TaxTMI 
TaxTMI 
2023 (1) TMI 399
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....to the extent prejudicial to the Appellant, is bad in law and liable to be quashed. 2. That on the facts and in the circumstances of the case, the learned Panel and the learned AO erred in upholding the learned TPO's approach of determining the arm's length price for the provision of software development MOW ('SWD') services and provision of marketing and sales support services (MSS') segments of the Appellant by: 2.1 Rejecting the value of international transaction of provision of SWD and provision of MSS, as recorded in the books of account. as the arm's length price. 2.2 Rejecting the TP documentation maintained by the Appellant under Section 92D of the Act, in good faith and with due diligence. 2.3 Applying the provisions of Rule 10B(5) read with Rule 10CA(2) and Rule 10CA(4) of the Income-tax Rules, 1962 ('the Rules') while undertaking the fresh benchmarking analysis. 2.4 Rejecting the Company's contentions against that the use of information under section 133(6) of the Act, which tantamounts to choosing secret comparable companies whose information were not available in public domain while undert....
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.... • Akshay Sof tware Technologies Ltd. • Sasken Communication Technologies Ltd. • Evoke Technologies Pvt. Ltd. • Yudiz Solutions Private Ltd. • Smartcloud Infoservices Pvt. Ltd. MSS segment 2.12. Including the following companies even though such companies are functionally different (such as engaged in commission activities, intermediary and outsourcing functions, technology and litigation support, etc.) from the Appellant. • Killick Agencies & Marketing Ltd. • Scarecrow Communications Ltd. • iRunaway India Pvt. Ltd. 2.13 Excluding the following companies even though the same are functionally comparable to the Appellant and data is available in the public domain. • Cheers Interactive India Pvt. Ltd. • MCI Management India Pvt. Ltd. • Showhouse Event Management Pvt. Ltd. • Competent Automobiles Co. Ltd. • Empire Industries Ltd. (Trading and Indenting) 2.14 Not considering certain expenses such as provision for doubtful debts, provision for warranties, provision for doubtful deposits, misc....
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....o and/or to alter, amend, rescind, modify the grounds herein below or produce further documents before or at the time of hearing of this appeal." Brief facts of the case are as under : 2.1 The assessee is a subsidiary of Arm Limited, UK. The Appellant is engaged in providing contract SWD and MSS services to its AEs. It filed its return of income for the A.Y. 2016- 17 on 11/11/2016 declaring total income of Rs.32,01,14,040/-. Subsequently, the case was selected for scrutiny. Statutory notice u/s 143(2) of the Act along with notice u/s 142(1) were issued and served on the assessee. 2.2 The Ld.AO noted that, during the F.Y. 2015-16, the assessee company had international transactions as per Section 92 of the Income-tax Act, 1961. According to Section 92CA of the Incometax Act, 1961, the case was referred to the Transfer Pricing Officer in order to determine the Arm's Length Price after obtaining necessary approval. 2.3 The Ld.TPO observed that the assessee had following international transaction with its AE for the year under consideration: Particulars Amount in Rs. Receipts from provision of contract SWD services 254,51,50,802/- Receipts from provision ....
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....r which financial information for 1 out of 3years was not available - rejected. 2. Companies having different financial year ending (i.e. not March 31,2016 or data of the company which does not fall within 12-month period i.e. 01-04-2015 to 31- 03-2016 - rejected. 3. Companies whose SWD service income is less than 75% of its total operating revenues - excluded. 4. Companies having more than 25% related party transactions of the sales - excluded. 5. Companies who have export service income less than75% of the sales - excluded. 6. Companies with employee cost less than 25% of turnover - excluded. 7. Companies having positive net worth- selected. 8. Companies making persistent losses (loss for any 2 years out of last 3 years)- excluded. 9. Companies with turnover > 1 crore- selected MSS segment: Filters applied by the Ld.TPO 1. Companies having different financial year ending (i.e. not March 31,2016 or data of the company which does not fall within 12-month period i.e. 01-04-2015 to 31- 03-2016-rejected 2. Companies whose income was less than Rs. 1Crore - excluded 3. Companies whose MSS service income is les....
