TaxTMI 
TaxTMI 
2023 (5) TMI 952
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....ee reported international transactions in ITeS, software development services, issue of equity shares, trade receivables and advances, the aggregate value of which was to the tune of Rs. 49,21,74,214/-. Determination of Arm's Length Price (ALP) of such transaction was referred to the learned Transfer Pricing Officer (TPO). By order dated 30/10/2018, learned TPO suggested adjustment of Rs. 59,48,346/- in respect of provision of software development services, Rs. 9,95,79,153/- in respect of provision of ITeS and Rs. 15,15,450/- in respect of interest on receivables. 3. Draft assessment order dated 28/12/2018 was passed accordingly incorporating the adjustment suggested by learned TPO. Assessee preferred objections before the learned DRP and the learned DRP vide order dated 23/09/2019 issued certain directions by granting certain reliefs. Post learned DRP's directions, learned TPO computed the ALP in respect of provisions of software development services at Rs. 45,18,888/- provision of ITeS Rs. 7,27,06,438/- and Rs. 15,15,450/- in respect of interest on receivables. Learned Assessing Officer passed the final assessment order on 31/10/2019. 4. Aggrieved thereby, assessee preferred th....
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....Ltd., Tata Elxsi Ltd., Thirdware Solutions Ltd., Persistent Systems Ltd., and Infobeans Technologies Ltd., The above entities were found to be excluded from the list of comparables on the ground of huge turnover. 9. In support of his contentions, he also placed reliance on the decisions of Avaya India P. Ltd. [2019] 416 ITR 638 (Del), Pentair Water India (P) Ltd. 381 ITR 216 (Bom), Agnity India Technologies (P) Ltd. 36 Taxmann.com 289, Evalueserve SEZ (Gurgaon)(P) Ltd. 416 ITR 51 (Del), Soft Brands India (P) Ltd. 406 ITR 513 (Kar), Quicklogic Software India (P) Ltd. in IT(TP)A No. 181/Bang/2022, AY. 2017-18, Samsung R&D Institute Bangalore (P) Ltd 431 ITR 615 (Kar), Eurofins IT Solutions India (P) Ltd. in IT(TP)A No. 186/Bang/2022, AY. 2017-18, Infor India (P) Ltd. in ITA No. 1689/Hyd/2019, AY. 2015-16 and ADP Private Ltd. in ITA No. 1611/Hyd/2019, AY. 2015-16. 10. Per contra, it is the submission of the learned DR on behalf of the Revenue that when once a company is found functionally comparable merely because of the turnover difference, the same cannot be excluded from the list of comparables. Learned DR placed reliance on the decision of the Hon'ble Delhi High Court in the....
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....like large size firms of Rs. 2,000 crores, medium size firms of Rs. 200 and 2000 crores and little size firms below Rs. 200 crores. The bench find it to be a reasonable classification and taking the Indian scenario into consideration, it was found that the classification made by Dun and Bradstreet's analysis was more suitable and reasonable. With that view of the matter, it was held that the turnover filter is very important and companies having turnover of Rs. 1 crore to Rs. 200 crores have to be taken as a particular range. 14. This turnover filter of the company between Rs. 1 crore to Rs. 200 crores is followed in some cases, but in the case of ITO vs. M/s. Maxim India Integrated Circuit Design Pvt. Ltd. in IT(TP)A No. 28/Bang/2012, dated 31/03/2016 while considering this aspect it was found that this approach has an inherent difficulty in applying such a turnover slab of Rs. 1 crore to Rs. 200 crore and the observations of the Bench are that,- "12. It is pertinent to note that the CIT(A) has applied turnover slab of Rs.1 crore to Rs.200 crores for excluding these companies, whereas there is an inherent difficulty in applying such a turnover slab of Rs.1 crore to Rs.200 crore....
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....es at both the ends and to conduct survey afresh. It is clear that since the assessee's turnover is Rs. 5.17 crore in the software development services, the range could be Rs. 52 lakhs to Rs. 52 crores, which will satisfy the test approved and referred to by the Tribunal in the case of M/s. Maxim India Integrated Circuit Design Pvt. Ltd. (supra) and also in the case of Acusis Software India (P) Ltd. (supra). As a matter of fact, the view taken by the Tribunal in the case of Acusis Software India (P) Ltd. (supra) is approved by the Hon'ble Karnataka High Court. 17. We accordingly set aside the findings of the authorities and direct the learned Assessing Officer/learned TPO to take the range of turnover filter at ten times on both the ends and conduct search afresh to take a plausible view. These grounds are accordingly treated as allowed for statistical purposes. 18. Now coming to the ALP adjustment in respect of the interest on trade receivables, it is argued by the learned AR that the outstanding receivables are not separate international transaction and, therefore, interest thereon does not require a separate benchmarking. It is further submitted that the authorities below ....
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....have considered the submissions on either side. In view of the view taken by the Hon'ble Bombay High Court in Patni Computer Systems (supra), on the amendment to Section 92B of the Act by way of Finance Act, 2012 with retrospective effect from 01/04/2002, it is not open for the assessee to agitate the question as to whether or not the interest on outstanding receivables is an international transaction requiring separate benchmarking. Only issue remains to be considered is in respect of the rate of interest. While placing reliance on the decisions reported in Tecnimont ICB House Vs. DCIT [2015] 60 taxmann.com 143 (Mumbai - Trib.), Hon'ble Bombay High Court in PCIT Vs. Tecnimont (P) Ltd., (supra) and CIT Vs. CottonNaturals (I) (P.) Ltd. [2015] 55 taxmann.com 523 (Delhi), assessee prayed that LIBOR+200 basis points may be adopted. This aspect is no longer res integra and dealt with by the Mumbai Bench of the Tribunal in the case of Tecnimont ICB House (supra) and confirmed by the Hon'ble Bombay High Court. CottonNaturals (I) (P.) Ltd. (supra) is also on the same aspect. 22. Insofar as the interest on receivable is concerned, Munbai Bench of the Tribunal, vs. DCIT [2015] 6....