TaxTMI 
TaxTMI 
2018 (6) TMI 1688
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....natural justice. GROUNDS OF APPEAL ON TRANSFER PRICING ISSUES 2. Assessment and reference to Transfer Pricing Officer are bad in law 2.1 The Ld. AO has erred in law in making a reference to the learned Deputy Commissioner of Income Tax (Transfer Pricing) 2(2)(2) ['Ld. TPO'], inter alia, since he has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case. 3. The Ld. TPO has erred in justifying the motive of shifting of profits 3.1 On the facts and in the circumstances of the case and in law, the Ld. TPO / AO erred in not demonstrating that the motive of the Appellant was to shift profits outside of India by manipulating the prices charged in its international transactions which is a prerequisite condition to make any adjustment under the provision of Chapter X of the Act. 4. Comparability Analysis and Determination of Arm's Length Price Grounds of Appeal for rejection of comparables selected by the Ld. TPO in the order issued u/s 92CA of the Act 4.1 The Ld. AO/ TPO grossly erred on facts in benchmarking the transactions of the captive ....
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....the functional and risk analysis of the Appellant. 4.6 The Ld. TPO erred on facts in rejecting Akshay Software Technologies Limited, selected by the Appellant as comparable in its transfer pricing study, despite the said company being functionally comparable and qualifying all the filters applied by the Ld. TPO in the order u/s 92CA of the Act. The Honorable Dispute Resolution Panel ('Honorable DRP') further erred in rejecting Akshay Software Technologies Limited in the absence of segmental information whereas the said company is engaged in rendering software development services and earns majority of its revenue from rendering such services. 4.7 The Ld. TPO erred on facts in rejecting Helios and Matheson Information Technology Limited and R Systems international Ltd., selected by the Appellant as comparable in its transfer pricing study, despite the said companies being functionally comparable. Ld. AO/ TPO erred in computing a negative working capital adjustment on the margins of the comparable companies 4.8 The Ld. TPO/ AC) erred on facts and in law. and the Honorable DRP further erred in upholding / confirming the action of the Ld....
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....sly erred on facts in arbitrarily rejecting companies having software development revenue less than 75% of total operating revenue and inconsistently applying such filter, without considering the specific segmental results. 5.6 The Ld. AO/ TPO also erred on facts in arbitrarily rejecting companies based on their financial results without considering the functional comparability. 5.7 The Ld. AO/ TPO erred on facts and in law in considering a set of 'secret data', i.e. data which was not available in public domain, in arriving at a fresh set of companies using his power under section 133(6), which is grossly unjustified. 5.8 The Ld. AO/TPO also erred on facts and in law in accepting comparable companies without considering the turnover and size of the Appellant and the comparable companies. GROUNDS OF APPEAL ON CORPORATE TAX ISSUES 6. Disallowance of commission expense on account of nondeduction of tax at source 6.1 On the facts and circumstances of the case and in law, the Ld. AO erred in disallowing the export commission expense amounting to Rs. 4,34,72,134 paid to non-resident parties under section 40(a)(i) of the Act w....
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....t prejudice to each other. (iii) The following is not in derogation of the arguments advanced at the hearing. The Appellant begs to submit the following synopsis of its arguments. TRANSFER PRICING ISSUES 1. The accompanying chart shows a summary of the comparables as selected by both sides and their fate before the learned DRP. NEGATIVE WORKING CAPITAL ADJUSTMENT IMPERMISSIBLE 2. The Appellant submits that the learned TPO erred in making a negative working capital adjustment to artificially increase the margins of the comparables for the following reasons. (a) The Appellant does not have any borrowings at all. It thus does not incur any expenditure whatsoever in the maintenance of its working capital. (b) 99.83% of the Appellant's share capital is held by Lifetree Cyberworks Pvt. Ltd., the Appellant's holding company and TecnotreeOyj, Finland, the Appellants ultimate holding company. Thus. the Appellant does not have any working capital risk at all. 3. A substantial portion of the Appellants working capital arises out of transactions with its related parties. For instance, out of the total trad....