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....CA Rs. 26,59,75,903/- MSS segment: Taxpayers operating revenue Rs. 3,56,17,182/- Taxpayer operating cost Rs. 3,29,82,027/- Taxpayers operating profit Rs. 26,35,155/- Taxpayers PLI 7.99% 35th Percentile Margin of comparables set 14.14% Adjustment required (if PLI<35th Percentile) Yes Median margin of comparable set 17.75% Arm's length price Rs. 3,88,36,337/- Price received Rs. 3,56,17,182/- Shortfall being adjustment u/s. 92CA Rs. 32,19,155/- 2.8 On receipt of the order passed under section 92CA by the Ld.AO, the proposed transfer pricing adjustment is the addition proposed in the draft assessment order. 2.9 Aggrieved by the Draft assessment order, the assessee raised objection before the DRP. The directions by the DRP are as follows: (i) The DRP directed recomputation of margin of CG-VAK Software & Exports Ltd., Aspire Systems (India) Pvt. Ltd., Cybage Software Pvt. Ltd., Nihilent Ltd. and Cigniti Technologies Ltd under SWD segment. In MSS segment, Quadrant Communications Ltd., Goldmine Advertising Ltd., Pressman Advertising Ltd., Ugam Solutions Pvt. Ltd., Killick Agencies & Marketing Ltd. and Scarecro....
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....se primary operations, ARM India also provides resource augmentation services to ARM UK and ARM USA. ARM India has its principal office in Bangalore and Noida, India and its business activities include: a) Contract software development services: ARM India has entered into a Services Agreement whereby it is required to provide contract software development services predominantly to ARM UK and a small portion of the software development services to ARM US. The services provided by ARM India under the agreement are contractual in nature and includes, validation, coding and verification of products developed by ARM UK and ARM US. For the projects sourced to ARM India, ARM UK provides the overall specifications and scope. Based on the specification document, ARM India team executes the specifications. The services provided by ARM India are in the nature of projects / assignments identified by ARM UK and sub-contracted to ARM India from time to time. There has not been any change in the operating model followed by ARM India in the provision of contract software development services to ARM UK and ARM US in the prior three years. ARM India is compensated with a cost plus arm....
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....r to the assessee on various counts and therefore deserves to be rejected. The Ld.AR submitted that, this comparable is functionally not similar with that of assessee, and that, the segmental data is not available in respect of diverse activities carried on by it. He relied on pages 1334, 1341 of the annual report paper book. He thus preyed for this comparable to be excluded from the final list due to lack of segmental data. 13. Larsen and Toubro Infotech Ltd.: It is submitted that this company is functionally dissimilar to the assessee on various counts and therefore deserves to be rejected. The Ld.AR submitted that, this comparable is functionally not similar with that of assessee, as it renders application development maintenance, enterprise solutions, testing and validation, digital solutions, infrastructure management services, platform-based service which cannot be equated to the routine software service provider like the assessee. The Ld.AR submitted that this company is also engaged in activities such as cloud computing, infrastructure management, analytics & information management, etc., and that No segmental details are available. The LdAR submitted that this compan....
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....ent, implementation services, application management services, and other related services and from sale the sale of license and subscription for software application, which are not akin to the captive services rendered by the assessee. He placed reliance on page 1825, 1834, 1857 of annual report paper book. The Ld.AR submitted that this company deals in product also and segmental details of diverse services are not available. He relied on page 2508 of annual report paper book. He thus prayed for exclusion of this company from the final list. It is submitted by the Ld.AR that, Inteq Software Pvt.Ltd, L&T Infotech Ltd., Infobean Technologies Ltd., Thirdware Solutions Ltd. excluded by Hon'ble Delhi Tribunal in case of Global Logic India Ltd., reported in (2022) 134 taxmann.com 35 for functional dissimilarities. On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. 16. We note that the decision of Hon'ble Delhi Tribunal in case of Global Logic India Ltd.,(supra) considered these comparables for assessment year 2016-17 and has held them to be functionally not ....
