TaxTMI 
TaxTMI 
2020 (11) TMI 1057
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....n seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies. 4. Whether the Hon'ble DRP is correct in fact and law in concluding that the companies selected by the TPO are not comparable to the assessee overlooking the fact that reasonably accurate adjustments could be made to eliminate the material effects of the differences between them. 5. For these and other grounds that may be urged at the time of hearing, it is prayed that the directions of the Dispute Resolution Panel in so far as it relates to the above grounds may be reversed. 6. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." ITA (TP) a No. 317/B/2016 "The grounds mentioned herein by the Appellant are without prejudice to one another. 1. That the order passed by the Learned Deputy Commissioner of Income- tax, Circle-3(1)(2), Bangalore Assessing Officer ("Assessing Officer" or "Ld. AO") pursuant to the directions of the learned Dispute Resolution Panel ("DRP" or "Ld. Panel") ....
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....gth price in connection with the impugned international transactions by the Ld. TPO and in holding that the Appellant's international transaction in the services segment is not at arm's length. [corresponding to ground 4(c) of original grounds of appeal] d) Disregarding the functional comparability of the comparables identified by the Appellant with respect to the Services segment. [corresponding to ground 4(d) of original grounds of appeal] e) Upholding the acceptance of companies that fail the parameters / tests of comparability analysis while performing the comparability analysis and arriving at the final set of comparables in the TP order with respect to the Appellant's Services segment. (i) The learned TPO/DRP erred in law and facts in considering Accentia Technologies Ltd. as a functionally comparable company to the service segment of the Appellant even though this company should have been excluded since it is functionally dissimilar being engaged in product development also segmental details are not available. [corresponding to ground 4(e) of original grounds of appeal] (ii) The learned TPO/DRP erred in law and facts in conside....
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....y the Appellant. (i) The learned AO/DRP erred in law and in facts in excluding Cosmic Global Ltd. because the company has subcontracting expenses whereas this company should have been included as it is functionally comparable. [corresponding to ground 4(i) of original grounds of appeal] (i) The learned AO/DRP erred in law and in facts in excluding Cosmic Global Ltd. because the company has subcontracting expenses whereas this company should have been included as it is functionally comparable. [corresponding to ground 4(i) of original grounds of appeal] (ii) The learned AO/DRP erred in law and in facts in excluding Mindtree Limited because the company is functionally different and has extra ordinary events during the year whereas this company should have been included as it functionally similar to the Appellant. [corresponding to ground 4(i) of original grounds of appeal] (iii) The learned AO/DRP erred in law and in facts in excluding e4e Healthcare Business Service Private Limited inconsistency in accounting principles regarding the provision of bad debts written off whereas this company should have been included being functionally similar to the....
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....reference, Ld.TPO called upon assessee to file requisite details of the transaction in Form 3 CEB. Ld.TPO observed that, assessee had following international transaction with its associated enterprise: Particulars Amount (Rs.) 1 Contract Manufacturing a) Import of Raw materials 1286411783 b) Purchase of capital goods 6374000 c) Sale of manufactured goods 3716702436 Payment of royalty/technical know -how fees 41780607 iii_Engineering design services 216573152 iii) Reimbursement of expenses 5243900 iv) Recovery of expenses 44401743 v) Sale of CTD Line 11485000 5. Ld.TPO noted that, assessee used following 13 comparables in respect of IT enabled services with an average margin of 10.61% as compared to its own margin at 10.01%. Assessee computed its margin by using OP/OC as PLI. It applied TNMM as most appropriate method and held the transaction to be at arms length. SN Name of the comparable Margin 1 Akshay Software Technologies Ltd -1.97% 2 CC-Vak Software & Exports Ltd -3.80% 3 Cades Digitech Pvt. Ltd. 5.47%....
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....nd papers as may be considered necessary either at or before the appeal hearing." 13. He submitted in the application for admission of additional ground that substantial Justice would be rendered to assessee by admitting this ground. It has been submitted that for adjudicating this ground no new facts needs to be referred to as it arises from the records placed before us. He also submitted that the issue stands squarely covered by decision of Hon'ble Rajasthan High Court in case of Chambal Fertilizers and Chemicals Ltd. v. Jt. CIT IT Appeal No. 52 of 2018 by order dated 31-7-2018. 14. On the contrary Ld. CIT DR though objected for admission of the additional gone could not controvert the submissions made by Ld.AR. 15. We have perused the submissions advanced by both sides in light of records placed before us. 16. We note that issue raised by the assessee in this additional ground is no longer res-integra. The ground raised by assessee under this application is a legal ground and needs to be admitted. We draw our support from the decision of Hon'ble Supreme Court in case of National Thermal Power Corporation Ltd (NTPC) v. CIT reported in (1998) 229 ITR 383. 17....
