TaxTMI 
TaxTMI 
2018 (4) TMI 1817
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....d AO and the learned Panel erred in upholding the rejection of Transfer Pricing ('TP') documentation by the learned Deputy Commissioner of Income tax, Transfer Pricing --Range 1(1)(2) (learned TPO') and in upholding the adjustment to the transfer price of the Appellant in respect of Software development services and IT enabled services. [corresponding to ground no. 2] 3. That on the facts and circumstances of the case, the learned AO/learned Panel erred in upholding the rejection of comparability analysis of the Appellant in the TP documentation and accepting the fresh comparability analysis performed by the learned TPO. [corresponding to ground no.3 (a)] 4. That on the facts and circumstances of the case, the learned AO/learned Panel erred in disregarding application of multiple year/prior year data as used by the Appellant in the TP documentation and holding that current year (i.e. Financial Year 2011-12) data for companies should be used for comparability. [corresponding to ground no. 3(b)] 5. That on the facts and circumstances of the case, the learned AO/learned Panel erred in upholding the learned TPO's approach of using data as at the time of assessment....
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.... in pursuance of the order of the learned TPO and the directions of the learned Panel erred on facts and law while including BNR Udyog Limited as a comparable in respect of its IT enabled services segment whereas the same should have been excluded because it fails the related party filter. [corresponding to ground no. 3(e)] 13. The learned AO in pursuance of the order of the learned TPO and the directions of the learned Panel erred on facts and law while including TCS e-serve Limited as a comparable in respect of its IT enabled services segment whereas the same should have been excluded for the reasons of functional dissimilarity, huge brand value, etc. [corresponding to ground no. 3(e)] 14. The learned AO in pursuance of the order of the learned TPO and the directions of the learned Panel erred on facts and law while excluding Akshay Software Technologies Limited as a comparable in respect of its software development services segment whereas the same should have been included for the reasons of functional similarity. [corresponding to ground no. 3(f)] 15. The learned AO in pursuance of the order of the learned TPO and the directions of the learned Panel erred on facts and la....
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....Pvt. Ltd. vs. ACIT in ITA No. 444/Hyd/2017 for the same Assessment Year, copy of relevant pages available on pages 2502 to 2504 of the paper book and in the case of Agilis Information Technologies India Pvt. Ltd. vs. ACIT in ITA No. 555/Del/2017 for same Assessment Year, copy of relevant pages available on pages 2484 to 2485 of the paper book. In respect of request for exclusion of Infosys Ltd., reliance has been placed on the same Tribunal order of Delhi Bench rendered in the case of Agilis Information Technologies India Pvt. Ltd. Vs. ACIT (supra), copy of relevant pages available on pages 2479 to 2481 of the paper book and on another Tribunal order rendered in the case of Alcatel-Lucent India Ltd. Vs. Addl. CIT in ITA No.1112/Del/2017 for the same Assessment Year, copy of relevant pages available on pages 2518 & 2519 of the paper book. In respect of request for exclusion of Genesys International Services Ltd., reliance has been placed on two Tribunal orders but these Tribunal orders are not for the same Assessment Year and in fact, one order is for Assessment Year 2008-09 in the case of Symphony Marketing Solutions India Pvt. Ltd. Vs. ITO in IT(TP)A No. 1316/Bang/2012 and in the ....
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.... the TP order, based on the 10 comparables selected by the TPO. It is clear from the above that the larger set of the comparables takes care of the differences between the comparables as compared to a smaller set of the comparables selected based on the strict comparability. Accordingly, we are of the view that the comparables selected by the TPO are appropriate for determination of the Arm's Length Margin. Accordingly the set of the comparables selected by the TPO is upheld by approving the adjusted margin of @ 19.40% instead of 19.90%, from the above exercise. 5. From the above Para reproduced from the order of DRP, we find that the DRP has held that only four companies are acceptable as good comparables and revenue is not in appeal against this decision of DRP. In our considered opinion, having held that only these four companies are good comparables, the remaining comparables selected by TPO cannot be considered in final list of comparables only because the mean margin of those four comparable is more than the 10 comparables selected by TPO. Hence, we hold that only these 4 comparables are good comparables and we have to consider and decide about the assessee's reque....