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....er Electronics, Consumer Retail & Pharma, Energy & Process, Automobile & Aerospace, Plant Equipment & Industrial Machinery, Utilities and E&C. But aforesaid various segments do not indicate profit earned from provisions of SDS. Apart from it, L&T is a huge brand having ownership of significant intangibles to the tune of Rs. 7.42 millions, as is evident from its financials at pages 8 and 103 of the paper book. 18. Coordinate Bench of the Tribunal rejected L&T in taxpayer's own case for AY 2014-15 (supra), available at pages 61 to 63 of the case law paper book, by returning following findings :- "6.6 The next objection of the assessee is regarding multiple segments. From segment reporting on page S-1258 of the Annual Report (page 129 of PB-2), we find that the assessee has reported three business segments. The first segment is service cluster which includes banking, financial services, insurance, media and entertainment, travel and logistics and healthcare. The second segment industry cluster which includes Hi Tech and consumer electronics, consumer, retail and Pharma, energy and process, auto Mobile and aerospace, plant equipment and industrial machinery, utili....
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....5 , the company is held to be not valid comparable on account of extraordinary events. Thus, In view of the extraordinary event in the year under consideration also, this company is liable to be excluded from the set of the comparable." 19. In taxpayer's own case in Global Logic India (P.) Ltd. v. DCIT [IT Appeal No. 8726 (Delhi) of 2019, dated 29-6-2020] L&T was excluded by the coordinate Bench of the Tribunal by returning following findings :- "20. The Tribunal in assessee's own case in ITA No. 4740/Del/2018 relating to Assessment Year 2014-15 vide order dated 1-5-2020 has directed the exclusion of the said concern from the final list of comparables while benchmarking the ALP of the international transaction by the assessee with its AE. Before parting, we may also refer to an extraordinary event under which Larsen & Toubro Infotech Ltd. initiated and completed transfer of its Product Engineering Services Business (PES) Unit to L&T Technology Services Ltd. w.e.f. January 1, 2014 as part of the business restructuring undertaken within the Larsen & Toubro group. Though the initiation started from 1-1-2014 but the whole effect of the transaction was during t....
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.... brought on record website of the company, available at pages 71 to 73 of the appeal memo, which shows that Thirdware is having competency in providing services in most advanced and niche area of technologies such as Robotic Process Automation, Big Data Analytics& Cloud Computing. 42. From the profile of Thirdware it has come on record that Thirdware is functionally dissimilar vis-à-vis the taxpayer as it has been deriving income from sale of licence and software services export from SEZ unit and revenue from subscription and training etc. and it is also into sale of licence and its segmental financials are not available. 43. Thirdware has been ordered to be excluded by the coordinate Bench of the Tribunal in case of Fiserve India (P.) Ltd. v. ITO [2015] 60 taxmann.com 48 (Delhi - Trib.) on ground of dissimilarity to routine software development service provider which has been affirmed by Hon'ble Delhi High Court in ITA 17/2016 order dated 6-1-2016. So, we order to exclude Thirdware from the final set of comparables. INFOBEANS TECHNOLOGIES LTD. (INFOBEANS) 44. The taxpayer sought exclusion of Infobeans as a comparable again on ground o....
