AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1322
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....al income of the Appellant at INR 3,03,89,190/- as against the loss declared by the Appellant in its return of income amounting to INR 2,57,12,740/- by making an upward adjustment of INR 50,764,694/- and INR 53,37,240/- with respect to Transfer Pricing and Corporate Tax matters, respectively. Part I - Transfer Pricing Grounds 3. That on facts of the case and in law, the DRP/TPO/AO have erred in rejecting the economic analysis undertaken by the Appellant for international transaction pertaining to provision of IT services ("impugned transaction"). 4. That on facts of the case and in law, the DRP/TPO/AO have erred in rejecting the comparable companies (viz. ADC India Communications Ltd., CMC Ltd., DCM Ltd., Glodyne Technoserve Ltd., Microland Ltd. and ORG Informatics Ltd.) which were considered as comparable by the Appellant for benchmarking the impugned transaction without considering the fact that these companies were engaged in providing similar services as compared to the Appellant. 5. That on facts of the case and in law, the DRP/TPO/AO have erred in recharacterizing the nature of the impugned transaction as provision of IT enabled services ("....
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.... in respect of certain companies considered/ rejected for benchmarking of impugned transaction. 11. That on facts of the case and in law, the DRP/TPO/AO have erred in erroneously allocating the operating costs pertaining to related and unrelated segments on the basis of the respective segmental revenue of the Appellant without appreciating the segmental details submitted by the Appellant and redetermined the operating cost of the Appellant for benchmarking the impugned transaction. 12. That on facts of the case and in law, the DRP/TPO/AO have failed to include foreign exchange gains/losses and provision for doubtful debts while computing the operating margins of the Appellant and the comparable companies. 13. That on facts of the case and in law, the DRP has grossly erred in giving a direction to carry out a fresh calculation of the margins of comparables as per the guidelines provided by the Safe Harbour Notification dated 18 September 2013, without understanding that: • Appellant has not applied for being assessed under safe harbor provisions • Safe Harbour provisions do not reflect arm's length nature of margins •....
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....g of IT products and provision of IT solutions and services in India. Portfolio of Fujitsu India includes servers, storage systems, workstations, notebooks, desktops & displays. Fujitsu India is also engaged in IT products Maintenance and Support services. During the year under consideration, the appellant was engaged in provision of IT services to its AEs. The said services were primarily in the nature of technical support pertaining to installation and implementation of goods sold directly by its AE in India. Broad portfolio of services includes: • Installation and commissioning • Integration services • Maintenance and support Services • Warranty Services During the relevant AY, 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's return of income. S. No. International Transaction Method Applied Amount 1 Trading of Goods RPM 14,45,29,350 2 Provision of IT Services TNMM 17,82,69,410 Payment of provision of IT Services TNMM 10,65,67,562 ....
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....td. 13.62% Average 30.87% Thereafter, the TPO proposed an adjustment of Rs. 5,07,64,694/- to the income of the assessee company. The Assessing Officer passed Assessment Order dated 30.01.2015 thereby making addition of Rs. 5,07,64,694/- towards TP adjustment. The Assessing Officer also made addition of Rs. 53,37,240 towards disallowance of provision for warranty. 4. Being aggrieved by the Assessment Order, the assessee filed present appeal. 5. As regards to Ground No. 1 and 2, the same are general in nature, hence dismissed. 6. The Ld. AR submitted that on Aggregation of international and domestic segments pertaining to IT segment, the segmental bifurcation of revenues and expenses into international and domestic segments given to the lower authorities are as under: Particulars International Segment Domestic Segment Total Revenue 178,289,410 61,200,528 239,469,938 Direct Cost 130,598,176 33,217,100 163,815,276 Indirect Cost 38,004,171 33,407,526 71,411,697 Total Operating Cost 168,602,347 66,624,626 235,226,973 Operating Profit 96,67,063 -54,24,098 4,242,965 NCP 5.73 -8.1....
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....sessee company is only engaged in the provision of limited IT support services for installation and commissioning of IT products directly sold by Fujitsu India's AEs to customers in India and thereby recharacterizing the assessee company as an ITES company. The primary function of the assessee company only comprises of providing basic support services once the IT products are sold by the AEs to the customers in India. Further, for the purpose of the said service, the assessee company derives its revenue on a lump sum basis and thus it is a risk mitigated entity. Additionally, the assessee company does not employ people having high end technical skills as the basic maintenance of the computer systems does not require people having high skilled technical knowledge. For IT service segment the functional analysis and risks assumed has been provided below: Functions performed: 1. Installation and commissioning: The assessee company is engaged in the installation and commissioning of IT Products (both hardware and software) sold by its AE's to third party customers in India. The services rendered range from integrating new technologies in IT infrastructure to providing ....
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....omestic and international segment. But the TPO has not taken into account the same while passing the order and rejected the economic analysis undertaken by the assessee company for international transactions pertaining to provision of IT services which is without any concrete reason. In fact, the TPO has taken Provision of IT services and payment for receipt of IT services in totality which are separately submitted by the assessee in respect of the segmental bifurcation of its revenues and expenses into different operating segments. To compute the arm's length price of the aforementioned transaction, the segment profitability of the assessee company needs to be taken into consideration as against aggregation of international and domestic segment of the assessee company. Thus, in the present case the arm's length price of the related party transactions of the assessee company has to be computed with its AE's on segmental basis and not that of profitability of the entire segment which include both AE and non AE transaction. This submission of the Assessee is well formed and is accepted as the assessee company has given all the information relating to international segment and domesti....