TaxTMI 
TaxTMI 
2016 (7) TMI 1540
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....Ltd., was neither royalty nor fees for technical services without appreciating that - a. The payment made to Equant Network Services Ltd., is in the nature of royalty payment since it involves the use of commercial equipments. b. The decision of ITAT, Hyderabad in the case of Frontline Soft Ltd., wherein such payment was held to be 'royalty'. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the adjustment at Rs. 28.44 Lacs instead of Rs. 5.17 Crs made by the TPO without appreciating that- a. The assessee did not furnish the necessary information relating to the payment of technical fees. b. The reasons given by the TPO in considering the companies Vishal Information Technologies Ltd. & Cepha Imaging Pvt. Ltd. are comparables. c. The TPO had given allowance appropriate for working capital adjustment after giving reasons in his order. d. The CIT(A) erred in giving allowance for working capital adjustment at 4% of average mean without sufficient reasons. e. The CIT(A) had given allowance of safe limits, which is not applicable to the subject assessment ye....
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....ted that the payment made by the assessee is in the nature of royalty. However, he was fair enough to submit that in assessment year 2006-07, learned Commissioner (Appeals) while deciding identical issue arising out of order passed under section 201 / 201(1A), has held that the payment made does not require deduction of tax at source. 7. Learned Authorised Representative strongly supporting the view of the learned Commissioner (Appeals) submitted that the issue stands decided in favour of the assessee not only by the orders of the learned Commissioner (Appeals) but by the Tribunal in assessee's own case both in respect of addition made in quantum assessment as well as in relation to order passed under section 201/201(1A) of the Act. 8. We have considered the submissions of the parties and perused the material available on record. It is observed that identical issue arising out of non-deduction of tax at source in respect of payment made to Equant Network Services Ltd. was subject matter of appeal before the Tribunal in assessee's own case for assessment year 2006-07 in ITA no.5129/Mum./2009 dated 31st May 2011. While considering the issue relating to demand raised under secti....
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....of the Tribunal as well as High Court, this company has been rejected as a comparable to ITES services provider. For the aforesaid reasons, we do not find any infirmity in the order of the learned Commissioner (Appeals) in excluding this company. Cepha Imaging Pvt. Ltd. 14. Learned Departmental Representative objecting to exclusion of this company by the learned Commissioner (Appeals) submitted that the functional profile of the company would suggest that it broadly fits into the category of ITES services provider, therefore, there is no reason to exclude this company. 15. Learned Authorised Representative vehemently opposing the submissions of the learned Departmental Representative contended that Cepha Imaging Pvt. Ltd. is engaged in software development services, hence, cannot be comparable. Further, learned Authorised Representative submitted the audited financial results of this company for financial year 2004-05 is not available in public domain. He submitted, only report of financial year 2005-06 is available in public domain and relying upon the information available in annual report for financial year 2005-06, Transfer Pricing Officer has selected it as a co....
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...., assessee filed appeal before the learned Commissioner (Appeals). It was submitted by the assessee before the learned Commissioner (Appeals) that the assessee is following cost plus model for charging fees to the A.E. while rendering ITES and the cost of technical service also forms part of total cost, based on which cost plus mark-up is charged. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record, held that if cost is to be disallowed in the hands of the assessee then similar adjustment has to be made to the income by not taxing the same in the hands of the assessee. Accordingly, he deleted the addition. 19. Learned Departmental Representative submitted, the assessee did not furnish any details before the Transfer Pricing Officer for which he disallowed the cost. He submitted, the learned Commissioner (Appeals) without appreciating this aspect has deleted the addition. 20. Learned Authorised Representative on the other hand relied upon the observations of the learned Commissioner (Appeals). 21. We have considered the submissions of the parties and perused the material available on record. Und....
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....ommissioner (Appeals). 26. We have considered the submissions of the parties and perused the material available on record. It is evident from the order of the Transfer Pricing Officer, while applying filter for selecting comparables has excluded companies having RPT of more than 25%. It is the contention of the assessee that RPT of Airline Financial Support Services India Ltd. is 31.75%, hence, it does not qualify RPT filter applied by the Transfer Pricing Officer himself. On a perusal of the material submitted before us, we find the aforesaid contention of the learned Authorised Representative to be correct. Moreover, in case of NTT Data Global Delivery Service Ltd. v/s ITO, the Tribunal, Delhi Bench, considering the fact that the RPT of this company roughly at 32% is more than RPT filter of 25% held that it cannot be treated as comparable. The same view was also expressed by the Tribunal, Mumbai Bench, in case of ACIT v/s Maersk Global Service Centre India Pvt. Ltd. Thus, the assessee having been able to demonstrate that for the impugned assessment year RPT of this company fails more than 25% RPT filter applied by the Transfer Pricing Officer, we are inclined to exclude this c....