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....ia Ltd. (supra) was a captive service provider to its AE for assessment year 2016-17. Nothing has been placed by the Revenue to deviate from the above view taken by the coordinate bench of this Tribunal in Global Logic India Ltd. (supra). 18. Respectfully following the view taken by the coordinate bench of this Tribunal in Global Logic India Ltd. (supra), we direct Ld. AO/TPO to exclude Inteq Software Pvt.Ltd, L&T Infotech Ltd., Infobean Technologies Ltd., Thirdware Solutions Ltd. from the final list of comparable for SWD segment. 19. Persistent Systems Ltd. : It is submitted that this company is functionally dissimilar to the assessee on various counts and therefore deserves to be rejected. The Ld.AR submitted that, this comparable is functionally not similar with that of assessee, as it is engaged in, rendering Enterprise Digital Transformation, product engineering and solutioning for Internet of Things (IoT), product engineering and professional services to ISVs and enterprises, IP products, IT services, development of software products and offers complete product life cycle services without there being separate segmental information disclosed in its Annual Report for s....
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....es comprising consulting, enterprise solutions, systems integration and advanced technologies; Products, business platforms and solutions to accelerate intellectual property-led innovation including Financial, and banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation He placed reliance on page 1901, 1903, 1949, 2013 of annual report paper book. It is submitted that this company is a full-fledged risk bearing entrepreneur who cannot be compared to the assessee that renders routine software services. It is submitted that the company owns seven Edge products/platforms and six other product based solutions. The Ld.AR submitted that, this company does not have segmental data in respect of rendering software services and development of products. It is submitted that this company has significant intangibles as a part of its fixed assets in the nature of intellectual property. He placed reliance on 1904, 1944, 1984 of annual report paper book. The company owns significant brand value and focuses immensely on brand building. The Ld.AR submitted that, this company heavily focuses on research and development activity and incurs significant expenditure....
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....l report paper book. The Ld.AR placed reliance on following decisions in support: Decision of Hon'ble Mumbai Tribunal in case of Red Hat India Pvt. Ltd. vs. Addl. CIT reported in (2022) 136 taxmann.com 52 Decision of Hon'ble Hydrabad Tribunal in case of Infor India Pvt. Ltd. in IT(TP)A No. 198/Hyd/2021 by order dated 06.10.2021 for A.Y. 2016-17. Decision of Hon'ble Punjab & Haryana in Equant Solutions India (P.) Ltd. reported in (2020) 113 taxmann.com 517 Coordinate bench of this Tribunal in case of ARM Embedded Technologies (P.) Ltd. reported in (2021) 129 taxmann.com 263 Coordinate bench of this Tribunal in case of Yahoo Software Development India Pvt. Ltd. reported in TS-191-ITAT-2020(Bang) On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions of both sides in light of records placed before us. We note that this company earns its revenue from power generation and it has nothing to do with the rendering of software development service. In fact, we note that this company is a full fledged entrepreneur in the business of power generation and therefore is not comparable func....
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....examined the website information of Nihilent, made available by the assessee at page No. 405 of the paper book, wherein it is mentioned that it is engaged in providing advanced analytics, artificial intelligence, blockchain, business intelligence, data science, cloud services etc. 45. Perusal of the disclosure of enterprise's reportable segment explanatory available at page No. A406 of the paper book shows that Nihilent is engaged in software development and consultancy, engineering services, web development and hosting and subsequently diversified itself into the domain of business analytics and business process outsourcing and financials of Nihilent available at page No. A304, A405-A406 of the paper book shows that Nihilent has only one business segment and in the absence of segmental financials, as it is into diversified business, this company cannot be a valid comparable vis-à-vis assessee, who is a low risk entity working on cost + markup model. Hence, Nihilent is ordered to be excluded as a comparable. Nihilent Ltd. 46. The assessee sought exclusion of Nihilent Ltd. as a comparable on the ground that it is functionally dissimilar vis-à-vis ....
