AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 1281
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....nder Section 143(3) L.W.S. 144C(13) and 144C(13) read with sections 143(3A) & 143(3B) of the Act on the following grounds: General: 1. On the facts and circumstances of the case and in contrary to law, the Additional Commissioner of Income-tax (Transfer Pricing), (hereinafter referred to as 'the Ld. TPO') and the Ld. AO under the directions issued by the Hon'ble Dispute Resolution Panel, Bengaluru ('the Hon'ble DRP'), erred in making a transfer Pricing addition of Rs. 50,31,76,086 to the Appellant's income and thereby determining a total income of Rs. 157,70,82,306 and the said addition being wholly unjustified are liable to be deleted. 2. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in violating the principle of natural justice by passing the Order under section 92CA(3) of the Act dated 31 October 2019 without providing the appellant with an opportunity of being heard and accordingly order passed by Ld. TPO is bad in law and liable to be quashed. Transfer Pricing: A. Provisions of....
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....on as a deemed international transaction and the Hon'ble DRP erred in holding this transaction as an international transaction. B. Provision of Information Technology enabled Services ('ITeS') 7. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in accepting the following inappropriate companies as comparables: * Cross-domain Solutions Private Limited * Tech Mahindra Business Services Limited * Infosys BPO Limited * SPI Technologies India Private Limited * Eclerx Services Limited * MPS Limited 8. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in rejecting the following companies without providing cogent reasons, even though they are functionally comparable and pass all the filters applied by the Ld. TPO: * Sundaram Business Services Private Limited * Informed Technologies Limited * Allsec Technologies Limited ....
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....O in confirming the application/incorrect application of the following filters: * Rejection of companies with different financial year ending; * Rejection of companies with export revenue less than 75% of the total revenue; * Rejection of companies with peculiar economic circumstances. 14. On the facts and circumstances of the case and in contrary to law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO in considering provision for bad and doubtful debts and bad debts as a non-operating expenditure while computing the operating margin of the comparable companies D. Outstanding receivables 15. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO, in considering outstanding receivable as a separate and distinct international transaction and further erred in making transfer pricing adjustment in the nature of notional interest on receivables amounting to Rs. 1,23,24,559. 16. On the fact, and circumstances of the case and in contrary to law....
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....opportunity of being heard to the Appellant, to present its case on merits, before denial of such deduction. 22. On the facts and circumstance of the case and in law, the Ld. AO erred by granting credit of tax deducted at source ('TDS') of INR 3,08,05,249 as against the eligible TDS credit of INR 3,08,07,638 available to the Appellant, thereby resulting in short grant of credit of TDS of INR 2,389. 23. On the facts and circumstance of the case and in law, the ld. AO erred by granting credit of advance tax of INR 28,30,00,000 as against the eligible advance tax credit of INR 35,66,82,429 available to the Appellant thereby resulting in short grant of advance tax of INR 7,36,82,429. 24. On the facts and circumstance of the case and in law, the Ld. AO grossly erred in levying interest under Section 234A of the Act of INR 46,47,052, without giving cognizance to the fact that there was no delay in filing the income-tax return by the Appellant for the AY 2016-17. 25. On the facts and circumstance of the case and in law, the Ld. AO erred in levying interest under Section 234B and 234C of the Act amounting to INR 13,94,11,560 and INR 5,80,865 resp....
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.... u/s. 142(1) were issued, calling for information electronically. In response, Assessee Company submitted the information electronically. 2.1. The AO observed that since the assessee had international transactions with Associate Enterprises, in accordance with the provisions u/s. 92CA of the IT Act, the case was referred to the Transfer Pricing Officer (TPO), Hyderabad with prior approval of Pr. CIT-1, Hyderabad. Order u/s. 92CA(3) was passed by TPO on 31-10-2019 by arriving at an adjustment of Rs. 27,83,27,552/- towards software development segment, an adjustment amount of Rs. 23,25,77,641/- towards Information Technology enabled Services and an adjustment amount of Rs. 1,23,24,559/- towards interest on delayed receivables. The AO thereafter passed his draft assessment order on 19-12-2019. 2.2. Aggrieved by the draft order, the taxpayer filed its objections before the DRP. Learned Panel's directions dated 10-022021, granted part relief to the assessee. Accordingly, the AO passed his assessment order whereby assessing the total income at Rs. 157,70,82,306/- by making the following adjustments: 1. Adjustments on account of provision of SDS - Rs. 25,82,73,886 ....
