TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1973
X X X X Extracts X X X X
X X X X Extracts X X X X
....eciating the non-comparability reasons as furnished by the Appellant: a. Cybermate Infotek Limited b. Infobeans Systems Private Limited c. Cybercom Datamatics Information Solutions Limited d. Thirdware Solutions Limited" 3. Briefly, in the facts of the case, the assessee had entered into providing software development services to related concerns. The total turnover of assessee was Rs. 33 crores and it picked up Profit Split Method. However, the Transfer Pricing Officer (TPO) was of the view that TNMM method was the most appropriate method. The margins of assessee concerns were 5.5%. The assessee is aggrieved by inclusion of four concerns Cybermate Infotek Ltd., Cybercom Datamatics Information Solutions Ltd., Infobeans Systems Pvt. Ltd. and Thirdware Solutions Ltd. and has stressed that the said concerns were functionally not comparable to the functional profile of assessee. It took us through orders of TPO and Dispute Resolution Panel (DRP) in respect of each of the concerns and pointed out that the issue raised in the present ground of appeal stands squarely covered by the ratio laid down by Pune Bench of Tribunal in the case of M/s. PubMatic India Private Limited V....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... form part of list of comparables. The perusal of annual report of the said concern reflects the said concern to be engaged in providing software development services as well as developing variety of software products i.e. in the field of Hospital Management, Software HEAL SOFT and 38 other products. The financials of the said concern reflect no segmental reporting and the services are declared under one head. In such circumstances, where the segmental details were not available of the concern which was engaged in multiple activities i.e. in the present case, in providing software development services as well as being a product company; then we hold that the margins of said concern cannot be applied to benchmark the international transactions of the concern which was engaged in providing software development services to its associated enterprises. The assessee was also providing back office support services to its associated enterprises but was maintaining segmental details for both the activities undertaken by it and hence, the two transactions have been benchmarked separately even by the TPO and the Assessing Officer. The concern which is functionally different from the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....757/PUN/2014 and cross appeals in ITA Nos.761 & 762/PUN/2014, relating to assessment years 2008-09 and 2009-10, order dated 25.01.2018 for exclusion of concern which was engaged in providing both software services and was also selling its products. Accordingly, we hold that the concern Cybermate which is engaged in both sale of software products and providing software development services and where no segmental details are available for each of the segments, then the margins of said concern could not be applied to benchmark the arm's length price of international transactions of providing software development services to associated enterprises by the assessee." 7. Following the same parity of reasoning, we hold that the concern Cybermate Infotek Ltd. being engaged in both sale of software products and also providing software development services and in the absence of any segmental details of two divisions being available, the margins of said concern cannot be applied in order to benchmark arm's length price of international transactions undertaken by the assessee, which was solely engaged in providing software development services. 8. Now, coming to the next concern i.e.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the notes to accounts, wherein the export of goods on FOB and services rendered is reported. 17. Another aspect which has been stressed by the assessee is the extraordinary event of demerger, wherein the financial statements of said concern included the financial statements of software business of demerged company i.e. Seed Enterprises Pvt. Ltd., are available at pages 614 and 633 of the Paper Book. 18. We have heard the rival contentions and perused the record. The first aspect is the functional comparability of concern which has been finally selected to be comparable. In respect of Infobeans Systems Pvt. Ltd., the financials of said concern clearly reflect that in addition to providing software development services to its associated enterprises, it had also earned foreign exchange from export of goods on FOB basis. The event of export of goods was also mentioned in notes and also in the Profit and Loss Account, where revenue from sale of software was declared. The segmental details of two activities carried on by the said concern were not available and in the absence of the same, the concern could not be equated as functionally comparable to a concern which was providing ....