TaxTMI 
TaxTMI 
2019 (6) TMI 1634
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....ed Transfer Pricing Officer ("learned TPO") issued under Section 92CA of the Act are not in accordance with the law, made in violation of the principles of equity and natural justice and are contrary to the facts and circumstances of the present case. 2. Transfer pricing adjustment of INR 99,984,156 The Hon'ble DRP and learned AO / TPO have erred in law and on facts in making Transfer Pricing ("TP") adjustment of INR 99,984,156 to the returned income of the Appellant and in holding that the international transactions between the Appellant and its associated enterprises ("AEs") were not at arm's length. 3. Rejection of transfer pricing documentation of the Appellant 3.1. The Hon'ble DRP and the learned AO / TPO have erred in law and on facts in rejecting the TP documentation which had been prepared by the Appellant, in the manner contemplated under the relevant provisions of the Act and the Income-tax Rules, 1962 ("the Rules"). 3.2. The Hon'ble DRP has erred in law and facts in upholding the learned TPO's finding that the information or data used in computation of arm's length price is "unreliable or incorrect", under ....
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....nt's TP documentation companies which are comparable to the Appellant: • Helios & Matheson Information Technologies Limited • R Systems International Limited • Onward Technologies Limited • Melstar Information Technology Limited • Akshay Software Technologies Limited 6.5. The Hon'ble DRP and the learned AO / TPO have erred in law and on facts in rejecting the following additional comparable companies proposed by the Appellant during the course of TP proceedings, without considering the detailed submissions of the Appellant: • Evoke Technologies Limited • Spry Resources India Private Limited 6.6. The Hon'ble DRP has erred in law and on facts in suo-moto rejecting the following company which was considered as comparable by the TPO and not objected to by the Appellant. • ICRA Techno Analytics Limited 7. Information gathered under Section 133(6) of the Act is inappropriate for the purposes of disturbing the TP documentation undertaken by the Appellant 7.1. The Hon'ble DRP and the learned AO / TPO have erred in law and in facts by gather....
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....of the above objections is independent and without prejudice to the other grounds preferred by the appellant." 3. The assessee has also raised some additional grounds which are as under. "Based on the facts and circumstances of the case, Broadcom Communications Technologies Private Limited (in the case of erstwhile Broadcom India Research Private Limited) ("Appellant"), respectfully submits the following additional grounds of appeal for admission before Your Honours: 6.7 The learned Transfer Pricing Officer ("TPO"), having applied the minimum service revenue of Rs. 1 crore, erred in not applying a cap on upper limit on the turnover/service revenue while selecting the companies comparable to the Appellant for the purpose of determining the Arm's Length Margin of the international transactions of the Appellant with its Associated Enterprises outside India in the software 6.7.1 The lower Authorities have erred in not appreciating that the Appellant was a mid-sized company with turnover of Rs. 234 crores and therefore companies having turnover of less than Rs. 200 crores and more than Rs. 2000 crores should be excluded while conducting the benchm....
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....ditional grounds but in the facts of present case, we admit the additional grounds because the issue raised is a purely legal issue and the relevant facts are available on record i.e. turnover of the tested party and of the comparables. 5. In course of hearing, ld. AR of assessee submitted a big chart containing arguments and it was submitted that issue may be decided on the basis of this chart. It was pointed out that as per this chart, the assessee is requesting for exclusion of two comparables i.e. CG-VAK Software Exports Limited and Larsen & Toubro Infotech Limited. He also pointed out that as per this chart, the assessee is requesting for inclusion of five comparables i.e. i) Evoke Technologies Ltd. ii) Spry Resources India Private Limited iii) Helios & Matheson Information Technology Limited iv) R Systems International Limited v) Akshay Software Technologies Limited 6. He submitted that assessee does not want to press for inclusion of one comparable i.e. Spry Resources India Pvt. Ltd. The assessee is only pressing inclusion of four comparables out of 5 comparables as per this chart. Regarding the exclusion of two comparables ....
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....roved the order passed by the tribunal wherein it has applied the filter of ten times of both sides of the assessee. As this Tribunal falling within the territorial jurisdiction of the Karnataka High Court, hence it is bound by the judgment passed by High Court of Karnataka , hence we are bound to apply the ratio of Acusis Software India p. Ltd (supra), in the present matter. 12. In view of the above, this ground of the revenue appeal is required to be allowed with respect to the following comparables, namely, iGate Global Solutions Ltd (turnover 406 cr), Flextronics Software Systems Ltd (turnover 457.45 crores) and L & T Infotech Ltd (turnover Rs. 562.45 crores) as the turnover of these companies fall broadly within the range of ten time of the turnover of the assessee company. Accordingly the matter is remanded back to the file of CIT(A) with a direction to examine the functional profile of all the comparable on the touch stone of FAR and decide the comparability of these comparables, as the Ld. CIT (A) had not examined the functional profile of these companies while excluding these comparables." 7. From the above paras reproduced from this Tribunal order, it is seen ....
