2019 (6) TMI 1180

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.... subsidiary of M/s. Starent Network Corporation, USA. The assessee is engaged in research and development relating to software solutions. The assessee-company is a captive service provider to its US parent company. The assessee is having three units in India registered under Software Technology Park Scheme. The assessee is claiming tax benefit u/s.10A of the Act in respect of two units. The assessee entered into international transactions with its Associate Enterprises (AEs) for software services. To benchmark Arm's Length Price (ALP) of international transactions, the assessee in its TP study report selected 18 companies as comparables. The assessee applied Transactional Net Margin Method (TNMM) as most appropriate method to benchmark the ....

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....es of the case and in law, the Dispute Resolution Panel has erred in excluding FCS Software and Infosys Technologies Ltd. from the final set of comparables. 4. For this and such other reasons as may be urged at the time of hearing, the order of the Dispute Resolution Panel may be vacated and that of the Assessing Officer be restored. 5. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 5. Shri Rajendra Agiwal appearing on behalf of the assessee submitted that the TPO in transfer pricing proceedings deleted 8 out of 18 companies selected by the assessee and introduced fresh companies in the list of comparab....

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....ground that in the TPO's order for assessment year 2009-10, the said company was rejected. The ld. AR clarified that during the assessment year 2009-10, the TPO had rejected the company on the ground that the said company is engaged in onsite and offshore business. The DRP upheld the findings of TPO. The assessee filed appeal before the Tribunal inter alia challenging exclusion/inclusion of certain companies in the list of comparables. Since, the assessee was in Arm's Length Range by contesting on few companies, other disputed companies including Thinksoft Global Services Ltd. were not contested. The ld. AR pointed that during assessment year 2009-10, the TPO had applied export turnover filter of 75%. The TPO has not applied any filter with....

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....n 75% of the total revenue and thus, it fails to qualify the filter applied by the TPO i.e. the company having income from software services less than 50% of the total operating revenue to be excluded. The ld. AR further draws our attention to the operating margin of the company over the period of 5 years starting from financial year 2007-08. The ld. AR pointed that FCS Software Solutions Limited is having supernormal profits in the financial years 2007-08, 2008-09 and 2009-10. Whereas, in the financial year 2010-11, the operating margin is 6.44% and in financial year 2011-12, it is -4.00%. Thus, there is wide fluctuation in the profits. The ld. AR in support of his contention for exclusion of FCS Software Solutions Ltd. placed reliance on ....

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....sment year 2006-07. ii) ACIT Vs. Synechron Technologies Pvt. Ltd. in ITA No.536/PUN/2015 for assessment year 2010-11. iii) TIBCO Software India Pvt. Ltd. Vs. DCIT in ITA No.276/PUN/2015 and ITA No.334/PUN/2015, CO No.04/PUN/2016 for assessment year 2010-11. 6. On the other hand, Mrs. Shabana Parveen representing the Department vehemently defended the draft assessment order and the findings of TPO in drawing final list of comparables. The ld. DR submitted that Thinksoft Global Services Ltd. was rejected in assessee's own case for assessment year 2009-10. The assessee never contested the rejection of said company from the list of comparables. Now, the assessee cannot assail exclusion of the company on same set of facts. T....

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....9 has held Thinksoft Global Services Limited as functionally comparable. The ld. AR has explained that in the assessment year 2009-10, the assessee had assailed exclusion of company from the list of comparables. Since the assessee was within Arm's Length range with the exclusion/inclusion of other comparables, inclusion of Thinksoft Global Services Ltd. in the list of comparables had become academic exercise and hence, was not further contested. We find merit in the contentions of the assessee. Thus, in light of order of Tribunal in assessee's own case for assessment year 2008-09, we uphold the findings of the DRP in including Thinksoft Global Services Ltd. in the final list of comparables. Consequently, ground No.2 raised in appeal by t....