TaxTMI 
TaxTMI 
2023 (4) TMI 270
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed selection of certain comparables under the software development services segment. 4. Briefly the facts are, the assessee is a resident corporate entity. Assessee carries on business in following four segments: (i) Software Development Services (ii) Information Technology Support Services (ITES) (iii) Business Support Services (iv) Technical Support Services. 5. However, in the present appeal, the dispute is confined to two segments, viz., Software Services Segment and ITES segment, that too, in respect of selection/rejection of certain comparables. 6. At the outset, we will deal with comparables objected in software services segment. As could be seen from the facts on record, in respect of international transactions relating to provision of software development services, assessee benchmarked the transaction applying Transactional Net Margin Method (TNMM) as the most appropriate method. For comparative analysis, assessee selected 22 companies as functionally comparable. Since, the margin shown by the assessee at 15.01% was found to be within the arm's length range of the average profit margin of the comparables, the transaction with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in public domain in respect of this company does not provide the segmental details. She submitted, for this reason, different Benches of the Tribunal have excluded the company from being treated as comparable. In support, she relied upon the following decisions: i. SynerzipSofttech India Pvt. Ltd. Vs. DCIT [ITA No.224/PUN/2017] (Pune ITAT) ii. FIS Solutions (India) Pvt. Ltd. Vs. DCIT [ITAT No.456/PUN/2017](Pune ITAT) iii. Triple Point Technology (India ) Pvt. Ltd. Vs. DCIT [ITA No.581/PUN/2016] (Pune ITAT) 8.2 Thus, she submitted, the company should be excluded from the list of comparables. 8.3 In reply, learned Departmental Representative drew our attention to the TP study report of the assessee and submitted that the software development services as well as ITES segments of the assessee are similar in all respect. He submitted, the assessee is doing various activities, including manufacturing as it is engaged into chip production and products designing. Drawing our attention to the financial statements of Infobeans, learned Departmental Representative submitted that it does not reveal that the company is into sale of software products. Further, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the set of the comparables." 8.5 In case of Skill Solutions India Pvt. Ltd. Vs. Dy. CIT, ITA No.6570/Mum/2017, while dealing with very same comparable, the Tribunal has held as under: "6. We have considered rival submissions in the light of the decisions relied upon and perused materials on record. As could be seen from the facts on record, the assessee operates in a single segment of providing routine software development services to its AE. Whereas, Infobeans Technologies Ltd. is providing a range of services, such as, automation engineering, service now, UX and UI, customized software, storage and virtualization, data mining, data modeling, statistical analysis, machine learning technique, etc. Considering the fact that Infobeans Technologies Ltd. is engaged in diversified activities and segmental details are not available, the Tribunal, Pune Bench, in Pubmatic India Pvt. Ltd. (supra) has held that this company cannot be treated as comparable. In case of M/s. Emersion Electric Co. India Pvt. Ltd. (supra) which is for the very same assessment year, the Coordinate Bench following the decision rendered in case of Pubmatic India Pvt. Ltd. (supra) has held that Infobea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lied upon the following decisions: i. Global Logic India Ltd. Vs. ACIT [ITA No.8726/Del/2019] (Delhi ITAT) for AY 2015-16 ii. Pubmatic India (P.) Ltd. Vs. ACIT [ITA No.655/Pun/2017] (Pune ITAT) for AY 2012-13 iii. Emerson Electric Company (India) Private Ltd. Vs. ACIT [ITA No.6098/Mum/2018] (Mumbai ITAT) for AY 2014-15 9.1 Learned Departmental Representative, strongly countering the submissions of the assessee, submitted that the company being functionally similar to the assessee cannot be rejected. 9.2 We have considered rival submissions and perused the materials on record. On examining the annual report of the company placed in the paper-book, it is observed that the company is engaged into diversified activities, including provision of software services. However, the segmental details relating to various segments are not available in public domain. Further, unlike this company, the assessee is not providing technical services. While examining the comparability of this company to a routine software service provider, the Coordinate Bench in case of M/s. Emerson Electric Company (India) Pvt. Ltd. Vs. ACIT (supra) has held as under: "13.5. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dia Pvt. Ltd., in IT(TP)A No.233 of 2014 dated 24/03/2014 is well founded wherein it was held as under:- "We have heard learned Counsel for the appellant, and have gone through the judgment and order of the learned Tribunal. The learned Tribunal on fact found in the manner as follows: " Having heard both the parties and having gone through the material on record, we find that the TPO at page 37 of his order has brought out the differences between a product company and a software development services provider. Thus, it is clear that he s aware of the functional dissimilarity between a product company and a software development service provider. Having taken note of the difference between the two functions, the Assessing Officer ought not to have taken the companies which are into both the product development as well as software development service provider as comparables unless the segmental details are available." In view of the aforesaid fact-finding of the learned "^burial, this Court cannot re-appreciate the same. Accordingly, the appeal is dismissed. Miscellaneous petitions pending, if any, shall stand closed. No order as to costs." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s relevant to observe, TNMM makes room for broad comparability. Considering the fact that this company is earning revenue from only one segment, viz., software services, we hold that it can be treated as a comparable to the assessee. Therefore, we do not find merit in the submissions of the assessee. 10.2 In ground no. 6, the assessee has challenged selection of two comparables in ITES segments. Hereafter, we will deal with them. Infosys BPO Ltd. (Infosys BPO) 11. Objecting to selection of this company as a comparable, learned counsel submitted that the company is functionally different as it is engaged in a wide array of services spanning from customer service outsourcing, legal process outsourcing to digital business services business, travelling services and robotic process automation. She submitted, the company renders legal process outsourcing services using its own technology tools and is also involved in digital content creating and designing. She submitted, the company is an established player in BPO industry and has positioned itself amongst the top 10 BPO companies in India and is an industries giant in BPO sector. She submitted, the company operates as full-fled....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee. MPS Limited (MPS) 12. Objecting to selection of this company, learned counsel submitted that the company is engaged in the business of providing publishing solutions, viz., typesetting and data digitization services. She submitted, the company has developed an end-to-end cloud-based publishing platform, MPS DigiCore. It has also developed automated solutions such as DigiTrak, MPS Digicomp, Automated composition. Thus, the company is a fullfledged entrepreneur, bearing substantial risks and concerns. She submitted, the company is also into software products as it has shown inventory of Rs.782.79 lakhs in its balance-sheet. Thus, she submitted, the company has more than one segment, whereas, segmental information is not available. She submitted, the financial statements also reveal that this company has a different business model as it has outsourced its activities. Further, she submitted, the company has reported abnormal increase in profit rate. Finally, she submitted, since, the DRP has not made any discussion on the comparability of this company, the issue can be restored back to the Assessing Officer. 12.1 Learned Departmental Representative submitted, it i....