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....2.04% Reliance in this regard is placed on the decision of the Hon'ble Hyderabad Tribunal in Infor (India) Pvt. Ltd. v. DCIT (supra). On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions of both sides in light of records placed before us. Primarily we note that this company is a product company and has diversified business segments. We note that this company is a full fledged entrepreneur and assumes all the risks attributable to the various business segments for which details are not available. In our view, under such circumstances, this company cannot be held tobe functionally comparable with that of assessee which is a captive service provider that caters only to its AE. Respectfully following the above view, we direct the Ld.AO/TPO to exclude Cybage Software Pvt.Ltd., from the final list. 25. R.S Software (I) Pvt.Ltd: It is submitted that, this company is engaged in diversified activities, which are not similar to the services rendered by the assessee. The company is into custom application development, quality assurance and testing, application maintenance and support, strategic consulting, in respec....
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....plea of the Assessee in proper perspective. The fact that the TPO rejected the TP study of the Assessee cannot be the basis not to consider the claim of the Assessee for inclusion of comparable companies. The TPO excluded these companies only on the ground that information related to these companies was not available in the public domain and this fact was shown to be an incorrect assumption by the Assessee in the submissions before the DRP. In such circumstances, it was incumbent on the part of the DRP to have adjudicated the question of inclusion of these companies as comparable companies. The fact that these companies do not figure in the search matrix of the TPO is not and cannot be a ground not to consider inclusion of these companies as comparable companies. Since the DRP has failed to do so, we are of the view that the issue regarding inclusion of the aforesaid companies as comparable companies should be set aside to AO/TPO for fresh consideration in the light of the information available in public domain. Thus ground No. 7 is treated as allowed for statistical purposes. Respectfully following the above view, we remit the comparables back o the Ld.AO/TPO for fresh consider....
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....provider. The company having operated without a single employee shows that the company is not rendering any services on its own and is therefore not comparable to the assessee. Further the revenue earned is in respect of different types of services which are not comparable to the assessee. Further, there are no segmental details available as regards the services. It is submitted that this company was directed to be excluded by the DRP in the assessee's own case for the assessment years 2013-14 and 2014-15 on the ground that it is not functionally comparable to the assessee. The relevant extracts of the DRP's directions are produced on page 188 of the appeal set. We have perused the submissions of both sides in light of records placed before us. This comparable has been excluded by the revenue itself in the preceding assessment years for being functionally different. We therefore direct exclusion of this company from the final list. 30. iRunway India Pvt. Ltd. The company is involved in providing services in nature of patent licensing, patent valuation and portfolio analysis, product testing, end-to-end litigation support, source code analysis, among other technology ....
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....t the transaction in question falls within the ambit of international transactions u/s 92B of the IT Act. However, this transaction is not an independent transaction. It is an integral part of transaction of sale made to the AE and therefore, it has to be considered alongwith the main transaction. The similar issue had come up for consideration before the Co-ordinate Bench of Mumbai in the case of Goldstar Jewellery Ltd. (supra), wherein it was observed as under:................. Respectfully following the above decision, we hold that there can be no separate international transaction of 'interest' in the international transaction of sale. Early or late realization of sale proceeds is only incidental to transaction of sale, but not a separate transaction in nature." 32.2 The Ld.AR placed reliance on decision of Delhi Tribunal in Kusum Healthcare Pvt.Ltd vs. ACIT reported in (2015) 62 Taxmann.com 79, deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT vs. Kusum Health Care Pvt. Ltd., reported in (2017) 398 ITR 66 (Del), held that no interest could have been charged as it cannot be considered as internation....
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....ation and hence under/non- payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT vs. Patni Computer Systems Ltd., (2013) 215 Taxmann 108 (Bom.), dealt with question of law: (c) `Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?' 32.6 The Ld.AR submitted that, while answering above question, Hon'ble Bomb....
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....ion of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. vs. DCIT (2017) 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; look....
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....r a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :--- (a) to (d)............. (e)transactional net margin method, by which,- (i) the net profit margin realised by the enterprise from an international transaction [or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by 'the enterprise or having regard to any other relevant base; (ii) the net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable. uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the am....
