TaxTMI 
TaxTMI 
2022 (11) TMI 1321
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....ing to adjustment on account of alleged excessive AMP expenditure 3. The learned AO / TPO and the learned DRP have erred, in law and in facts. by concluding that the Appellant has incurred excessive or extraordinary AMP expenses attributable to the Development, Enhancement, Maintenance, Protection and Exploitation ('DEMPE') of marketing intangibles owned by the AE and that such expenditure is a separate international transaction of provision of service. without appreciating that the Assessee operates as a Limited Risk Distributor ('LRD'): 4. Without prejudice to the above ground. the learned AO / TPO and the learned DRP have erred, in law and in facts, by failing to accept the aggregation approach adopted by the Appellant and not appreciating that the sales and distribution expenditure incurred by the Appellant is included in the Profit Level Indicator ('PLI') used for the distribution activity, which is tested under the Transactional Net Margin Method ('TNMM'): the arm's length benchmarking and the comparable companies so adopted are not disputed by the learned TPO: 5. The learned DRP has erred, in facts, by concluding....
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....06 to conclude that it is obligatory for the assessee (distributor) to undertake marketing activities on behalf of supplier (its AE). He has also referred that it is operating under the direct supervision and control of its AE. As the assessee has not benchmarked this marketing function, the TPO has benchmarked this transaction separately to determine the ALP of this international transaction. Therefore, the TPO has rightly concluded that the assessee has incurred excessive or non-routine AMP expenditure attributable to DEMPE of marketing intangibles owned by the AE and that such expenditure is a separate international transaction of provision of service. 2.2 Further, the TPO has discussed in para 9.4 of his order that the assessee has not been compensated for the sales and distribution expenditure incurred. It is seen that the TPO has proved that the assessee has incurred far more expenses when it was compared to the companies involved in similar activity. He has mentioned that the assessee has spent substantial portion of money on brand awareness activities. He concluded that this has enhanced the brand image in India. The fact remains that the brand is owned by its AE and hen....
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..../on behalf of the taxpayer. Hence, the TPO has rightly considered the distribution commission paid as part of AMP expenses and therefore, it is requested that the Hon'ble DRP may kindly affirm the TPO's order." Considering the facts and circumstances of the case, and also considering the submissions of the assessee, we are of the view that the TPO for the detailed reasoning given therein is justified in his approach to make an adjustment on AMP. However, in respect of ground No 2, relating to distributors' commission, we are of the view that the cost relating to provision of warehousing, particularly the cold storage being provided by the distributors, needs to be excluded from the AMP. As per the Consignment Agency Agreement (CAG) entered by the assessee with M/s Parekh Integrated Services Pvt Ltd, Consignment Agent (CA), responsibility is cast on the CA by Clause 11 (a) to provide: (a) The CA shall provide work space equivalent to 500 square feet at the zonal offices and 300 square feet at other locations including two cabins for the zonal mangers of Alcon at the Zonal offices. It is agreed between the Parties that the area of the above work space(s)....
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....n the Indian territory he submitted that by these expenditures the assessee is promoting its own business in India as a distributor. The details of the expenditure are as under: Turnover 5,24,73,00,000 Distributor's Commission 36,80,00,000 Seminars & Conventions 14,87,00,000 Sales Promotion 7,97,00,000 Total AMP 59,64,00,000 Alcon India's AMP to Sales 11.37% 9.3 The Ld.AR submitted that, the revenue made adverse observation that assessee incurred excessive sales and distribution expenses and compared to the comparable companies by using CUP as the most appropriate method. He submitted that the revenue has attributed excessive sales and distribution expenditure to the additional function of promoting and developing the marketing intangibles of the AE by assessee in India by using bright line test. It is the submission of the Ld.AR that, this is not a recognised method under the trans-uprising regulation. 9.4 The Ld.AR submitted that, there is no agreement between the assessee and the AE to make such expenditure in order to promote the intangibles of the AE in India. And in the absence of any specific requirement to make s....