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....arsen & Toubro Infotech Ltd., in particular at page Nos. 1249 of paper book - Volume - 3 disclosure under the Companies Act, 2013, we observe that the company information system resource centre Pvt. Ltd. (ISRC) was amalgamated with the company with effect from September, 21, 2015 and the appointed for the scheme was October, 17, 2014, which reads as under: "Pursuant to the Scheme of Amalgamation sanctioned by the Hon'ble High Court of Bombay vide its order dated September 04, 2015, Information Systems Resource Centre Pvt. Ltd. (ISRC) was amalgamated with the Company with effect from September 21, 2015. The appointed date for the Scheme was October 17, 2014. Consequently, the entire business, assets, liabilities, duties and obligations of ISRC have been transferred to and vested in the Company with effect from October 17, 2014. ISRC was engaged in the business of software services with respect to application development, information technology support and maintenance service to OTIS Elevator Company, USA and other companies of UTC group and was acquired by the Company on October 16, 2014." 4.4. From the above observations, which were extracted from the finan....
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.... a) It is not functionally comparable to the assessee. In the financial statements of the company, the nature of business carried out by Tata Elxsi is given below: i) Corporate Information "Tata Elxsi Ltd. was incorporated in 1989. The Company provides product design and engineering services to the consumer electronics, communications and transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry." 29. We find that in the case of Infor (India) (P.) Ltd. vs. ACIT in ITA No. 2307/Hyd/2018, the Coordinate Bench of the Tribunal has considered similar objections of the assessee therein and has held that these two companies along with Thirdware Solutions Ltd. is not comparable to the software development company like the assessee before us. The relevant portions has been reproduced by us in the above paras. Respectfully following the same, these two companies are also directed to be excluded from the final list of ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad comparables. Thus, assessee's ground of appeal No. 2 is partly allowed." 5.3. In the s....
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....nsportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry." 29. We find that in the case of Infor (India) (P.) Ltd. vs. ACIT in ITA No. 2307/Hyd/2018, the Coordinate Bench of the Tribunal has considered similar objections of the assessee therein and has held that these two companies along with Thirdware Solutions Ltd. is not comparable to the software development company like the assessee before us. The relevant portions has been reproduced by us in the above paras. Respectfully following the same, these two companies are also directed to be excluded from the final list of ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad comparables. Thus, assessee's ground of appeal No. 2 is partly allowed." 6.3. In the said decision, it has been held that the company is functionally different and engaged in diversified activities and since the revenue could not controvert the said decision nor brought any contrary decision, following the same, we direct the AO/TPO to exclude this company from the final list of comparables. 7. Infobeans Technologies Ltd.: The ld. AR ....
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....concern could not be equated as functionally comparable to a concern which was providing software development services to its associated enterprises. Applying the same set of reasoning as in the paras hereinabove, we hold that Infobeans Systems Pvt. Ltd. is not comparable to the assessee". 22. Respectfully following the same, we direct that Infobeans be excluded from the final list of comparables in this case also. 7.4. On perusal of the order of the coordinate bench of this Tribunal and on perusal of the financial statements of Infobeans Technologies Ltd., we observe that the company is functionally not comparable and no segmental details are available. Therefore, the coordinate bench did not consider this company as comparable in assessee's own case for AYs 2014-15 & 2015-16. Respectfully following the decision of the coordinate bench, we direct the AO/TPO to exclude this company from the final list of comparables. 8. Aspire Systems India Pvt. Ltd.: The ld. AR of the assessee submitted that this company fails related party transaction filter of 25% applied by TPO. Further, he submitted that this company shall also be excluded from the final set of comparables a....
