TaxTMI 
TaxTMI 
2019 (8) TMI 1604
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....t is "Software Development" irrespective of whether onsite or offshore. ii) Whether the Hon'ble DRP in correct in excluding M/s RS Software Pvt. Ltd. and M/s Acropetal Technologies and M/s L&T Infotech ltd on the ground that they have significant onsite revenue without appreciating the fact that onsite development of software entails more cost and thereby results in lower profit margins. iii) Whether the Hon'ble DRP was right in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies. iv) Whether the Hon'ble DRP has erred on fact in deleting M/s E-infochips as a comparable on the ground that it fails the filter of service income less than 75% of the sales, when the said company has service income being 100% of the sales. v) Whether Hon'ble DRP erred in fact in rejecting the company as a comparable on the ground that it is functionally different when the primary source of income of the comparable is from provision of software development services. vii) Whether while seeking the exact comparability as men....
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....nable comparability criteria and irrelevant filters. b) Accepting companies that are otherwise not comparable to the assessee based on unreasonable comparability criteria. c) Rejecting certain comparable companies appearing in the search process of the learned TPO. The Leaned AO/learned TPO/Hon'ble DRP has erred, in law and in facts, for not allowing suitable adjustments to be made to account for differences in the risk profile of the Assessee vis--vis the comparables The ld. AO erred in making an erroneous computation of interest u/s 234B and 234C of the Act. The Respondent submits that each of the above ground is independent and without prejudice to one another. The Respondent craves leave to add, alter, vary, omit, amend or delete one or more of the above grounds of Cross-objections at any time before, or at the time of, hearing of the appeal, so as to enable the Appellate Tribunal to decide this response according to law. 2. Brief facts of the case are as under: It has been submitted that assessee is a private limited company and is a subsidiary of Herbalife International Inc, USA. Assessee is engaged in business of dealing in weight management, food an....
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....d 56.44% 4 Evoke 8.11% 5 ICRA Techno Analytics Ltd. 24.83% 6 Infosys Ltd 43.39% 7 Larsen & Toubro Infotech Ltd 19.83% 8 Mindtree Ltd.(Seg.) 10.66% 9 Persistent Systems & Solutions Ltd. 22.12% 10 Persistent Systems Ltd. 22.84% 11 R S Software (India)Ltd. 16.37% 12 Sasken Communication Technologies Ltd. 24.13% 13 Tata Elxsi Ltd.(Seg.) 20.91% Average 24.82% Less: working capital adjustment 1.63% Adjusted operating margin 23.19% Ld.TPO thus proposed adjustment of Rs. 98,32,574/- in respect of software service segment. It is submitted that Ld.TPO provided adjustment of 1.63% towards working capital. Ld.TPO rejected submission of assessee to consider adjustment of ALP if any, to be limited to lower end of 5% range as per proviso to section 92C (2) of the act. 3. Aggrieved by adjustment proposed by Ld.TPO, assessee raised objections before DRP. DRP rejected 14 comparables selected by Ld. TPO and restricted to 4 comparables with average margin of 19.94% as under: Sl.No Company name Net margin as per TP order 1 Persistent Systems &....
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.... selectively, but should be applied to all comparables. In support, she also placed reliance upon decisions of Delhi Tribunal in case of DCIT vs Vertex customer services in ITA No.5228/Del/2018 vide order dated 06/11/17 and Aircom International India Pvt. Ltd., in ITA No. 04/04/03/del/2012 wide order dated 19/05/17. She further submitted that RS Software India Ltd rejected by DRP was acceptable to assessee as well as Ld.TPO. It is contended by her that entire analysis needs to be revisited based upon new filter that has been applied by DRP and therefore needs to be set aside to Ld.TPO. 7. On the contrary, Ld.AR submitted that issue of suo moto application of on-site revenue filter by DRP has been addressed by coordinate bench of this Tribunal in case of Autodesk India private limited vs ACIT in ITA(TP)A No.156/Bang/2016 for assessment year 2011-12 vide order dated 21/12/18. She further submitted that assessee do not have any objection of RS software India Private Limited to be included as they are functionally similar. 8. We have perused submissions advanced by both sides in the light of records placed before us. 8.1 Main grievance of revenue is in respect of on-site revenue ....
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....rdinate bench of this Tribunal in the case of AMD India (P.) Ltd. (supra) relied on by the assessee has excluded 'Acropetal' on the ground that it fails the service income filter of 75%; a ground apparently not put forth by the assessee before the authorities below. 13.3.2 Considering the facts and circumstances of the case, as discussed above; that the DRP has not rendered findings on some of the issues raised by the assessee before it and there is a contradiction in the number of segments that this company 'Acropetal' operates in, we are of the opinion that it is necessary to remand the issue of comparability of this company back to the file of the DRP for examining and adjudication of the issues raised by the assessee, after affording the assessee adequate opportunity of being heard in the matter and to file details /submissions in this regard, which shall be duly considered. We hold and direct accordingly. 16.2 During proceedings before us, the learned Authorised Representative for the assessee stated that the assessee does not wish to press the ground related to exclusion of Sasken Communication Technologies Limited; therefore this ground is d....
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....ervations by coordinate bench of this Tribunal, it is very clear that comparables were remanded for the reason that, in case of Acropetal, DRP rendered finding that segmental details were available which was contrary to materials placed on record. In case of L & T, coordinate bench sent back comparable for reason that financial details which were initially not available on public domain was subsequently available for consideration. 11.1 In the facts of present case there is no such dispute between parties and observations regarding financials of these companies by DRP are concurrent with annual reports placed in paper book filed before us. Thus, in our considered opinion, these comparables cannot be held to be functionally similar with of assessee, who is a contract service provider, working on a cost plus business model. It is observed that RS software (India) Ltd, has been excluded by DRP on application of on-site revenue filter. Both parties do not have objection for inclusion of this company. We are therefore of the view that this company should be included in the list of comparables. Accordingly, Ld. TPO is directed to consider this comparable in the list. Accordingly groun....