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....: "12. We have heard the submissions of the learned counsel for the assessee as well as the ld. DR. The first aspect which was brought tour notice by the ld. counsel for the assessee is the decision of the ITAT in assessee's own case for assessment year 2009-10 and 2010-11 on the same issue of AMP expenses. The Tribunal took the following view after extracting the decision of the Hon'ble Delhi High Court in the case of M/s Maruti Suzuki India Ltd. (supra). "21. Respectfully following the ratio of the decision of the Hon'ble Delhi High Court in the above cases, we hold that no TP adjustment can be made by deducing from the difference between AMP expenditure incurred by assessee-company and AMP expenditure of comparable entity, if there is no explicit arrangement between the assessee - company and its foreign AE for incurring such expenditure. The fact that the benefit of such AMP expenditure would also ensure to its foreign AE is not sufficient to infer existence of international trans action. The onus lies on the revenue to prove the existence of international transaction involving AMP expenditure between the assessee-company and its foreign AE. We als....
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.... CIT, TPO [2010] 328 ITR 210 (Delhi), in the case of a licensed manufacturer incurring AMP expenses it was held that it incurring of AMP expenses would be an international transaction and the issue of determination of ALP was remanded. This decision was however overruled in Maruti Suzuki India Ltd. v. Addl. CIT [2011] 335 ITR 121 (SC) wherein the Hon'ble Supreme Court left the question whether AMP expenses gives raise to international transaction or not open with the following observations: "In this case, the High Court has remitted the matter to the Transfer Pricing Officer ("the TPO" for short) with liberty to issue fresh show-cause notice. The High Court has further directed the Transfer Pricing Officer to decide the matter in accordance with law. Further, on going through the impugned judgment of the High Court dated July 1, 2010, we find that the High Court has not merely set aside the original show cause notice but it has made certain observations on the merits of the case and has given directions to the Transfer Pricing Officer, which virtually conclude the matter. In the circumstances, on that limited issue, we hereby direct the Transfer Pricing Officer, who, in the mea....
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....IL for SMC. On the above facts, the Hon'ble Delhi High Court held as follows: ".... when the licence agreements were originally entered into in 1982, MSIL was known as MUL and SMC did not hold a single share in MUL. In 2003 SMC acquired the controlling interest in MSIL. There were various models of Suzuki motor cars manufactured by MSIL and each model was covered by a separate licence agreement. Under these agreements, granted licence to MSIL to manufacture that particular car model and provided technical know-how and information and right to use Suzuki's patents and technical information. It also gave MSIL the right to use Suzuki's trade mark and logo on the product. Pursuant to this agreement, MSIL was using the co-brand, i.e., Maruti Suzuki trade mark and logo for more than 30 years. This cobrand could not be used by SMC and was not owned by it. The clauses in the agreement between MSIL and SMC indicated that permission was granted by SMC to MSIL to use the co- brand "Maruti Suzuki" name and logo. The mere fact that the cars manufactured by MSIL bore the symbol "S" was not decisive as the advertisements were of a particular model of the car with the logo "Ma....
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....pter X envisaged a separate entity concept. In other words, there could not be a presumption that the assessee was a subsidiary of the foreign company and that all the activities of the assessee were in fact dictated by the foreign company. Merely because the foreign company had a financial interest, it could not be presumed that advertising, marketing and sales promotion expenses incurred by the assessee were at the instance or on behalf of the foreign company. The initial onus was on the Revenue to demonstrate through some tangible material that the two parties acted in concert and further that there was an agreement to enter into an international transaction concerning advertising, marketing and sales promotion expenses." 19. In the light of the law as it exists today, we shall examine the arguments of the rival parties. There has been no agreement between Essilor International which owns the various brands set out by the TPO in his order and the Assessee to incur any Advertisement and Marketing or Sales promotion expenses. None of the other reasons given by the TPO which have been explained by the Assessee and set out in the earlier paragraph can be the basis to hold t....