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.... development and level of competition and whether the markets are wholesale or retail. 9.1. He further submitted that this company offers end to end business solutions including product support, product engineering and lifecycle solutions, artificial intelligence, software products, business platforms and solutions. Further, he submitted that it has a turnover of Rs. 53,983 crores whereas assessee's turnover is Rs. 437 crores and the turnover of this company is 123 times more than assessee. He, therefore, submitted that this company cannot be compared as the different in its size and scale of operations have a direct impact on their profitability. He relied on various decisions of ITAT including the decision in ITA No. 2233/Hyd/2018 for AY 2014-15 wherein this company is excluded as comparable. 9.2. On the other hand, ld. DR submitted that under TNMM comparable transactions needs to be broadly similar with this company and significant product diversity and some functional diversity between the controlled and uncontrolled parties are acceptable. 9.3. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue....
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....he said decision, we direct the AO/TPO to exclude this company as comparable from the list of comparables. 10. Thirdware Solutions Ltd.: The ld. AR submitted that this company is functionally different to assessee for the following reasons: 1. This company earns revenue from sale of products, evident form purchases of stock in trade of Rs. 39.88 crore as per P & L Account. 2. It is engaged in diversified activities, i.e. professional, technical and business and services and IT consulting services. 3. The segmental details between software services and consultancy services are not available. 4. It has revenue from subscripting and training Rs. 32.59 lakhs and also income from licensing amounting to Rs. 8.77 lakhs and, therefore, functionally not comparable. He relied various decisions of ITAT including the decision in ITA No. 2233/Hyd/2018 for AY 2014-15 wherein this company was excluded from the final set of comparables. He, therefore, requested to exclude this company for determining ALP. 10.1. The ld. DR, on the other hand, submitted that this company is engaged in rendering of software services and hence, functionally comparable to as....
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....and vii) Accenture Services Pvt. Ltd. vs. ACIT, (2018) 96 taxmann.com 37. The learned Departmental Representative submitted, before the Transfer Pricing Officer the assessee has not objected to the selection of this company as a comparable. He submitted, only in subsequent stages, the assessee has objected to selection of the aforesaid company by raising new grounds. He submitted, since the issue of development of product by this company and unavailability of segmental details, were not raised before the Transfer Pricing Officer, it requires verification. 38. We have considered rival submissions and perused materials on record. Though, it may be a fact that the assessee may not have objected to selection of this company before the Transfer Pricing Officer, however, the assessee raised objections against selection of Infor Global Solutions India Pvt. Ltd. this company before the DRP as well as before us. The grievance of the assessee is, the company being involved in development of products and since no segmental details are available in the annual report, it cannot be treated as comparable. The Co-ordinate Bench in Tech Mahindra Ltd. (supra) having found ....
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....ables. 24. The learned D.R. however, supported the Orders of the authorities below. 25. Having heard both the parties and having gone through the material on record, we find that the TPO at page 37 of his order has brought out the differences between a product company and a software development services provider. Thus, it is clear that he is aware of the functional dissimilarity between a product company and a software development service provider. Having taken note of the difference between the two functions, the Assessing Officer ought not to have taken the companies which are into both the product development as well as software development service provider as comparables unless the segmental details are available. Even if he has adopted the filter of more than 75% of the revenue from the software services for selecting a comparable company, he ought to have taken the segmental results of the software services only. The percentage of expenditure towards the development of software products may differ from company to company and also it may not be proportionate to the sales from the sale of software products. Under section 133(6) of the I.T. Act, the TPO has the....