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.... there are various differences between the assessee and the comparables. Holding that it was a difficult exercise to determine precisely the nature and extent of the differences, it held that a downward adjustment of 20% from the mean Profit Level Indicator (PLI) of the comparables was to he allowed. 8. Option 2: This option is based on the decision of a co-ordinate bench in Philips Software Centre's cases. In that case, it was held that the risk premium (i e., the incremental rate of return to be attributed to additional risk) of the return of full-fledged entrepreneurs over the return of captive service providers such as the Appellant would be the difference between the bank rate and the Prime Lending Rate (PLR). The bank rate is considered the risk-free rate of return while the PLR is considered the normal risk-bearing rate. For the relevant previous year, this risk premium would be 2.94% (i.e., 294 basis points) (being 10.25% (PLR notified by RBI during the year ended 31.03.2013) - 7.31% (bank rate notified by RBI for that period). 9. Option 3: The third option is based on the decision of a coordinate bench of this Honourable Tribunal in Motorola's case. T....
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.... a detailed computation. This is untrue. Annexure 12 to the reference to the DRP in Form 35A read with the enclosures thereto (all forming part of the memorandum of appeal before this Tribunal) contains detailed computations for this purpose. 13. The learned TPO has also held that the Appellant has "single customer risk" and that thus no risk adjustment was warranted. This reasoning has been expressly disapproved by this Honourable Tribunal in Intellinet Technologies India Pvt. Ltd. v. ITO [2012] 22 taxmann.com 28 (Bang.-Trib.). 14. The learned TPO relied on SAP Labs' casel°. Meritor LVS' case and Symantec's case. In both SAP Labs and Symantec's cases, the risk adjustment was denied as it was either brought up before the tribunal for the first time or that computations of the adjustment were not furnished before the lower authorities. Both these are not true in the present case. Additionally, the learned DRP relied on the decisions in Zyme Solutions", CDC Software', Stryker Global, and Aptara Technologies. In Zyme Solutions, the attending circumstances were that the DRP had directed the TPO to grant a risk adjustment of 1% without consideri....
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....equent precedents cited above, the Appellant has recomputed the PLI by the following process of reasonable extrapolation. However, in order to do so, it has had to rely on the financial statements of R Systems for its financial year ended 31 03.2313 as well. An application for admitting the same as additional evidence has been filed. It is humbly prayed that that application be allowed for the reasons stated therein. 18. The twelve months constituting the Appellant's financial year consist of nine months from R Systems financial year ended 31.12.2012 and three months from R Systems' financial year ended 31.12.2013. The Appellant has thus considered 9/12th of R Systems' segmental figures from its year ended 31.12.2012 and 3/12th of its figures from its year ended 31.12.2013. It is submitted that this method, being a reasonable method of extrapolation ought to be accepted and thus, the rejection of the comparable on the ground of its different financial year deserves to be set aside in accordance with the binding precedents. 19. The PLI of R Systems, so computed, is 15.95%. This computation is as follows. Particulars Amount (in Rs.) FY....
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.... 55,000 1,46,85,953 1,80,00,506 63,45,039 63,45,039 Total Expenditure (B) 7,34,10,206 7,67,24,759 Operating Profit (C = A - B) 1,50,77,646 1,18,21,693 PLI 20.54% 15.41% 22. Submissions are separately addressed on each of the differences below. (a) Sundry receipts: In computations, other income, to the extent it does not represent interest and non-operating incomes is excluded. The learned TPO/AO had no basis to exclude sundry receipts in the absence of a finding that it is non-operating in its nature. The learned TPO/AO had every occasion to determine the nature of the funds by making inquiries with the relevant entity but has omitted to do so. (b) Provision for doubtful debts: The learned TPO/AO has excluded provisions for doubtful debt on the ground that it is nonoperating in its character. This runs against settled precedent, arising from the following precedents, that provisions for doubtful debts are in fact operating in the....