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....gulations are only applicable to medical practitioners and shall not extend to pharmaceutical and allied healthcare companies; 14. Without prejudice to the grounds 11 to 13, the learned AO/ DRP has erred in law by retrospectively applying the CBDT Circular to the subject AY without considering the fact that the CBDT Circular is effective only from 1 August 2012 and hence applicable prospectively from 1 August 2012; 15, Without prejudice to the above grounds i.e. 11 to 14, the learned AO/ DRP has erred, in law and on facts, in disallowing on an ad hoc rate of 50% of seminar and convention expenses and 25% of sales promotion expenses: 16. The learned AO/ DRP has erred. in law and on facts, in disallowing an amount of Rs. 9,57.25.000 in respect of seminar and convention and sales promotion expenses on an ad hoc basis as the same is contrary to provisions of the Act and also the law as laid down by the Courts; 4.1 Facts of the case are that the assessee company was asked to explain vide notice u/s 142(1) of the Act dated 21.12.2016 as to why the expenses incurred related to doctors in the form of seminars and conventions and sales promotion should not be d....
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....es Act, 1897 defines 'Indian law' under section 3(29) to mean any Act, Ordinance, Regulation, rule, order, byelaw or other instrument which before the commencement of the Constitution had the force of law in any Province of India or part thereof, or thereafter has the force of law in any Part A State or Part C State or Part thereof, but does not include any Act of Parliament of the United Kingdom or any Order in Council, rule or other instrument made under such Act. Similarly, under Constitution of India the word 'law' in context of fundamental rights is defined under article 13(3)(a) and includes any ordinance, order, byelaw, rule, regulation, notification, custom or usage having in the territory of India the force of law. iv. Thus, the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 has force of law as it was promulgated in exercise of the powers conferred under section 20A read with section 33(m) of the Indian Medical Council Act, 1956 (102 of 1956), the Medical Council of India, with the previous approval of the Central Government, made the regulations relating to the Professional Conduct, Etiquette and Ethics for r....
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....d to Doctors amounting to Rs.1,11,39,591 (total disallowance of Rs.1,22,44,326). 16. Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR submitted that by incurring these payments to Doctors, the assessee has not violated the MCI Regulation. It was contended that the expenses incurred by the assessee towards Doctors are not hit by the judgment of the Hon'ble Supreme Court in the case of M/s. Apex Laboratories Pvt. Ltd. v. DCIT reported in (2022) 442 ITR 1 (SC). The assessee has filed elaborate written submission. The content of the same for ready reference is reproduced below:- Although detailed bifurcation of abovementioned expenses incurred along with nature of expenses were furnished before the lower authorities such expenditure was disallowed in entirety without appreciating that such expenses were not violative of MCI regulations. AO did not verify whether the expenses incurred by the Appellant falls within the ambit of MCI regulations but disallowed the entire expenditure relying on Circular 5/2012 without specifically highlighting as to how each expense is violative MCI Regulations and CBDT circular. Both the authorities failed....
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....essment year 2016-17. Even otherwise, the decision of Hon'ble Supreme Court in the case of Apex Laboratories is distinguishable on facts (as highlighted in the subsequent paras) which needs to be analysed/examined by the assessing officer. In the present case. it is reiterated that the assessing officer has failed to examine the nature of expenses incurred by the assessee and has proceeded to disallow the same on conjecture and surmises. Thus in larger interest of justice and to ensure that disallowance is only in accordance with law. it becomes necessary to examine the exact nature of the expenditure from all these angles discussed hereinabove. To facilitate the same. additional evidences are being placed by way of details/documents on sample basis. We crave leave to file more complete details/documents before AO if the verification aspect is set aside/ remanded to Ld. AO. Accordingly, it is respectfully prayed that the issue may kindly be remanded and AO may kindly be directed to verify/examine such details/documents for all the above aspects. Detailed submission justifying each expense incurred by the Appellant not being violative of MCI Regulations and CBOT circula....
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....consultancy services. Hence, CBDT Circular would not be applicable and provisions of section 37 of the Act cannot be invoked. In addition to the above. it may kindly be appreciated that the Appellant entered into an agreement with such doctors for availing professional! consultancy services under which apart from paying profession fee to such doctors. Appellant is also obliged to incur cost of travelling and accommodation. With regard to such arrangement/ expenses incurred. "it is submitted that such expenses would not come under the ambit of "freebies" as mentioned in IMC Regulations/ CBDT Circular, since such expenses have been incurred based on specific contractual arrangement entered with doctors and not given gratis to medical practitioners which alone is prohibited by IMC Regulations/ CBDT Circular. Even though the term "freebies" has not been defined under the Act, the same can be understood from common parlance as something that is given to another person for gratis without any obligation to incur such expense and without expecting any reciprocal service from the other person. Sample copies of agreements entered with doctors are enclosed as Annexure 4 to applicatio....
