TaxTMI 
TaxTMI 
2018 (7) TMI 2061
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1961 ["the Act"] relating to assessment year 2011-12. 2. The only ground of challenge in this appeal is with regard to determination of Arm's Length Price (ALP) in respect of an international transaction entered into by the assessee with its Associated Enterprise (AE). The assessee is a wholly owned subsidiary of MetricStream Inc., California, USA. The assessee is engaged in the business of providing software development services to its parent company. It is not in dispute that the transaction of providing software development services to its holding company, there was international transactions and the income from such transactions had to be determined having regard to the arm's length price (ALP) as laid down in section 92 of the Inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation Technologies 24.13% 22.75% 13 Tata Elxsi (seg) 20.91% 17.27% Arithmetic. Mean 24.82% 21.68% Computation of arm's length price by the AO/TPO and the adjustment made: Arm's length mean margin 24.82% Less: Working capital adjustment 1.63% Adjusted mean margin after working capital adjustment 23.19% Operating Cost (A)* 24,05,28,396 Arm's length price - 123.19% of operating cost (B) 29,63,06,931 Total Operating Revenue (C) 27,63,36,605 Short fall being Adjustment u/s 92CA (B - C) 1,99,70,326 4. Aggrieved by the directions of the TPO directing the shortfall in the price charged by the Assessee to its AE at a sum of Rs. 1,99,70....
X X X X Extracts X X X X
X X X X Extracts X X X X
....& Solutions Ltd. 8. At the time of hearing, the ld. counsel for the assessee brought to our notice the decision of ITAT Bangalore pertaining to AY 2011-12 rendered in the case of software development service provider such as the assessee viz., M/s. Electronic Imaging India Pvt. Ltd. v. DCIT, IT(TP)A No.1506/Bang/2015, order dated 14.05.2017. In the aforesaid order, the aforesaid 4 companies were excluded from the list of comparable companies. It is not in dispute that the functional profile of assessee in the decision cited by the ld. counsel for the assessee and in the present case are identical. It was also brought to our notice that the comparables chosen by the TPO in the present case and in the case of M/s. Electronic Imaging India ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any is not functionally comparable with a company providing software development service. 11. As far as Persistent Systems & Solutions Ltd. is concerned, this Tribunal in the case of M/s. Electronic Imaging India Pvt. Ltd. (supra) held that this company was not functionally comparable and is also engaged in development of software products vide para 8 of its order. 12. In view of the aforesaid decisions on the comparability of the aforesaid 4 companies, we hold and direct exclusion of the aforesaid 4 companies from the list of comparable companies. The TPO is directed to compute the arithmetic mean of comparable companies after excluding the 4 companies. 13. The other issue which was argued before us by the ld. counsel for the asse....