TaxTMI 
TaxTMI 
2020 (8) TMI 832
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....(3) r.w.s. 144C of the Income-tax Act, 1961 [the Act] in relation to assessment year 2011-12. 2. The main issue to be decided in this appeal is with regard to the correctness of the determination of Arm's Length Price [ALP] in respect of international transaction entered into by the assessee with its Associate Enterprise [AE]. The assessee is an Indian company and is a 100% owned subsidiary of LG Electronics, South Korea. The assessee provides software development [SWD] services to its AE. It was not in dispute that the rendering of SWD services by the assessee to its AE is an international transaction and that the income arising from the said international transaction has to be determined keeping in view the ALP as is required u/s. 92....
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....% 3. E-Infochips Ltd. 56.44% 56.68% 4. Evoke Technologies Ltd. 8.11% 10.42% 5. ICRA Techno Analytics Ltd. 24.83% 24.68% 6. Infosys Ltd. 43.39% 44.51% 7. Larsen & Toubro Infotech Ltd 19.83% 21.85% 8. Mindtree Ltd. (Seg) 10.66% 11/62% 9. Persistent Systems & Solutions Ltd. 22.12% 23.10% 10. Persistent Systems Ltd. 22.84% 23.52% 11. R S Software India Ltd. 16.37% 18.32% 12. Sasken Communication Technologies Ltd. 24.13% 26.31% 13. Tata Elxsi Ltd. 20.91% 20.96% Arithmetic Mean 24.82% 25.24% Less: Working Capital Adjustment - 1.02% Adjusted Arithmetic Mean 25.84% 4. Based on the above, the TPO determined the Average arithmetic profit marg....
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....s, Mind tree Ltd, & Tata Elxsi cannot be taken as comparables, being functionally different when it satisfies all the qualitative and quantitative filters applied by the TPO. 3. The Hon'ble DRP Bangalore, instead of relying on decision of ITAT, ought to have decided the comparability of these companies on the basis of specific facts brought on record by the TPO in the case of the assessee. 4. Whether a comparable may be considered as engaged in Software product business merely because it has developed software product by following software development process without having legal ownership on such software product? 5. Whether while seeking the exact comparability as mentioned above the DRP was right in fact and in law in imposing ....
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....tware India Ltd. and Evoke Technologies Ltd. in Gr.No.2 of the grounds of appeal by the revenue and ground No.15 of the grounds of appeal by the Assessee in its appeal. The ld. counsel for the assessee and the revenue has no objection for inclusion of the aforesaid two companies and hence ground No.2 raised by the revenue and Gr.No.15 raised by the Assessee in respect of the aforesaid two companies is allowed. 9. Apart from the above, the assessee also expressed no objection to Mindtree Ltd. being included as a comparable and hence ground No.2 raised by the revenue in so far as inclusion of Mindtree Ltd. is concerned, is allowed. 10. With regard to the other 7 comparable companies, whose exclusion is challenged by the revenue in ground No....
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....that this company was engaged in diversified activities and was not a pure SWD services provider such as the assessee. In para 9 of the aforesaid order, the Tribunal held e-Infochips Ltd., was earning revenue both from the software services and software products and though the break-up of revenue from the two segments were available, but the break-up of Operating Cost and Net Operating revenue and segmental details were not available. 12. As regards e-Zest Solutions Ltd., in the case of Symantech Software & Services (I) Pvt. Ltd. v. DCIT, ITA No.614/Mds/2016, this company was held to be engaged in Knowledge Process Outsourcing (KPO) and cannot be regarded as a SWD services company. 13. The Tribunal in the case of DCIT v. Ikanos Communicat....
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....td. and Persistent Systems Ltd. Exclusion of these 3 companies was considered by the Tribunal in the case of Electronics 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 dissimilarity viz., dealing with multimedia products and R&D activities with no b....