing Officer has erred in facts and in law to reject, based on his subjective grounds and presumptions, the economic analysis conducted by the appellant for determination of the arm's length price. 5. The Ld. Transfer Pricing Officer has erred on facts and circumstances of the case in rejecting the appropriate filters as applied by the appellant and further modifying the filters arbitrarily without proper appreciation of the facts, law and commercial reality. 6. The Ld. Transfer Pricing Officer has erred in laws and facts of the case by rejecting the comparables submitted in a fresh and comprehensive study conducted by the appellant for ascertaining arm's lengths price. 7. The Ld. Transfer Pricing Officer has erred on facts and circumstances of the case by considering companies having very high turnover as comparables. 8. The Ld. Transfer Pricing Officer has erred on facts and circumstances of the case by erroneously computing related party transactions of companies selected by him 9. The Ld. Tr....
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.... of software development services Rs.9,38,16,056/-. 2.2 Ld.TPO observed that assessee has selected TNMM as most appropriate method to benchmark international transaction by using OP/OC as PLI. The PLI of assessee accordingly was computed at 15.82% on cost. Assessee selected following 4 comparables with an average margin at 11.11%, and thus, it was contended that transaction was at arm's length. S. No. Comparables OP/OC Average OP/OC 1. KALS Inf. Systems 16.40% 14.19% KALS Inf. Systems 11.98% 2. Space Computers 5.95% 5.95% Space Computers 2.34% 0.02% 3. Zylog Sys -2.31% 4. Laser Soft Infosystems Ltd. 14.56% 24.29% Laser Soft Infosystems Ltd. 34.02% Average 11.11% 2.3 Ld. TPO rejected 3 comparables, by using various filters and selected a set of following 11 comparables including one from assessee's set with an average margin of 20.33%. S. No. Comparables OP/OC (margin) 1. Evoke Technologies Pvt. Ltd. 18.56% 2. L & T Infotech Ltd. 19.06% 3. Mindtree Ltd. (Segment) 13.92% 4. Sasken....
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.... products to customers. It also involves marketing and advertising of products/services for business and promotion of brand name in market, which is carried out by Intertech alone. Further Intertech also takes up marketing and promotion activities of products developed by assessee whereas, assessee is involved in marketing sales and distribution of the same only. 6.3 Assessee also carries out accounting, administration, human resource management to manage the office and assignments. Assets: 7. Assessee owns normal routine assets like computers officer except at equipments furniture fittings vehicles software etc it does not own any intangibles and non-routine that assets and does not own any trade secrets or undertake research and development activities on its own account, that would lead to development of non-routine intangibles. Risks: 8. Assessee experiences moderate market risk low product liability risk locus, credit risk high foreign exchange risk and nil on inventory risk. 9. Ld. Counsel submitted that Ground No. 1-3 are general in nature and therefore do not require any adjudication. Accordingly the same are dismissed. 10. Ground No. 4-5 ....
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.... use current year data, unless it is shown by assessee that such earlier years data has an influence in determining transfer price and that, use of earlier year data is in addition to current year data. Ld.TPO rejected company, where current year data was not available and assessee had sought to rely upon preceding two years data, which in our considered opinion is appropriate as assessee has not been able to establish what is required under rule 10 B (4) of Income Tax Rules 1963. 18. Next filter that has been modified by Ld.TPO is in respect of turnover. Assessee had included companies with an average sales of less than 1 crore during the year and companies with more than 50 crores were rejected. Ld.TPO observed that companies whose income is less than 5 crore would be appropriate as otherwise analysis may not lead to proper compatibility. It is observed that Ld.TPO modified lower limit of turnover filter from less than 1 crore to less than 5 crore. 19. We have also observed that Ld.TPO rejected companies which are making losses as comparables. This shows that there is a limit for lower end for identifying comparables. In such a situation, we are unable to understand as to w....
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....tudy as well as TP order, it is observed that comparables selected by assessee has been rejected as these fail revenue's filters. However no FAR analysis has been conducted by Ld.TPO in respect of comparables that has been rejected. 21. Comparables alleged for exclusion: 1. Evoke Technologies Pvt. Ltd. 21.1 Ld. Counsel submitted that this comparable selected by Ld.TPO is functionally dissimilar with that of assessee, as it provides services relating to ITeS and not into rendering of software development services like that of assessee. 21.2 On the other hand, Ld. DR submitted that this company has revenue from software development charges and its website reveals company to be providing quality software services to its clients. 21.3 We have perused submissions of both sides in light of records placed before us. Audited account for relevant year of this comparable is placed at page 402-416 of paper book volume 2. It is observed that revenue earned by this company is from software development charges. We are therefore not inclined to accept argument advanced by Ld. Counsel that this company is performing IT enabled services. Assessee has not been able to point out any di....