TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1923
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.... learned CIT(A) is based on incorrect interpretation of law and facts, and therefore bad in law; 2. The learned CIT(A) has erred, in law and in facts, by re-determining an addition of Rs.1,83,26,121 on account of adjustment to the arm's length price in respect of the international transaction relating to provision of software development services by the Appellant to its Associated Enterprise (AE.): 3. The learned CIT(A) has erred, in law and in facts, by not accepting the Appellant's plea in entirety and confirming with the learned Assessing Officer ('AO') / Transfer Pricing Officer ('TPO') on not accepting the economic analysis undertaken by the appellant in accordance with the provisions of the Act read with the Income Tax Rules,1962 ('Rules'). 4. The CIT(A) has erred, in law and in facts, by upholding the action of the learned AO / TPO in determination of the arm's length margin/ price using only FY 2011-12 data which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements; 5. The learned CIT(A) has erred, in law and in facts, by upholding the action of the learned AO / TPO in re....
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....tiation of penalty proceedings u/s 271(1)(c) of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law. 3. ITA No. 2112/Bang/2017(Assessment year: 2012-13) The order of the Id.CIT(A) is opposed to law and facts of the case.. 1. The Id.CIT(A) erred in holding that negative working capital adjustment cannot be granted in the case of the assessee. 2. The Id.CIT(A) ought to have considered that allowing working capital adjustment would result into better comparison. 3. The learned CIT(A) ought to have considered the fact that working capital adjustment is computed scientifically and negative or positive working capital adjustment is only consequential. 4. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 2. Brief facts of the case are as under: Assessee filed its return of income for year under consi....
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....e Technologies Limited 15.18% 22 Thinksoft Global Services Limited 16.37% 23 Thirdware Solutions Limited 32.75% 24 Ybrant Digital Limited (Formerly known as LGS Global Limited) 16.59% 25 Zylog Systems Limited 29.63% Arithmetical Mean 19.22% 3. Assessee thus held its transaction to be at arms length price as margin fell within plus -5% range. Ld.TPO by applying various filters, rejected certain comparables and reduced list comprising of following 10 comparables with average margin of 28.2%: Ld. TPO thus computed adjustment as under: Sl. No. Name of the Company Mark-up on Total Costs (OP/OC) (WC-unadj) (in %) Mark-up on Total Costs (OP/OC) (WC - adj) (in %) 1 Datamatics Global Services Limited 14.57 22.24 2 Genesys International Corp. Limited 30.09 32.70 3 ICRA Techno Analytics Limited 17.24 23.44 4 Infosys Limited 43.10 48.68 5 Larsen & Toubro Infotech Limited 25.47 32.76 6 Mindtree Limited 15.01 22.20 7 Persistent Systems Limited 27.20 34.11 8 R S Software (India) Limited 15.34 24.96 9 Sasken Communication Technologies Ltd. 12.15 20.67 10 Spry Resources India Pvt. Ltd. 26.18 18.48 AVERAGE MARGIN 22.63% ....
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....ed with AE and assessee does not undertake any marketing activities as it does not create any marketing intangibles. Assessee therefore owns usual assets like computers office equipments furniture fixtures etc. Risks It is observed in TP study that assessee undertakes bare minimal risk only in respect of remuneration as it is received in foreign exchange. Otherwise all risk service liability risk, product liability risk, credit and collection risk etc are borne by AE. Thus assessee is characterized to be functioning in a risk mitigated environment which does not carry out significant entrepreneurial activities nor does it bear significant risk associated with such activities. Accordingly assessee has been characterised as a risk mitigated contract service provider for provision of software development services. From TP order, it is observed that Ld.TPO do not dispute to this functional analysis carried out in TP study. With this FAR analysis of assessee, we shall undertake comparability of assessee with comparables objected for inclusion. 7. At the outset Ld. AR submitted that these comparables have been considered by this Tribunal vide order dated 14/06/19 passed in case of V....
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....t Delhi ITAT in case of Agilis Information Technologies India Private Limited (supra) has held as follows: "Infosys Ltd was excluded from the list of comparable companies by following the decisions of orderable Delhi High Court in case of Agnity India technologies private limited reported in 36 Taxmann.com 289. The discussion is contained in paragraph 4.5 to 4.7 of the tribunal's order. The tribunal accepted that Infosys is a giant risk ranking company and engaged in development and sale of software product and also owns intangible assets and therefore not comparable with a software development service provider such as assessee in that case." Respectfully following the same we are of considered opinion that this company deserves to be excluded from the final list. 10 Larsen and Toubro Infotech Ltd It has been submitted by Ld. counsel that this company has been included by ld.TPO though it is not comparable with that of assessee, as it is huge company owning large intangibles. It has been submitted that Delhi ITAT in case of Agnity Inida Technologies Private Limited (Supra)has excluded this company and the same has been upheld by Hon'ble Delhi High Court. 10.1. Ld. CIT DR plac....
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.... list. Accordingly ground No. 6 of assessee's appeal stands allowed. It has been submitted that Ground No. 7-10 are not pressed and accordingly they are dismissed. In the result appeal filed by assessee stands partly allowed. Revenue's appeal 12. Ground No. 1 is general in nature and therefore do not require any adjudication. 13. Both parties submitted that only effective ground in revenue's appeal is in respect of Ground No. 2-4 is in respect of negative working capital adjustment worked out by the Ld. AO/TPO. 14. Ld.AR submits that this issue stands covered in favour of assessee by decision of this Tribunal in case of F & F India Private Limited in ITA No.195/Bang/2016 & 495/Bang/2017 for assessment year 2011-12 and 2012-13 passed on 03/07/19. 14.1 Ld. CIT DR placed reliance upon the authorities below however could not controvert that this issue is covered by decisions relied upon by Ld.AR. We have perused the submissions advanced by Ld sides in the light of records placed before us. 14.2 We have also perused the decision relied upon by Ld. counsel. It is observed that this issue has been decided by this Tribunal in F & F India Pvt.Ltd.,(Supra) as under: "14. Ground N....