AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1096
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed down to selection of seven comparables. Therefore, we will restrict our finding to the aforesaid issue alone. 3. The assessee is a successor to Delmia Sales Pvt. Ltd., which was a subsidiary of Somero Enterprises Inc., Mauritius. Somero Enterprises Inc., in turn, is a subsidiary of Delmia Corporation, USA. The assessee basically is engaged in providing software development services to the AE. During the year under consideration, the assessee received revenue of Rs. 17,02,81,992, towards provision of software development and consultancy services to the AE. In the transfer pricing report, the assessee benchmarked the aforesaid transaction with the AE by adopting Transactional Net Margin Method (TNMM) as the most appropriate method. By applying certain filters, the assessee undertook a search process to select comparables and ultimately shortlisted seven companies as comparable with average profit margin of 9.7%. Since the margin shown by the assessee @ 10.9% was higher than the margin of the comparables, the price charged to the AEs towards services rendered was claimed to be at arm's length. Though, the Transfer Pricing Officer agreed with the assessee that TNMM is the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said reasons, the company was not considered as a comparable by the Tribunal in assessee's own case in assessment year 2008-09. In this context, he drew our attention to the relevant observations of the Tribunal. Further, he submitted, the Tribunal in Saplabs India Pvt. Ltd. v/s ADIT, [2017] 87 taxmann.com 316, while considering the issue relating to comparability of this company with a software development service provider for the very same assessment year, has held that this company cannot be treated as comparable. Thus, he submitted, this company should be excluded as a comparable. 7. The learned Departmental Representative submitted, the assessee cannot selectively seek exclusion of certain comparables by raising the issue of functional dissimilarity. He submitted, when the assessee is not objecting to some other comparables selected with same functions, it cannot object to specific comparables. He submitted, since the other companies not objected by the assessee stand on same footing they should also have to be excluded on account of functional dissimilarity and the matter should be restored to the Assessing Officer/Transfer Pricing Officer for selecting fresh comparable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....observations of the learned Commissioner (Appeals) / Transfer Pricing Officer. 11. We have considered rival submissions and perused the material on record. From the facts placed on record, it appears that this company has more than one segment and further, the software development service segment also has more than one sub segments. Whereas, the segmental details are not available. Considering these aspects, the Tribunal in assessee's own case rejected this company as a comparable. Further, in case of Google India Pvt. Ltd. (supra) the Tribunal while examining the comparability of this company in the very same assessment year has held that this company is not a comparable. Taking note of the judicial precedents cited above, we hold that this company should not be treated as comparable. iii) FOURSOFT LTD. 12. Objecting to selection of this company, the learned Authorised Representative submitted, related party transaction (RPT) as a percentage of total turnover works out to 19.9%. Thus, it exceeds the RPT filter of 15%. He submitted, in assessee's own case in assessment years 2006-07 and 2007-08, the Tribunal has applied RPT filter of 15%. In this context, he relied upon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Suite of products owned by it. He submitted, the company owned significant intangible including marketing intangible consisting 60% of its gross assets. He submitted, the company is involved in complex operations of developing proprietary technologies and marketing the same. Further, he submitted, during the year there was a amalgamation of another company by name Holool India Ltd. with this company. Therefore, the year under consideration being an exceptional year of operation, the company cannot be considered as a comparable. In support of his contention, the learned Authorised Representative relied upon the decision of the Tribunal, Bangalore Bench, in Saplabs India Pvt. Ltd. (supra). 16. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and learned Commissioner (Appeals). 17. We have considered rival submissions and perused the material on record. From the facts on record, it is noticed that this company is engaged in various activities including development of software products. The company owns a product in the name of ERP Suite. Further, it owns significant intangible which provides that it is a product company. Furthe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are not available. Thus, he submitted, the company cannot be treated as comparable. In support, he relied upon the decision of the Tribunal in Saplabs India Pvt. Ltd. (supra) and Google India Pvt. Ltd. (supra). 22. The learned Departmental Representative strongly relied upon the observations of the Transfer Pricing Officer and learned Commissioner (Appeals). 23. We have considered rival submissions and perused the material on record. From the materials available on record, it is noticed that apart from providing software development services, the company is also engaged in developing software products. Whereas, segmental details relating to the aforesaid activities are not available. Considering the above, the Co-ordinate Bench in Saplabs India Pvt. Ltd. and Google India Pvt. Ltd. (supra) has excluded this company as a comparable. Nothing contrary has been brought to our notice by the Revenue to deviate from the view taken by the Co-ordinate Bench in the decisions referred to above. Therefore, we direct the exclusion of this company from the list of comparables. vii) BODHTREE CONSULTING LTD. 24. Objecting to the selection of this company as a comparable, the learned Aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... comparables. Accordingly, we direct the Assessing Officer to compute the arm's length price afresh after excluding the comparables as directed herein above. 27. In the result, appeal is partly allowed. ITA no.6732/Mum./2013 Appeal by the Revenue 28. The only ground raised by the Revenue is against application of turnover filter the learned Commissioner (Appeals) while excluding some comparables selected by the Transfer Pricing Officer. 29. As discussed earlier in this order, out of 17 comparables selected by the Transfer Pricing Officer, learned Commissioner (Appeals) rejected four comparables, namely, Flextronics Software Systems Ltd. (segmental), L&T Infotech Ltd., Satyam Computer Service Ltd. and Infosys Technologies Ltd., due to their high turnover. 30. The learned Departmental Representative submitted, high turnover is not a criteria to reject comparables if the comparable is otherwise functionally similar to the assessee. He submitted, the companies rejected by learned Commissioner (Appeals) on the ground of high turnover are functionally similar to the assessee. Thus, he submitted, merely because the turnover of the company is high, it cannot be rejected as a....