TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 390
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....e-tax Act, 1961 ("the Act"). 2. The learned AO/learned TPO/Hon'ble DRP erred in rejecting the TP documentation maintained by the Appellant by invoking provisions of sub-section (3) of 92C of the Act. 3. The learned AO/learned TPO/Hon'ble DRP erred in rejecting comparability analysis carried in the TP documentation and in conducting a fresh comparability analysis by introducing various filters in determining the Arm's Length Price ("ALP"). 4. The learned AO/learned TPO/Hon'ble DRP erred in not considering the previous two years financial data of the comparable companies while determining the ALP. 5. The learned AO/learned TPO/Hon'ble DRP has grossly erred in not rejecting the following companies from the list of comparable companies: * Persistent Systems Limited * R S Software (India) Limited * Cigniti Technologies Limited * Thirdware Solutions Limited 6. The learned AO/learned TPO/Hon'ble DRP has grossly erred in rejecting companies that ought to have been included as comparable companies: * Akshay Software Technologies Limited * Cat Technologies Limited * Evoke Technologies private Limited * Lucid Software Limited *....
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....of software and Software Development Services. The assessee company has filed the Return of Income on 27.11.2014 with total income of Rs. 18,36,09,584. Subsequently the case was selected for scrutiny and Notice under Section 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance, the learned Authorized Representative appeared from time to time and Books of Accounts are furnished along with details. The assessee is engaged in the international business of software design and Software Development Services to its parent company Zyne, USA . The Assessing Officer found that the assessee has international transactions and with prior approval of Pri. CIT, the matter was referred to the Transfer Pricing Officer (TPO). The TPO dealt on the financial statements of assessee at para 2.2 and international transactions at 2.3 which are as under : 2.2. Financial statements: 2.2.1 The financials of the taxpayer for the F.Y. 2013-14 as per TP document are as under: Particulars Amount (In Rs) FY 2013-14 Income Income from operations 1099971917 Operating Revenue 1099971917 Expenditure Salaries wages & other benefits to employees 580229381 A....
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.... notice, perusal of relevant annual reports and examination of additional comparable suggested by the taxpayer on the touchstones of filters and functionality, the final set of comparable companies considered by the TPO, is as under Sl. No. NAME (M/s.) OP/OC (in %) 1. Persistent Systems Ltd. 35.10% 2. R S Software (India) Ltd. 24.25% 3. Cigniti Technologies Ltd. 27.62% 4. S Q S India B F S I Ltd. 22.37% 5. Thirdware Solution Ltd. 44.68% 6. Dumadu Games Private Limited 1.78% 7. Appon Software Private Ltd. 16.28% 8. Inexgen Games Technologies Pvt. Ltd 0.30% Average 21.55% The TPO computed the Arm's Length Price (ALP) at para 17.4 as under : 17.4. Computation of Arm's Length Price: 17.4.1 The arithmetic mean of the Profit Level indicators is taken as the arm's length margin. Please see Annexure 'A' for details of computation of PLI of the comparable. Based on this, the arm's length price of the services rendered by the taxpayer to its AE(s) is computed as under: SWD Segment Arm's Length Mean Margin on cost 21.55% Operating Cost 968311922 Arm's Length Price (ALP) of operating Revenue (@ 121.55% of OC) 11769....
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....ear exclusively for the product business engaged in R & D and also has onsite activities and no segmental information is available. During the year there are extraordinary events of acquisitions of cloud squads and fails the turnover filter of more than Rs. 200 Crores. The learned Authorised Representative relied on co-ordinate Bench decision of Nielsen Sports (India) Pvt. Ltd.vs Dcit in IT(TP)A No.196/Bang/2017 and In LG Soft India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 for the Assessment Year 2014-15 Dt.28.5.2019 the tribunal has at page 3 Para 7 & 7.1 held as under : "7. In AY 2008-09, the co-ordinate bench has excluded M/s Persistent Systems Ltd also by following the decision rendered in the case of 3DPLM Software Solutions Ltd (supra), where in it was held that M/s Persistent Systems Ltd is engaged in product development and product design services while the assessee is a software development service provider. Further, the segmental details were not available. 7.1 It was stated that there is no change in facts. Accordingly, following the decision rendered in the assessee's own case in AY 2008-09, we direct exclusion of M/s Persistent Systems Ltd." (ii) R S Softwa....
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....te Ltd. (supra) and Nielsen Sports (India) Pvt. Ltd. (supra). We found that the Tribunal in the case of LG Soft Pvt Ltd. (supra) has observed at page 4 paras 8 & 8.1 as under : "8. We also notice that in AY 2008-09, the co-ordinate bench has excluded M/s Thirdware Solutions Ltd also by following the decision rendered in the case of 3DPLM Software Solutions Ltd (supra), where in it was held that M/s Thirdware solutions Ltd is engaged in product development and earns revenue from sale of licenses and subscription. Further, the segmental details were not available. 8.1 It was stated that there is no change in facts. Accordingly, following the decision rendered in the assessee's own case in AY 2008-09, we direct exclusion of M/s Thirdware Solutions Ltd." Considering the facts, findings and judicial decisions, we are of the opinion that the following Three comparables are to be excluded from the list of comparables for determination of ALP by the TPO. (i) Persistent Systems Ltd. (ii) R S Software (India) Ltd. (iii) Thirdware Solutions Ltd. And (iv) Cignity Technologies Ltd is restored to the file of TPO for fresh consideration. The learned Authorized Representative argued ....