TaxTMI 
TaxTMI 
2021 (2) TMI 846
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.... CIT(A) is right in not appreciating in fact that transfer pricing is not an exact science and no two entities can be exact replicas? 4. Whether on the facts and circumstances of the case, the CIT(A) is right in trying to find out exact replica of the assessee for determining the Arm's length price based on such replica, even when the law and the international jurisprudence itself recognize that there cannot be an exact comparable to a given situation, especially with TNMM as the most 5. Whether the order of CIT(A) in imposing conditions is not beyond the scope of law and business reality by rejecting all close comparables on one or the other ground, without appreciating that not two companies can ever be same? 6. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so for as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 7. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." ITA No. 3087/B/2018 I. Transfer Pricing The grounds mentioned hereinafter are without pre....
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....vis the comparable companies. Corporate taxes 11. The learned AO/Hon'ble CIT(A) erred in disallowing software expenses amounting to INR 2,690,426 by erroneously considering the same as software purchase and therefore that the same was ought to have been capitalized while in reality the same were in the nature o software expenses incurred for professional services. Further even considering but not admitting that the said sum was to be disallowed, the learned AO erred in adding back the said sum as income without considering the benefit of section 10B on such addition when the same ought to have been rightly considered. 12. For the purpose of computing 'Export Turnover' u/s. 10B the learned Assessing Officer erred in reducing the expenditure incurred towards Telecommunication charges amounting to INR. 4,057,317/- insurance amounting to INR. 282,534/- and foreign travel and other expenses incurred in foreign currency amounting to INR. 3,384,388/- totaling to INR. 7.724,239/- 13. Without prejudice to the above, the learned AO ought have made corresponding adjustment in the amount of 'Total Turnover' while arriving at the amount of....
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....tion in Form 3 CD. 5. The Ld. TPO noted that assessee entered into following international transaction: Sl no Type of transaction Amount (Rs) 1 R & D Services 19,19,57,973 2 Tech Support Services 3,81,89,551 Total 23,01,47,524 5.1. The Ld. TPO observed assessee carried out following functions as per TP document: "Verifone India Operations: Currently Verifone India is carrying out R & D Services as per requirement of Verifone Singapore. Verifone India currently employs over 156 employees. Verifone India has basic strengths in software development and rendering technical support for the various requirements of Verifone Singapore in the Payment solutions. Verifone India operations are funded by Verifone Singapore. The details of R & D services that Verifone India currently provides to Verifone Singapore are: a) Software development projects as agreed from time to time between Verifone Singapore and Verifone India. b) Assisting with research and development project/program issues in coordination with Verifone Singapore personnel or personnel of verifone Singapore Subsidiaries or affil....
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....ascertained 7. Rejected companies with no data available 8. Rejected companies with unusual transactions during the year of review 9. Selected companies with segmental data 7. Thereafter, the Ld. TPO applied following filters and selected following set of 11 comparables which included 8 new comparables and 3 comparables selected by assessee in the TP document: S No Filters used for Software development segment 1. Use of current year data 2. Companies whose software development income was less than Rs. 1 crore were excluded 3. Companies whose software development service is less than 75 percent of the total operating revenues were excluded 4. Companies who have more than 25 percent related party transactions of the sales were excluded 5. Companies who have persistent losses for the last three years upto and including FY 2009-10 were excluded 6. Companies having different FY ending (i,e not March 31, 2010) or data of the company does not fall within 12 month period ie, April 1 2009 to March 31 2010, were rejected 7. Companies that are functionally different from the taxpayer were excluded 8. Companies that are....
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....was deducted by assessee which the Ld. CIT(A) directed Ld. AO to verify the claim and allow the payment, if TDS is found to be deposited. 13. Aggrieved by the order of the Ld. CIT(A), assessee as well as revenue are in appeal before us. 14. At the outset the Ld. AR submitted that amongst the grounds raised by assessee, it wishes to argue Ground 6-7, 9 and the other grounds are not pressed. Accordingly we are adjudicating only ground No. 6, 7, 9 in assessee's appeal. 15. The Ld. AR submitted that Ground No. 6-7 are in respect of comparables retained by the Ld. CIT(A), without considering the fact that, these comparables are functionally not similar with that of assessee and also that they fail the turnover filter. The Ld. AR submitted that applying the upper limit for turnover filter while carrying out the benchmarking analysis is necessary as the Ld. TPO excluded comparables which is less than Rs. 1 crore turnover. He submitted that, Larsen and Toubro Infotech Ltd., Mindtree Ltd., Sasken Communications Technologies Ltd. having high turnover of more than 200 crores deserves to be excluded by applying an upper turnover limit. 16. The Ld. AR placed reliance on the d....
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.... the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India (P.) Ltd. (supra) are to be regarded as per incuriam as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned couns....
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....n.com 92 (para 5.4) and Apigee Technologies (India) (P.) Ltd. reported in (2015) 63 Taxmann.com 129 (paras 17 to 19) it has been held that adjustment towards working capital differences between the assessee and the comparables should be considered and appropriate adjustment granted in arriving at the profit margins of comparable companies for the purpose of comparison. 27. Respectfully following the same, we direct the Ld. AO/TPO to grant working capital adjustment in actuals for determined in the profit margin of comparables. Accordingly this ground raised by assessee stands allowed for statistical purposes. 28. In respect of corporate tax issues raised by assessee being. 29. Ground No. 11-16 it has been submitted that the directions by the Ld. CIT(A) needs to be followed while considering the claim of assessee. The Ld. AR also submitted that, order giving effect to the order passed by the Ld. CIT(A) has not been passed by the Ld. AO. 30. Considering the submissions advanced by the Ld. AR, we direct the Ld. AO to follow the directions passed by the Ld. CIT(A) on these issues and to consider the claim of assessee in accordance with law. Accordingly these grounds r....