TaxTMI 
TaxTMI 
2022 (11) TMI 1321
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....MP 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 that the commission paid to M/s Parekh Integrated Services Private Lim....
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....alf 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 hence, the AE has certainly benefitted by the expenses incurred by the assessee. However, the assessee has not be....
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....ore, 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) may be increased or decreased by Alcon as ....The work space provided at the zonal offices and other locations shall include telephone facilities ....
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....nder: 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 such expenditure on behalf of AE, the expenditures incurred by assessee cannot be treated to be an international transaction. In support, he placed reliance on the decision of Hon'ble Delhi High Court in case of....
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....nd 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 also hold that that in the absence of machinery provisions to ascertain the price incurred by the assessee-company to promote the brand values of the products of the foreign entity, no TP adjustment can be made by invoking the provisions of Chapter X of the Act. 22.Applying the above....
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....ddl. 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 meantime, has already issued a show cause notice on September 16, 2010, to proceed with the matter in accordance with law uninfluenced by the observations/directions given by the High Court in the impugned judgment dated July 1, 2010. The Transfer Pricing Officer will decide this matter on or before Dece....
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....anufactured 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 "Maruti- Suzuki". The Revenue had been unable to contradict the submission of MSIL that the co-brand mark "Maruti-Suzuki" in fact did not belong to SMC and could not be used by SMC either in India or anywhere else. The decision in the case of Sony Ericsson requires that the mark or brand should belong to the foreign associated enterp....
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....sing, 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 that there was in fact an international transaction in the matter of incurring of AMP expenses by the Assessee. The order of the Tribunal in Assessee's own case for A.Y.2009-10 and 2010-11 in our view requires to be followed and there are no reasons whatsoever to take a different view. Consequently, there could not be any exercise of determi....
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....le 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 disallowed. The assessee company vide submissions dated 23-12-2016 has stated as under; "i. So that sales and profitability of the assessee company increases which clearly reflect that these are illegal gratification which are prohibited by law. ii. The CBDT brought a Circular No. 5 of 2012 dated 1-8-2012 which is clarificatory and clarifies that any expenses incurred in violation of the provisions of....
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....cil, 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 registered medical practitioners, namely ,the Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 and hence these regulations shall be covered under the definition of 'law' and hence is covered under explanation to section 37. For claiming the expenses under section 37 which is a residuary section, it is essential that the expenses are not covered under clauses of sections 30 to 36 and are i....
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....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 to examine and find how details/documents filed by the Appellant justify disallowance. Disallowance was made under section 37 of the Act on a mistaken notion / presumption without verification of same in context of MCI regulations. In this context. to understand the issue involved. it is pertinent to note that the Hon'ble Courts before decision of Hon'ble Supreme Court in case of M/s Apex Laboratories Pvt. Ltd. v. DCIT (SLP No. 2320712019)) held that MCI Regulations are not applicab....
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....rdance 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 circular is submitted hereinbelow: Travel & Conveyance Appellant incurred Rs.11,04,735 on travelling and conveyance of doctors/ professors of high repute who have been hired by the Appellant as consultants to speak! make presentations at the seminars/ conferences conducted by the Appellant on various topics. We wish to mention that these expenses are not violative of MCI regulations for the reasons highlighted herein below: * MCI regulations only covers the expenses incurred for medical professionals who are delegates and not tho....
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....egulations/ 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 application for admission of additional evidences @; Pg 5162. Considering that the doctors are hired as speaker/ consultant to provide presentations at the seminars/ conference conducted by the Appellant. the travel and accommodation expenses incurred by the Appellant while availing such services of doctors have been incurred in the course of conducting its normal business operations and hence. eligible for deduction under section 37 of the Act. Gifts & donations * Break-up of gifts & donations expense reveals that it includes the following expenses: Conference expense of INR 50,94,39....
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....(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, fridges, laptops, etc. to medical practitioners to promote its nutritional health supplement 'Zincovit'. In Appellant's case, the expenditure is towards contractual obligations with some doctors for seeking their services in lieu of remuneration. In fact, in the agreement entered with the doctors. it is specifically mentioned that the latter will not prescribe Astra's products for gaining any business advantage for AstraZeneca (Refer Pg 52, 56, 60 of application for admission of additional evidence). It is settled law that decision of Courts has to be read in context of facts of the case. Expenses incurred in Appellant's case under a contractual oblig....
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....e 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 be taken on record. In support of the additional evidence, the learned AR placed reliance on the following judicial pronouncements:- a) Hon'ble High Court of Madhya Pradesh in the case of CIT v. Kum. Satya Setia (143 ITR 486), has held that under rule 29 of the Rules, it was within the discretion of the Tribunal to allow the production of additional evidence and even if there was a failure to produce the documents before the Income-tax Officer and the Appellate Assistant Commissioner, the Tribunal had the jurisdiction in the interest of justice to allow the production of such vital documents. b) The Bangalore Tribunal in case of Tim ken Engineering & Research India (P.) Ltd v DCIT (ITA No. 974/ Bang/2008) relied on the abovementioned decision. c)In the case of Abhay Kumar Shr....