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....ed, paras 20 to 22 in respect of Evoke Technologies Ltd. and para 24 in respect of R Systems International Limited and it was pointed out that regarding all these three comparables, the Tribunal in this case has restored the matter back to the file of TPO for fresh decision. For ready reference, we reproduce paras 17 to 22 & 24 of this Tribunal order. These are as under. Akshay Software Technologies Ltd. ("Akshay") 17. The assessee has submitted that Akshay Software is one of the comparable companies selected by the Assessee in the TP documentation. It was further submitted that The Ld. TPO rejected Akshay as a comparable on the ground of functional dissimilarity saying that the company is engaged in providing professional services, procurement, installation, implementation, support and maintenance of ERP products and services in India and overseas on the basis of reply to notice u/s 133(6) received by Ld. TPO from Akshay Software. The submitted that the services rendered by Akshay were forming part of the subset of software development services and all the functions mentioned in Annual Report such as installation, support and maintenance of ERP products and ....
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.... the rival contentions and perused the record. As per the TP study of the assessee the software development services rendered by the assessee to its AE involved various steps including banking, capital markets, finance, risk and compliances, package integration, technology, wealth and investment management. Whereas the comparable Akshay Software Technologies Ltd, is into different category of software development and further Akshay Software Technologies Ltd, is into providing professional services, procurement and installation, implementation, support and maintenance, ERP products and services in India and overseas. On account of that, the comparable is attending the business operation of AE by rendering the above said services to the clients of AE both in India and outside India. Thus the revenue of the comparable had been consolidated and disclosed under the income under the head 'income from software services'. In fact, when the comparable rendering services outside India, then it is rendering services onsite and therefore the segregation of financials is required for making it comparable with the assessee company. Further the assessee was shared with the response received by th....
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....eenshot from annual report: h) Segment Reporting: There are no separate reportable segments as per Accounting Standards 17, as the entire operations of the company relate to one segment namely, Software development. Even the Ld. TPO has not objected on the functional comparability of Evoke Technologies. The Assessee would like to bring to the notice of Ld. TPO that Evoke Technologies Ltd . was selected as a comparable to the Assessee by TPO in its final set of comparables of TP order for AY 2011-12. There is no change in functional profile of the company from AY 2011-12. Hence, the Assessee humbly submits that Evoke technologies should be accepted as a comparable. 21. Per contra, the Ld. DR, relies upon the order of the DRP at page 20 & 21 and has submitted that the company is functionally not comparable with the assessee and the decision relied upon are distinguishable on facts. 22. We have heard the rival contentions and perused the record. The primary reason for not including Evoke Technologies Ltd was that the data were not available in public domain when search was conducted by the TPO. However the assessee has submitt....
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.... it was submitted that this is the only objection of TPO and DRP that the Financial Year of this company is different. In this regard, our attention was drawn to page no. 7 of the order of TPO and pages 5 to 7 of the order of DRP. On page no. 7 of the order of TPO, it is noted by TPO that the accounts of this company is prepared for the period from 01.10.2012 to 30.09.2013 while the accounts of tested party is prepared for the period from 01.04.2012 to 31.03.2013. As per para 24 of the Tribunal order in the case of Capco Technologies Pvt. Ltd. as reproduced above, it is noted that M/s. R Systems International Limited was rejected by the TPO on the ground of different Financial Year and the Tribunal has considered the judgment of Hon'ble Punjab & Haryana High Court rendered in the case of CIT Vs. Mercer Consulting (India) (P) Ltd. (supra) and decided the issue as per para no. 24.3 of the order which is reproduced below because in this para, the Tribunal has reproduced the relevant portion of the judgment of Hon'ble Punjab & Haryana High Court. This para is as under. "24.3 We have heard the rival contentions and perused the record. At the outset we may record that in the mat....
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.... the financial year in which the international transaction has been entered into". 31. The Rule does not exclude from consideration the data of an entity merely because its financial year is different from the financial year of the assessee. What the Rule requires is that the data to be used in analyzing the financial results of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Thus so long as the data relating to the financial year is available, it matters not, if the financial year followed is different. In the case before us the data relating to the relevant financial year of R. Systems International Limited is available. 32. We are, therefore, entirely in agreement with the decision of the Tribunal that if the data relating to the financial year in which the international transaction has been entered into is directly available from the annual accounts of that comparable, then it cannot be held as not passing the test of sub-rule(4) of rule 10B." In view of the authoritative pronouncement of the Hon'ble High Court we do not find th....