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....on and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 2. Chapters I and III of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereafter the "TPG") contain extensive guidance on comparability analyses for transfer pricing purposes. Guidance on comparability adjustments is found in paragraphs 3.47-3.54 and in the Annex to Chapter III of the TPG. A revised version of this guidance was approved by the Council of the OECD on 22 July 2010. In paragraph 2 of these guidelines it has been explained as to what is comparability adjustment. The guideline explains that wheri applying the arm's length principle, the conditions of a controlled transaction (i.e. a transaction between a taxpayer and an associated enterprise) are generally compared to the conditions of comparable uncontrolled transactions. In this context, to be comparable means that: • None of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology (e.g. price or margin), or • Reasonably accurate....
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.... + (plus) the period needed to collect money from customers - (less) the period granted to pay debts to suppliers." 14. Examples of how to work out adjustment on account of working capital adjustment is also given in the said guidelines. The guideline also expresses the difficulty in making working capital adjustment by concluding that the following factors have to be kept in mind (i) The point in time at which the Receivables, Inventory and Payables should be compared between the tested party and the comparables, whether it should be the figures of receivables, inventory and payable at the year end or beginning of the year or average of these figures. (ii) the selection of the appropriate interest rate (or rates) to use. The rate (or rates) should generally be determined by reference to the rate(s) of interest applicable to a commercial enterprise operating in the same market as the tested party. The guidelines conclude by observing that the purpose of working capital adjustments is to improve the reliability of the comparables. 15. In the present case the TPO allowed working capital adjustment accepting the calculation given s by the Assessee. The CIT(A) in exer....
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.... no defence to say that the Assessee has not furnished the required details and on that score deny adjustment on account of working capital differences. Regarding applying the daily balances of inventory, receivables and payables for computing working capital adjustment, the Delhi Bench of ITAT in the case of ITO Vs. E Value Serve.com (2016) 75 taxmann.com 195(Del-Trib) has held that insisting on daily balances of working capital requirements to compute working capital adjustment is not proper as it will be impossible to carry out such exercise and that working capital adjustment has to be based on the opening and closing working capital deployed. The Bench has also observed that that in Transfer Pricing Anal is there is always an element of estimation because it is not an exact science. One has to see that reasonable adjustment is being made so as to bring both comparable and test party on same footing. Therefore there is little merit in CIT(A)'s objection on working adjustment based on unavailable daily working capital requirements data. There is Also no merit in the objection of the CIT(A) regarding absence of segmental details available of working capital requirements of co....
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.... (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences." 18. In such a scenario there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore, in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore, the working capital adjustment as claimed by the Assessee should be allowed. We hold and direct accordingly." 33.4 In view of the above, we remit the issue to the file of AO/TPO to compute the working capital adjustment after necessary examination in the light of the above observation and after allowing an opportunity of hearing to the assessee. Accordingly this ground stands partly allowed for statistical purpose. In the result, appeal of the assessee stands partly allowed. Order pronounced in the open court on 30th August, 2022. ============= Document 1Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api ....
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....ies. However, since the contract between ARM India and ARM and ARM US All business and market risks with respect to the final product including risk of warranty and product liabilities are borne by ARM UK and ARM US. ARM UK and ARM US is responsible for any claims on the products and claims or product liability insurance expenses accrue to them. ARM UK being the owner of the technology bears the risk of technological obsolescence. Since ARM UK is the owner of the development activities, any success or failure of such activities also lies with ARM UK. Thus, the risk of R&D activities is borne solely by ARM UK. ARM UK and ARM US is exposed to credit risk as it deals with multiple third party customers. The credit facility provided by ARM UK and ARM US to its customer's results in the former bearing the risk of non-payment etc. ARM Group has business dealings with a number of companies in different parts of the world. Document 3 Risk Category and Description Exposure of ARM India Exposure to ARM UK is a cost plus arrangement, the foreign exchange risk i....