TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1487
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....ment towards the Arms length price without appreciating the fact that the Transfer Pricing Officer while passing the order U/s.92CA of the Act has not met with the specific objections filed by the appellant and ignoring the same without any justification. iii) making an adjustment as per the order giving effect to the order of the DRP passed by the TPO vide order dated 17.04.2017 ignoring the fact that, the DRP has passed orders without meeting the objections of the appellant in regard to the comparables selected and rejecting the objections with incorrect justifications and not providing the eligible assessee an opportunity to meet with such alleged justification. iv) Ignoring the fact that, the DRP has deleted the company M/s. ICRA Techno Analytics from the list of comparables of the TPO in his order U/s.92CA(3) of the act, dated 30.09.2016 without proper justification and since the TPO has selected this company as a comparable. could not have been rejected by the DRP. v) Ignoring the fact that. the DRP has not accepted the specific objection of the appellant that, the size of the company should also be a criteria and ignoring the ratios laid down by various tribunals an....
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....ctionally different. iv) The Learned TPO has erred in including the company M/s.Mind Tree Ltd as comparable ignoring the fact that. the said comparable has substantially high turnover. hence not comparable to the appellant and also that. the said comparable has substantial own intangibles. The comparable has incurred large foreign currency expenditure making the comparable functionally different. v) The Learned TPO has erred in including the company M/s.Persistant Systems Ltd as a comparable ignoring the fact that, the said company has substantial high turnover, hence not comparable to the appellant and also that, there are substantial own intangibles and functionally different. vi) The learned TPO has erred in excluding the company M/s.R. Systems International Ltd for the reason that, the said company has a different year ending i.e, 31.12.2012 ignoring the fact that. the financials cover a period of 9 months of the F.Y.2012-13 and therefore, since the major portion of the year is covered. The company could not have been rejected. vii) The learned TPO has erred in excluding the company M/s.Thinksoft Global Services on the ground that the comparable is functionally diff....
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....ns to the TPO without demonstrating as to why it was necessary and expedient to do so and ii) passing the order without demonstrating that the appellant had any motive of tax evasion all the more so under the circumstances. wherein the total income of the appellant is exempt under the provisions of section 10AA of the act. 4. GROUNDS RELATING TO THE OTHER ADDITIONS MADE IN THE ASSESSMENT CONSEQUENT TO FINDINGS OF THE DRP i) The learned Assessing Officer erred in reducing the telecommunication expenses of Rs.94,68,469/- and also the insurance charges of Rs.1,76,939/-from the export turnover while determining the adjusted export turnover for computing the eligible deduction U/s.10AA of the act, ignoring the position of law that. such reduction is not contemplated under the provisions of the act. 5. PRAYER In view of the above and the other grounds which may be adduced at the time of hearing. the appellant prays that the Hon'ble Tribunal may kindly i) delete the addition of Rs.2.59.28.248/- made consequent to adjustment of arms length price under the provisions of section 92CA(3) of the act. ii) direct that, the telecommunication charges and also the insurance ch....
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....ble Paid/Payable Method Used Software Exports 292811166 TNMM Management Consultancy Charges 14002404 TNMM Interest on ECB loan 1726700 CUP Reimbursement of Expensive Paid 11112728 Other Method Reimbursement of Expensive received 14154370 Other Method Total Amount 306965536 26841832 5.2 The Ld.TPO noted that assessee computed the margin at 12.16% by using OP/OC PLI. It used TNMM as the most appropriate method and used following 9 comparables having average margin at 8.32%. It was thus submitted by the assessee that the transaction is at arms length: Sl.No. Name of the Company (M/s.) Wt. Avg (%) 1. R Systems International Ltd. 14.55 2. Thinksoft Global Services Ltd. 15.99 3. Datamatic Global Services Limited 14.11 4. R.S. Software (India) Ltd. 16.88 5. Sasken Communication Technologies Ltd. 4.91 6. Akshay Software Technologies Ltd. -0.07 7. GSS Infotech Limited 6.19 8. ICRA Techno Analytics Ltd 5.46 9. CG-VAK Software & Exports Ltd -3.12 Arithmetic mean 8.32% 5.3 The Ld.TPO rejected the TP study done by the assessee, and carried out analysis by adopting various filters. The Ld.TPO se....
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....bles. In Ground No.1(iv) &(v)-(vi), the assessee seeks exclusion of capital following comparables: * ICRA Techno Analytics * Larsen and Toubro Ltd, * Persistent Systems Ltd * Mindtree Ltd In respect of ICRA Techno Analytics, the Ld.AR submitted that, the DRP had directed its exclusion however, the Ld.AO/TPO did not follow the directions. The Ld.AR, thus prayed for, exclusion of this comparable based on the observations of DRP directions. The Ld.CIT.DR do not object for the exclusion of this comparable from the finalist. Considering the submissions hereinabove, we direct the Ld.AO/TPO to exclude ICRA Techno Analytics as directed by the DRP from the finalist. 10. The Ld A.R submitted that, the assessee seeks exclusion of following four comparable companies selected by the Ld.TPO as they have high turnover and are not comparable functionally to a captive service provider like assessee. Larsen & Toubro Infotech Ltd 3630.15 crores Mindtree Limited (seg.) 1640.81 crores Persistent systems Ltd. 996.75 crores 11. He submitted that, the turnover of the assessee during the year was Rs.29.28crores, and hence, it falls under the category of companies having turnover in the rang....
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....estment Advisors (India) Pvt. Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a nonjurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT v. Pentair Water India Pvt. Ltd. Tax Appeal No. 18 of 2015 judgment dated 16-9-2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following the principle that where two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay Hi....
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....ct. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)." 14. From the above, the objection of the Ld.CIT.DR is also met with, and therefore we are of the view that the comparables sought for exclusion deserves to be upheld on failure to fulfil turnover filter. We accordingly direct the Ld.AO/TPO to exclude Larsen & Toubro Infotech Ltd., Mindtree Ltd. and Persistent Systems Ltd. from the finalist. Accordingly Ground No.1(iv) &(v)-(vi), raised by assessee stands allowed. 15. Ground No.1(ix): The assessee is seeking directions for granting of working capital adjustment. Admittedly, the assessee do not bear any working capital risk as compared to the comparables. If at all any working capital adjustment is to be made in such a situation, it would be a positive working capital adjustment to bring the comparables on par with assessee. We therefore, direct Ld.AO/TPO to recompute working capital adjustment in actuals to the selected comparables to make them comparable with assessee. Accordingly, this ground raise....