TaxTMI 
TaxTMI 
2019 (6) TMI 1670
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....ng company. The transaction of rendering software development services to its holding company was a transaction with an Associated Enterprise (AE) and was therefore an international transaction. As per the provisions of Scc.92 of the Income-tax Act, 1961(Act), income from international transaction has to be computed having regard to Arm's Length Price (ALP). 4. The Assessee received a sum of Rs.24,79,60,171 from its AE for rendering SWD services. To justify the price received in the international transaction was at Arm's Length, the Assessee filed a transfer pricing analysis in which it adopted the Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) for determination of ALP. The profit level indicator chosen for the purpose of comparison of the Assessee's profit with that of comparable companies was Operating Profit/Total Cost (OP/TC). The Transfer Pricing Officer has accepted the TNMM to be the MAM for determining ALP and also the profit level indicator (PLI) chosen for the purpose of comparison. The OP/TC of the Assessee was 10.38%. The Assessee in its TP study selected 14 comparable companies whose arithmetic mean of OP/TC was more comparable wit....
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....rder on the aforesaid addition before the Dispute Resolution Panel (DRP) u/s.144C of the Act. The Assessee however filed appeal against the order of assessment before the CIT(A). 8. The CIT(A) in the impugned order directed the AO (i) to exclude ICRA Techno Analytics Ltd,, Datamatics Global Services Ltd., and Sasken Communications Technologies Ltd., from the list of comparable companies as the CIT(A) agreed with the Assessee that these two companies are not functionally comparable to the Assessee, The CIT(A) rejected the Assessee's claim for exclusion of the following four companies viz., (a) Genesys International Corpn. Ltd., (b) Infosys Ltd., (c) Larsen and Toubro Infotech Ltd., (d) Persistent Systems Ltd., and (e) Spry Resources India Pvt.Ltd. The Assessee had contended before CIT(A) that the first 5 companies are not comparable to the Assessee functionally. 9. Pursuant to the above directions issued by the DRP, the list of comparables that remained for consideration was as follows: SI. No. Name of the Company 1 Genesys International Corpn. Ltd. 2 Infosys Ltd. 3 Larsen & Toubro Infotech Ltd. 4 Mindtree Ltd. 5 Persistent Systems Ltd. ....
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....rability of the 3 companies which the Assessee seeks to exclude from the final list of comparable companies chosen by the TPO. The functional profile of me Assessee and that of the Assessee in the case of Agilis Information Technologies India (P.) Ltd. (supra), is identical inasmuch as the said company was also involved in providing SWD services to its AE and the TPO had chosen some comparable companies which were also chosen by the TPO in the case of the Assessee for the purpose of comparability. In the aforesaid decision the Tribunal held on the comparability of the 3 companies which the Assessee seeks to exclude as follows:- (a) Infosys Ltd., was excluded from the list of comparable companies by following the decision of the Hon'ble Delhi High Court in the case of CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289/219 Taxman 26 (Delhi). The discussion is contained in paragraphs 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys Ltd. is a giant risk taking company and engaged in development and sale of software m in the case of Saxo India Pvt. Ltd.(supra). The findings in this regard are contained in Paragraphs 4.14 to 4.16 o....
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....or mapping and geospatial services and operates a few development centres in India. The company is predominantly into software development services. The intangibles in the possession of the company are only the GIS database which is only depreciation. It does not add significant value to the company. The CIT(A) confirmed the order of the AO observing that the software developed by Assessee is also complicated. 16. At the time of hearing it was brought to our notice that comparability of this company with a company engaged in providing SWD services such as the Assessee was considered by this Tribunal in the case of CGI Information Systems and Management Consultants Ltd. Vs. ACIT ITA No.183/Bang/2017 order dated 11.4.2018, and it was held therein on the comparability of M/S.Gensys International Corporation Ltd., as follows: "35. We have given a careful consideration to the rival submissions. It is clear from the material brought to the notice of the TPO by the Assessee that this: company renders mapping and geospatial services. In rendering such services it develops software. But that does not mean that this company is in the business of software development. The business....