TaxTMI 
TaxTMI 
2021 (7) TMI 828
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....3-14. 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 sec. 92-A 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 to holding company was an "international transaction" i.e., a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such....
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....the price it charged in the international transaction should be considered as at Arm's Length. 4. The Transfer Pricing Officer (TPO) to whom the determination of ALP was referred to by the AO, accepted TNMM as the MAM and also used the same PLI for comparison i.e., OP/TC. He also selected comparable companies from database. The TPO on his own identified 7 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 I CG-VAK Software Exports Ltd 20.54% 2 I C R A Techno Analytics Ltd. 17.10% 3 Larsen & Toubro Infotech Ltd. 26.06% 4 Mindtree Ltd. (Seg) 18.19% 5 Persistent Systems Ltd. 28.27% 6 R S Softwar....
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.... hearing, the learned Counsel for Assessee prayed that ground with regard to excluding 5 comparable companies chosen by the TPO by application of Turnover Filter alone be adjudicated and all other grounds would be academic, hence need not be adjudicated. The Assessee seeks exclusion of the following 5 companies out of the 7 companies retained after the order of the DRP. a) Larsen & Tourbo Infotech Ltd b) Persistent Systems Ltd. c) Tech Mahindra Ltd d) Mindtree Ltd e) RS Software India Pvt. Ltd. 8. We have heard the rival submissions. As far as ground No. 2 raised by the Revenue is concerned the question boils down on application of turnover filter in choosing comparable companies. The turnover of the Assessee is Rs. 15.86 Crores ....
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.... 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 Vs. Pentair Water India Pvt. Ltd. Tax Appeal No. 18 of 2015 judgment dated 16.9.2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following....
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....ecisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/s. NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incuriam. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the ca....