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....s Interest Other expenses Expenditure Expenditure Expenditure Expenditure 1,867 5,281 479 71 1,867 5,281 479 71 NUMERATOR (B) 7,698 7,698 Operating Revenue (C) 1,80,737 1,80,737 Total Expenses (D) 1,59,007 1,59,007 RPT Percentage (Option 1) E= A / C F= B / D 21.92% 4.84% N/A N/A G = E + F 26.76% N/A RPT Percentage (Option 2) (H = (A+B) / C) N/A 26.19% 25. So computed, the RPT percentage exceeds 25%, being the filter adopted by the learned TPO as upheld by the learned DRP. In any event the Appellant contends that the appropriate filter to be applied is 15% and not 25%. 26. The Appellant has applied the 15% filter while the learned TPO has applied a 25% filter. Therefore, it is common ground that an RPT filter is to be applied. The only question concerns the percentage to be considered. Firstly, there is no doubt that the 15% filter is being regularly applied by various benches of the Tribunal. Secondly, on the very question of how to choose between the 25% and the 15% ....
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.... i) ABB Industrial IT Development Centre Ltd. v. ACIT [2017] 83 taxmann.com 122 (Bangalore) ii) AOL Online India Pvt. Ltd. v. DCIT [2016] 68 taxmann.com 235 (Bangalore) iii) DCIT v. Sunquest Information Systems (India) Pvt. Ltd. [2016] 70 taxmann.com 273 (Bangalore) iv) Lam Research (India) (P.) Ltd. v Dy. CIT [IT Appeal Nos.1437 & 1385 (Bang.) of 2014. dated 30-4-2015] (para 9) MINDTREE LTD. (SEGMENT) 29. This comparable was selected by the learned TPO and accepted by the learned DRP. 30. The Appellant submits that this comparable ought to be rejected as it is functionally different from the Appellant. This is evidenced by the following statements in Mindtree's annual report. (a) Operations (page 28): "With delivery centers in India and overseas, we offer IT strategy consulting, application development and maintenance, data warehousing and business intelligence, package implementation, product architecture, design and engineering, embedded software, technical support, testing, infrastructure management services etc., to our customers." (b) Substantial Research & Development (page 34): Paragraph C in t....
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.... the segment "IT Services" is a heterogenous, multi-faceted and composite mixture of various kinds of activities. vii) In the paragraph above the segment table on page 58/90, the company itself has stated that as segmental assets are used interchangeably between segments, meaningful disclosures in that regard are not possible. viii) From all this, it is clear that Mindtree's operations are an indivisible blend of a variety of verticals, rendering any information on specific aspects of its operations unreliable, being merely and conjectures. (e) Product Company: Page 3 of its annual report shows that it offers a wide variety of products such as Match, MindTest etc. Thus, since Mindtree's IT Services includes maintenance, consulting. package implementation, etc., it is evident that these services are inextricably linked to their products. (f) Brand: Page 5 of its annual report shows that a process of brand transformation was undertaken evidencing the existence of substantial brand value. Page 30 contains an analysis of its brand identity. Mentions of the comparable's brand are also to be found at pp. 10 and 28. 31. The above av....
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.... comparable CG-VAK. OTHER ISSUES TDS ON COMMISSION 36. The Appellant paid commission of Rs. 4,34,72,134 to parties based abroad and having no permanent establishment (PE) in India for services rendered by them abroad. No tax was deducted at source. The entire amount of Rs. 4.34,72,134/- has beer disallowed under section 40(a)(i) on the ground that export commission is not exempt under the Act. 37. The DRP noted the factual position that the agents rendered services and solicited orders outside India and the commission was also remitted abroad. It, however, upheld the disallowance on the reasoning that as the order is executed by the assessee in India the right to receive the commission also arose in India. TDS under section 195 was applicable. 38. The Appellant submits that this reasoning is incorrect as the execution of the orders by the Appellant determines the situs of the source of the Appellant's income arid not that of the overseas commission agent. 39. The Appellant relies on the following precedents. (a) CIT vs. Faizman Shoes (P) Limited [2014] 367 ITR 155 (Madras) where, on identical facts, the court held t....
