TaxTMI 
TaxTMI 
2017 (5) TMI 1728
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....ases on similar matters pending adjudication before different forums within the Indian dispute resolution chain. The assessee has also filed an affidavit of Mr. Chandra Sekhar Mishra of the assessee company being the authorized representative of the assessee. The ld. counsel submitted that same issue is permeating through all the years. At initial stage third party data was not available to come to any conclusion and, therefore, in larger interests of justice delay may be condoned. The ld. counsel relied on the decision of the Hon'ble Bombay High Court in Prima Paper & Engg. (P) Ltd. v. CIT [2014] 41 taxmann.com 240/221 Taxman 209 (Mag.), wherein in para 8 and 9, it has been observed as under:- '8. In State of West Bengal (supra), the Supreme Courthas held that it is not possible to lay down precisely as to what facts constitute "sufficient cause" under section 5 of the Limitation Act. But it may be safely stated that delay in filing an appeal should not have been for reasons which indicate the party's negligence in not taking necessary steps, which he could have or should have taken. Here again, what will be such necessary steps will depend upon the c....
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.... the years and, therefore, if in one year on account of wrong advice of the counsel appeal is not preferred in time, then, the adverse finding for that year should not prejudice the assessee's claim for other years. Under such circumstances, it would be in the interest of justice to condone the delay in filing the appeal. We, accordingly, condone the delay in filing the appeal. 4. The brief facts of the case are that in the relevant assessment year the assessee company was engaged in the business of software solutions and consultancy services in the area of telecommunication industry. The assessee is a 100% subsidiary of Aircom International, UK. It had filed its return of income declaring an income of Rs. 1,01,82,082/- on 8th December, 2006. The international transaction reported in Form No.3CEB, inter alia, included software development of Rs. 281,86,213/-. The ld. TPO, after adopting various filters, considered the following five comparables:- (i) Einfochips Bangalore Limited (ii) Apex Advanced Technology Private Limited (iii) Apex Knowledge Solutions Private Limited (iv) Synetairos Technologies Limited (v) Sankhya Infotech Lim....
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....on two counts. Firstly, the assessee is aggrieved by inclusion of Kals Information Systems Ltd., in the list of comparables for determining the ALP of the international transaction relating to software development segment. The second grievance of the assessee is on account of non- grant of working capital adjustment. As regards the first issue, the ld. counsel referred to the annual report of Kals Information Systems Ltd., contained at pages 238 to 259 of the paper book and specifically referred to page 255, wherein the schedule No.22 - Notes to the Financial Statements - is contained, wherein Significant Accounting Policies have been given. In the Revenue Recognition, it has been observed as under:- "Revenue Recognition: The Company derives its revenues primarily from software services and software products. Revenue from time and material contract is recognized on the basis of software developed and billed in accordance with the terms of the contract. Revenue from the fixed price contract is recognized on the completion of milestones in contracts, under the percentage of completion method. Income from training is recognised on time proportion basis." 8. The ld. counsel....
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..... v. ACIT [ITA No.761(Delhi) of 2012, dated 31-5-2013); (iii) Telelogic India (P) Ltd. v. Dy. CIT [2015] 58 taxmann.com 364/69 SOT 135 (Mum.-Trib) 12. In the case of Toluna India (P) Ltd. (supra), the Tribunal has noticed that the assessee rendered software development and related services to Greenfield Group. In that context, the Tribunal directed for exclusion of Kals Information Systems Ltd., observing as under:- "KALS Information Systems Limited (Segmental): 27.1. The TPO observed that this company was engaged in Software development and training. As the software products constituted only 3% of its revenue and training revenue constituted 8.56%, the TPO held that this segment of KALS Information Systems Limited was rightly includible. 27.2. After considering the rival submissions and perusing the relevant material on record, it is an admitted position that the TPO adopted Software development segment of this company by noticing that this segment also included revenues from software products and training. In view of the fact that the assessee is not engaged in imparting any training on commercial basis or selling its software products, we hold that ....
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.... per the annual repot, the salary cost debited under the software development expenditure was Rs. 45,93,351. The same was less than 25% of the software services revenue and therefore the salary cost filter test fails in this case. Reference was made to the Pune Bench Tribunal's decision of the ITAT in the case of Bindview India (P.) Ltd. v. Dy. CIT [ITA No 1386/PN/10, dated 30-11-2011] wherein KALS as comparable was rejected for AY 2006-07 on account of it being functionally different from software companies. The relevant extract are as follows: "16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not 10 comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that ....
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....ngaged in training of software professional for online projects. Further, in Telelogic India (P) Ltd., the Tribunal, inter alia, observed that the assessee was engaged in the business of development of software and maintenance of data for software for its parent company in assessment year 2006-07 and directed for exclusion of Kals Information Systems Ltd., inter alia, observing that the company had revenues from software products as well as software development. The ld. CIT, DR referred to the decision in Agnity India Technologies (P) Ltd. v. Dy. CIT [2016] 73 taxmann.com 102 (Delhi-Trib) for the proposition that each year is to be considered separately and the decisions should not be followed without proper verification. He submitted that the matter may be restored to find out if product revenue is there or not in the case of Kals Information. We are constrained to observe that this plea of Ld. CIT, DR cannot be accepted, particularly, when the decisions have been rendered by the Tribunal for assessment year 2006-07 and 2007-08 with reference to the annual report of Kals Information. The revenue recognition statement noted on page 255 of the paper book clearly holds that Kals Info....