TaxTMI 
TaxTMI 
2019 (4) TMI 1609
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....AO on account of transfer pricing adjustment when the TPO has rightly determined the arm's length price u/s 92CA(3) in respect of international transaction entered into by the assessee during the Financial Year 2004-05. The reliance is placed on the decision of the Ld. ITAT in the case of Serdia Pharmaceuticals (I) Pvt. Ltd. vs ACIT (ITAT - Mumbai). 2. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in directing the TPO to exclude the two companies, namely (i) L&T Infotech (ii) M/s Thirdware Solution Ltd from the final set of comparables, when TPO has rightly drawn the conclusion that in view of the peculiarity of this case and also keeping in view of the unique nature of transactions involved, the comparables selected are justified and appropriate. 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in facts and law in holding that working capital adjustment should be allowed on the same lines as given in the Assessment Year 2007-08, when the TPO has rightly drawn the conclusion that the biggest problem about this adjustment is the i....
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....e its billing system. 6. CSG renders professional services to CSG, UK. The professional services rendered by CSG India entail analysis, configuration, customization, integration, implementation and deployment of billing solutions of CSG, UK. The said services are provided as per the Inter-Company Service Agreement between CSG UK and CSG India. 7. The functions performed by CSG India and CSG UK in relation to the professional services are as follows: a) Product development; b) Integration and implementation; and c) Billing and collection. 8. CSG India also renders liaison services to CSG UK which includes liaising with potential customers and communicating with them about the services and products of CSG UK in India. 9. CSG India also renders maintenance services to CSG UK, which involves warranty related services on behalf of CSG UK., error verification, bypass, big fix assistance in update and new release implementation and help desk services. 10. During the course of transfer pricing assessment proceedings, on examination of FAR analysis conducted by the assessee, the TPO noticed that the assessee company has not selected appropriate comp....
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....rated and justified its transfer pricing method employed in the transfer pricing report and stated that the FAR analysis conducted by the assessee is adequate. 14. In its submissions, the assessee vehemently pointed out that in the fresh analysis carried out by the TPO, the TPO has failed to demonstrate the weight assigned to functions, assets and risks used in the fresh search carried out by the TPO as this seems to be the reason for discarding the comparables chosen by the assessee. 15. It was further pointed out that the turnover filed is not a correct filter in the case of the assessee and objected to the rejection of loss making companies from the set of comparables. It was pointed out that some of the comparables are functionally different and having related party transaction. The use of multiple year data was also objected. The assessee strongly pointed out that working capital adjustments and risk adjustment should be made to the comparables. 16. After considering the submissions of the assessee, the TPO partly accepted the contentions and agreed that the following companies are having related party transactions: 1. Four soft Ltd 2. Geometirid Sof....
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....After considering the facts and submissions, the ld. CIT(A) found correctness in the contention of the assessee, in so far as L & T Infotech Ltd is concerned. The ld. CIT(A) accordingly directed to exclude L & T from the list of comparables. 22. In so far as Thirdware Solution Limited is concerned, the ld. CIT(A) was convinced that this company has a super normal profits and following the decision of the co-ordinate bench in the case of Egain Communication Pvt Ltd [supra], directed the TPO for exclusion of Thirdware Solutions Ltd. 23. In so far as the benefit of working capital adjustment is concerned, the ld. CIT(A) observed that it is logical to make adjustments on account of working capital of the comparables and found that the only objection of the TPO was with regard to not allowing working capital adjustment is the difficulty in working out such adjustments. However, the ld. CIT(A) found that the working capital adjustment has been made in the case of the assessee for assessment year 2007-08. Considering this fact, the ld. CIT(A) directed the TPO to give working capital adjustment on the same basis as given in assessment year 2007-08. 24. Before us, the ld. DR strong....
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....n Life India Service Centre Private Limited ITA No. 1489/DEL/2014 order dated 28.09.2015 and pointed out that on identical objection, the bench has allowed the working capital adjustment. 28. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below. In so far as the first objection of the ld. DR that exclusion of Thirdware Solution Pvt Ltd was not in the grounds of appeal before the first appellate authority does not hold any water because once the assessee challenges the TP adjustment, based upon the comparables, inclusion/exclusion is imbibed in the grounds itself. 29. The Annual Report of Thirdware Solution Pvt Ltd has been carefully examined. As mentioned elsewhere, the sales of this company includes : a) sale of licence b) software services c) export d) revenue from subscription. 30. However, a perusal of the annual report reveals that there is no segmental reporting. In our understanding of the facts, even if the Revenue from the three services mentioned at b), c) and d) above comprises of 90% of the total sales, still segmental reporting is a must to justify the inclusion o....
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....issue. 34. Coming to the additional ground raised by the Revenue which states that the ld. CIT(A) erred in not including M/s Infosys as one of the comparables, which was left out by the TPO due to inadvertence. 35. Before us, the ld. DR strongly stated that the assessee itself has included M/s Infosys as a good comparable in its TP study and the TPO inadvertently did not include the same in the list of final set of comparables. It is the say of the ld. DR that erroneously the TPO included L & T Infotech which was excluded by him and instead of including M/s Infosys, the TPO has mentioned L & T Infotech. Being a typographical error, Infosys Ltd should be included. 36. Per contra, the ld. counsel for the assessee vehemently opposed to the admission of this additional ground. It is the say of the ld. counsel for the assessee that if it was erroneous on the part of the TPO/Assessing Officer, the error could have been easily rectified u/s 54 of the Act and if such error is prejudicial to the interest of the revenue, the same could have been rectified u/s 263 of the Act. Therefore, the plea taken by the Revenue cannot be a matter of additional ground. 37. Having heard the riv....