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....es which can be cured by such medicines. With regard to other marketing expense. we wish to mention that it majorly includes payments to State Chemist and Drug Association in the nature of Product Information Service Charge which is paid in order to publish the information on the Appellant's products and the payment is made based on the standard rates framed by these associations. We wish to submit that the above expenditure is not specifically prohibited in the MCI regulations. Even otherwise, expenses incurred by the assessee would not be hit by the decision of Hon'ble Apex Court in case of M/s Apex Laboratories Pvt. Ltd. v. DCIT (SLP No. 2320712019) which is distinguishable on facts. Post issuance of directions dated 27.11.2014 by DRP and during the pendency of the present appeal before the Hon'ble Tribunal, Hon'ble Supreme Court in the case of Apex Laboratories Pvt Ltd. v. DCIT (2022] 135 taxmann.com 286, under the facts of that taxpayer, held freebies/gifts given to doctors to be not allowable under section 37 of the Act. In this case, taxpayer gifted expensive gifts such as hospitality, conference fees, gold coins, LCD TVs, ....
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.... 1108 of Legal Paperbook - III) *CJ Paul and Others vs District Collector and Others (2009 14 SCC 564) (Page 1117 of Legal Paperbook - III) That apart. even if expenses incurred by the assessee during preamendment are directed to allowed. the expenses incurred post amendment would include expenses which are otherwise not violative of MCI Regulation as also CBDT circular for reasons already explained herein above. Therefore. same may kindly be directed to be allowed a deduction after examination by Ld. AO. In this regard. it is respectfully prayed that the issue of disallowance of expenditure incurred on doctors may kindly be restored to the file of assessing officer for fresh examination / verification." 17. The assessee has also filed additional evidence vide its application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. The additional evidence that is now sought to be admitted, according to the learned AR, provide for details of expenditure / break up incurred on the Doctors. It was submitted that the additional evidence being sought to be taken on record as it goes to the root of the dispute and for substantial justice, the same may ....
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.... matter may be restored to the A.O. to examine whether such expenditure incurred by the assessee is violative of the provisions of MCI Regulation and the dictum laid down by the Hon'ble Apex Court in the case of M/s. Apex Laboratories Pvt. Ltd. v. DCIT (supra). 19. We have heard rival submissions and perused the material on record. The assessee has filed additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 for admission of additional evidence. The additional evidence is details of break-up of expenses, such as travelling, conveyance, gift and donations provided to Doctors aggregating to Rs.1,22,44,326. It was stated that though the assessee had submitted before the lower authorities such details, were not segregated under various heads. It is pertinent to note that prior to the judgment of the Hon'ble Apex Court in the case of M/s. Apex Laboratories Pvt. Ltd. v. DCIT (supra), many of the judicial pronouncements had held that MCI Regulations are not applicable on pharmaceutical companies and expenses incurred by such companies are not violative of CBDT Circular. During this phase of assessment, there were only adhoc summary basis evaluation o....
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....d. Vs. Deputy Commissioner of Income-tax cited (supra). 7. Next ground in IT(TP)A No.3376/Bang/2018 is with regard to adjustment in respect of IT support services. The assessee has raised ground Nos.14 to 22 in assessment year 2014-15 which are reproduced as under:- "Grounds relating to adjustment in respect of IT support services 14. The learned AO TPO and the Hon'ble DRP have erred, in law and in facts, by making an addition of Rs.1.78.45,766 to the total income of the Appellant, by disregarding the economic analysis undertaken by the Appellant in the TP documentation and conducted a fresh search to arrive at the arm's length price ('ALP') for the IT support services transaction. Further. the ALP was determined by using incorrect comparable companies engaged in end-to-end software development services. 15. The learned AO / TPO and the Hon'ble DRP have erred, in law and in facts, by applying only the lower cap on the turnover filter of Rs.1 crore and not applying any upper cap for the comparability criterion: 16. The learned AO / TPO and the Hon'ble DRP have erred, in law and in facts, by rejecting certain comparable c....
