TaxTMI 
TaxTMI 
2020 (1) TMI 248
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....lutions Ltd , M/s L&T Infotech Ltd. Satyam Computers Ltd , Infosys Technologies Ltd M/s. Flextronics Software Systems Ltd as comparables in the segment. 3.The Ld. CIT (A) erred in rejecting companies on the basis of Abnormal Profit without defining what constitutes abnormal profit filter and how the same is determined and consequently erred in excluding the comparable companies Exensys Software Solutions Ltd and Thirdware Solutions Ltd. 4. The learned CIT (A) erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 5.The honorable CIT(A) erred in computation of the margins of M/s Quintegra Solutions Ltd, by determining the same as average of margins of 6.85% and 10.68% for FY ended 30/09/2004 and 30/09/2005 respectively, without appreciating the fact that an average cannot represent the arm's length margin of any comparable company for the purposes of arm's length margin determination 6.The honorable CIT(A) erred in computation of the margins of M/s Quintegra Solutions Ltd, by determining the same as average of margins of 6.85% and 10.68% for FY ended 30/09/2004 ....
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....hat may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 16.The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal. Grounds raised by assessee in its CO No.155(B)/2015 (AY: 2005-06) On the facts and circumstances of the case and in law: 1. The learned CIT(A) has erred, in law and in facts, by not accepting the Respondent's plea in entirety and confirming with the Learned AO/TPO on not accepting the economic analysis undertaken by the Respondent in accordance with the provisions of the Act read with the Income Tax Rules, 1962 and conducting a fresh economic analysis for the determination of the arm's length price in connection with the impugned international transaction and holding that the Respondent's international transaction is not at arm's length. 2. The learned CIT(A) has erred, in law and in facts, in not accepting the Respondent's plea and confirming with the Learned AO/TPO by determining the arm's length margin/ price using financial year 2....
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....C of the Act; The Respondent submits that each of the above grounds is independent and without prejudice to one another. The Respondent craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of Cross-objections at any time before, or at the time of, hearing of the appeal, so as to enable the Appellate Tribunal to decide this response according to law. 2. Brief facts of the case are as under: Assessee is a company and wholly owned subsidiary of M/s Analog Group engaged in providing technical, project management, marketing and sales support services. For year under consideration assessee filed return of income on 31/10/05 declaring total income of Rs. 3,13,75,410/-. The case was selected for scrutiny and notice under section 143(2) was issued along with questionnaire and notice under section 143(1) of the Act. In response to statutory notices, representative of assessee appeared before Ld.AO and filed requisite details as called for. During assessment proceedings, Ld.AO observed that assessee had international transaction with its associated enterprises. Accordingly, reference was made under section 92CA to Ld.TPO for determin....
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....Sankhya Infotech Ltd., 3.2. At the outset, both parties submitted that comparables alleged for inclusion by revenue has been considered by this Tribunal in case of DCIT vs EMC Software and Services (India) Pvt.Ltd., in ITA(TP)A No.875/Bang/2013 along with CO No. 175/Bang/2018 for assessment year 2005-06 vide order dated. It has been submitted that grounds raised by revenue in case of DCIT vs EMC Software and Services (India) Pvt.Ltd., (supra) and present case are identical. 4. In our considered opinion, comparability is to be carried out on broad object of benchmarking international transaction and according to law laid down under section 92B of the Act, read with Rule 10B(2) Income Tax Rules, 1963. Comparables must be similar in material aspects and must be compared on the basis of products/services, characteristics, functions undertaken, assets used and risk assumed. Merely because certain comparables has been upheld for its exclusion/inclusion by various decisions, does not ipso facto lead to exclusion/inclusion in a given set of facts. In our considered opinion, exclusion/inclusion of any comparables must be strictly analysed on basis of FAR, in accordance with Rule 10....
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.... by various decisions of this Tribunal. However, Ld.AR alleged that these comparables are to be excluded even on functional dissimilarities as assessee is a captive service provider catering only to its AE on cost plus basis. Ld.AR filed before us charts pertaining to comparables alleged by revenue and assessee for inclusion/exclusion respectively. In the chart Ld. ar referred to Paper Book-II (Part 2), wherein pages of annual reports pertaining to alleged comparables by revenue and assessee are mentioned. We have checked our records as well as the records filed by assessee with the registry and Ld. CIT DR. We note that there is no such paper book that is forming part of any of records. We are therefore referring to the extracts of annual reports that forms part of various written submissions filed by assessee before authority is below which is placed in Paper Book I (Part 2 of 2) Flextronics software systems Ltd (SEG) This comparable has been excluded by Ld.CIT(A) due to high turnover of about Rs. 457.45 crores. It has further been submitted by Ld.AR that this comparable is functionally different with that of assessee. It has been submitted that this company is engaged in....
