TaxTMI 
TaxTMI 
2019 (2) TMI 1731
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....Form 36B with grounds of appeal on 15.12.2017. The assessee has also filed an application for condonation of delay in filing the appeal. It has been mentioned by the assessee that the second appeal filed by the assessee on 15.12.2017 was the same as the first appeal and the only difference was that the Director of assessee signed the second appeal and therefore strictly speaking, there is no delay, but nevertheless by way of abundant caution, an application for condonation of delay is being filed supported by an affidavit of the Director of the assessee. 3. We have considered the submissions of the assessee and we find that identical issue had come up for consideration before the Tribunal in assessee's own case for AY 2012-13 and this Tribunal condoned the delay in filing the appeal observing as follows:- "6. Originally this appeal was filed on 1.3.2017 along with appeal memo - in Form No.36, grounds of appeal and other documents which were signed, by authorized signatory of the pee. The appeal so filed was well within the time. Later on it was noticed by the assessee that Form 36, grounds of appeal and other documents have to be signed by the Director of the company. Accord....
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....ssee and that of the comparable companies was Operating Profit (OP) to Operating Cost (OC). The OP to OC of assessee was 13.01%. The assessee had chosen 26 comparable companies and arithmetic mean of profit margin of those comparable companies was 11.83%. The assessee claimed that since its margin was more than the comparable companies chosen, the price received in the international transaction was at arm's length. 6. The TPO to whom a reference was made by the AO for determination of ALP u/s. 92CA of the Act, accepted some of the comparable companies chosen by the assessee and finally chose 7 companies as comparables and based on the arithmetic mean of the profit margin of those companies after giving allowance for working capital adjustment, determined the ALP and addition to be made to the total income as follows:- Sl. No. Name of the Company Operating Margin on Cost Woking Capital Adjusted Margin (OP/OPC) 1 CG-VAK Software & Exports Limited (Segment) 14.31% 13.12% 2 I C R A Techno Analytics Ltd. 17.10% 12.15% 3 Larsen & Toubro Infotech Ltd. 26.06% 24.70% 4 Mindtree Ltd. (Seg) 18.19% 16.51% 5 Persistent Systems Ltd. 28.27% 26.04% 6 R S Software (In....
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....mpanies should be excluded from the list of comparable companies. 12. As far as Tech Mahindra Ltd. is concerned, the assessee made a specific prayer before the DRP that the related party transaction (RPT) of this company was more than 25%. Our attention was drawn to page 641 of the assessee's PB, which is objections filed by the assessee before the DRP wherein the following submission was made:- "The assessee would like to submit that Tech Mahindra fails the RPT filter applied by your good self. The working for the same is provided below for your reference: Related Party Net Sales Related Party Transaction Transaction /Net Sales 25,739,000,000 60,019,000,000 42.88% (Source: AR 2012-13 0 pg. 69, 70 & 71) Hence, the company fails the RPT filter applied by the TPO and hence should be rejected." 13. The DRP, however, has not considered this submission, but has confirmed the order of TPO. We are of the view that it would be just and proper to set aside the order of DRP on this issue and remand the issue to AO/TPO for consideration of the contention of the assessee with regard to the exclusion of this company by application of RPT filter. 14. The ld. Counsel for the assessee d....
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....e assessee submitted that this company is actually in software development services. It was submitted that in AY 2009-10 in assessee's own case, this company was accepted as a comparable. 17. The ld. DR, on the other hand, had pointed out that when the company itself has accepted that it is providing ERP products and services, it cannot be said that this company was in software development services. He relied on para 15.3 of the DRP's order in which the DRP has given the following findings:- "15.3 As regards assessee's argument that ERP systems are software systems and as such the same should be considered as software development, the same is devoid of any merit. For determining the functionality of a company, it needs to be determined as to what is the exact nature of functions. In case a company is in Software Development, it would not matter as to what kind of customer it serves as the broad range of services remain the same and that is the development of software. Further, it will not matter whether the company develops complete software for its client e.g. develops a final product as per demand of the client or develops only some software modules, as per the req....