TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1568
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....sued and served on assessee on 07.09.2012. Thereafter, notice u/s 142(1) of the Act along with questionnaire was issued and served on the assessee. AO noticed that during the year under consideration, assessee had entered into international transactions with its Associated Enterprises (A.Es) aggregating to Rs. 28,13,74,447/- which falls within the ambit of Secs.92A and 92B of the Act. He therefter made a reference u/s 92CA(1) of the Act to the Transfer Pricing Officer (TPO) for determining the Arms Length Price (ALP). 3. Thereafter, TPO/AO passed order u/s 92CA(3) of the Act vide order dt.19.01.2015 wherein he did not accept the bench marking of the international transactions done by the assessee with it's A.Es. TPO proposed upward adjustment of Rs. 2,48,67,246/- in respect of international transactions relating to software development and technical support by the assessee to its holding company Redknee Inc. Thereafter, a draft assessment order was passed by the AO u/s 143(3) r.w.s. 144C(1) of the Act vide order dt.20.02.2015 and the total income was determined at Rs. 2,48,71,230/-. Aggrieved with the adjustment of Rs. 2,48,67,246/- to the Arms Length Price (ALP) of assessee's int....
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.... adjustment to the Appellant The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred on the facts and in circumstances of the case in non-granting risk adjustment to the Appellant. 6. Transfer pricing adjustment without giving benefit of +/- 5 per cent The learned DCIT has erred in law and on the facts and in circumstances of the case in not granting the benefit of +/- 5 percent as per proviso to section 92C(2) of the Act. 7. Initiation of penalty proceedings The learned DCIT, erred on the facts and in law in proposing to initiate penalty proceedings section 271 (1)(c) of the Act, without considering the facts of the case. 8. Levying of interest 15.1 The learned DCIT, has erred on the facts and In law by levying interest under sections 234B and 234C of the Act. 15.2 The Appellant pleads that the shortfall in advance tax and excess refund has resulted in view of the transfer pricing adjustment which have been objected in the grounds above. 9. Each one of the above grounds of appeal is without prejudice to the other." 4. Before us, at the outset, Ld.A.R. submitted that he does not wish to press ground No.3. In view of the submissions of Ld.....
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....nt at Rs. 1,71,78,297/-. Aggrieved by the order of TPO, assessee is now in appeal before us. 6. Before us, the Ld.A.R. reiterated the submissions made before AO/TPO & DRP and further with respect to inclusion of E-Infochips Limited as comparable by DRP, submitted that E-Infochips Limited has been wrongly considered to be a comparable with the assessee. He submitted that E-Infochips Limited not only provides software services but is also engaged in manufacturing and trading of printed circuit electronic boards and for which no segmental data is available. He further submitted that the business activity of EInfochips Limited is mainly in the nature of product designing. On the other hand, he submitted that assessee does not undertake any research and development and hence, E-Infochips Limited cannot be compared with the assessee company. He further submitted that from the analysis of year-on-year profitability of EInfochips Limited, it can be observed that profitability shows an abnormal trend. It has shown operating loss of 18.12% in 2009 and thereafter the profitability of E-Infochips Limited has risen to 56.44% while the operating cost has remained more or less constant. He furth....
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....roducts, manufacturing EVM and VDB Electronic Boards and all the activities being considered as single reportable business segment, it is an undertaking in IT enabled services and cannot be compared to a concern engaged in rendering pure software development services and accordingly directed its exclusion. He therefore submitted that E-Infochips Limited be excluded from the list of comparables. He thereafter submitted that if the E-Infochips Limited is excluded from the comparable companies, the margins of the assessee will fall within + 5% range as compared to the margins of comparables and therefore the international transactions will be at Arms Length Price and in such a situation, no adjustment to ALP would be made and therefore the adjudication of other grounds would not be necessary. 7. Ld.D.R. on the other hand, pointed to the findings of DRP at Para 11.3, wherein it was noted that the turnover of trading account is not substantial and therefore it cannot be considered to be not comparable to assessee. He further pointed to the findings of the TPO, wherein he has held that there is no material change in the revenue composition as more than 70% of the revenue are from softwa....