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....bles of Rs. 163.35 Crores as on 31.03.2013, more than 77% i.e. Rs. 126,40,42,576/- is receivable from its holding and subsidiary companies and this is the claim of the assessee that this factual position reinforces the proposition that the assessee bears no working capital risk. The assessee has placed reliance on several Tribunal orders as noted in para 4 of the synopsis of the assessee's arguments reproduced above and therefore, we have to consider and examine the applicability of these judgments. The first Tribunal order on which reliance is placed is the Tribunal order of Hyderabad Bench of the Tribunal rendered in the case of Adaptec (India) Pvt. Ltd. vs. ACIT as reported in [2015] 57 taxmann.com 307. Copy of this Tribunal order is available on pages 275 to 286 of compilation of case laws and in particular, our attention was drawn to paras 10 & 11 of this Tribunal order available on page nos. 285 and 286 of paper book. Hence, for the sake of ready reference, these paras are reproduced hereinbelow. The same are as under. "10. Ground No.8 pertains to the issue of negative working capital. As briefly stated above, after arriving at the arithmetic mean of all comparables ....
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....ing capital adjustment is to be made to t his situation, only a positive adjustment has to be made to the comparables so that they are brought on par with the applicant. In view of the same, the Panel directs that negative working capital adjustment to the arithmetic mean margin of the comparables shall not be made." In view of the above, the Panel directs that negative working capital adjustment to the arithmetic mean margin of the comparables shall not be made." 11. In view of the above, we are of the opinion that assessee's case being similar, there is no need for making any negative working capital adjustment when assessee does not carry any working capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee. In view of this, we direct the TPO not to make negative working capital adjustment." 8. From the above paras reproduced from this Tribunal order, it is seen that in that case, the Tribunal has reproduced the relevant para of the directions of DRP in a different case i.e. Market Tools Research P. Ltd. and Mega Systems Worldwide India P. Ltd.....
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....credit as against payment terms of one month credit and payment terms of cash payment i.e. immediately on supply. Hence it is seen that the very basis adopted by DRP in those cases is wrong and the Tribunal has simply decided the issue on this basis that since the assessee does not carry any working capital risk, negative working capital adjustment is not called for. At this juncture, we feel it proper to reproduce the relevant Para from the order of TPO in the present case from page 31 of the order of TPO being Para 12.1 which reads as under. "12.1 NEGATIVE WORKING CAPITAL ADJUSTMENT A question that few ITAT benches have deliberated over lately pertains to whether negative working capital adjustment should be given. Most ITATs have equivocated that positive working capital adjustment should be made on the comparables' margin. The adjusted margin is [PLI-WCA]. Hence positive WCA reduces the mean margin of comparables, whereas negative WCA increases the mean margin of comparables. In the case of Adaptec (India) Private Limited (ITA.No. 206/Hyd/2014), the assesse argued in ITAT that it is a captive service provider and does not bear any working capital risk. Hon....
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....of deciding this aspect that working capital position affects the pricing of any service or goods in the open market because in the present case, this is the objection of the TPO as per relevant paras reproduced above and this aspect is not discussed and decided by Tribunal in this case. 10. Now we examine the applicability of the second Tribunal order on which reliance is placed and this Tribunal order is rendered in the case of Lam Research (India) Pvt. Ltd. Vs. DCIT (supra), copy of this Tribunal order has not been provided by the assessee in the compilation of case laws and no citation is also provided and this is not a reported Tribunal order and therefore, we cannot examine and consider the applicability of this Tribunal order and hence, we hold that this Tribunal order is not applicable in the present case. 11. The third Tribunal order on which reliance is placed is the Tribunal order rendered in the case of CAPCO IT Services India Pvt. Ltd. Vs. ITO (supra), copy available on pages 287 to 295 of case law compilation and it was pointed out before us that paras 13 to 17 of this Tribunal order are relevant and the same are available on page no. 294 of paper book. These pa....
