TaxTMI 
TaxTMI 
2021 (3) TMI 1401
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....ard to addition made consequent to determination of ALP and consequent upward revision and adjustment made to the price at which international transaction was carried out by the Assessee with its AE in respect of Software development Services(SWD services). 3. There is no dispute that the Most Appropriate Method chosen for the purpose of comparison of the profit margin of the Assessee with that of the comparable companies was the Transaction Net Margin Method (TNMM) and the Profit Level Indicator (PLI) chosen for the purpose of such comparison was Operating Profit to Operating Cost (OP/OC). The OP/OC of the Assessee in the SWD services segment was as follows:- Description Amount Operating Revenue Rs.16,25,43,160/- Operating Cost Rs.14,06,95,730/- Operating Profit (OP) Rs.2,18,47,430/- Operating Profit to Cost(OP/OC) 15.52% 4. The TPO rejected the Transfer Pricing Study of the Assessee and arrived at a set of 13 comparable companies with that of the Assessee and arrived at arithmetic mean of the profit margin of those 13 companies at 24.82% before working capital adjustment. The following chart will show the list of 13 comparable companies ultimat....
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....the list of comparable companies viz., Persistents Systems & Solutions Ltd., Persisten Systems Ltd., and Sasken Communication Technologies Ltd., and inclusion of the The Assessee is also aggrieved by the exclusion of Evoke Technologies Ltd., CG Vak Software and Exports Ltd,. And RS Software Ltd. The Assessee has not chosen to challenge inclusion of these companies in the grounds of appeal before the Tribunal, exclusion of these three companies from the list of comparable companies. The reason for not doing so has been explained as non-availability of more details in public domain and subsequent availability of details in public domain which renders these companies as not comparable with Assessee engaged in SWD services such as the Assessee. The learned counsel for the Assessee has relied upon the decision of the Special Bench in the case of DCIT v. Quark Systems P. Ltd, [42 DTR 414] wherein the functionally comparability of these companies have been examined by this Tribunal and pleaded that the additional ground raised by the assessee may be admitted for adjudication on merits. Ld. AR has submitted that in a series of decisions, the Tribunal has held that there cannot be estoppel ....
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....ical. The tribunal held on the comparability of the aforesaid three companies as follows: "26. In ground No. 3(k), the assessee has prayed for exclusion of all 3 companies which were retained by the DRP in the impugned order. In this IT(TP)A.No.156 & 220/Bang/2016 Page 15 of 18 regard, the ld. counsel for the assessee has brought to our notice that Persistent Systems & Solutions Ltd. was regarded not comparable for the reason that it had diverse functions and segmental details were not available and that it was product company and that there was abnormal increase in turnover due to funding from holding company. These aspects were considered by the Tribunal in the case of Applied Materials (I) P. Ltd. (supra) and vide para 9.2.1 to 9.2.4, the Tribunal regarded this company as not comparable. Persistent Systems Ltd. was also considered as not comparable in the aforesaid order vide same paras referred to above for the reason that it was engaged in diverse activities and in the absence of segmental details, besides holding IPRs. 27. The other company is Sasken Communication Technologies Ltd. which was retained by the DRP. As far as this company is concerned, the plea ....
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.... company are not sound. When both the Assessee and the revenue seek inclusion of this company, there was no valid basis for the DRP to suo motto exclude this company from the list of comparable companies. In the decision cited by the learned counsel for the Assessee in the case of a SWD service provider such as the Assessee, this company was held to be a valid comparable company and included in the list of comparable companies. We therefore direct inclusion of this company in the list of comparable companies. 11. As for RS Software (India) Ltd., it was rejected by the DRP solely on the basis that it was allegedly predominantly engaged in the onsite development of software in FY 2010-11. In this regard, it is seen that this company was selected by the TPO and accepted by the Assessee as a comparable, and it was accordingly included by the TPO in the list of comparables. In the proceedings before the DRP, the Assessee did not object to its inclusion in the list of comparables. However, despite the above, the DRP on its own directed its exclusion. We are of the view that since the revenue as well as the Assessee wants to retain this company as a comparable company, this company sho....