TaxTMI 
TaxTMI 
2019 (7) TMI 1921
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....ices and IT enabled services (ITES) to its Associated Enterprises (AEs), filed its original return of income for Assessment Year 2012-13 on 29.11.2012 declaring income of Rs.61,23,25,140/-. A revised return was filed on 10.06.2013, wherein the assessee declared income of Rs.41,11,22,730/-. The case was selected for scrutiny and thereafter the Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) under section 92CA of the Act for determination of the arm's length price (ALP) of the international transactions entered into by the assessee with its AEs in the year under consideration. The TPO passed an order under section 92CA of the Act dated 06.01.2016, wherein he proposed (i) an adjustment of Rs.20,99,44,284/- to the international transactions relating to the assessee's software development services segment (SWD segment) and (ii) an adjustment of Rs.1,66,99,160/- to the assessee's ITES segment. Vide order under section 92CA(5) r.w.s. 154 of the Act, dated 04.04.2016, the TP adjustment to the SWD segment was reduced to Rs.15,35,74,316/-. 2.2 The assessee filed its objections thereto before the DRP, who vide its directions dated 31.10.2016 allowed the assess....
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....pellant; 3.4. Conducting a fresh comparability analysis by rejecting certain filters applied by the Appellant in the transfer pricing documentation (i.e., R&D spend / Sales filter, net-worth filter and advertising, marketing and distribution expenses / sales filter) and applying additional /modified filters (i.e., service revenue > 75% filter, export sales / total sales filter, consistent losing making filter, different year ending filter and RPT /Sales >25% filter). 3.5 Rejecting companies (i.e., Celstream Technologies Private Limited, Akshay Software Technologies Limited and Evoke Technologies Private Limited) which pass the test of comparability and are functionally comparable to the Appellant; 3.6 Introducing additional purported companies (i.e., Larsen & Toubro Infotech Ltd and Persistent Systems Ltd.) which fail the test of comparability; 3.7 Ignoring the limited risk nature of the services provided by the Appellant and in not providing an appropriate adjustment towards the risk differential, even when full-fledged entrepreneurial companies were selected as comparable companies; and 3.8 Not considering certain items of expenses/inc....
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....hey were software product companies and were functionally different. 6.2 Before taking up the comparables of these two companies for consideration, it would be appropriate to give a factual background of the transfer pricing issues in this case. The assessee, inter alia, in the year under consideration, is engaged in providing software development services and IT enabled services to its AEs. In its TP study / documentation, the assessee selected the following 14 comparable companies, as listed at para 8 of TPO's order, with an average margin of 13.08%. As the PLI of the assessee (OP/TC) was 12.02% in comparison to those of the comparable companies selected (supra) at 13.08%, the assessee considered its international transactions in the software development services segment to be at arms length. 6.3.1 The TPO rejected the assessee's TP study for the reasons stated in his order under section 92CA of the Act. He then proceeded to conduct his own TP study / comparability analysis, applying various filter and selected the following 10 companies with average margin of 22.63% as comparable to the assessee:- 6.3.2 In view of the above, the TPO, in his order under section 92CA o....
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.... 89 taxmann.com 440 (Delhi-Trib.) for the same AY 2012-13. In this regard it was submitted that the functional profile of the Assessee is same as that of the Assessee in the case of Agilis Information Technologies India (P) Ltd., is identical in as much as the said company was also involved in providing SWD services to its AE and the TPO had chosen 16 comparable companies out of which 6 companies chosen by the TPO in the case of the Assessee for the purpose of comparability were the same. His submission was that the decision rendered by the Tribunal in the case of Agilis Information Technologies India (P) Ltd., (supra) would be equally applicable to the Assessee in the present case also. The learned DR submitted that the DRP in its directions has merely accepted with the reasoning of the TPO and therefore the issue of exclusion of these companies should be directed to be examined afresh by the DR. 29. We have considered the rival submissions. In the case of Agilis Information Technologies India (P) Ltd., (supra), this Tribunal considered the comparability of the 3 companies which the Assessee seeks to exclude from the final list of comparable companies chosen by the TPO. T....
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....comparable companies for the purpose of arriving at the arithmetic mean of comparable companies for the purpose of comparison with the profit margins." 6.4.2 Respectfully following the aforesaid decision of the Co-ordinate Bench of this Tribunal in the case of CGI Information Systems & Management Consultants Pvt. Ltd., Vs. ACIT in ITA No.183/Bang/2017 dated 11.04.2018, which is also rendered for Assessment Year 2012-13, we direct the AO/TPO to exclude:- (1) M/s. Larsen & Toubro Infotech Ltd., and (2) M/s. Persistent Systems Ltd., from the TPO's list of comparable companies. We hold and direct accordingly. Consequently, ground No.3.6 of the assessee's appeal is allowed. 7. In the result, the assessee's appeal for Assessment Year 2012-13 is partly allowed. Order pronounced in the open court on this 3rd day of July, 2019. ============= Document 1 Weighted Remarks Average 31.47 12.33 4.24 16.41 13.08 No Data and different year ending. Data not available in public domain. Failed the Forex filter of 75% to sales. Qualifies all filters. Hence accepted No Data and different year ending. Data not available in public domain.....