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....) the co-ordinate Bench of this Tribunal having found that these two companies are functionally different as they are into product development has directed excluding these companies for comparability analysis. Respectfully following the decision of the Coordinate Bench of this Tribunal in case of Intoto Software India (P.) Ltd. (supra) we also direct the Assessing Officer/TPO to exclude both these companies". (4) ITAT Delhi Bench (2017) 79 Taxmann.com 207 St. Ericsson India (P.) Ltd. vs. Addl. CIT "THIRD WARE SOLUTIONS LIMITED 47. This is again TPO's own comparable and assessee sought to exclude this company from the list of comparables on the ground of non-comparable services i.e. application implementation, management and development services. TPO rejected objections raised by the assessee by observing that software development, implementation and support services are various subsegments of software development services only and require employment of software engineers and retained this company as a comparable for benchmarking international transactions. 48. However, perusal of the annual report of this company, available at page 1735 to 1782 of the....
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....bifurcation is available, which makes it impossible to correctly determine the operating margin of software services. On a perusal of the break-up of sales of this company as on 31 st March, 2009, the contention of assessee appears to be correct. Further, ITAT Bangalore Bench in case of 3DPLM Software Solutions Ltd. Vs. DCIT (supra), has held as under: "15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications Pvt. Ltd. (supra) has directed that since the income ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this fa....
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....t and earns revenue from sale of licences and subscription. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. In the case of E-Gain communications Pvt. Ltd. (2008-TII-04-ITAT-PUNE-TP), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company The ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad Learned A.R. prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra) this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and IT(TP)A. 1550/Bang/2012 Page-29 su....
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....ftware services were available. In respect of Thirdware Solution Ltd., it was pointed out that the said concern was engaged in software development, trading of software licences and training implementation activities apart from software development. Another contention was raised that Thirdware Solution Ltd. was super profit earning company and was also engaged in the business of software licences and trading of implementation activities. The Tribunal taking note of the Special Bench decision in the case of Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT vide ITA No. 7466/M/2012 in respect of super profits and inclusion of concern Thirdware Solution Ltd., held that the said concern was not comparable and observed as under:- "29. We have considered the rival arguments made by both the sides. We find the Special Bench of the Tribunal in the case of Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT vide ITA No. 7466/Mum/2012 has observed as under: Schedule: Sales As on 31.3.2019 As on 31.3.2018 Sale of Licence 22,237,588 3,916,427 Software Licence 89,177,023 76,724,371 Export from SEZ 478,572,420 263,971,033 Export from STPI 162,900....
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....licence of software which is available from the audited accounts, the details of which are as under: Apart from the above the company is also having dividend income, interest income and profit on sale of investment as well as premium of software contract totalling to Rs. 2,30,48,603/- which is as per Schedule-13 "other sources". From the various decisions relied on by the Ld. Counsel for the assessee we find Thirdware Solutions Ltd. has been rejected on the ground that it is functionally dissimilar. The Hyderabad Bench of the Tribunal in the case of Intoto Software India Pvt. Ltd. Vs. ACIT and Vice versa in consolidated order dated 24-05-2013 for A.Y. 2005-06 and 2007-08 at para 26 of the order has observed as under: "26. As far as Thirdware Software Solution Limited is concerned, we find from the information furnished by the said company that though the said company is also into product development, there are no software products that the company invoiced during the relevant financial 52 year and the financial results are in respect of services only. Thus, it is clear that there is no sale of software products during the year but the said company might have incur....
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....the other decisions cited by the learned Authorised Representative. Since, many of these decisions pertain to the impugned assessment year, respectfully ITA Nos. 161 and 2307 of 2018 Infor India P. Ltd. Hyderabad. following the aforesaid decisions of the Tribunal, we direct the Assessing Officer to exclude this company from the list of comparables. 35. We have considered rival submissions and perused materials on record. On a perusal of the documents placed in the paper book it appears that this company is engaged in various activities including development of niche product and development services. Thus, the company is functionally different from the assessee. Considering the aforesaid aspect, the Co-ordinate Bench in case of Telcordia Technologies India (P.) Ltd. (supra), which is for the very same assessment year, has excluded this company as a comparable. Similar view has also been expressed in the other decisions cited by ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad the learned Authorised Representative. Thus, keeping in view the decisions of the Tribunal referred to above, we hold that this company cannot be a comparable to the assessee. 38. We h....