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....e price or cost" and secondly, an attempt should be made to make reasonable adjustment to eliminate the material effect of such differences. Hence, if only this tribunal order is considered, the matter has to go back to the file of AO/TPO for fresh decision in the light of this judgment of Hon'ble Delhi High Court. Hence, we examine the applicability of another Tribunal order rendered in the case of Agilis Information Technologies India Pvt. Ltd. vs. ACIT (supra). As per Para no. 2 of this Tribunal order, it is noted that this company is engaged in the activities of software development as in the present case and therefore, this Tribunal order is also applicable in the present case and this Tribunal order is also for same Assessment Year i.e. 2012-13. The issue regarding exclusion of Larsen & Toubro Infotech Ltd. is discussed and decided by Tribunal as per paras 4.8 to 4.10 of this Tribunal order and for the sake of ready reference, these paras of this Tribunal order are reproduced herein below from relevant pages 2481 and 2482 of paper book and the same are as under. "4.8. Larsen & Turbo Infotech Ltd. The Ld. AR submitted that segmental data is not available. As per the an....
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....n support of this request for exclusion of Infosys Ltd. also, reliance has been placed by ld. AR of assessee in the chart on the same Tribunal order rendered in the case of Agilis Information Technologies India Pvt. Ltd. Vs. ACIT (supra) which is for same Assessment Year and we have already seen that this Tribunal order is applicable in the present case. Para nos. 4.5 to 4.7 of this Tribunal order are relevant in respect of Infosys Ltd. and hence, these paras are also reproduced herein below from paper book pages 2478 to 2481 of paper book. The same are as under. "4.5. Infosys Ltd. The Ld. AR submitted that as per page 9 of the annual report, the company has set up a network of research labs and during the relevant previous year 143 unique patent applications were filed by the company. The Ld. AR further submitted that the company has been granted 47 patents out of which 46 are in USA and one in Luxemburg. At page 26 of the annual report it is also stated that the company recognizes it's strong brand as one of it's competitive strengths. In this regard the Ld. AR submitted that the Hon'ble Delhi High Court in the case of Agnity India Technologies (ITA 1204/2011 date....
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....munications International AB (India Branch Office) vs. DDIT (ITA No. 769/Del/2014) iv. Headstrong Services (India) Pvt. Ltd vs. DCIT (ITA No. 714/Del/2015) v. Bentley Systems India Pvt. Ltd. vs, ACIT (ITA No. 6161/Del/2013) vi. Sun Life India Service Centre Pvt. Ltd. vs. DCIT (ITA No. 1489/Del/2014) vii. Avaya India (P) Ltd. vs. ACIT (ITA No. 5528/Del/2011) viii. Alcatel-Lucent Technologies vs. DCIT (ITA No, 2298/Del/2008) ix. DCIT vs. Mentor Graphics (ITA No. 2634/Del/2011) The Ld. AR also relied upon the following decisions of the various Benches of Tribunal wherein it has been held that companies engaged in sale of software products cannot be regarded as appropriate comparable for the purpose of benchmarking the international transaction of provision of software services: (i) Connexant Systems India Pvt. Ltd vs. ITO ITA No 1429/Hyd,/2010 (ii) Intoto Software Ltd Pvt. Ltd. (ITA No 1196-97/Hyd/2010 & 2102/Hyd /2010) (iii) NXP Semiconductors India Pvt. Ltd. vs. ACIT (ITA No. 1174/Bang/2011) (iv) (Sapient Corporation Pvt. Ltd vs. DCIT (ITA No 5263/Del/2010) (v) Bindview India Private Limited Vs. DCI, ITA No. ITA No 1386/PN/10 (vi) Trilogy E-Business Softwar....
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....ced reliance on two Tribunal orders i.e. the Tribunal order rendered in the case of M/s. Citrix R&D India Pvt. Ltd. Vs. DCIT in IT(TP)A No. 1289/Bang/2014 for Assessment Year 2009-10 and the Tribunal order rendered in the case of DCIT Vs. M/s. Wabco TVS Ltd. in ITA No. 883/Mds/2015 for Assessment Year 2010-11 and since, the Assessment Years in both these two Tribunal orders is different, these two Tribunal orders are not relevant for the purpose of inclusion of this comparable. The DRP has decided the issue against the assessee on this basis that the company provides professional services and ERP services, but the entire revenue has been shown as income from software services and there is no segmental information available. This finding of DRP could not be controverted by ld. AR of assessee and since, the Tribunal orders cited by ld. AR of assessee is not supporting the case of the assessee because these Tribunal orders are for different Assessment Years, we find no reason to interfere in the order of DRP on this issue and we hold that Akshay Software Technologies Ltd. cannot be included in the final list of comparables of software development segment. Accordingly, ground no. 14 of....