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....h as HR and Commerce are the focus areas for the products and solutions. c) Product offerings by Infosys pertain to various niche and emerging technologies (Pg no. 10 of AR) d) Infosys is deriving revenue from sale of products and services. Segmental data for products and services is not available e) Infosys brand is a key intangible asset of the company f) Infosys has spent INR 88 crores in brand building. g) As per the report of Brand Finance, the brand value of Infosys was USD 3414 million and USD 2291 million in 2015 and 2014 respectively h) The total R&D expenditure for the year ended 2014 is Rs.873 crores which accounts for 2% of revenue g) The turnover of Infosys is INR 44,341 Cores, which is much higher when compared to the Assessee's turnover of INR 24.26 cores. 8.1.1 In this regard, the ld. AR relied on the following judgements in support of his arguments: Functionally different a) ARM Embedded Technologies Pvt. Ltd. [IT(TP)A No.3374/Bang/2018 for AY 2014-15] b) Salesforce.com India Private Limited [IT(TP)A No 3286/Bang/2018 for AY 2014-15] c) Microsoft Research Lab India Pv....
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....rowth is on account of business dynamics. Therefore, the pleas are rejected by the Ld. DRP. 8.2.2 It was also pleaded by the Ld. AR before Ld. DRP that this company has a huge brand which has contributed to its growth in revenue and hence not comparable. A perusal of the annual report (the messages of Executive Vice Chairman, Senior Vice President, whole time director in the annual report) by Ld. DRP shown that the growth in revenue was on account of various business initiatives taken to accelerate growth such as implementing cost effectiveness through reducing cost of operation, improving utilization percentage of employee, restricting the organization for agility by creating smaller and nimbler sales regions, redesigning supply chain functions, etc. Thus, the growth in revenue is not on account of its brand or any exceptional event, and hence cannot be a reason for rejecting this company, which is otherwise found to be functionally comparable. 8.2.3 The Ld. D.R. stated that the perusal of the details in the annual report by the Ld. DRP shown that the company has incurred R & D expenditure to the tune of Rs.873 crores, which constitute meagre 1.96% of its total operating rev....
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....he company. 8.3.1 In this regard, the ld. AR relied on the following judgements in support of his arguments: Functionally different a) ARM Embedded Technologies Pvt. Ltd. [IT(TP)A No.3374/Bang/2018 for AY 2014-15] b) Salesforce.com India Private Limited [IT(TP)A No 3286/Bang/2018 for AY 2014-15] c) Microsoft Research Lab India Pvt. Ltd. [IT(TP)A No. 3131/Bang/2018 for AY 2014-15] d) EMC Software and Services India Pvt. Ltd.[IT(TP)A. No.3375/Bang/2018 for AY 2014-15] e) LSI India Research & Development Pvt. Ltd [IT(TP)A No.3170/Bang/2018 ] f) Hewlett Packard (India) Software Operation Pvt Ltd [ITA No. 3400/Bang/2018] g) M/s. Alcon Laboratories (India) Pvt. Ltd vs DCIT IT(TP)A No. 726/Bang/2017 Turnover a) Zynga Game Network India Private Limited [ITA No. 2573/Bang/2019 for AY 2015-16] b) Lam Research (India) Private Limited [IT(TP)A No 2490/Bang/2017 for AY 2013-14] Ld. D.R's submissions: 8.4. On the other hand, the Ld. D.R. submitted that on perusal of the annual report by Ld. DRP it clearly shown that the entire revenue is from provision of services. As per Note 2, rev....
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....t and not a product company and hence, functionally comparable to a software service provider company, by the Bangalore Tribunal in the case of M/s. Advice America Software Development Centre Private Limited (in I T A (TP) No. 2531/Bang/2017 dated 23.05.2018 relating to A.Y. 2013-14). In view of the above, Ld. DRP upheld the selection of M/s. L&T Infotech Ltd. as a comparable. (c) Persistent Ltd. Ld. A.R's submissions: 8.5 Further, with regard to exclusion of Persistent Systems Ltd., the Ld. A.R. stated that this company may be excluded from the list of comparables due to following reasons: a) Persistent specializes in building computer software products. Persistent's business is organized with a focus on three areas: Products (IP Business), Platforms (Solutions Integration) and Services (Product Engineering). b) The company is a global company specializing in software products, services and technology innovation c) Persistent is a leader in outsourced product development and works with world's largest software product companies. d) Persistent is also engaged in business of sale of software products and there is no reve....