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....ty as requested by Collaborator to develop, make have made, assemble, or have assembled the Produce(s), and thereafter to use, sell, lease, offer for sale or otherwise dispose of and if applicable service such Products, and b. To incorporate the Licensed Software, including the right to copy and modify the Licensed Software and to make or have made Software derived from the Licensed Software, into the Product(s). As per the TP document: 24. GE BE manufactures CT Tubes, X-ray tubes, HV Tanks. Detectors and other parts and accessories for medical diagnostic imaging equipment. The said products are manufactured to cater to both domestic and export markets. The products manufactured by GE BE are sold only to AEs whether in India or abroad. 25. GE BE also provides engineering design services to its AEs. Its services include value-engineering design services for GEHC global's customer related problems and issues, and take the form of technical drawings and designs. GE BE uses computer aided design ("CAD'), computer aided manufacturing ("CAM') and other software tools in the provision of these services." 26. In the trans-apprising study assessee has been categorise....
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....35. The comparables that remains to be adjudicated in Ground No.2 is M/s.Jeevan Scientific Technology Ltd and M/s.iGate Global Solutions Ltd. 36. Ld.CIT.DR submitted that, Ld.AO wrongly excluded these comparables even though it satisfies all the filters applied by Ld.TPO. M/s Jeevan scientific technology Ltd: 37. Ld.TPO included this comparable as this comparable was one of the comparables accepted by assessee in the preceding year and that assessee is raising issues for the sake of objection which is not acceptable. Ld.CIT.DR thus submitted that DRP wrongly excluded this comparable and prayed for its inclusion. On the contrary, Ld.AR submitted that, DRP correctly observed that this comparable is engaged in ERP implementation and sales to client which is not the services rendered by assessee. It has been submitted by him that this comparable is not functionally similar with that of assessee and it also fails the service revenue filter applied by Ld.TPO. He also submitted that BPO operation segment is less than 75% of total operating revenue which is also one of the filters applied by Ld.TPO. Ld.AR submitted that the entire foreign exchange revenue pertains to BPO segment a....
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....has been considered by Ld.AR for arguments. 48. At the outset, Ld.AR submitted that Ground No.1-3, 4 (a)- (d), (g)-(h), (j) are general in nature and therefore do not require any adjudication. 49. It is also been submitted by Ld.AR that Ground No.4 (f) (ii), (k) and Ground No.5 are not pressed. Accordingly these grounds are dismissed as not pressed. 50. In the remaining grounds which Ld.AR argued are in respect of exclusion of following comparables: For Exclusion: • Accentia Technologies Ltd • ICRA Online Ltd • Cades Digitech Pvt. Ltd. • Microland Ltd For Inclusion • Cosmic Global Ltd • Mindtree Ltd • e4e-Healthcare Business Services Pvt Ltd. 51. We have already considered following comparables which was commonly raised by revenue for inclusion in para -------- hereinabove. Accordingly ground 4 (i) stands allowed. For exclusion Accentia Technologies Ltd 52. This comparable was included by Ld.TPO by holding that it is functionally comparable with that of assessee. Ld.AR submitted that this comparable is engaged in a knowledge process outsourcing company and ....
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....ion of Oak Technologies, incorporated and transmission services during the previous year." 14. We have perused the aforesaid decision and we find that in the aforesaid case, reasons for excluding Accentia Technologies Ltd., was on account of mergers and acquisition that took place in the relevant previous year and to verify that factor, the issue was set aside to the TPO. The Ld.DR submitted before us that by implication of functional comparability of this company has been accepted. We are of the view that such conclusions cannot be drawn and we find that functional comparability has been made in the case of Mis. Novo Nordisk India Pvt. Ltd., Vs. DCII (supra) and it was found that this company was in the field of medical transcription, billing and coding. Therefore, there is no substance in the stand taken by the department. 56. Respectfully following the same, we do not find any reason to include this comparable in the finalist. Accordingly Ld. AO/TPO is directed to exclude this comparable from the finalist. ICRA Online Ltd 57. This comparable was included by learnt TPO by holding it to be functionally similar. Ld.AR submitted that this company has its operations bi....