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....ld. AR of the assessee requested the Bench to inclusion of the following comparables, which were rejected by the TPO/DRP: 12.1. Evoke Technologies Pvt. Ltd.: The ld. AR of the assessee submitted that this company may be included as comparable as it is functionally similar to assessee company and accepted in earlier years as comparable. He submitted that as per Directors report, there is no change in nature of business and engaged in IT decision and development services. He submitted that in assessee's own case for AY 2014-15 in ITA No. 2233/Hyd/2018 vide order dated 18/12/2020 the coordinate bench included this company as comparable for determining ALP. He also relied on the following cases: 1) Infor India (P.) Ltd. Vs. DCIT, ITA No. 161 and 2307/Hyd/2018 2) Conexant Systems Pvt. Ltd., ITA No. 464/Hyd/2016 12.2. The ld. DR, on the other hand, submitted that this company not appeared in TPO's search matrix and it is taken as a comparable, it amounts cheery picking and, therefore, the TPO/DRP has rightly rejected this company as comparable. 12.3. We have considered the rival submissions and perused the material on record as well as gone through the ....
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....d. 2. Nucleus Software Exports Ltd. 3. ACE Software Exports Ltd. 4. Sasken Communication Technologies Ltd. 5. Infomile Technologies Ltd. 6. Sagarsoft India Ltd. 7. E-zest Solutions Ltd. 8. Sankhya Ltd. 9. Harbinger Systems Pvt. Ltd. 14. As regards ground No. 5 relating to the action of TPO that incorrectly computing the margin of the following comparable companies. 1. CG-VAK Software & Exports Ltd. 2. Larsen & Toubro Infotech Ltd. (Segmental) 3. Aspire Systems (India) Pvt. Ltd. 4. Infosys Ltd. 14.1. After hearing parties and considering the orders of TPO/DRP, it is observed that since we have excluded the said companies, namely, Larsen Toubro Infotech Ltd. and Infosys Ltd., there is no need to compute the margin in respect of these both the companies. In respect of companies M/s. CG-VAK Software & Exports Ltd. and Aspire Systems (India) Pvt. Ltd., the TPO and AR of the had computed PLI as under: PLI calculated by TPO Assessee M/s CG-VAK Software & Exports Ltd. 16.76% 12.03% Aspire Systems (India) Pvt. Ltd., 33.04% 32.00% 14.2. Since the PLI....
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....he final set of comparables for the reason that this company has incurred outsourcing costs for FY 2013-14, FY 2014-15 and FY 2015-16 and the outsourcing cost incurred by this company reflects a different operating model and hence cannot be compared with the assessee company. Further, he submitted that while this company operates under various revenue model as per the assignments i.e., proportional completion method on rendering services, whereas the assessee charges a mark-up on the cost incurred to provide the services. Further, he submitted that since the cost structure and revenue model of this company is different with that of the assessee, this company ought to be rejected as a comparable company. He relied on the decision of the coordinate bench in assessee's own case for AY 2014-15 in ITA No. 2233/Hyd/2018 wherein the coordinate bench excluded this company as comparable. 16.2. The ld. DR, on the other hand, submitted that presence of outsourcing cost/subcontracting cost does not affect functional comparability. Further, it reduces the operating margin of the company, which is beneficial to the assessee. He, therefore, submitted that the TPO/DRP has rightly included t....