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....tment is made for the time value of money lost when credit time is provided to the customers. It was submitted that the assessee is not an entrepreneur but a captive service provider and its entire funding needs are provided by the A.E. This being so, the assessee does not static to lose anything as it is compensated on a total cost plus basis. It was further submitted that the assessee is running its business without any working capital adjustment is to be made to this situation, only a positive adjustment has to be made to the comparables so that they are brought on par with the assessee." 12. We find that in this case also, the decision of Tribunal is on this basis that working capital adjustment is made for the time value of money lost when credit time is provided to the customers and there is no decision in this case also on this aspect that working capital position affects the pricing of any service or goods in open market as the case made out by TPO in the present case as per Para 12.1 of TPO's order reproduced hereinabove. Hence we hold that in the present case, this tribunal order is also not applicable. 13. Now we examine the applicability of the fourth Tribunal ord....
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.... TPO. The assessee pleaded that the DRP has acceded such a plea in some other case. On examination, we find that the DRP, Hyderabad in the case of Cordys Software India P. ltd., for A.Y. 2008-09 in its directions dated 03.08.2012 has given a finding as under : "7.7. 4 Thus, working capital adjustment is made for the time value of money lost when credit time is provided to the customers. The applicant is not an entrepreneur but a captive service provider. Its entire funding needs are provided by the A.E. This being so, the applicant does not stand to lose anything as it is compensated on a total cost plus basis. The TPO probably was carried away by the large amount of receivables appearing in the books of the applicant. But the applicant is running its business without any working capital risk while comparable companies have such a risk for them. If at all any working capital adjustment is to be made to this situation, only a positive adjustment has to be made to the comparables so that they are brought on par with the applicant. In view of the same, the Panel directs that negative working capital adjustment to the arithmetic mean margin of the comparables shall not be made....
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....o-ordinate Bench of ITAT in the case of Adaptec (India) P. Ltd., Vs. ACIT in ITA. No. 206/Hyd/2014 (AY 2009-10) dt. 25-03-2015, has decided the issue of negative working capital as under: "10. Ground No.8 pertains to the issue of negative working capital. As briefly stated above, after arriving at the arithmetic mean of all comparables at 22.03%, the A.O. worked out negative working capital adjustment of 3.22% thereby, making arms length price at 25.25%. Even though, DRP refused to interfere with the objections of the assessee in its order, we were informed that DRP has directed the TPO/A.O. not to make any negative working capital adjustment in some of the cases in the next assessment year, in the cases of Market Tools Research P. Ltd., and Mega Systems Worldwide India P. Ltd., assessee placed on record copies of orders of DRP. In that DRP considered the issue and directed the TPO as under : "14. Ground No.11 : Negative Working Capital adjustment - Making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks. On this issue, the assessee submitted as under : "The learned TPO determined....
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..... In view of this, we direct the TPO not to make negative working capital adjustment"." 16. From the above paras, we find that in this case also, the issue is decided by Tribunal by following Tribunal order rendered in the case of Adaptec (India) Pvt. Ltd. Vs. ACIT (supra) and we have already seen that this Tribunal order is not relevant in the present for the reasons mentioned above and therefore, we hold that this Tribunal order is also not applicable in the present case. We also find that in para 5 of the synopsis of arguments reproduced above, this is the submission of the assessee that the basis of the working capital adjustment is the existence of a difference in the cost of working capital and it is also stated that this is relevant because the cost is stated to affect the margin and in the assessee's case, the assessee has demonstrated that it holds its working capital at no cost, completely out of its own funds without any borrowings at all. In our considered opinion, these factors are not relevant for working capital adjustment because in TP analysis, operating profit is considered which is profit before interest and therefore, the interest cost has no relevance for TP....
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.... client, and therefore, if the client is out of business the taxpayer will also be out of business. Moreover, the proviso to Sec. 92C (2) of the Act provides for adopting arithmetical mean of the different prices. This provision neutralizes the effect of difference in the risk profile, if any between the tax payer and the comparables as realized risk may pull down the profitability below the risk free return. This stand is supported by the decision of the Hon'ble ITAT Bangalore bench in the case of M/s SAP Labs India (P.) Ltd. [2012] 17 taxmann.com 16 (Bang.) and M/s Meritor LVS India Pvt. Ltd. [2015] 64 taxmann.com 136 (Bangalore - Trib.) and also by the Hon'ble ITAT, Mumbai bench in the case of M/s. Symantec Software Solutions Pvt. Ltd. Vs ACIT (2011) 46 SOT 48 (Mumbai). Based on the above discussions, no risk adjustment is allowed." 18. We also reproduce Para no. 10 available on page no. 13 of DRP directions. "10.0 Objection no 12 The Ld. TPO erred in not allowing appropriate adjustments on account of difference in functional, risk and operational profile. The Ld. AO erred in upholding the actions of the TPO. 10.1 In relation to the above o....
