TaxTMI 
TaxTMI 
2021 (2) TMI 183
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....') and the learned DRP have erred, in law and in facts, by making an addition of Rs. 1,36,50,206 to the total income of the Appellant on account of adjustment to the arm's length price of the software development services transaction entered into by the Appellant with its associated enterprise; 2. The learned AO / TPO and the learned DRP have erred, in law and in facts, by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ('Rules'), conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international transaction, and holding that the Appellant's international transaction is not at arm's length; 3. The learned AO / TPO have erred, in law and in facts, by exercising his powers under section 133(6) of the Act to obtain information which was not available in public domain and relying on the same for comparability purposes; 4. The learned AO / TPO and the learned DRP have erred, in law and in facts, by determining the arm's length margin/ price using data pertaining only to FY 2012-13 which w....
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....s that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at anytime before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law." Brief facts of the case are as under: 2. The Assessee in engaged in the business of provision of Software Development Services (SWD services), to its wholly owned holding company. In terms of the provisions of section 92A of the Act, the Assessee and its wholly owned holding company were Associated Enterprises ("AEs"). In terms of sec.92B(1) of the Act, the transaction of providing SWD Services and ITeS were "international transaction" i.e., a transaction between assessee and the associated enterprise, the details of which are as under: Particulars Amount Received (in Rs.) Amount Paid (in Rs.) Software Development Services 1874,28,190 IT Enabled Services / EDS (CAD/CAM) (Including SAP Implementation services) 1704,78,609 Reimbursement of Expenses 49,044 Recovery ....
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....Technology) 15.78% 7 Mindtree Limited (I T Services) Average 13.78% 6. Ld.TPO did not approve the selection criteria of comparables by assessee. The Ld.TPO on his own identified five companies as comparable with the Assessee company and worked out the average arithmetic mean of their profit margins as follows: SI. No. Name of the taxpayer OP/OC 1 CG-VAK Software Exports Ltd 20.45% 2 I C R A Techno Analytics Ltd. 17.10% 3 Larsen & Toubro Infotech Ltd. 26.06% 4 Mindtree Ltd. (Seg) 20.23% 5 Persistent Systems Ltd. 28.27% 6 R S Software (India) Pvt Ltd 17.41% 7 Tech Mahindra Ltd (Seg) 21.90% Unadjusted average margin 21.63% 7. The Ld.TPO proposed the adjustment to ALP being shortfall at Rs. 1,36,50,206/-. 8. The Assessee filed objections before the Disputes Resolution Panel (DRP) against the draft assessment order passed by the Ld.AO wherein the addition suggested by the Ld.TPO as adjustment to ALP was added to the total income of the assessee by the Ld.AO. The Assessee filed objections before the DRP and the DRP gave certain directions. Based on the direc....
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....over more than 200 crores to 500 crores has to be regarded as one category and those companies cannot be regarded as comparables with companies having turnover of less than 200 crores, the Tribunal held as follows:- "17.7 We have considered the rival submissions. The substantial question of law (Question No. 1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt. Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT v. Pentair Water India Pvt. Ltd. Tax Appeal No. 18 of 2015 judgment dated 16-9-2015 has taken the view th....
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....ta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)." 15. In the light of the aforesaid decision of the Tribunal, comparables sought for exclusion in Ground No.6.1 raised by the assessee is allowed. Accordingly this ground stands allowed partly . Ground No. 6.2 16. Assessee seeks inclusion of only 1 comparable being, Akshay Software Technologies Ltd. It has been submitted that, the Ld.TPO and DRP accepted this comparable in the final list in previous years, however for the year under consideration the same has been excluded. Ld.AR placed reliance on coordinate bench of this Tribunal in case ....