TaxTMI 
TaxTMI 
2020 (11) TMI 411
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....exchange gains/loss are operating in nature or not? (b) Whether the Ld DRP was justified in directing the AO to follow the decision of Karnataka High Court rendered in the case of Tata Elxsi Ltd, i.e., exclusion of expenses incurred in foreign currency from both export turnover and total turnover. (c) Relief granted by Ld DRP in respect of addition made on account of transfer pricing adjustment. 4. The facts relating to the case are discussed in brief. The assessee company is now known as M/s Synamedia India Private Limited. Earlier, it was known as M/s Cisco Video Technologies India P Ltd and prior to that, it was known as M/s NDS Services Pay TV Technology P Ltd. It is providing following support services to its AE, M/s NDS UK, as narrated by Transfer Pricing Officer (TPO):- Software research and development services:- NDS India primarily operates as a delivery R & D centre which is a sub-division of the global R & D division of NDS group. NDS India undertakes software research and development activities according to the functional specifications provided by NDS UK for existing clients. The delivery R & D teams are focused on developing the existing technologies NDS UK f....
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.... 24.13% 13 Tata Elxsi Ltd. (seg) 3,581,985,000 2,962,533,352 20.91% AVERAGE MARGIN 24.82% After making negative working capital adjustment, the TPO arrived at adjusted margin of 25.44%. Accordingly, he made transfer pricing adjustment of Rs. 30.24 crores. 6.2 The Ld DRP directed the AO/TPO to exclude following ten companies:- (a) Acropetal Technologies Limited (b) E-Zest Solutions Limited (c) E-infochips Limited (d) ICRA Techno Analytics Limited (e) Infosys Limited (f) Evoke Technologies Limited (g) R S software (India) Ltd (h) Mindtree Limited (i) Tata Elxsi Ltd (seg) (j) Larsen & Toubro Infotech The Ld DRP upheld the selection of following two companies:- (a) Persistent Systems & Solutions Limited (b) Persistent Systems Limited However, there was no discussion in the DRP order on M/s Sasken Communication Technologies Ltd and the assessee has submitted that the above said company is also included as a comparable company. 6.3 In the appeal of the assessee, grounds B-2 to B-14 relate to the transfer pricing adjustment. On perusal of those grounds, we notice that the assessee has raised only general contentions and he....
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....O in the proceedings before him. He invited our attention to page no.10 of TPO's order, wherein the assessee had accepted Larsen & Toubro Infotech Ltd; Mindtree Ltd, Persistent Systems & Solutions Ltd, Persistent Systems Ltd, R.S. Software (India) Ltd, Sasken Communications Ltd. Hence these companies should be taken as comparable companies. The three companies retained by Ld DRP are Persistent Systems & Solutions Ltd, Persistent Systems Ltd and M/s Sasken Communications Ltd are included in the list of companies accepted by the assessee before TPO. Accordingly, he submitted that the assessee cannot go back on its stand and now contend that the companies retained by Ld DRP should also be excluded. 6.8 The Ld D.R further submitted that the assessee has accepted inclusion of M/s Larsen & Toubro Infotech Ltd, Mindtree Limited, R.S Software (India) Ltd in the list of comparable companies by the TPO. However, the assessee has objected inclusion of above said three companies before Ld DRP and the Ld DRP has also directed exclusion of above said three companies without giving opportunity to the TPO to examine these companies. Since the assessee had accepted this companies as good comparab....
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....2017)(85 taxmann.com 124). For the sake of convenience, we extract below the discussions made and the decision taken by the Tribunal in the case of L G Soft India P Ltd (supra):- "10. With regard to the other 7 comparable companies, whose exclusion is challenged by the revenue in ground No.2 of its appeal, we find that exclusion of these comparables from the list of companies selected by the TPO had come up for consideration before the Bangalore ITAT in the case of Electronic for Imaging (I) Pvt. Ltd. v. DCIT [2017] 85 taxmann.com 124 [Bang. Trib]. ; Symantech Software & Services (I) Pvt. Ltd. v. DCIT, ITA No.614/Mds/2016; DCIT v. Ikanos Communication Pvt. Ltd. in ITA 137/Bang/2015; Ness Technologies (I) Pvt. Ltd. v. DCIT in ITA No.696/Mum/2016 which are also decisions rendered in relation to AY 2011- 12 in the case of a companies providing SWD services such as the assessee in the present appeal. It is also relevant to point out that the very same comparable companies chosen by the TPO in the present appeal IT(TP)A Nos.52 & 97/Bang/2016 had been chosen by the TPO as comparable companies in the case of Electronic for Imaging (I) Pvt. Ltd. (supra). The Tribunal in its order dated 1....