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.... 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 of expenditure. In the present case also there is no critical evaluation of the expenses and post the Hon'ble Supreme Court judgment, the dictum laid down, same needs to be followed and each of the expenditure needs to be evaluated to see if the disallowance is justified. It is also important to note that for the assessment year 2016-2017, the A.O. had raised query in relation to the expenditure incurred on the Doctors by the assessee. The assessee filed detailed response to such notice and the A.O. after analyzing the nature of expenses (which is claimed by the assessee similar to the expenditure incurred for the relevant assessment year) in the context of MCI Guidelines and CBDT Circular No.5/2012 dated 01.08.2012 accepted the claim of the assessee. Copy of the order in assessee's own case for assessment year 20162017, is placed on ....
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.... 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 companies identified by the Appellant for having different accounting year (i.e.. companies having accounting year other than 31 March or companies whose financial statements were for a period other than 12 months); 17. The learned AO / TPO and the Hon'ble DRP have erred, in law and in facts. in accepting companies without appreciating that such companies engaged in providing end-to-end software development services and are not functionally comparable to the Appellant, providing IT support services: 18. Without prejudice to the above grounds, the learned AO / TPO and the Hon'ble DRP have erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant in the TP documentation as not comparable: 19. Without prejudice to the above grounds, the learned AO / TPO and the Hon'ble DRP have erred in law and in facts, by using e....
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....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) Hewlett Packard (India) Software Operation Pvt. Ltd. (ITA No.3400/Bang/2018) Turnover a) Zynga Game Network India Pvt. Ltd. (ITA No.2573/Bang/2019) Ld. DR's submissions:- 8.2. On the other hand, the Ld. D.R. stated that on perusal of the annual report of the company, Ld. DRP noted that this company is engaged in providing IT technology services comprising Application Outsourcing, Infrastructure Management, Independent validation, Business service management, consulting and systems integration services. The service delivery is through various platforms and solutions such as Infosys IT Service Management Platform, Infosys Agile and Vscrum Methodology, Infosys command centre frame work, Infosys cloud and co-system hub,....
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....incurred R & D expenditure to the tune of Rs.873 crores, which constitute meagre 1.96% of its total operating revenue, and which is much less than the generally acceptable tolerable limit of 3% of the total revenue. It is further seen by the Ld. DRP that the value of generally acceptable intangible assets declared in the Asset schedule was Rs.13 crores. Further as per note 1.1 of the annual report, at page 50, software product developments costs are expensed as incurred unless the technical and commercial feasibility of the project enable to use or sell the software. Such a development is not reflected in the Asset schedule. Thus, Ld. DRP inferred that the development of intangibles and its impact on the revenue and profitability is meagre. Further, the assessee has failed to establish that such differences, if any, on account of R&D, brand and intangibles have material effect on the margin of the above company, in terms of clause (i) of subrule (3) of Rule 10B, which provides that an uncontrolled transaction shall be comparable to an international transaction if none of the differences, if any, between enterprises entering into business transactions or likely to materially affect ....
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....nised when services are rendered and related costs incurred. There is no reference to any product sale or inventory in the financial statements. As there is no revenue stream on account of product sales, Ld. DRP did not find any merit in the argument that the company is engaged in product sales. On the pleas as to presence of brand, Ld. DRP noted that, there is no specific information in the financial statements to indicate that the brand has contributed to revenue growth of the company. On the other hand, the reference in the annual report only mentions that the company's cost-effective and agility in contributing value to clients have strengthened its brand. There is no information that the brand has impacted the revenue of the company. The intangibles referred in the Asset Schedule represent the computer software, and business rights and as such does not refer to any IPR owned by the said company during the year. Certain developments are under way which has not crystallized into an intangible to be a source of revenue. Thus, the assessee has failed to establish that such differences, if any, on account of IPR, brand or intangibles have material effect on the margin of the ab....
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....ware products and there is no revenue break-up in the annual report in relation to the various products and services. f) The company has huge intangibles. g) The company also incurs expenditure on in-house research and development centre. h) The turnover of Persistent is INR 1184.12 crores, which is much higher when compared to the Assessee's turnover of INR 24.26 crores. 8.5.1 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/I3ang/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] 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 A....
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....rease of intangible block of assets during the year (2012-13), of Rs.262.84 million, was mainly on account of acquisition of various IPs during the year and the same is shown in the intangible Asset Schedule of the consolidated financial statement at page115 as under: (Intangible assets of Group 2012-13) (In Software Acquired contractual rights Total Gross block (At Cost) Gross block (At cost) As at April 1. 2012 1.287 49 261.63 1 569 .1 2 Additions 94.03 261 23 355.26 Disposals 116.10 116.10 Other adjustments * Exchange differences 23416 in 18) 23.68 As at March 31, 2013 1,289.28 -542.68 1.831.96 The intangible Asset Schedule of the Indian company, as per the standalone financial statement at page 160, shows the following position: (Intangible assets of Indian Company 2012-13) (In Million) Software Acquired contractual rights Total Gross block (At cost) As at April 1. 2012 928.21 232 54 1,160.75 "- Additions 90.90 90.90 Disposals 116 10 116.10 As at March 31, 2013 903.01 232.54 1,135.55 8.6.3 Ld. DRP obser....
