AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (5) TMI 481
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....unds of appeal raised by the assessee are as follows: "Grounds of appeal pertaining to transfer pricing adjustment 1. In appropriate transfer pricing adjustment even though the pricing of all international transactions of the Appellant was at arm's length Erred in making/confirming transfer pricing adjustment by rejecting the analysis undertaken by the Appellant to determine arm's length price for its international transactions pertaining to rendering of software development support services to the AEs. 2. In appropriate use of single year and non-contemporaneous financial data comparable companies for transfer pricing analysis. Erred in considering the operating profit margins on operating cost of the comparable companies based on the financial data pertaining only to financial year ended 31 March 2012 and rejecting use of financial data of comparable companies for multiple years i.e. including 31 March 2011 and 31 March, 2010. Further, erred in computing the arm's length price using the financial information of comparable companies available at the time of assessment proceedings although such information was not available at the time of when the Appellant ....
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....of the appellant vis-a-vis the comparable companies. Erred in comparing full-fledged risk bearing entities with the Appellant's captive operations without making any risk adjustment for differences between the risk profile of comparable companies vis-a-vis the risk profit of the appellant. Other Grounds of appeal: 11. Inappropriate levy of interest and initiation of penalty proceedings Erred in levying interest under section 234B of the Act and initiating penalty proceedings under section 271(1)(c) of the Act. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the Honourable Income Tax Appellate Tribunal to decide this appeal according to law." 5. The assessee has also filed modified grounds in respect of Ground Nos. 8 & 9 of the grounds of appeal in the appeal memo specifically mentioning the concerned companies which reads as follows: "Modified grounds of appeal 8. Inappropriately rejecting certain companies identified in the transfer pricing study Erred by rejecting following company from the set of comparable companies identified b....
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....nted to include the comparable on the basis of merits submitted before the learned CIT(A). The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal any time before or at the time of hearing of the appeal so as to enable your honours to decide this appeal according to law." 8. At the very outset, the Ld. Counsel for the assessee submitted that they are not pressing Grounds of appeal No. 1 to 7 & Ground No. 10. After hearing the submission of the Ld. Counsel for the assessee, Grounds of appeal No. 1 to 7 & Ground No. 10 are dismissed as not pressed. 9. The Ld. Counsel for the assessee submitted that Ground No. 11 is premature and consequential and hence, the same does not call for any adjudication. 10. Therefore, the effective grounds of appeal as per grounds of appeal memo are Ground Nos. 8 & 9 which has been further modified and the same is extracted hereinabove vide Para 5 of this order. 11. The brief facts in this case are that the SAS R & D is wholly owned subsidiary of SAS Institute Inc. (SAS US). SAS R & D was established on 28th July 2000 as a private limited company under the Indian Companies Act, 1956. During the year under....
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...., the assessee submitted that the name of Thinksoft Global Services Limited has been changed into "SQS India BFSI Limited" in FY 2014-15. The said company is listed on the Bombay Stock Exchange and the Annual Report of the company is available on the BSE website (i.e. in public domain). That further, the assessee submitted that Thinksoft Global Services Limited satisfies all the comparability filters that have been applied by the TPO in his TP order. 15. The Ld. CIT(Appeals) vide Para 2.2.2.12.3 and 2.2.2.12.4 has observed that the company's annual report was placed before him which was not examined by the TPO and therefore, he directed the TPO/AO to examine the company's annual report submitted from the point of view of its comparability and re-adjudicate the matter. 16. The assessee on the other hand contends the very fact that in the public domain, annual report of Thinksoft Global Services Limited is available for which the assessee also has computed the margin for that company which is evident at Page 6 of the TPO's order. Therefore, the ground of TPO for not considering this company as comparable company that annual report of Thinksoft Global Services Limited is....
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....ixed asset to sales filter used by the TPO. Thereafter, the Ld. CIT(Appeals) vide Para 2.3.1.2.4 onwards as per reasons given in his order, rejected the contention of the assessee and upheld the order of TPO. 20. At the time of hearing, the Ld. Counsel for the assessee took us to the annual report of the Cybermate Infotek Limited at Page 1083 of the paper book onwards. That therein, at Page 1096, the evidence of products of this company i.e. Cybermate Infotek Limited has been specifically mentioned. That, reiterating the submissions already made before the Department, the Ld. Counsel for the assessee submitted that this company is functionally dissimilar with that of the assessee company since the said company i.e. Cybermate Infotek Limited is into product development whereas the assessee provides software development services. Evidencing these facts at Page 1096 of the Paper book, where it is clearly mentioned that Cybermate Infotek Limited has made products called "HEALSOFT". That apart from HEALSOFT, Cybermate Infotek Limited has made 38 products. Therefore, it can be seen Cybermate Infotek Limited is into product development. 21. The Pune Bench of the Tribunal in the case of ....