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..... 2010-11) dt. 13-11-2015, has decided the issue as under: ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad "TCS e-SERVE LIMITED 11.2.1. As regards TCS e-Serve Limited is concerned, we find that it possesses brand value as is evident from the Schedule-N (Operation and Other expenses) to the P & L A/c of the annual report for the financial year 2009-10 of Rs. 46,065 thousands and also that it possesses intangibles in the form of software licenses which have not been taken note of by the authorities below while adopting its margin. It is also the case of the assessee that this company has a turnover of Rs. 1405.10 crores which is 25 times of the turnover of the assessee and hence, is not comparable to the assessee. The Ld. Counsel for the assessee had also placed reliance upon the TPO's order in the case of M/s. IGS Imaging Services India Ltd., to hold that there are exceptional circumstances during the relevant financial year due to which this company is not comparable to the assessee. The Ld. Counsel for the assessee also submitted that the segmental details of this company are not available and hence, has to be excluded on this count also. 11.2.2. We find that....
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....on and diversified activities. Therefore, following the decision of the coordinate bench, we direct the AO/TPO to exclude this company as comparable for determining ALO. 17. Eclerx Services Ltd.: The ld. AR of the assessee submitted that this company may be excluded as comparable from the final set of comparables as this company is engaged in providing KPO services, different to low end BPO services provided by the assessee. He submitted that Safe Harbor Rules recognizes ITeS activities under tow distinct categories i.e., BPO and KPO and activities of this company falls under KPO services. He submitted that the services provided by this company of following: a) Contract Risk Review, b) Margin Exposure Management, c) Online Operations and web analytics, d) CRM and business intelligence, e) Content creation, f) business process consulting. 17.1. He further submitted that as per NIC code provided in the annual report, this company has been classified as KPO and has been awarded as leading KPO's in India, basis award and accolades received. He submitted that this company has undertaken the following extraordinary transactions thereby impacting the operating margins: ....
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....rder of the TPO, it was the contention of Ld. DR that DRP was not correct in excluding them on the basis of the turnover, whereas Ld. Counsel submitted that DRP has followed the decisions of the Co-ordinate Benches in excluding the above three comparables. 8. We have considered the rival submissions and perused the order of the DRP and Co-ordinate Benches. As far as M/s. TCS e-Serve Ltd., is concerned, the Coordinate Bench of ITAT in the case of M/s. Hyundai Motors India Engineering P. Ltd. in ITA Nos. 1743/Hyd/2014 (A.Y. 2010-11) & ITA No. 1917/Hyd/2014 (A.Y. 2010-11) dt. 13-11-2015, has decided the issue as under: ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad "TCS e-SERVE LIMITED 11.2.1. As regards TCS e-Serve Limited is concerned, we find that it possesses brand value as is evident from the Schedule-N (Operation and Other expenses) to the P & L A/c of the annual report for the financial year 2009-10 of Rs. 46,065 thousands and also that it possesses intangibles in the form of software licenses which have not been taken note of by the authorities below while adopting its margin. It is also the case of the assessee that this company has a turnover of Rs. 1405.1....
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.... of the fact that it owns and possesses brand value and intangibles as compared to the assessee which does not own such assets, we direct that this company be excluded from the list of final comparables. Accordingly, assessee's grounds of appeal No. 6 is partly allowed. 8.1. Respectfully following the above decision of the Coordinate Bench, we confirm the order of DRP excluding the above company from the list of comparables. We observe from the financial statements that this company is functionally dissimilar and engaged in KPO and BPO services and amalgamation of Agilest Consulting Pvt. Ltd., vide page No. 23 of paper book volume-1 para 8 and acquisition of CLX Europe which impacts on the profits of the company. From the financial statements of the Chairman's message placed at page No. 18 of paper book volume - 1, it has been categorically stated that after acquisition of CLX Europe, the revenue has grown by 30%, which clearly shows that it impacts on the profitability of the company. These are extraordinary events. Therefore, If an extraordinary event has taken place by way of amalgamation in a company, that company cannot be considered as a comparable as held....
