2019 (3) TMI 1919

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....P-2/BLR/2016-17 dated 19.12.2016. 2. MIs. Prodapt Solutions Private Limited , the assessee, is the headquarter entity in the Prodapt group and was incorporated in 1999. On its own and through its subsidiaries have offices and software development centers in India, the United States, South Africa and Europe. It operates as part of Jhaver Group of Companies. Prodapt India is a global software services company with a singular focus on telecom segment . The company provides software services for communications service providers, independent software vendors and equipment companies in India and internationally. It provides experience and innovation with state of the art processing technology and a solid reputation ensuring outstanding customi....

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....l workings, the assessee's NCP margin of 11.79% earned by from its international transactions within its AEs segment is higher than the NCP margin of 4.82% earned in its Non AE segment. Therefore, the assessee submitted that the international transactions of provision of software development services, even on application of internal TNMM method, was concluded to be at arm's length as per section 92C of the Act. However, the TPO held that the said segmentation was prepared for transfer pricing purposes only after issue of show cause notice. Therefore, he held that the assessee had prepared self-serving documentation for its own convenience in the absence of separate cost centres maintained and hence, the TPO rejected the segmental approach a....

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.... Total expenses 1,621.27 1,378.80 1,574.47 Net Operating Profit 191.08 66.46 257.54 Net Cost Plus Margins 11.79% 4.82% 8.58% The revenue from AE segment is shown at Rs. 81.12 crores and non-AE segment at rs.14.45 crores. It is seen that in above table the amount shown as direct expenses for both the segments are same for other expenses also. Even without mentioning other prima facie errors in the table it would suffice to conclude that the claim of segmental financials as submitted in the above table by the assessee is patently incorrect and deserves to be rejected outright. In view of the above, the approach of the TPO to reject the contention of the assessee is upheld and the objection of the ass....

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....not between Associated Enterprises (as admitted by the TPO), where such transactions were not covered by Chapter-X of the Income Tax Act." 4. With regard to the issue of rejection of segmentation, the Ld. AR invited our attention to the decision of Delhi Bench of this Tribunal in Birlasoft (India) Ltd. Vs. DCIT (2014) 49 taxmann.com 312 (Delhi-trib), wherein, the Hon'ble ITAT following the co-ordinate Bench decision, set aside the order of the AO/TPO for the purpose of determining the arm's length price in respect of the international transactions undertaken with the associated enterprise by making internal comparison of profitability from the international transactions with unrelated parties after allocating respective revenues and expe....

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....essee, the Ld AR relied on the order of this this Tribunal in the case of M/s. Yongsan Automative India Pvt. Ltd Vs. ACIT in ITA No.357/Mds/2017 dated 16.11.2017. The relevant portion of the order of this Tribunal is extracted as under:- "7. This Tribunal is the considered opinion that under the scheme of the Income tax act, the transfer pricing adjustment has to be made only in respect of the transaction of the assessee being a tested party, with associated enterprise outside the country after comparing the transaction made by similarly placed company in uncontrolled transaction with non-Associated Enterprise. Therefore, we are unable to uphold the order of the Dispute Resolution Panel Accordingly the order of the DRP is set aside....