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....y examined the material on record, including the judicial pronouncement cited. We find that the coordinate bench of this Tribunal in its order in the asseesse's own case for asst year 2011-12 in IT (TP) A No. 1397/Bang/2016 dated 13/1/2017has excluded this company, 'Infosys', from the set of comparables for the reason that it is functionally different; being an established market leader, enjoying immense brand value and goodwill, with huge economies of scale and geographical dispersion of customers. The relevant portion from the order of the coordinate bench at Para 11 is extracted hereunder:- " 11. The relevant portion of the order from the assesse's case in IT (TP)A no. 1765/Bang/2013 & IT(TP)A.1783/Bang/2013 dt 04.11.2015 for ay 2008-09 is extracted as under : " 6.7 Infosys BPO Ltd. 6.7.1 As far as this company, chosen by the TPO as comparable, is concerned, the learned Authorised Representative for the assessee submitted that this company, being a wholly owned subsidiary of Infosys Technologies Ltd. would enjoy a premium in the market, due to brand value and goodwill of the parent company, whereas the assessee is a low end provider of BPO / ITES support se....
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....bsidiary of Infosys, has an element of brand value associated with it. This is also clear from the presence of brand related expenses incurred by this company. Presence of a brand commands premium price and the customers would be willing to pay, for the services/products of the company. Infosys BPO is an established player who is not only a market leader but also a company employing sheer breadth in terms of economies of scale and diversity and geographical dispersion of customers. The presence of the aforesaid factors will take this company out of the list of comparables. We therefore accept the contention of the assessee that this company cannot be regarded as a comparable." Following the above cited decision of the co-ordinate bench of this Tribunal in the case of Symphony Marketing Solutions India Pvt. Ltd. (supra) for Assessment Year 2008-09, we are of the view that in the case on hand also, where the assessee is only providing low end ITES / BPO support services, this company i.e. Infosys BPO Ltd. is to be excluded from the list of comparables to the assessee in the case on hand. We hold and direct the TPO accordingly. Thus, the assessee has made out a case in its favour ....
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....ssee could not make out a case for exclusion of this company. At the best, this issue may be restored back to the file of AO/TPO for fresh decision in the light of this judgment of Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisors (India) (P.) Ltd. Vs. DCIT (supra). We hold accordingly and restore this matter back to the file of AO/TPO for fresh decision in the light of this judgment of Hon'ble Delhi High Court rendered in the case of Chryscapital Investment Advisors (India) (P.) Ltd. vs. DCIT (supra) after providing adequate opportunity of being heard to assessee. We would like to mention that in support of assessee's request for exclusion of this comparable, reliance was placed on another judgment of Hon'ble Delhi High Court rendered in the case of PCIT Vs. M/s. Oracle (OFSS) BPO Services Pvt. Ltd. in ITA 124/2018 but this judgment is for Assessment Year 2007-08 and therefore not relevant. 13. Now the only remaining comparable which has to be discussed and decided is TCS e-Serve Ltd. Reliance has been placed on Tribunal order rendered in the case of Baxter India Pvt. Ltd. Vs. ACIT in ITA No. 6158/Del/2016 for the same Assessment Ye....
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....t the assessee is engaged in BPO services. The coordinate Bench in the case of Equant Solutions India Pvt. Ltd. vs. CIT in ITA No. 120210el./2015 for A. Y. 2010-11 has held that it has used intangibles and use of data brand. Vide Para No. 24 of that order, it was held to be excluded compared to low risk ITES company like Appellant. Further, the decision of the coordinate Bench in the case of Ameriprise India Pvt. Ltd. has considered in ITA No. 701410el.l2014 at Para No. 12 has excluded this company as under: 12. TCS e-Serve Ltd. 12.1 The assessee objected ... Thus, the entity level figures render this company as unfit for comparison. Following the above reasons also taken note in the case of TCS e-Serve International Limited, we order for the elimination of this company from the final set of comparables. " Therefore, following the decision of the coordinate Bench, we direct exclusion of TCS E-Serve Limited from the final list of comparables. " 19. Further, in the case of FIL India Business Services Pvt. Ltd. (ITA no. 6867/Del/2014) for AY 2010-11, Tribunal has observed in regard to TCS E-serve Ltd., segment as under: "56. We have considered the rival submissions and perus....