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....ve material effect on the margin of the above company, in terms of clause (i) of sub-rule (3) of Rule 10B, which provides that an uncontrolled transaction shall be comparable to an international transaction if none of the differences, if any, between enterprises entering into business transactions or likely to materially affect the profit arising from such transactions in the open market. The said company also clarified u/s 133(6) that its intangible assets are in the nature of software licenses acquired for use in the operation of the company and are not in the nature of inbuilt software product generating revenue for the company. Hence, these pleas were rejected by the Ld. DRP. 8.6.7 Further, Ld. DR stated that the Ld. DRP stated in his order that this company was held to be engaged in software development 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 Pvt. Ltd. (in ITA (TP) No.2531/Bang/2017 dated 23.5.2018 relating to AY 201314). In view of the above, Ld. DRP upheld the selection of M/s. Persistent Systems Ltd. as a comparable. (d) Thir....
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.... was on account of export of software services to the tune of Rs.20,194.37 lakhs, from software services Rs.414.07 lakhs, from subscription and training Rs.59.32 lakhs, from sale of licenses 7.98 lakhs. The revenue from software licence constitutes meagre 0.03% of total operating revenue. Thus, it is very clear that this company is predominantly into sale of software services and hence can be safely taken as a comparable. 8.8.2 The Ld. D.R. further stated that besides at page 7 of annual report, Ld. DRP observed that the company has acquired intangible asset relating to software purchased for company's internal use which was capitalized as the cost of acquisition. There is no information in the annual report to indicate that this company owns or developed IPRs. Thus, intangible assets have no impact on the profits of the company. Thus, Ld. DRP noted that in all aspects this company can be considered as comparable to the assessee company. Ld. DRP also noted that the assessee failed to establish that such differences, if any, on account of R&D/intangibles have material effect on the margin of .the above company, in terms of clause (i) of sub-rule (3) of Rule 10B, which provides ....
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....roducts / platforms and six other product based solutions. The company leverages on its premium banking solution and during the year the company merged with its wholly owned subsidiary Infosys Consulting India Limited. We found that the company was excluded from the final list of comparables in assessee's own case for the Assessment Year 2011-12 by the DRP and revenue has accepted. The learned Authorised Representative supported his arguments relying on the decisions in the case of CIT Vs. Agnity (India) Technologies Pvt. Ltd. (2013); CGI Systems and Management Ltd. Vs. ACIT (2015) 94 taxman.com The learned Authorised Representative also substantiated that for the Assessment Year 201415, the co-ordinate Bench of the Tribunal in the case of LG Soft India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 for the Assessment Year 2014-15 Dt.28.5.2019. We support our views relying on the LG Soft India Pvt. Ltd. Vs. DCIT (supra) where the Tribunal has observed at paras 6 and 6.1 as under : "6. We notice that the co-ordinate bench has excluded M/s. Infosys Ltd in A.Y 2008-09 by following the decision rendered by another coordinate bench in the case of 3DPLM Software Solutions Ltd (IT(....
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....excluded from the final list of comparable in assessee's own case for the Assessment Year 2011-12 by the DRP and further the comparable company was excluded by the co-ordinate Bench of Delhi Tribunal in the case of Pitney Bowes Software India Pvt. Ltd. Vs. ACIT 101 Taxman.com 350. The learned Authorised Representative also relied on CGI Information Systems & Management Consultants (P) Ltd. Vs. ACIT (2018) 94 taxman.com 97 and DCIT Vs. Taxman India Pvt. Ltd. (2016) 74 Taxmann.com 88 (Del). We found that the co-ordinate Bench of Tribunal in M.P. No.95/Bang/2019 in IT(TP)A No.3122/Bang/2018 for the Assessment Year 2014-15 has dealt on the issue at page 2 para 4 as under : " 4. We heard Ld D.R and perused the record. We find merit in the miscellaneous petition filed by the assessee. Accordingly following paragraph is inserted after paragraph 10 in the impugned order of the Tribunal, which will adjudicate the issue relating to "L & T Infotech Ltd":- "10A The assessee has sought exclusion of M/s L & T Infotech Ltd on the ground that there were extraordinary events during the year, it possesses brand and intangibles, it has not provided segmental information and it has got subcont....
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....on the decision of CGI Information Systems & Management Consultants Pvt. Ltd. (supra) at paras 28 to 30 as under : We rely on judicial decisions and facts in respect of comparable Persistent Systems Ltd. and direct the Assessing Officer to exclude from the final list of comparable for determination of ALP." We found there is a functional dissimilarity in comparison to assessee financial profile and accordingly, we direct the TPO to exclude the comparable from the final list for determination of ALP. iv) Third ware Solutions Ltd. - The company is not functionally comparable as it has different diversified activities, and derives income from software development, income from subscription contract and from sale of user licenses. Further, no segmental details are available and has diverse services and also error in computation of margins. 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(iv) pages 594 & 595 of Paper Book as under : " 6 (iv) Thirdware Solutions Ltd. the company is functionally dissimilar and is engaged in rendering software development implementation and suppo....