TaxTMI 
TaxTMI 
2021 (9) TMI 440
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion u/s. 10A of the Act. 4. The assessee herein is engaged in the business of providing software development services and IT enabled services to its Associated Enterprises (AE). This assessee is an amalgamating entity and has got a history. Initially two companies named M/s. Dell International Services India Pvt. Ltd. and Perot Systems Business Process Solutions Pvt. Ltd. got amalgamated with M/s. Perot Systems TSI (India) Pvt. Ltd., vide order passed by Hon'ble High Court of Karnataka u/s. 391 to 394 of the Companies Act. The amalgamating company M/s. Perot Systems TSI (India) Pvt. Ltd. is the assessee herein, whose name now stands changed to M/s. Dell International Services Pvt. Ltd. 5. We shall take up first the appeal filed by the assessee. The first issue urged by the assessee relates to transfer pricing assessment made in respect of Software development services (also referred as "Information Technology Services"). The turnover of the assessee in software development segment is Rs. 1197.60 lakhs. The assessee adopted TNM method as most appropriate method and operating profit by operating cost (OP/OC) as profit level indicator (PLI). The assessee declared PLI of 15.05%.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re international transactions relating to SWD segment was 15.05%. He further submitted that contention of the assessee for inclusion and exclusion and inclusion of comparable companies are fully supported by the decisions rendered by the Tribunal, in which case, following five comparable companies will remain:- (a) R.S Software (India) Ltd - 7.78 (b) Evoke Technologies P Ltd - 9.03 (c) Mind Tree Ltd. - 15.98 (d) Akshay Software Technologies Ltd - 14.21 (e) LGS Global Ltd. - 3.62 50.62 He submitted that the average margin of above said companies would work out to 10.12% only and hence profit margin declared by the assessee would be at arms length. He fairly agreed that the revenue would dispute the prayer of the assessee and further the revenue has also raised objections to the decision rendered by Ld. DRP in respect of some of the companies. Accordingly, all those companies are required to be examined vis-à-vis the Tribunal decisions and facts relating to each of the comparable companies. 10. The Ld. A.R submitted that the assessee is making an alternative prayer in the additional grounds in order to put quietus to this matter, i.e., the assessee is....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."US") opted for the Mutual Agreement Procedure ("MAP") proceedings pursuant to Article 25 of the India-US Double Taxation Avoidance Agreement ("DTAA") with respect to the transfer pricing adjustment made to the ITES revenue earned by the Assessee from its AE located in the US. Thereafter, the Assessee has accepted the terms of the MAP resolution under Article 27 of the India-US DTAA on 13.07.2020 with respect to its ITES rendered to the AEs based in the US at a margin of 15.69%. Accordingly, the IT(TP)A Nos. 637 and 639/Bang/2016 Assessee has withdrawn the grounds in the appeal insofar as it related to the ITES provided by the Assessee to its AE based in the US. 41. It is the plea of the assessee in the additional ground of appeal filed along with application dated 24.02.2021 for admitting additional ground that the profit margin of the assessee adopted in MAP ought to be adopted as ALP mark-up for non-US based AE transactions also. It is submitted that the transactions entered by the Assessee with its US based AE is similar to the transactions entered into with the non-US based AEs and that no distinction has been made by the Assessee between the two in its TP study and while pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that the revenue has appeal challenging the order passed by Ld. DRP and hence the grounds urged by the assessee would be relevant depending upon outcome of the revenue's appeal. Accordingly he did not advance his arguments at this stage. 16. The next ground urged by the assessee relates to the grievance of non-granting of proper credit for TDS and advance tax. The Ld. A.R submitted that the assessee has claimed credit or payment of advance tax of Rs. 74.53 crores and TDS of Rs. 7.39 crores. However, the AO has allowed credit of Rs. 43.00 crores and Rs. 3.04 crores respectively as against the above said claim. The Ld. A.R submitted that the TDS deduction as well as advance tax payment has happened under PAN number of merged entities. Accordingly he submitted that the AO may be directed to allow credit for correct amount. 17. We heard the parties on this issue and perused the record. It appears that the AO has given credit for the amounts wherein the PAN number of the present assessee is shown. It is the case of the assessee that the payments made under the name and PAN number of merged entities also should be given credit, when the corresponding income is assessed in the h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ineering design segment. Hon'ble ITAT, Bengaluru in IT(TP)/A/1678/Bang/2012 in the case of Global E Business Operations, directed to exclude the above company by observing that 'we have considered the submission of the learned counsel for the assessee, on perusal of note no. 15 of notes to accounts, which gives segmental revenue of this company, it is clear that the major source of the income for this company is from providing engineering design services and information technology services. The function performed by the engineering design services of the company cannot be considered as comparable to the ITES/BPO function performed by the assessee. The performance of the engineering design services is regarded as providing high end services amongst the BPO which require high skill whereas the services performed by the assessee are routing low end ITES function. We therefore hold that this company could not have been selected as comparable, especially when it performs engineering design services which only a knowledge processing outsourcing (KPO) would do and not a business processing outsourcing (BPO).' Similar View was taken by Hon'ble Bengaluru ITAT in the case of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lude the above company from the comparables. 23. In respect of M/s. Acropetal Technologies Ltd. we notice that the LD. DRP has taken note of the fact that major source of income for this company is from Engineering Design Services which is an activity falling under the category of "Knowledge Process Outsourcing (KPO)" while the activities carried on by the assessee falls under the category of "Business process outsourcing (BPO)". Further, the Ld. DRP has followed the decision rendered by the coordinate bench in the case of Symphony Marketing Solutions India Pvt. Ltd. (surpa). Hence, we do not find any reason to interfere with the decision of Ld. DRP on this comparable company. 24. In respect of Jeevan Scientific Technologies Ltd., the Ld. A.R. placed his reliance on the decision rendered by coordinate bench in the case of DCIT Vs. C-Cube Solutions Pvt. Ltd. (109 Taxmann.com 293) and Finastra Software Solutions (India) Pvt. Ltd. (93 Taxmann.com 460). In the case of C-Cube Solutions Pvt. Ltd. the coordinate bench has excluded this company with the following observations: 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rix of the case, as discussed above, we uphold the action of the DRP of excluding this company 'Jeevan Scientific Technology Ltd.,' from the list of comparables for failing the 75% revenue filter applied by the TPO and on account of its hugely fluctuating margins over the last few years which indicate that there were certain peculiar circumstances influencing the profit margins of the company. Consequently, grounds 2(a to c) raised by Revenue (supra) are dismissed." We notice that the Ld. DRP has given identical reasoning for excluding this company in this case also. Accordingly, following the decision rendered by the coordinate bench in the case of C-Cube Solutions Pvt. Ltd., we confirm exclusion of this company. 25. The revenue is challenging exclusion of Infosys BPO Limited by Ld. DRP. Before us the Ld. A.R. placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of PCIT Vs. H&S Software Development and Knowledge Management Centre Pvt. Ltd. (Order dated 3.1.2018 passed in ITA No. 912/2017). We notice that the Ld. DRP has followed the decisions rendered by the coordinate benches in the case of Symphony Marketing Solutions India Pvt. Ltd. (su....