TaxTMI 
TaxTMI 
2019 (6) TMI 437
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..... It provides Software Development Services and Quality Assurance (Testing) Services to its Associated Enterprises (AEs) on exclusive basis as a captive unit. The assessee filed its return declaring total income of Rs. 2.26 crore. The income-tax return was accompanied by the Audit Report in Form No.3CEB detailing its international transaction of providing software services. The assessee received revenue of Rs. 14.45 crore from rendering software development services. The Transactional Net Marginal Method (TNMM) was applied as the most appropriate method for benchmarking the international transaction with Profit Level Indicator (PLI) of Operating Profit to Total Cost (OP/TC). Such profit rate of the assessee was 14.72%. Certain comparables w....
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....les. The ld. AR submitted that this company should be excluded from the list of comparables on several reasons including different functional profile. The ld. DR raised a preliminary objection for non-exclusion of this company putting forth that it was a comparable chosen by the assessee itself and hence it cannot be allowed to resile from its own stand. 4. We are disinclined to sustain the preliminary objection taken by the ld. DR that the assessee should be prohibited from taking a stand contrary to the one which was taken at the stage of the T.P. study or during the course of proceedings before the AO/TPO. It goes without saying that the object of assessment is to determine the income in respect of which the assessee is rightly chargeab....
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.... assessee as comparable cannot act as a deterrent from challenging the fact that such a company is actually not comparable. 5. The Hon'ble Bombay High Court in several decisions including CIT Vs. Tata Power Solar Systems Ltd. (2017) 298 CTR 0197 (Bom) has held that a party is not barred in law from withdrawing from its list of comparables, a company included on account of mistake. Similar view has been taken by the Hon'ble Delhi High Court in Xchanging Technology Services India Pvt Ltd [TS-446-HC-2016(DEL)-TP] and the Hon'ble Punjab & Haryana High Court in CIT VS. Mercer Consulting (India) P. Ltd. (2017) 390 ITR 615 (P&H). In view of the foregoing discussion, we do not find any substance in the preliminary objection taken by the ld. DR....
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....enue from `Metals and minerals' at Rs. 51.19 lakh leading to total consolidated revenue of Rs. 14.01 crore. Thus, it is clear that the revenue from `Software development service' segment, which has been considered for the purposes of comparison with the assessee's only international transaction of rending software development services, stands at Rs. 3.28 crore. On perusal of Note no.33 to the annual accounts of this company as referred to above containing break-up of revenue from `Software development services' segment, it emerges that revenue from software development services is only a sum of Rs. 6.02 lakh and the entire remaining revenue of Rs. 3.22 crore is from engineering services. There can be no dispute on the proposition that engi....
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....al services, more so, when the percentage of software development services is minuscule, at just 1.86%. 8. It is further pertinent to note that the Directors' report of this company contains `Segment-wise performance' at page 11, which states that : "As of March 31, 2012 our main reportable segments are Software Development & Services (IT & ITeS) and Product/Hardware Sales & Services". It is, thus overt that the "Software Development & Services" segment of Vama Industries Ltd., which has been considered as comparable not only includes revenues from Software development services but also from I.T. enabled services as well. It goes without saying that I.T. services and I.T. enabled services are as distinct in connotation and nature as north ....