TaxTMI 
TaxTMI 
2021 (1) TMI 72
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....64,490/-under normal provisions of the Act and a book profit of Rs. 25,76,48,522/-. 3.1. During the course of assessment proceedings, the AO found that the assessee had entered into international transactions, hence, referred the case to TPO for determining Arm's Length price (ALP). 3.2. The assessee is engaged in the development of software and provision of software services to its holding company. The taxpayer is wholly owned subsidiary of DE Shaw & Co., L.P. USA. For the AY 2013-14, as per Form 3CEB report/TP document, the assessee had entered into international transactions in respect of software development services to the extent of Rs. 2,19,56,93,803/-and the margin being 12.27%. As per the economic analysis carried out by the assessee the margin of the comparables was worked out to 13.81% and since, the software development services transaction is within the arithmetic mean (OP/OC) of 13.81% and within the range, it was stated that the SDS transactions are at arm's length and no adjustment was made by the assessee. 3.3. The TPO analysed the Balance Sheet and statement of account and its financials and viewed that method of search process conducted by the assessee ....
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....he assessee company. Merely on the basis of notes mentioned in P&L Account, the same cannot be held as functionally different. Ld. DR relied on the decision of the ITAT, Bangalore Bench in the case of Advice America Software Development Center Pvt. Ltd., 94 taxmann.com 179 wherein the coordinate bench has rejected assessee's contention to exclude this company from the list of comparables. Similarly, ld. DR also relied on the decision of ITAT Bangalore in the case of CGI Information Systems and Management Consultants (P) Ltd. in IT(TP) A No. 2460/Bang/2017, dated 12/09/2018 wherein assessee's contention of exclusion of the Persistent Systems Ltd. was rejected. The ld. DR further argued that the DRP has given clear finding that Persistent Systems Ltd. is engaged in the software development services and relied heavily on the DRP's findings in its order at page 8 and argued that acceptance or rejection of a company as a comparable by the ITAT or any other appellate body in a particular year cannot be a criteria to determine its comparability. The comparability of a company has to be determined with reference to the functions performed, assets deployed, risks undertaken by t....
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.... and 31.03.2013. From page 1059 of the paper book, we find that the final segmental results of each segment is not available and therefore, we are of the opinion that the TPO ought to have excluded this company from the final list of comparables. 5.4 The DRP has gone into the details and observed that the company Persistent Systems ltd. is in sale of software services. The DRP verified the annual report of Persistent Systems ltd. and observed that the revenue from the operations from group companies of Rs. 12,945.12 was from sale of software services. The DRP has perused the entire details in its order and stated that the stand alone P&L account of Indian company, was given at page 145 of the paper book, as per which, the revenue from operations was 9,967.51 Million, which is stated to be from sale of software services. For the sake of clarity, we extract the relevant para of the order of DRP, which read as under: "At the outset, we are of the view that the acceptance or rejection of a company as a comparable by the ITAT or any other appellate body in a particular year cannot be a criteria to determine its comparability. The comparability of a company has to be determined with r....
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....platform called Cloud from a privately held company viz. Doyenz. Inc. This acquisition furthers your company's objectives in growing its IP-led business and strengthens its cloud computing and SMB offerings. Strategic agreement with Helwett Packard (HP) for licensing client automation software. PSI further entered into a strategic agreement with HP to license its client automation software. This acquisition underscores your company's commitment to expand its IP portfolio and further strengthen its expertise in PC lifestyle Management (PCLCM) Virtual Desktop Infrastructure (VDI) and MDM. Acquisition of certain assets from Nova Quest. Persistent Telecom Solutions Inc. (PTSI) a wholly owned step down subsidiary of PSI acquired certain assets from a Nova Quest a leading value added reseller (VAR) and services provider of Dassault Systems. SDS experience platform and applications. This acquisition furthers the operatives of your company in expanding its PLM practice strengthening its existing partnership with Dassault Systems and growing its North America Development. A careful perusal of the above would show that there was no acquisition during the year by the Indian ....
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....rvices and is comparable to the assessee company. 5.6 The ld. DR relied on the decision of coordinate bench of Bangalore Tribunal in the case of Advice America Software Development Center Pvt. Ltd. (supra) wherein the coordinate bench has also taken the similar view after going into the details of financials and observed that the segmental details are available in the case of Persistent Systems Ltd. and upheld the orders of revenue authorities for inclusion of this company in the list of final comparables. For the sake of clarity, we extract para 21 of Bangalore ITAT order in the case of Advice America Software Development Center Pvt. Ltd.,(supra), as under: "21. Persistent Systems Ltd.: The objection of the Assessee for excluding this company from the list of comparable companies is on the ground that this company is also engaged in making software products and is not only in providing SWD services and that the segmental details of revenue from sale of Software Products and revenue from rendering SWD services are not available. This objection is examined in the light of the Annual Report of this company for 2013 which is at pages 648 to 841 of Paper Book filed by the Assessee. ....