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....segments are identified based on review of market and business dynamics bard on risk and returns affected by the type of class of customers for the services provided. As per page 195 of the annual report, the earnings in foreign currency of Rs.10,606.23 million, (constituting 89.57%) was from sale of software; and there is no reference to sale of products. Thus, it is evident that this company's revenue from operation was predominantly on account of services rendered. There is no mention of any revenue stream from sale of products in the P& L account or balance sheet. 8.6.1 The Ld. D.R. further stated that the references to product transaction relied by the assessee's AR before Ld. DRP was in the context of the consolidated results of the company and management discussion. As per the consolidated balance sheet, there is information to show that there was acquisition of intangible rights during the year 2012-13 (refer annual report for F.Y 2012-13), which has contributed to IP driven revenue. No such acquisition or addition to intangible assets are seen in the stand alone Asset Schedule of this Indian company, which is being compared, for this year or in the earlier year.....
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....ual property products and generating some revenue from licensing and support of these products. The Indian company PSL India is predominantly engaged in the business of rendering software development services, the revenue reported is primarily on account of rendering of software development services only'. 8.6.5 In the light of these clarifications, Ld. DRP has not hesitated in upholding this company as functionally comparable to the assessee's software development activity. 8.6.6 The Ld. D.R. stated that the Ld. DRP observed that the expenditure incurred towards R&D as per page 195 of the annual report was Rs.39.61 million, which constitute meagre 0.33% of operating revenue. The value of intangible assets was only Rs.162.85 million constituting 1.36% of operating revenue. There is no reference to any intangible assets or patent owned or developed by the company, in the stand-alone annual report. There is also no acquisition of intangibles during the year. Further as per note in of the annual report, software product developments costs are expensed as incurred unless the technical and commercial feasibility of-the project enable to use or sell the software, they are n....
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....ale of services alone. e) The turnover of Thirdware is INR 206.76 crores, which is much higher when compared to the Assessee's turnover of INR 24.26 crores. 8.7.1 In this regard, the ld. AR relied on the following judgements in support of his arguments: Functionally different a) ARM Embedded Technologies Pvt. Ltd. Vs. ITO (IT(TP)A No.3374/Bang/2018 for AY 2014-15) b) Salesforce.com India Private Limited [IT(TP)A No 3286/Bang/2018 for AY 2014-15] c) Microsoft Research Lab India Pvt. Ltd. Vs. DCIT [IT(TP)A No. 3131/Bang/2018 for AY 2014-15] d) EMC Software and Services India Pvt. Ltd.[IT(TP)A. No.3375/Bang/2018 for AY 2014-15] e) LSI India Research & Development Pvt. Ltd [IT(TP)A No.3170/Bang/2018] f) Hewlett Packard (India) Software Operation Pvt. Ltd. [ITA No.3400/Bang/2018] 8.8 On the other hand, the Ld. D.R. submitted that on perusal of the annual report by the Ld. DRP, the Ld. DRP noted that the company is engaged in the business of software development and consultancy service. (page 16 of Balance Sheet), and that the company's operation comprises of software, development, implementation and ....
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....R submitted that (i) Infosys Ltd. (ii) Persistent Systems Limited, (iii) L & T Infotech Limited and (iv) Thirdware Solutions Ltd. are to be excluded on the turnover criteria and supported her submissions, relying on the catena of judicial decisions. We find, i) Infosys Technologies Ltd. - The Company is not functionally comparable as it has diversified operations and no segmental data is available, and does end to end business solutions like business consulting, technology, engineering and outsourcing services. Further, Lack of segmental details in respect of services and investment in products and focuses on immense brand building. The company owns significant brand value, significant amount of IPR and brand value, and involved in R & D activities and incurred significant expenditure. During the year the company has amalgamated its wholly owned subsidiary Infosys Consulting India Ltd. For the A.Y.2014-15, the company was excluded as comparable by the co-ordinate Bench of Tribunal in the case of M/S EMC Software and Services India Pvt. Ltd. Vs. JCIT in IT(TP)A No.833/Bang/2018 dt.18.12.2019 [115 taxmann.com 293 (Bang)] at para 6(i) as under : " 6 (i) Infosys Limit....
