TaxTMI 
TaxTMI 
2021 (2) TMI 1086
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd without prejudice to one another: 1. On the facts and in the circumstances of the case, and in law, the Learned Assessing Officer ('Ld. AO'), following the directions of the Learned Dispute Resolution Panel ('Ld. DRP'), erred in confirming the action of the Learned Transfer Pricing Officer ('Ld. TPO') in rejecting the Arm's Length Price ('ALP') computation undertaken by the Appellant for benchmarking the international transactions pertaining to software development services ('SDS') and marketing support services ('MSS'), thereby making a transfer pricing ('TP') adjustment of INR 5,63,19,340 and INR 22,08,862, respectively. The Appellant prays that the TP analysis conducted by the Appellant ought to be accepted and consequently the TP adjustment ought to be deleted. 2. On the facts and in the circumstances of the case and in law, Ld. AO/Ld. TPO/Ld. DRP erred in: a) rejecting the transfer pricing study which was maintained in good faith and with due diligence; b) rejecting the search process followed by the Appellant and carrying out fresh comparability analysis for determining....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ologies Ltd. d) Akshay Software Technologies Limited e) Bells Softech Ltd. f) TVS Infotech Ltd. 4.6. On the facts and in the circumstances of the case, and in law, the Ld. AO/Ld. DRP/Ld. TPO has erred in considering provision for doubtful debts as non-operating expenses. 4.7. On the facts and in the circumstances of the case, the Ld. AO/Ld. DRP/Ld. TPO have erred in considering a mark-up (determined based on the modified benchmarking analysis) on the total value of assets received on free of cost basis from its AE which has resulted in an adjustment of INR 7,336,991. 4.8. On the facts and in the circumstances of the case, the Ld. AO/Ld. DRP/Ld. TPO have erred in not allowing the Appellant, the benefit of an adjustment for the differences in the level of risk borne by the com parables and the Assesses and the adjustment to account for differences in the level of working capital between the Assesses vis-à-vis comparable companies. 4.9. On the facts and in the circumstances of the case, the Ld. AO/Ld. DRP/Ld. TPO have erred in computing the operating margin of final set of comparable companies for SDS segment for A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....antive grounds being general in nature, 5th substantive ground keeping in mind the smallness of the amount involved therein and sixth substantive ground, being premature in nature; respectively. 2.2. We are left with assessee's fourth substantive ground seeking to reverse the learned lower authorities action making above stated arm's length price adjustment in its hands. There is no dispute that this assessee viz., M/s. Cavium Networks (India) Private Limited is engaged in software development services. It had carried out international transactions of Rs. 74.28 crores with its USA based Associated Enterprise M/s. Cavium LLC US in the relevant previous year. These transactions formed the subject matter of section 92 CA reference from the Assessing Officer to the Transfer Pricing Officer "TPO" which has resulted in the impugned adjustment in the assessment order before us. 2.3. The assessee's sole argument during the course of hearing is regarding the PLI pertaining to software development services challenges the alleged wrongful inclusion of M/s. Infosys Limited as a comparable entity in the TPO's order. It has sought to buttress the point that the assessee'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... crores and Rs. 3,031.6 crores respectively as against the assessee's turnover of Rs. 116.00 crores only. The learned Counsel for the assessee also argued that they are functionally dissimilar and own intangibles etc. 7.5. The learned DR argued that unless the assessee demonstrates as to how the huge turnover impacts the margin of the said companies, they should not be excluded from the final list of comparables. 7.6. Having regard to the rival contentions and the material on record, we find that the Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies (P) Ltd. (2013) 36 Taxmann.com 289 (Delhi H.C.) has held Infosys Ltd. as not comparable as it is a giant company in the area of development of software. The same ratio applied to both L&T and Mindtree as well. Thus, we direct exclusion of all these three companies on account of huge turnover." 6.2.1. Both the Ld. AR and the Ld. DR have agreed that there is no change in the facts of the case for the year under consideration. The assessee's turnover was Rs. 46.69 crores whereas the turnover in the above companies is huge and uncomparable. Therefore, respectfully following the ....