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....has high non-current investment of Rs. 6.05 crores and further that it is a KPO. According to the assessee, it is also not a KPO but is an ITeS company and that its total Revenue is from the Call Centre Services only. He therefore, prayed that this company may be included in the list of comparables. 41. Similarly, as regards Ace BPO Services Ltd., the contentions of the assessee are that this company is functionally comparable and that it satisfies all the filters of the TPO and also that there are no related party transactions or the (RPT) of this company are negligible. It is also submitted that the financials of this company are very much available in the public domain and therefore, the findings of the TPO that the financial of the company are not available is not correct. He relied upon the decision of the Tribunal in the case Infor (India) (P.) Ltd. wherein the Tribunal directed the AO/TPO to adopt this company as a comparable and prayed for a similar direction in the case of the assessee also. 42. The learned DR relied upon the orders of the authorities below. 43. Having regard to the fact that the assessee has brought out that these two companies ....
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....mely, Microland Ltd. and SPI Technologies India Pvt. Ltd. are required to be recalculated for determining ALP. The assessee is directed to provide data for recalculating the margins. 22. Ground Nos. 10 & 11 have not been pressed by the ld. AR of the assessee at the time of hearing, therefore, the same are dismissed as not pressed. 23. With regard to Ground No. 12, the ld. AR of the assessee submitted that the assessee demonstrated the impact of working capital on profit of comparables adopted by the TPO. He submitted that the working capital adjustment is allowed in assessee's own case for AY 2015-16 in ITA No. 1611/Hyd/2019. 23.1. The ld. DR, on the other hand, submitted that the assessee has not demonstrated the impact of working capital differences on its profit. He submitted that average working capital will not reflect the actual capital employed during the year and the segmental working is not disclosed in annual reports, and therefore, the TPO/DRP has not allowed the working capital adjustment. 23.2. We have considered the rival submissions and perused the material on record as well as the orders of TPO/DRP. Following the decision of the coordinate bench in a....
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.... 2. Value Momentum services Pvt. Ltd., ITA No. 2197/hyd/2017 3. Kony India Pvt. Ltd., ITA No. 1709/hyd/2019. 26.2. The ld. DR, on the other hand, relied on the orders of revenue authorities. 26.3. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The issue is squarely covered by the decision of the coordinate bench in assessee's own case for AY 2015-16 in ITA No. 1611/Hyd/2019 vide para No. 4 placed at page 2123 of assessee's paper book. Following the same, we direct the AO/TPO to delete the impugned adjustment on account of interest on outstanding receivables. 27. As regards ground Nos. 20 to 27, wherein, the assessee contended that the AO has grossly erred in not granting credit of DDT paid by the assessee on the dividends distributed to the shareholders and thereby determining a DDT liability of Rs. 41,72,50,334/- including levy of interest under section 115P of the Act amounting to Rs. 16,88,87,040/-. 27.1. The ld. AR of the assessee submitted that the entire DDT was paid within the due date and denies the interest liability u/s. 115P. He submitted that the as....
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....e Ld. TPO') and the Ld. AO under the directions issued by the Hon'ble Dispute Resolution Panel, Bengaluru ('the Hon'ble DRP'), erred in making a Transfer Pricing addition of Rs. 32,63,46,008 to the Appellant's income and thereby determining a total income of Rs. 98,60,66,648 and the said addition being wholly unjustified are liable to be deleted. 2. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and Hon'ble DRP further erred in in upholding/confirming the action of Ld. TPO in violating the principle of natural justice by passing the Order under section 92CA(3) of the Act dated 30 October 2019 without providing the appellant with an opportunity of being heard and accordingly order passed by Ld. TPO is bad in law and liable to be quashed. Transfer Pricing: A. Provisions of software development services 3. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in accepting the following inappropriate companies as comparable: * Rheal Software ....