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....and was considered by the co-ordinate Bench of the Tribunal for exclusion in the Assessment Year 2014-15. Accordingly, we direct the TPO to exclude the Infosys Ltd. from the final list of comparables for determination of ALP." In the present case also, we find that the comparable has significant intangibles, and therefore, we direct the TPO to exclude Infosys Technologies Ltd. from the final list of comparables in determination of ALP. ii) L & T Infotech Limited - The company is not functionally comparable, as it has high brand value and market leader and also benefit from its parent brand. It has proprietary business and during the year extraordinary events like product engineering services business of the company was transferred to its subsidiary and has incurred expenses in foreign currency being 57.13% of its total expenditure. The company was excluded as comparable in the decision of co-ordinate Bench in the case of EMC Software and Services Pvt. Ltd. Vs. JCIT (supra) at para 6(ii) at page 592 & 593 of Paper Book as under : " 6 (ii) L & T Infotech Limited : The company has a margin of 24.61% and has high brand value and is a market leader, high prese....
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....or Imaging India P Ltd (supra) for AY 2011-12. The Ld A.R submits that there is no change in facts prevailing in the current year visa-vis the years considered by the co-ordinate benches in the above said cases. Accordingly, following the above said decisions, we direct exclusion of M/s L & T Infotech Ltd." We considering the functional dissimilarity and judicial decisions and various facts which are not similar to the assessee functional profile, Accordingly, we direct the TPO to exclude M/s. L & T Infotech Limited from the final list of comparable in determining the ALP. iii) Persistent Systems Ltd. - The company is not functionally comparable as it has diverse business operations including IP led business, extraordinary events and is engaged in R & D activities and large scale of operations. The company was excluded as comparable in the decision of co-ordinate Bench in the case of EMC Software and Services Pvt. Ltd. Vs. JCIT (supra) at para 6(iii) pages 593 of Paper Book as under : " 6 (iii) Persistent Systems Ltd. : The company is functionally different as it is engaged in rendering IT services and in the development of software products without there....
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....ware India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 dt.28.05.2019 for the Assessment Year 2014-15 has excluded the comparable as observed at paras 8 & 8.1 at page 4 as under : "8. We also notice that in A.Y 2008-09, the co-ordinate bench has excluded M/s. Thirdware Solutions Ltd also by following the decision rendered in the case of 3DPLM Software Solutions Ltd (supra), where in it was held that M/s. Thirdware Solutions Ltd. is engaged in product development and earns revenue from sale of licenses and subscription. Further, the segmental details were not available. 8.1 It was stated that there is no change in facts. Accordingly, following the decision rendered in the assessee's own case in A.Y 2008-09, we direct exclusion of M/s. Thirdware Solutions Ltd." The comparable Thirdware Solutions Ltd. has to be excluded as it is predominant in activity and segmental details are not available. Accordingly we direct the TPO/A.O to exclude this comparable from the list of comparables for determining the ALP." We found there is a functional dissimilarity in respect of assessee's financial profile and accordingly, we direct the TPO to exclude ....
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....ks to exclude from the final list of comparable companies chosen by the TPO. The functional profile of me Assessee and that of the Assessee in the case of Agilis Information Technologies India (P.) Ltd. (supra), is identical inasmuch as the said company was also involved in providing SWD services to its AE and the TPO had chosen some comparable companies which were also chosen by the TPO in the case of the Assessee for the purpose of comparability. In the aforesaid decision the Tribunal held on the comparability of the 3 companies which the Assessee seeks to exclude as follows: Document 2 (a) (b) (c) Infosys Ltd., was excluded from the list of comparable companies by following the decision of the Hon'ble Delhi High Court in the case of CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289/219 Taxman 26 (Delhi). The discussion is contained in paragraphs 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys Ltd. is a giant risk taking company and engaged in development and sale of software products and also owns intangible assets and therefore not comparable with a software development service provider ....