TaxTMI 
TaxTMI 
2021 (10) TMI 1098
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....med, assets employed and risk assumed by the assesse company viz., (i) Larsen & Toubro Infotech Ltd, and (ii) Persistent Systems Ltd 3. The Ld. TPO, AO as well as DRP have erred in law as well as on facts by excluding five companies which have passed through all filters and are functionally comparable to the functions performed, assets employed and risk assumed by the assesse company viz, (i) Akshay Software Technologies Ltd (ii) Batchmaster Software Pvt Ltd (iii) Cigniti Tech and (iv) E-Zest Solutions Limited . 4. The Learned Transfer Pricing Officer [TPO], Assessing Officer [AO] and Honorable Dispute Resolution Panel [DRP] have erred in law as well as on facts by rejecting the assessee's filters and adopting inappropriate filters like one sided turnover filter ignoring the upper turnover filter a lied b the assessee at 10 times of the turnover of the assesse company and thereby erred in considering comparable companies having turnovers greater than 10 times the turnover of Rs. 95 Crores reported by the assessee company. 5. The Ld. TPO, AO as well as DRP have erred in law by excluding communication charges amounting to Rs. 17,22,189/- and traveling a....
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.... 19.37% Arithmetic mean 8.28% 5. The Ld.TPO rejected the filters applied by assessee. He chose following 7 comparable is based on new set of filters with an average margin of 19.95%: SI No Name of the Company Margins - PLI 1 CG VAK Software & Exports Ltd 20.54% 2 ICRA Techno Analytics Ltd 17.10% 3 Larsen & Toubro Infotech Ltd 26.06% 4 Mindtree ( Seg) 18.19% 5 Persistent Systems Ltd ( Seg) 28.27% 6 R S Software India Ltd 17.41% 7 Tech Mahindra Ltd ( Seg) 18.72% Arithmetic Mean before Working Capital Adjustment Less: Working capital Adjustment considered by the TPO 20.90% 0.95% Adjusted Margin for comparable companies 19.95% Operating margin of the Assessee Company 15% The Ld.TPO proposed adjustment of Rs. 4,09,19,899/- being the shortfall to the arm's-length price. 6. On receipt of the transfer pricing order, the Ld.AO passed draft assessment order by re-computing the deduction under section 10 AA of the Act at Rs. 4,44,11,444/- as against Rs. 4,49,14,165/- claimed by assessee. He disallowed communication expenses and foreign travel expenses from the export turnover for the pu....
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....nder the category of companies having turnover in the range of One crore to 200 crores. However the turnover of the companies sought for exclusion is more than 200 crores. It is thus submitted by the Ld.AR that these comparables cannot be considered as good comparable companies. In support, the Ld.AR placed his reliance on the decision of by co-ordinate bench of this Tribunal in case of Autodesk India Pvt.Ltd vs.DCIT reported in (2018) 96 taxman.com 263. On the contrary, the Ld.CIT.DR relied on orders passed by authorities below. We have perused submissions advanced by both sides in light of records placed before us. 9.5 We note that coordinate bench of this Tribunal for assessment year 2013-14 in case of Evolving Systems Network (I) Pvt.Ltd Vs.ACIT reported in (2021) 130 taxman.com212 held as under: "9. As far as excluding the companies on the basis of turnover is concerned, the issue has been settled in several decisions of the Tribunal and has been elaborately discussed by this Tribunal in the case of AutodeskIndia (P.) Ltd. v. Dy. CIT [2018] 96 taxmann.com 263 (Bang. - Trib). The Tribunal in this decision after review of entire case laws on the subject, consid....
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....ng (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5-8-2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini IndiaPvt. Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions 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 incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We....
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....ement Ltd. 13.1 The learned Authorised Representative has submitted that the TPO has rejected this company on the similar reasoning of diminishing revenue and abnormal cost. 13.2 On the other hand, the learned DR has submitted that this company is incurring persistent losses and further the turnover of this company is less than Rs. 1 Crore and therefore it does not satisfy the filter of turnover applied by the TPO. 13.3 We have considered the rival submissions as well as the relevant material on record. At the outset, we note that turnover of this company in the ITES segment is only Rs. 45.33 lakhs which is any case does not satisfy any filter of turnover in comparison to the assessee's turnover more than Rs. 27 Crores. Even if we apply the tolerance range of turnover of 10 times on both sides of the assessee's turnover then the company which is having less than Rs. 2.7 Crores of turnover will be outside the said range of 10 times. Accordingly, we are of the view that this company which is having only Rs. 45.33 lakhs turnover cannot be considered as a good comparable to the assessee". 15. From the aforesaid findings of the learned Tribuna....