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....ing/confirming the action of Ld. TPO in rejecting the following companies without providing cogent reasons, even though they are functionally comparable and pass all the filters applied by the Ld. TPO: * Sundaram Business Services Private Limited * Informed Technologies Limited * Allsec Technologies Limited * AXA Business Services Limited * Jindal Intellicom Limited * Cosmic Global Limited * Suprawin Technologies Limited * R. Systems International Limited * BNR Udyog Limited * Tata Consulting Engineers Limited * Tata Elxsi Limited * ACE BPO Services Private Limited * Cameo Corporate Services Limited 8. Without prejudice to the above mentioned grounds, on the facts and circumstances of the case and in contrary to law, the Ld. TPO erred by incorrectly computing the margin of following comparable companies: * Microland Limited * Infosys BPO Limited * SPI Technologies India Private Limited C. Common Grounds to Provision of software development services and ITeS 9. On the facts and circumstances of the case and in cont....
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....d. TPO, in considering outstanding receivable as a separate and distinct international transaction and further erred in making transfer pricing adjustment in the nature of notional interest on receivables amounting to Rs. 1,12,56,411. 15. On the facts and circumstances of the case and in contrary to law, the addition made by the Ld. TPO with respect to interest on outstanding receivables is untenable and be deleted since the addition has been made by computing interest on an invoice to invoice basis as against on a weighted average basis for all invoices raised during the year under consideration. 16. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO/the Hon'ble DRP erred in not providing justification for selection of State Bank of India's ('SBI') short term deposit rates as an appropriate comparable uncontrolled price ('CUP') to benchmark the Appellant's outstanding receivables.. 17. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO/the Hon'ble DRP has failed to understand that outstanding receivables cannot be benchmarked using SBI short term deposit....
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....g the income-tax return by the Appellant for the A.Y. 2016-17. 24. On the facts and circumstance of the case and in law, the Ld. AO erred in levying interest under Section 234B of the Act amounting to INR 13,80,25,680. Consequential: 25. On the facts and in the circumstances of the case and in law, the Ld. AO erred in in levying interest and penalty and the said levy of interest and penalty being wholly unjustified, ought to be deleted." 29. As regards ground No. 3 regarding provision of software development services, the TPO/DRP wrongly, accepting the companies as comparable for determining ALP, since this ground is similar to ground No. 3 in ITA No. 227/Hyd/2021, following the decision therein vide para Nos. 4 to 10.3 supra, we direct the AO/TPO to exclude the following companies as comparable for determining ALP: * Larsen & Toubro Infotech Limited (Segmental) * Tata Elxsi Limited (Segmental) * Persistent Systems Limited * Infobeans Technologies Limited * Aspire Systems (India) Private Limited * Infosys Limited * Thirdware Solutions Limited 29.1. The ld. AR of the assessee has not pres....
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.... 33. As regards ground No. 6 relating to provision of information technology enabled services (ITeS) wherein the assessee challenged the action of the TPO/DRP in accepting the inappropriate companies as comparables, namely, Infosys BPO Ltd. and Ecelerx Services Ltd. Since this ground is similar to ground No. 7 in ITA No. 227/Hyd/2021, following the decision therein vide para Nos. 16 to 17.4, we direct the AO/TPO to exclude the said two companies as comparable for determining ALO. 34. The ld. AR of the assessee has not pressed the following companies as comparables raised in Ground No. 7, therefore, the same are dismissed as not pressed: 1. Cross-domain solutions Pvt. Ltd. 2. Tech Mahindra Business Services Ltd. 3. SPI Technologies India Pvt. Ltd. 4. MPS Ltd. 35. As regards ground No. 7 relating to the rejection of the company i.e. Informed Technologies Ltd. as comparables by the TPO/DRP in the ITeS domain. Since this ground is simpler to ground No. 8 in ITA No. 227/Hyd/2021, following the decision therein vide para Nos. 19.1 to 19.3, we direct the AO/TPO to include this company as comparable for determining ALO. 36. With regard to the....