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....t dated 28.09.2016 had held that the cost for a particular segment had to be available in order to determine the exact profitability and if same was not available, then the said company could not be selected as comparable company. The Hon'ble High Court of Delhi (supra) while deciding the case of a company which was engaged in providing software development services and its margins were compared with a company which were involved in both software development services as well as sale of software products held that the said concern was to be rejected from final set of comparables. 12. The Mumbai Bench of Tribunal in Ness Technologies (India) Pvt. Ltd. Vs. ACIT in ITA No. 7016/Mum/2012, relating to assessment year 2008-09, order dated 24.09.2014 had excluded Cybermate as not comparable to the company providing software development support services to associated enterprises. The learned Authorized Representative for the assessee has pointed out that profile of concern Cybermate for assessment year 2008-09 and in the year under appeal i.e. assessment year 2012-13 is the same and hence, the said proposition is to be applied. We find merit in the plea of assessee in this regard. 1....
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....The Ld. CIT(Appeals) was of the opinion that demerger became effective only on 26.09.2012 as per High Court's order. 24. At the time of hearing, the Ld. Counsel for the assessee took us to the annual report of this company at Pages 689 to 692 of the Paper book wherein it has been stated as follows: "MERGER A scheme of Arrangement ("Scheme") between the company, Infobeans Systems India Private Limited ("the Demerged Company") currently known as Seed Enterprises Private Limited) to Infobeans Software Solutions Private Limited ("Resulting Company, currently known as infobeans Systems India Private Limited"). Under the scheme, the Resulting Company had acquired the Software Business of the Demerged Company along with all the assets and liabilities pertaining to that business with retrospective effect from 1st April, 2011 (Appointed Date). The Scheme had accordingly been given effect to the Financial Statement." ACKNOWLEDGEMENT Yours Directors place on record their appreciation of the sincere cooperation received from the employees, banks and other Government Agencies. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS CHAIRMAN" Place : Indore Date : 31st December, 2012 The....
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....ich was providing software development services to its associated enterprises. Applying the same set of reasoning as in the paras hereinabove, we hold that Infobeans Systems Pvt. Ltd. is not comparable to the assessee. 19. Before parting, we may also refer to the observations of DRP on Safe Harbour Rules but the same at present cannot be applied and in any case the same cannot be applied to equate software product with software development company. Another aspect which had taken place during the accounting period is the demerger of business of Seed Enterprises Pvt. Ltd., for which the said concern had filed revised accounts. The extraordinary event which had taken place makes the said concern as not comparable to the assessee. In this regard, we find support from the ratio laid down by the Pune Bench of Tribunal in M/s. Aptara Technologies Pvt. Ltd. Vs. ACIT in ITA No. 259/PN/2015 and cross appeal in ACIT Vs. M/s. Aptara Technologies Pvt. Ltd. in ITA No. 579/PN/2015, relating to assessment year 2010-11, order dated 31.05.2016 and in Cummins Turbo Technologies Limited Vs. DDIT in ITA No. 784/PN/2014, relating to assessment year 2009-10, order dated 30.03.2016. Accordingly, we dire....
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....ould adjudicate the matter as per law complying with the principles of natural justice. Thus, this part of ground is allowed for statistical purposes. 29. Thus, ground No. 9 raised in appeal by the assessee is partly allowed for statistical purposes. 30. Now coming to the additional ground i.e. Ground No. 13, the assessee submitted that they are not pressing this ground. After recording the submissions of the assessee, this additional ground of appeal i.e. Ground No. 13 is dismissed as not pressed. 31. Next additional ground i.e. Ground No. 12 pertains to rejection of Thirdware Solutions Limited as comparable company with that of the assessee. 32. The Ld. Counsel for the assessee brought to notice to the Bench at Page 1065 of the Paper book referring description of the products or services of Thirdware Solutions Limited wherein it has been specifically stated as follows: "Acquisition/purchase of IT hardware and software including software as a service (SAAS)." Therefore, Thirdware Solutions Limited is involved in purchase of IT hardware and thus, functionally different with that of the assessee company. 32.1. The Ld. Counsel for the assessee for this proposition further reli....
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....ingly direct learned AO to delete this company from the list of comparables for benchmarking the international transactions." 33. The Ld. DR submitted that this issue may be remanded to the file of the AO/TPO for detailed factual verification based on annual report and other relevant documents in order to verify the nature and scope of the function of Thirdware Solutions Limited. The Ld. Counsel for the assessee did not raise any objection to this proposition. We are of the considered view, in the interest of justice, we agree with the submissions of the Ld. DR and considering the facts and circumstances, we restore this ground to the file of the AO/TPO for determining functionality of this company as per law while complying with the principles of natural justice. Thus, additional ground i.e. Ground No. 12 is allowed for statistical purposes. 34. In the result, appeal of the assessee in ITA No. 632/PUN/2017 is partly allowed for statistical purposes. ITA No. 619/PUN/2017 (By Revenue) A.Y. 2012-13 35. In ITA No. 619/PUN/2017, the Revenue has raised following grounds of appeal: "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred on facts and in l....