TaxTMI 
TaxTMI 
2019 (1) TMI 1467
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..... 2. The Ld. AO erred in proposing and the Hon'ble DRP further erred in confirming the addition of Rs. 275,332,146 to the Appellant's returned income of Rs. 268,459,314. Transfer Pricing Adjustment - Rs. 238,365,237 3. On the facts and in law, the Learned Joint Director of Income Tax, Transfer Pricing Officer-II(2) ("Ld. TPO") and the Ld. AO erred in proposing and the Hon'ble DRP erred in confirming the adjustment of Rs. 238,365,237 in relation to the international transactions of provision of software development services, provision of competency center services, provision of IT support services and payment of royalty and license fees for maintenance enhancement support entered into by the Appellant with its Associated Enterprises ("AEs") during the relevant previous year. 4. On facts and in law, the Ld. TPO/ Ld. AO and Hon'ble DRP further erred in disregarding the transaction-by-transaction analysis carried out by the Appellant in compliance with Rule 10B(l)(e) of the Rules read with Section 92C of the Act and determining the arm's length price at entity level by merging the Purchase of Software Segment with Software Development segment. In doing so: 4.1 The Ld....
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..... AO/ Ld. TPO erred in ignoring the directions of the Hon'ble DRP and incorrectly computing the operating profit margin of the finally selected companies by the Ld. TPO. 11. On the facts, the Ld. TPO/ Ld. AO and Hon'ble DRP erred in not considering the suo-moto adjustment of Rs. 18,966,029 offered by the Appellant in the tax return of year under consideration (i.e. AY 2010-11) for the Purchase of Software segment. 12. On facts and in law, the Ld. TPO/ Ld. AO and Hon'ble DRP erred in using the data for the current year (i.e. financial year 2009-10) which was not contemporaneous and which was not available in the public domain at the time of preparing the TP documentation by the Appellant, thereby grossly misinterpreting the requirement of'contemporaneous' data in the Rules to necessarily imply current year data, thereby breaching the principles of natural justice and 'impossibility of performance'. 13. On the facts and in law, the Ld. TPO/ Ld. AO and the Hon'ble DRP grossly erred in not allowing the risk adjustment in accordance with the provisions of Rule 10B(3) of the Rules to account for the differences in the risk profile of the Appellant and the comparable companies. ....
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....her services. During the relevant FY, the assessee company undertook the following international transactions with its AEs which were duly reported in the Accountant's Report (Form NO. 3CEB), filed along with the assessee company's return of income: Sr. No. International Transaction Amount (Rs.) 1 Payment of Royalty for Software 18,84,66,897 2 Purchase of Software and payment of license fees for maintenance, enhancement and support of software 17,94,90,302 3 Provision of software development services 1,08,09,46,382 4 Provision of competency centre services 3,70,21,317 5 Provision of IT Support services 13,30,62,645 3,62,51,053 6 Payment of APHQ Charges 7 Receipt of APHQ Charges 1,21,64,775 8 Infrastructure Utilization Expenses 4,56,47,025 9 Reimbursement of Expenses 1,47,58,023 10 Recovery of Expenses 2,99,83,257 With regard to Provision of software development, competency centre and IT support services, the assessee company operates as a contract services provider for Group Companies. With regard to the segment of purchase of software, the assessee company has been granted a nonexclusive, nontransferable license ....
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....separate. The Ld. AR further submitted the TPO erred in rejecting the segmentation carried out by the assessee and in further combining the Trading Segment with the Service Segment because the functional, asset and risk profile under these two segments are entirely different which are as below: Points for consideration Software Trading Segment Software Development Segment Transactions covered Purchase of software for re-selling Provision of software development services Pricing model Payment Transaction License and Royalty paid as a percentage of sales Income Transaction Cost plus mark-up received Customers Third party domestic customers Associated Enterprise Risk Assumed Assessee bears market risk, price risk, credit risk, etc. Assessee is low risk bearing captive service provider Thus, the Ld. AR submitted that the TPO changed the characterization which is not proper in respect of the Transfer pricing issues. The Ld. AR further submitted that the TPO has incorrectly stated that "the assessee has a fullfledged manufacturing facility". In-fact, the assessee is only engaged in duplicating the PLM Software and reselling such softwares in the Indian market. For such....
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....Software Trading Segment with Software Development Segment, but while doing so, there was no finding as to why these two segments has been aggregated/merged/clubbed by the TPO. Therefore, it will be appropriate to remand back this issue to the file of TPO/A.O. to decide the same afresh by taking into account FAR analysis given by the assessee in TP Study as well as principle of consistency. Therefore, Ground No. 4.2 is partly allowed for statistical purpose. Since this issue is remanded back, the subsequent grounds which were raised by the assessee in respect of Transfer Pricing Adjustment will also be decided by the TPO/A.O. according to the decision of aggregation/segregation of these two segments. Therefore, Ground Nos. 1 to 13 are partly allowed for statistical purpose. 9. As regards Ground Nos. 14 &15 relating to adjustment on account of advance billing, the Ld. AR submitted that this issue is already covered in favour of assessee vide order passed by the Co-ordinate Bench of the Tribunal in ITA Nos. 584 & 585/Del/2006 & 322/Del/2007 for Assessment Years 2001-02 to 2003-04 in UGS India Pvt. Ltd. Vs. ACIT and also in assessee's own case for Assessment Year 2008-09 and 2007-08 ....