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....es and ground No.2 raised by the assessee to this extent is dismissed. We may add that the other grounds raised by the revenue in its appeal are purely supportive of ground No.2 and are general grounds with no specific reference to instances of comparables excluded and hence dismissed." 6.14 Following above said order of co-ordinate bench, we confirm exclusion of above said seven companies. Since the assessee has sought for inclusion of three companies out of the ten companies excluded by Ld DRP, viz., M/s Evoke Technologies Ltd, R.S software India Ltd, Mindtree Limited, the ground of revenue in respect of above said three companies are allowed. 6.15 In the appeal of the assessee, the assessee seeks exclusion of all the three companies retained by Ld DRP, viz., M/s Persistent Ltd, M/s Persistent Systems & Solutions Ltd and M/s Sasken Communications Ltd. It is the submission of Ld DR that the assessee did not plead to the exclusion of M/s Sasken Communications Ltd before Ld DRP. Further, the assessee has accepted remaining two comparable companies before TPO. Accordingly, the Ld DR strongly opposed this plea of the assessee. The Ld A.R, on the contrary, submitted that the assessee....
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....er. Besides differences in assets and other characteristics referred to by Shri Aggarwal. The Income-tax Appellate Tribunal is a fact-finding body and, therefore, has to take into account all the relevant material and determine the question as per the statutory regulations. 31. In the case of CIT v. Bharat General Reinsurance Co. Ltd. [1971] 81 ITR 303, the Hon'ble Delhi High Court observed as under : "It is true that the assessee itself had included that dividend income in is return for the year in question but there is no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question it must be taken that it had resiled from the position which it had wrongly taken while filing the return. Quit apart from it, it is incumbent on the Income-tax Department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year." 32. In the case of ....
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....y the proper tax upon it. The agreement there related to the quantification of taxable income but in the present case what is sought to be taxed is not a taxable income. The assessee in such a case can certainly raise the plea that his income is not taxable under the Act. We, therefore, reject this plea." 35. In para 4.16 of latest report, the OECD provides the following guidelines : "In practice, neither countries nor taxpayers should misuse the burden of proof in the manner described above. Because of the difficulties with transfer pricing analysis, it would be appropriate for both taxpayers and tax administrations to take special care and to use restraint in relying on the burden of proof in the course of the examination of a transfer pricing case. More particularly, as a matter of good practice the burden of proof should not be misused by tax administrations or taxpayers as a justification for making groundless or unverifiable assertions about transfer pricing. A tax administration should be prepared to make good faith showing that its determination of transfer pricing is consistent with the arm's length principle even where the burden of proof is on the taxpayer, and the t....
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....ics for Imaging (I) Pvt. Ltd. (supra). In para 8 of the order, this Tribunal held that Persistent Systems & Solutions Ltd. was a company engaged in SWD services and products with no segmental details and excluded it. Similarly, Persistent Systems Ltd. was also excluded on the ground that it was engaged in diverse activities with no segmental break-up. As far as Sasken Communication Technologies Ltd. is concerned, this Tribunal in the case of Symantech Software & Services (I) Pvt. Ltd. (supra) has excluded this company on the ground of functional IT(TP)A Nos.52 & 97/Bang/2016 dissimilarity viz., dealing with multimedia products and R&D activities with no break-up of segmental information. 17. Following the aforesaid decisions, we direct exclusion of the aforesaid 3 comparable companies. The TPO is directed to compute the ALP of the international transaction in accordance with the directions given above in this order, after affording Assessee opportunity of being heard." 6.17 Consistent with the view taken by the co-ordinate benches in the above said cases, we direct exclusion of aforesaid three comparable companies. 6.18 Accordingly, we direct the AO/TPO to compute the ALP of ....