TaxTMI 
TaxTMI 
TaxTMI 
2017 (4) TMI 1610
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....ted financial results and international transactions as reproduced by the TPO in paras 3.4 and 3.5 as under : 3.4 Financial Results 4. Ground No.1.1is regarding Transfer Pricing Adjustment in respect of international transactions pertaining to call centre service segment. To bench-mark its international transactions, the assessee has adopted CUP as a Most Appropriate Method (in short MAM) however supplementary analysis of Transactional Net Margin Method (TNMM) was also done in TP document. The TPO accepted CUP method in respect of call centre service however the TPO proposed adjustment in respect of customer care segment of call centre services by considering only 9 months rate charged by the assessee for working out in respect of the average rate of the assessee as well as the comparable party. Thus the TPO noted that ratecharged by the assessee was less than the CUP rate. The assessee objected to the adjustment proposed by the TPO and explained that the difference in rate as attributed to the difference in the contractual terms specifically the difference in credit party for payment which was 45 days for the third party service provider and as against 15 days in the case of th....
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....hough only one comparable was available. Further the data of the said comparable was also available only for 9 months started from July, 2003 onwards upto March,2004. The comparative rates charged by the independent comparable and the assessee are as under : Thus it is clear that in the case of comparable company, the price for the first 3 months i.e. April, May & June were not available. Therefore this is a case of non-availability of complete data in respect of the comparable selected by the assessee and accepted by the TPO. It is pertinent to note that when the assessee has entered into the international transaction throughout the year therefore, the price charged by the assessee from April, 2003 to March, 2004 has to be taken into consideration for bench marking its international transactions. Further the TPO has also disallowed the working capital adjustment on account of the credit period for payment. Thus in view of the facts and circumstances of the case when the appropriate data was not available at the relevant point of time and further the MAM in the case of ITES services, in our view should be TNMM instead of CUP method as it encompass the minor variation and also prov....
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....ssee which is a simple data processing service provider. He has relied upon the said decisionof the co-ordinate bench of Tribunal in the case of 24/7 Customer.Com (P) Ltd. Vs. DCIT (supra). 10. On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and contended that some of the companies were found to be comparable by the co-ordinate bench in the case of 24/7 Customer.Com (P) Ltd. Vs. DCIT (supra). The learned Departmental Representative has pointed out that the company Ultra Marine Pigment Ltd., the Tribunal has found the same as comparable. Similarly in the case of Nucleus & GIS India Ltd., the comparability of the said company was not disputed. 11. Having considered the rival submissions as well as the relevant material on record, we find that the functional comparability as well as process of selection of the comparables by applying various filters has not been properly examined by the authorities below. Since it was an initial year of applying the TP provisions therefore some criteria evolved in the process of consideration and adjudication was not available to the benefit of the TPO. We further note that out of 8 comp....
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....uthorised Representative has further submitted that this company has earned revenue of Rs.509.14 lakhs from export of software which shows that this company is a product company and not merely a software development services provider. Thus the learned Authorised Representative has submitted that this company is also engaged in the outsourcing activity and has intangibles therefore cannot be compared with the assessee. 13.2 On the other hand, the learned Departmental Representative has submitted that when this company is not showing any revenue from sale of product or stock in trade then it cannot be concluded from the commentary in the Annual Report that the income earned by the assessee during the year is from sale of products. 13.3 We have considered the rival submissions as well as the relevant material on record. In the profit and loss account for the year ended on 31.3.2004, this company has shown income from operations without any segmental details. It is further noted that in the Director's Report, the company has explained R&D and technology absorption as under : "b) Research & Development and Technology Absorption : Your company will continue to focus and inve....
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.... the relevant material on record, we note that this company has stated in the Annual Report that its principle activity is software design and consultancy. Further this company has reported that it is engaged in the trading and development of software. This company earned revenue from various diversified activities which comprise the revenue from subscription contracts, revenue from sale of user license for software application and revenue from sale of investment. Therefore in the absence of segmental data this company cannot be considered as functionally comparable. Accordingly, we direct the TPO/A.O. to exclude this company from the set of comparables. Gebbs Infotech Limited 15.1 The learned Authorised Representative of the assessee has submitted that this company is engaged in the software product development activity and therefore functionally not comparable. He has referred to the Schedule J of the Balance Sheet and submitted that this company is having revenue from 3 segments namely export sale on site, export sale of off-shore and export of BPO services. However segmental results are not available therefore the margin from software development services cannot be computed. ....
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.... comparables. Transworld Infotech Limited 17.1 The learned Authorised Representative of the assessee has submitted that this company is engaged in web hoisting and cloud computing activity. He has also referred to the Related Party Transactions of this company and submitted that this company has failed the RPT filter. He has referred to the Annual Report of this company at page 10 as well as page 24 and submitted that this company has earned income from software services and products. Thus the learned Authorised Representative has submitted that this company cannot be considered as functionally comparable. 17.2 On the other hand, the learned Departmental Representative has relied upon the orders of authorities below. 17.3 We have considered the rival submissions as well as the relevant material on record. At the outset, we note that in the Annual Report of this company the profile has been discussed at page 10 as under : "The company commands good brand image in the IT segment it deals in with. The company's ability to effectively deliver competitively priced and quality niche software solutions and products in the market would hold it in good stead in the years to come. The c....
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.... 341 ITR 385 which has been upheld by the Hon'ble Supreme Court vide decision reported in 391 ITR 274 wherein the Hon'ble Supreme Court has held in paras 15 to 17 as under : " 15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head "profits and gains from business" in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging that any such reference or mention would have been a repetition of what has already been provided in Section....