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....or variation regarding turnover risk profile and functional differences; therefore, the legislature has provided a margin of + 5% while determining the ALP. Therefore, when the assessee is having benefit of choice/option as per the said provision as existed at the relevant point of time, no separate adjustment is required on account of risk and functional differences. Therefore, we do not find any merit and substance in the claim of the assessee for adjustment in respect of risk and functional differences. 10.2 In view of the decision in the case of Symantec Software Solutions (P.) Ltd. v. Asstt. (supra), no separate adjustment is required on account of risk functional difference. Further, the assessee has not provided any detailed working of the adjustment it was seeking. So in view of the decision of the Hon'ble ITAT Bangalore in Zyme Solutions AY 2010-11 in I.T(TP).A No. 465/ Bang/2015 order dt 22.01.2016, no such adjustment can now be provided to the assessee. That Risk Adjustment cannot not be granted as a general rule was also upheld in CDC Software India Pvt Ltd [TS839-ITAT-2016(Bang)-TP] and Stryker Global Technology Centre Pvt Ltd [TS-450-ITAT-2015(DEL)-TP] As....
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....justment on account of risk level. The TPO has also referred to Rule 10B (3) of IT Rules which says that if any adjustment should be made, it should be reasonably accurate to eliminate the material effects of such differences. Before us also, as per the synopsis reproduced above, the assessee has pointed out three options for risk adjustment but these are general in nature and the assessee has not established that there is any risk difference between the tested party and the comparables. In the absence of any working having been provided by the assessee showing difference in risk between the tested party and comparables and in the absence of any working regarding the assessee's claim for risk adjustment, we find no reason to interfere in the order of DRP on this issue also. This issue is also decided against the assessee. 20. Now we examine the assessee's claim for inclusion of one comparable i.e. R Systems International Ltd. (segment). On this aspect, it is submitted that this comparable was excluded by the TPO and DRP on this basis that it has a different Financial Year i.e. year ending 31st December as opposed to the assessee's 31st March. Reliance was placed on the judgment ....
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....ata for the financial year April 1, 2008 to March 31, 2009. 30. This View is not contrary to rule 10B(4) which reads as under : "10B. (4) The data to be used in analyzing the comparability of any uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into." 31. The Rule does not exclude from consideration the data of an entity merely because its financial year is different from the financial year of the assessee. What the Rule requires is that the data to be used in analyzing the financial results of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Thus so long as the data relating to the financial year is available, it matters not, if the financial year followed is different. In the case before us the data relating to the relevant financial year of R. Systems International Limited is available. 32. We are, therefore, entirely in agreement with the decision of the Tribunal that if the data relating to the financial ye....
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.... reasonable opportunity of being heard to assessee. 23. Now we take up the issue in respect of CG-VAK Software and Exports Ltd. Regarding this comparable, this is the case of the assessee that the assessee does not challenge the selection of this comparable and therefore, does not press the relevant ground. The assessee's case is only to determine the PLI of this company correctly. As per the assessee, the PLI of this company should be adopted at 15.41% as against 20.54% computed by the TPO/AO. In the synopsis reproduced above, the basis of difference in working of the PLI of this comparable is this that the AO has reduced the amount of 39,97,218 being the provision for doubtful debts from the operating and other expenses of this company and in the result, the profit of that company has been increased by AO by this amount resulting in increase of PLI. But as per the assessee, provision for doubtful debts is operating expenses and therefore, it should not be excluded from the operating and other expenses. In support of this contention that provision for doubtful debts is an operating expenditure, reliance has been placed by ld. AR of assessee on various judicial pronouncements as....
