TaxTMI 
TaxTMI 
2021 (3) TMI 1403
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....n & Toubro Infotech Ltd. (iv) Mindtree Ltd. (v) Persistent Systems Ltd. 3. Genesys International Corporation Ltd. : With regard to this company, the objection of the assessee is that this company has super profits, the company profit margin for the year ended 31.3.2012 was at 50.08% which was at 108.28% for the year ended 31.3.2011. There is a high degree of fluctuation in the profit of that company which cannot be compared to the assessee's case. Therefore the same should have been excluded. He relied on the order of this Tribunal in the case of VeriSign Services India (P) Ltd. 109 taxmann.com 432 (Bang. Trib.) wherein it was held that this company was functionally different and ought to be excluded from the comparables. 4. On the other hand, the ld. DR submitted that there is no rule that a company having high degree of profits cannot be considered as a comparable or it has to be excluded while determining the ALP. He submitted that a company can be excluded only on the basis of FAR analysis, but not merely on the ground of amount of profit/loss earned by the comparable cases. He relied on the following judgments:- (i) The Bangalore Tribunal in the case of Sap Labs (20....
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....in of the comparable is highly fluctuating as in the year ended on 31.3.2012 it was 50.08% of the turnover and in the earlier year ended 31.3.2011 it was 108.28%. The degree of fluctuation is not due to any external factors, it is only due to high margin of profit in the business of the company. On this reason it cannot be excluded as rightly pointed out by the ld. DR. Being so, we find force in the arguments of the ld. DR and reliance placed by the lower authorities on various judgments also supports the revenue's case. 7. Accordingly, this ground of appeal by the assessee is rejected. 8. Infosys Ltd. and Mindtree Ltd. : The ld. AR submitted these companies are having high turnover with brand name and own huge intangibles and cannot be comparable. On the other hand, the ld. DR submitted that the benefit of brand is not restricted to parent company, but it is available to all associate companies if they are using the brand name. The assessee is a subsidiary of M/s. Meritor Holdings Lt. which in itself is a subsidiary of M/s. Meritor Inc USA and carries brand name 'Meritor' with it and is thus expected to provide services commensurate with brand name. Though it may be a captive se....
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....f high turnover filter has itself been rejected by the jurisdictional Bench of ITAT, as discussed supra on the comparability of Genesys International Corporation Ltd. As such, this comparable cannot be excluded. 12. We have heard both parties on this issue. This company was held to be not comparable in the decision of this Tribunal in the case of Verisign Services India (P) Ltd. (supra). The relevant observations of the Tribunal are as under:- "(b) Larsen & Toubro Infotech Ltd., was excluded from the list of comparable companies by relying on the decision of the Delhi Bench of ITAT in the case of Saxo India (P.) Ltd. v. Asstt. CIT [2016] 67 taxmann.com 155 (Delhi - Trib.) . The discussion is contained in paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that L & T Infotech Ltd., was a software product company and segmental information on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal's order was dismissed by the Hon'ble Delhi High Court in ITA No.682/2016." 13. Accordingly, we direct exclusion of L&T Infotech from the comparables. 14. Persistent Systems Ltd. : The ld. AR submitted....
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....nd functionally different from the assessee. 19. Before us, the assessee prayed for its inclusion in the list of comparables. 20. We have heard the both the parties on this issue. As per annual report, the company is having a foreign branch and during the year its total expenditure in foreign currency was Rs 146.55 crore as against total expenditure of the company at Rs 214.77 crore. Thus foreign branch expenses are about 68% of the total expenditure. This shows that major work of the company was onsite and so this company cannot be considered as functionally comparable to the assessee company, which is operating offshore. 21. This Bench of the Tribunal in the case of Trilogy E-Business Software India (P.) Ltd. (supra) held as follows:- "Thus, assets and risk profile, pricing as well as prevailing market conditions are different in predominantly Onsite companies from predominantly t)/Shore companies like the taxpayers. Since, the entire operation of the tax payers are taking place Offshore i.e., in India, it is but natural that it should be compared with companies with major operations Offshore, due to the reason that the economics and profitability of Onsite operations are di....
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....siness Software Ltd. (supra) held that Thinksoft provided software testing services which are not comparable with software development services. Software testing is only part of software development cycle and can't be equated with software development. So considering this aspect M/s Thinksoft Global Services Ltd. cannot be considered as a comparable as it is functionally different. 27. We have heard the parties and considered the material on record. In view of the decision of the Tribunal in Trilogy E-Business Software Ltd. (supra), we do not find any infirmity in the order of the DRP and confirm the same. 28. Nucleus Software Export Ltd.: The ld. AR sought inclusion of this company which was rejected by the DRP. The ld. DR submitted that it was rejected by the TPO by observing that it was in software product development. It was argued by the assessee that the said company is in software development, however, from the financials of this company it is evident that the said company is having revenue from "software services and products". No segmental details of software services and software product development were given in the financials. So the rejection of this company as a....