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....f his contentions. 6.2. We have perused submissions advanced by both sides in light of records placed before us. Application of turnover filter has been upheld by this Tribunal in several decisions including Genesis integrating systems India Pvt. Ltd. vs DCIT reported in [2012] 20 taxmann.com 715. This Tribunal in case of Genesis Integrating Systems India Pvt.Ltd., (supra) observed as under: "For the purpose of classification of companies on the basis of net sales or turnover, a reasonable classification has to be made. Dun & Bradstreet and NASSCOM have given different ranges. Taking the Indian scenario into consideration, the classification made by Dun & Bradstreet is more suitable and reasonable. In view of the same, it is held that the turnover filter is very important and the companies having a turnover of Rs. 1.00 crore to 200 crores have to be taken as a particular range and the assessee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study" It is observed that comparables sought to be excluded are 100 % Software Developmen....
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....details were called for under section 133 (6) according to which this company was engaged in implementation and customer services which includes training, customised development and Help Desk services for ERP software and BI salutes and products. Ld.AR submitted that this company is a distributor and other services are merely ancillary to its distribution activity. He thus submitted that this company is functionally not similar in activities carried on by assessee. 7.1. On the contrary Ld.Sr.DR submitted that these companies are functionally similar with respect to the software service provided by assessee in the present case. In support he placed reliance upon the view of Ld. AO. 7.3. We have perused submissions advanced by both sides in light of records placed before us. As regards company Exenys software is concerned, page 430 of Paper Book I (Part 2 of 2), assessee refers to scheduled for of income statement wherein company has valued its brand at Rs. 5 crores which indicates that this company owns huge intangibles. Also that this company had an exceptional year of operation due to amalgamation with Holool India Ltd. Thus in our opinion this comparable needs to be excl....
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.... which makes it to be economically different with that of assessee's who undertakes limited risks and provides technical assistance to its AE's in products developed for AE. We do not find this comparable to be functionally similar in any manner whatsoever with that of assessee. Accordingly we uphold exclusion of this comparable from the final list. 10. Ground No. 9 This ground has been raised by revenue as Ld. CIT (A) excluded two comparables being Bodhtree Consulting Ltd and Geometric software solutions Ltd on ground that they do not satisfy the qualitative as well as quantitative filters applied by Ld.TPO. Bodhtree consulting Ltd Ld. CIT(A) excluded this comparable by observing that this company is engaged in product development and offers product solutions in the areas of data quality, business intelligence and life sciences to reputed customer base worldwide and its products include spend data management solutions, multi-industry data and anomaly, data cleansing and integration software, patents asset management except etc. it has been observed by Ld. CIT (A) that this company does not have breakup of segmental revenues and it also fails functional tests set by ....
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..../information is under section 133 (6) in respect of this comparable which was not communicated to assessee. Under such circumstances in our opinion this issue needs to be re-examined by Ld.TPO regarding functional similarities. Needless to say that details obtained by the Ld.TPO under section 133(6) should be provided to assessee and proper opportunity as per law must be granted. Ld.TPO shall then carry out FAR analysis as per law. Accordingly this ground raised by revenue stands allowed for statistical purposes. 12. Ground No.12-14 These grounds has been raised by revenue, in respect of exclusion of telecommunication expenses while computing deduction under section 10 A of the Act, upheld by Ld. CIT (A). 12.1 Ld.AR placed reliance upon the decision of Hon'ble Karnataka High Court in case of CIT vs Tata Elxsi Ltd reported in 349 ITR 98 and submitted that this issue stands covered in favour of assessee. 12.2. On the contrary, Ld.CIT DR placed reliance upon order passed by Ld.AO. 12.3 We have perused submissions advanced by both sides in the light of the records placed before us. It is observed that, Hon'ble Karnataka High Court in case of CIT vs Tata Elxsi Lt....