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....r doubtful debts is operating expenditure, the same has to be excluded in TP analysis for the reasons discussed above. 24. Now we examine and decide about the assessee's claim is for exclusion of four comparables i.e. ICRA Techno Analytics Ltd.,L&T Infotech Ltd.,Mindtree Ltd. (segment) andPersistent Systems. 25. Regarding ICRA Techno Analytics Ltd., this is the case of the assessee that RPT% of this company is either 26.76% or 26.19% and since it is more than 25%, this comparable should be excluded because of RPT filter of 25% adopted by the TPO. This is also the claim of the assessee that in the present case, the RPT filter should be adopted at 15% and not 25%. In this regard, we feel it proper that regarding the working of RPT% of this comparable company, the issue should be restored back to the file of TPO for fresh decision after examining these contentions of ld. AR of assessee because we find that from page no. 12 of TPO order, the RPT% of this comparable has been worked out by the TPO at 0% as against the working of the assessee in the synopsis that it should be 26.76% or 26.19%. Hence we restore this matter back to the file of TPO for fresh decision after providing ad....
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....iminate the material effect of such differences. Hence on this issue, we restore the matter back to the file of AO/TPO for fresh decision in the light of this judgement of Hon'ble Delhi High Court. 28. The next company for which the assessee is requesting for exclusion is Mindtree Ltd. (seg.). The contentions raised by the assessee regarding exclusion of Mindtree Ltd. are contained in Para nos. 29 to 31 of the synopsis reproduced above. As per the same, this is the contention raised that Mindtree is offering various services such as IT Strategy consulting, application development and maintenance, data warehousing and business intelligence, package implementation, product architecture, design and engineering, embedded software, technical support, testing, infrastructure management services etc., to its customers. It is also pointed out that this company is having substantial research and development and have substantial intellectual property. This is also contended that this company is having wide range of operations and there is lack of information from segment reporting. This is also pointed out that the graphs on page 57 of the annual report of this company show the distributi....
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....his company also. The third contention of assessee regarding this comparable company is that this company is not functionally comparable. 30. Regarding functionality difference aspect of this company, it is submitted in synopsis that page no. 4 of annual report of that company shows that company is in many lines of businesses such as product engineering, technology consulting, strategic partnership to build platforms and IP-led business and therefore, the activities of this company are wide and multifarious. We find that the orders of TPO and DRP are not speaking orders on these aspects which are raised before us and therefore, we feel it proper to restore this matter also back to the TPO for fresh decision by way of a speaking order after considering all these aspects and after providing adequate opportunity of being heard to the assessee. We order accordingly. 31. Regarding assessee's request for exclusion of Larsen & Toubro Infotech Ltd. and Persistent Systems Ltd., we have come across a Tribunal order rendered in the case of W M Global Technology Services (India) (P.) Ltd. Vs. ACIT as reported in [2018] 91 taxmann.com 403(Bengaluru-Trib) in which one of us i.e. Ld. Judici....
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....ompany as well as the assessee in other case are materially comparable with each other and there is no element of distinction between the profile of those two companies. However at this stage we do not wish to examine the profile of the assessee company as well as the profile of Microsoft Research Lab India P. Ltd(supra) as we are remitting back the matter and we leave it to the wisdom of the TPO to consider the facts of the present case (assessee) with that of Microsoft Research Lab India P. Ltd, and apply the decision of Microsoft Research Lab India Ltd (supra). 11. Following the above order of the coordinate bench, these two comparables namely LARSEN & TOUBRO INFOTECH Ltd & PERSISTENT SYSTEMS Ltd are restored back to the file of the TPO to decide afresh in terms of the observations made hereinabove." 32. From the above paras reproduced from this Tribunal order, it is seen that our decision regarding these two comparables to restore back the matter to the file of TPO is fortified by this Tribunal order also in which, the tribunal has considered one more Tribunal order rendered in the case of Microsoft Research Lab India (P.) Ltd. vs. ACIT as reported in [2017] 85 taxm....