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.... Ltd. and in the order of DRP, we are of the view that this issue needs verification by AO/TPO to decide whether the company is comparable or not with the segmental details. Therefore, we deem it fit to remit the matter back to the file of TPO/AO to examine financials of the Persistent Systems Ltd., and decide the issue afresh on merits whether to include or exclude the Persistent Systems Ltd. from the list of final comparables. Accordingly, this issue is allowed for statistical purposes. 6. Infobeans Technologies Ltd.-The ld. AR challenging the inclusion of this company from the list of comparables, submitted that this company is functionally dissimilar, hence, argued that the same needs to be excluded from the list of comparables. The ld. AR relied on the decision of M/s. Kony India Pvt. Ltd. in ITA No. 2305/Hyd/2018 for AY 2014-15. 6.1. On the other hand, the ld. DR vehemently opposed for exclusion of Infobeans Technologies Ltd. as comparable. 6.2. We have heard both the parties and perused the material on record. The TPO has rejected the exclusion of Infobeans Technologies Ltd. as comparable on the ground that the company is found to be functionally similar. The DRP rejected....
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....ons are that the it is a giant company with a turnover of Rs. 3613 Crs and has a significant brand value and in RPT schedule there is revenue from sale of services as well as products. Further, under operating expenses there are costs of bought-out items for resale of products and therefore, in the absence of segmental details, it cannot be considered as a comparable. In support of this contention, Learned Counsel for the Assessee placed reliance upon the following decisions:- (i) Saxo India (P) Ltd. vs. ACIT-ITA No. 6148/Del/2015 (ii) Electronic Arts Games India (P) Ltd. vs. ACIT-ITA No. 444/Hyd/2017 (iii) Agilis Information Technologies Intl. P. Ltd. vs. ITO-ITA No. 1063/Del/2016 (iv) Alcatel-Lucent India Ltd. vs. DCIT-ITA No. 6856/De/2015 18. We have gone through the financial results of this company which are placed at 1116 of the paper book and find that the revenue from IT services of this company for the relevant assessment years is Rs. 3613 Crs and that it has huge 11 intangibles. This company has been considered by the coordinate Bench of the Tribunal at Delhi and also the Hon'ble High Court in various decisions and in the case of PCIT vs. Saxo India (P) Ltd.....
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....following the view taken by this Tribunal, we hold that L&T Infotech Ltd. is functionally dissimilar to that of assessee company and not comparable. Accordingly, we direct the AO/TPO to exclude the L&T Infotech Ltd., from the final list of comparables. This issue is allowed. 8. In ground No. 9, assessee has requested for inclusion of following 5 companies: 1. Acropetal Technologies Ltd. 2. Akshay Software Technologies Ltd. 3. Spry Resources India 4. CAT Technologies Ltd. and 5. Sankhya Infotech Ltd. However, when the appeal was taken up for hearing, the ld. AR of the assessee pressed for inclusion of only CAT Technologies Ltd. and did not press the remaining four comparables. Therefore, the assessee's appeal on remaining four comparables, namely, 1. Acropetal Technologies Ltd. 2. Akshay Software Technologies Ltd. 3. Spry Resources India and 4. Sankhya Infotech Ltd. are dismissed as not pressed. 8.1. Assailing for inclusion of CAT Technologies Ltd. in the list of final comparables, the ld. AR argued that CAT Technologies Ltd. is functionally similar to that of the assessee company, therefore, requested to include the CAT Technologies Ltd. in the final list o....
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....r:- Particulars As on 31.03.2013 (Rs.) Sales & Services EXPORT Consultancy Fees Receipts 14,630,808 Medical Transcription Receipts 4,342,700 Software Development Receipts 55,221,160 DOMESTIC Course Fees 178,350 Local Software Development Receipts 109,730 Total 74,482,748 33.1 As seen from the above, the company is engaged in software development services as per its annual report. Further, the revenue from the software development services is more than 93.93% of the total revenue. Being so, this company should be included in the list of comparables. Accordingly, we direct the TPO to include Cat Technologies Limited in the list of comparables." From the order of this Tribunal, it is observed that the revenue from software development services was more than 93.93%. Out of total receipts of Rs. 7.44 crores, as seen from the order of ITAT, software development receipts amounts to Rs. 5.5 crores and the remaining receipts were consultancy fee receipts and medical transcription receipts etc. Ld. DR objected for inclusion of consultancy receipts, medical transcription receipts as software development receipts and the Ld. AR did not place any materi....