TaxTMI 
TaxTMI 
2016 (10) TMI 1277
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.... learned DR did not object to the correctness of the facts in the chart filed by the assessee and therefore, the same is taken on record and the decision is given on the basis of the said chart as well as the material on record. 4. At the time of hearing, the learned Counsel for the assessee, submitted that the assessee has raised as many as 11 grounds of appeal and that ground Nos.1 to 9 are on Transfer Pricing adjustment, while grounds Nos.10 & 11 are on corporate issues. He submitted that the assessee is mainly contesting Ground No.4 and other grounds may be taken as not pressed if the ground of appeal No.4 is allowed. 5. Brief facts of the case are that the assessee company is engaged in developing software i.e. it is engaged in rendering designing, development and modification services relating to semi conductors for semi-conductor based products and also providing marketing support and financial and administrative support services to its AEs. The assessee had entered into various international transactions with its AEs and the AO referred the determination of the Arms' Length Price (ALP) of the international transactions to the TPO. The margin of the assessee according ....
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....ITR 225 (S.C) (iii) Jute Corporation of India Ltd (187 ITR 688 (S.C) (iv) NTPC Ltd, Vs. CIT (229 ITR 383 (S.C) (v) Ashok Vardhan Birla vs. CWT (208 ITR 958 )(Bom.) (vi) Controller of Estate Duty v. R.Brahadeeswaran (163 ITR 680)(Mad.) 7. The learned DR, however, submitted that these are the companies selected by the assessee itself during its T.P. study and therefore, cannot be allowed to challenge them at this stage before the Tribunal. 8. Having regard to the rival contentions and the material on record, we find that the assessee, though, had considered these companies as comparable to the assessee at the time of its TP study, has challenged their consideration before us. In the decisions relied upon by the learned Counsel for the assessee (Supra), it is held that the Tribunal had powers to admit the additional grounds of appeal, even if the same was not raised before the lower authorities. Further, we also find that these companies have been treated as not comparable to another assessee, i.e. Planet Online Pvt. Ltd for the very same A.Y and that Planet Online is also in similar line of business. Therefore, we deem it fit and proper to ad....
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.... Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. v. ITO, ITA No.7633/Mum/2012, order dated 6.11.2013. In this case, the Tribunal followed the decision rendered by the Mumbai Bench of the Tribunal in the case of Wills Processing Services (I) P. Ltd., ITA No.4547/Mum/2012. In the aforesaid decisions, the Tribunal has taken the view that Bodhtree Consulting Ltd. is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology. The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid decision of the Mumbai Bench of the Tribunal, we hold that Bodhtree Consulting Ltd. cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should ....
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.... (ii) (ii) the observation of the ITAT, Delhi Bench in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856 (Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and market leader assuming all risks leading to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the breakup of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of op....
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....ted under the software development expenditure was Rs. 45,93,351. The same was less than 25% of the software services revenue and therefore the salary cost filter test fails in this case. Reference was made to the Pune Bench Tribunal's decision of the ITAT in the case of Bindview India Private Limited Vs. DCI, ITA No. ITA No 1386/PN/1O wherein KALS as comparable was rejected for AY 2006-07 on account of it being functionally different from software companies. The relevant extract are as follows: "16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that the said company is into development of software ....
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....ould be computed. The company has also in its response to the notice u/s.133(6) stated that it cannot be considered as comparable to any other software services company because of its complex nature. Hence, Tata Elxsi Ltd., is to be excluded from the list of comparables. 10.2 ITAT, Hyderabad Bench following the aforesaid decision of the ITAT, Bangalore Bench also excluded these four companies in case of M/s Kenexa Technologies Pvt. Ltd. Vs. DCIT in ITA No. 243/Hyd/2014 dt. 14/11/2014. Respectfully following the decisions of the ITAT, we direct AO/TPO to exclude these four companies. As far as Comp-U Learn Global Tech India Ltd. is concerned, ITAT, Hyderabad Bench in case of M/s Kenexa Technologies Pvt. Ltd. Vs. DCIT (supra) observed as under: "39. The assessee submitted before the DRP that Comp-ULearn Tech India Ltd. was engaged in the development of new software (product development) (page 7 of the Annual Report) in ITES call centre and BPO services (page 11 of Annual Report). It was further submitted that schedule XIII of the Annual Report shows software development expenditure at only 25% of the total expenditure. The TPO extracted the 133(6) notice and held th....
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....cal. Therefore, respectfully following the view expressed by the coordinate bench, we exclude this company as comparable. 10.5 As far as Think Soft Global Services Ltd. is concerned, assessee has objected to inclusion of the aforesaid company on the reasoning that it is functionally different as it is a product based company and provides testing services. On a perusal of the annual report of this company, extract of which was submitted before us, it is seen that the company is predominantly into software testing. In case of Triology E Business Vs. DCIT, ITA No. 1054/Bang/11, dtd. 23/11/12 it has been held by coordinate bench that software testing services cannot be equated with software development services. Therefore, we find merit in the contention of ld. AR. Accordingly, we hold that this company cannot be treated as comparable to assessee. 10.6 As far as Thirdware Solutions is concerned, assessee has sought exclusion of the aforesaid company because it is into product development and purchase and sale of licences. It is further contention of assessee that though segmental details for sales is available but no expenditure bifurcation is available, which makes i....
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....laim that the company is into product development is correct. As relevant informations required for coming to a definite conclusion are not before us, we are inclined to remit the issue of comparability of this company to AO/TPO for considering afresh. Further, we may observe that in case of Triology E Business (supra) this company has been excluded on the basis of high turnover. Therefore, this aspect is also required to be examined by AO/TPO while deciding comparability of this company. 10.9 As far as Zylog Systems Ltd. is concerned, it is the contention of the ld. AR that during the year company has made acquisitions which could be having an impact over the financials of the company as the revenue has substantially increased compared to the preceding year. On a perusal of the extract of annual report for the FY 2008-09 of this company, which were placed before us by learned AR, it is seen that during the FY 2008-09, the company has acquired Fair Fax Consulting Inc. and Ducont FZ LLC through its wholly owned subsidiary ZylogBV Ltd.. The company itself has admitted in the annual report that benefits from such acquisition include access to new clients, new geographical are....