TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 78
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.... not in dispute that Transaction Net Margin Method (TNMM) is the most appropriate method for determination of ALP and the Profit Level Indicator (PLI chosen for the purpose of comparison of the assessee's profit margin with the comparable companies is OP/OC. 3. The TPO did not accept the comparables chosen by the assessee in its TP study and the TPO on his own chose 8 comparables and the arithmetic mean of profit margin of those companies was as follows:- Amounts in Rs. Lakh S NO NAME OF TAX PAYER OR/SALES OC OP OP/OC (in % 1 Infosys Ltd. 46,91,700 32,77,700 11,84,200 36.13% 2 Larsen & Toubro Infotech Ltd. 4,54,360 3,64,619 89,741 24.61% 3 Mindtree Ltd. 2,99,010 2,48,290 5,072 20.43% 4 Persistent Systems Ltd. 1,18,412 87.649 3,07,625 35.10% 5 R S Software (India) Ltd. 35,188 28,321 6,867 24.25% 6 Cigniti Technologies Ltd. 5,563 4,359 1,204 27.62% 7 S Q S India B F S I Ltd. 20,061 16,394 3,667 22.37% 8 Thirdware Solution Ltd. 19,883 13,742 6,140 44.68% Average 29.40% 4. The assessee was aggrieved by the inclusion of certain ....
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....e company is less or more than 10 times the turnover of assessee, then it cannot be considered as a comparable company. In the light of the aforesaid decision of the Hon'ble High Court, we are of the view that the aforesaid 5 companies should be excluded from the list of comparable companies. We hold and direct accordingly. 8. As far as inclusion of 3 companies which was argued before us by the ld. counsel for the assessee, the first company which the assessee seeks for inclusion is Sagarsoft (I) Ltd. This company was rejected by the TPO by applying the RPT filter which was not accepted by the DRP. The DRP directed the TPO to consider the comparability of this company afresh. The TPO while giving effect to the order of DRP, chose to reject this company as a comparable by pointing out that this company fails the persistent loss filter. It was the submission of the ld. counsel for the assessee that that in the light of decision of ITAT Pune Bench in the case of Yezaki (I) Pvt. Ltd., ITA No.621/PUN/2014 AY 2009-10, order dated 11.17.2019, the persistent loss filter can be applied only if there is a loss in 3 successive assessment years and that if there is a profit in any one of the ....
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....revenue towards R&D expenses to consider a company as a software development services company. Since the R&D filter of 3% of revenue was not satisfied, this company deserved to be excluded. The ld. counsel for the assessee submitted before us that this was never a filter applied by the TPO in his TP analysis. Apart from the above submissions, it was also submitted that incurring of R&D expenses excluding capital expenditure was only Rs. 95.25 lakhs and that constituted 1.12% of turnover. We are of the view that this aspect also needs to be looked into afresh by the TPO/AO and accordingly we set aside the order of the DRP on this issue and remand the question of comparability of this company to the TPO/AO for fresh consideration in accordance with the law, after due opportunity to the assessee. 12. The Second issue which requires consideration by the Tribunal in this appeal is the question with regard to determination of ALP in respect of an international transaction whereby interest income was attributed by the TPO/AO on the delayed recovery of trade receivables. The TPO rejected the plea of assessee that any delay or extended period of credit allowed on trade receivables cannot b....
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....vant discussion holding 'deferred receivables' would constitute international transaction is as under: "14...... ...In the case of Techbooks India International Pvt. Ltd vs. DCIT (supra), taking note of the &planation inserted by the Finance Act, 2012 to Section 92B, it was observed that there remained no doubt that apart from any short-term or long-term borrowing, etc.. or even advance payments or deferred payments. 'any other debt arising during the course of business' had also been expressly recognized as an international transaction. In the said decision, the decision of the Horrible Bombay High Court in the case of CIT vs. Patni Computer Systems was also considered, wherein Hon'ble Bombay High Court set aside the view taken by the Tribunal in view of amendment to section 92B. The decision in the case of KUSUM Healthcare Pvt. Ltd. was duly considered in the case of ,4meriprise India Pvt. Ltd and it was observed from para 20 to 23 as under: The ld AR supported the impugned order by relying on a Tribunal order dated 31.3.2015 passed in Kusum Healthcare Pvt. Ltd. vs. ACTT (ITA No.6814/Del/2014) in which it has been held that no additional imputation of inte....
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..../non-receipt of interest on the loans accepted or allowed in the circumstances as mentioned in this clause of the Explanation, also become international transactions, requiring the determination of their ALP. If the payment of interest is excessive or there is no or low receipt of interest, then such interest expense/income need to be brought to its ALP. The expression 'debt arising during the course of business' in common parlance encompasses, inter alia, any trading debt arising from the sale of goods or services rendered in the course of carrying on the business. Once any debt arising during the course of business has been ordained by the legislature as an international transaction, it is, but, natural that if there is any delay in the realization of such debt arising during the course of business, it is liable to be visited with, the TP adjustment on account of interest income short charged or uncharged. Under such circumstances, the contention taken by the assessee before the TPO that it is not an international transaction, turns out to be bereft of any force. 23. The Hon`ble Bombay High court in the case of CIT vs. Patni Computer Systems Ltd, (2013) 215 Taxman 108 (....