TaxTMI 
TaxTMI 
2022 (8) TMI 1388
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....he directions issued by Dispute Resolution Panel ("Hon'ble DRP"), Bangalore dated 09 September 2019 under section 144C(5) of the Act ("impugned order") inter-alia on the following grounds: That on the facts and circumstances of the case and in law: General 1. The impugned order and directions of the Hon'ble DRP are based on incorrect appreciation of facts and wrong interpretation of law and therefore, are bad in law. 2. The learned AO has erred in making adjustments/disallowances aggregating to INR 11,94.62,783 to the returned income and thereby has erred in law and on facts in assessing the total income of the Appellant at INR 24,38,80,173. 3. The learned AO has erred in laws and in facts, in determining a sum of INR 6,06,03,330 as the balance tax (including interest) demand payable by the Appellant. 4. Transfer Pricing grounds 4.1 The learned DRP/AO/TPO erred in making an addition of INR 11,03,17,720 to the total income of the Appellant on account of adjustment in the arm's length price ("ALP") of the provision of software development services transaction entered by the Appellant with its associated enterprise. ....
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....erred in law and in facts, by rejecting the following companies identified by the Assessee in the search conducted by the Assessee itself which were rejected by the Assessee at the time of TP study for the reason that sufficient information was not available at the time of TP Study: * Maveric Systems Ltd * I2T2 India Ltd * Evoke Technologies Ltd * Harbinger Systems Pvt Ltd 4.9 The learned DRP/ AO / TPO erred in law and in facts, by accepting the following companies as comparable company though the same cannot be considered as comparable to the Appellant in law and fact on one or more grounds: * Tata Elxsi Ltd * Mindtree Ltd * Persistent Systems Ltd * Nihilent Technologies Pvt Ltd * Aspire Systems India Pvt Ltd * Inteq Software Pvt Ltd * Infosys Ltd * Thirdware Solution Ltd * Cybage Software Pvt Ltd 4.10 Without prejudice to the transfer pricing documentation maintained by the Appellant, the Learned DRP/ AO / TPO have failed to appreciate that the following companies are not functionally comparable to the Appellant, and therefore erred in co....
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.... for computation of interest adjustment on account of delayed/ outstanding receivable. 4.20 Without prejudice to our ground of appeal 4.15 above, the learned DRP / AO / TPO have erred, in law and in facts. by not considering the average credit period provided to third party customers as the benchmark to calculate the interest adjustment on account of delayed/ outstanding receivable. Consequential grounds: 5. The learned AO has erred in levying interest of INR 2,15,04,395 under section 234B of the Act. 6. The learned AO has erred, in laws and on facts, in initiating penalty proceedings u/s 271(1)(c) of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law." 2. At the outset, the Ld.AR submitted that, if the issue raised by the assessee in Ground no. 4.14 is considered, all other issues would become academic....
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....lysed, CUP ,CPM and TNMM were found applicable. Out of the above, CUP method cannot be applied in the present case due to non-availability of transaction level data through both internal and external sources of data. Further, RPM/CPM was also not considered due to the following reasons: Absence of reliable data on functional comparability (same or similar services) of comparable companies, i.e., the degree of comparability existing between the international transaction and the uncontrolled transaction and between the enterprises entering into such transactions; and Absence of reliable gross margin data of comparable companies necessary for application of the method. Net margins earned by comparable companies performing activities similar to those of XSL are available in the public domain and can be easily established, thus facilitating a more reliable comparability analysis. Further, it is a well accepted principle that net margins are less affected by transactional differences than are prices (as in the case of CUP) and gross margins (as in the case of CPM). In this case, since the functions performed by comparables identified by us were broadly similar to the fu....
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.... * In Trading Pvt Ltd [ITA No. 3712/De1/2018 for AY 2011-12] 4. On the contrary, the Ld.DR vehemently opposed the above submissions of the assessee and relied on the orders passed by the authorities below. 5. We have perused the submissions advanced by both sides in the light of records placed before us. 6. It is submitted before us that the assessee provides software development service to its AE and the amounts outstanding from the AE was to be settled as on-going basis in the normal course of business having regard to commercial and economic factors. The Ld.AR primarily submitted that, the arms length determination in respect of the trade receivables stands subsumed within the determination of principle transaction, being the software development service segment. 7. It is also the submission of the Ld.AR that, the assessee also rendered services to unrelated third parties, and no interest was charged by the assessee in respect of delayed receivables from such unrelated third parties, and therefore, the assessee cannot be charged with any interest in case of the receivables outstanding from the AE. He thus vehemently argued that no separate adjustment in re....
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....ent proposed by the Ld.TPO in respect of outstanding trade receivables has to be considered along with the main transaction being the software development service rendered by the assessee to the AE by considering a credit period of 90 days. The Ld.AO shall verify if the same is subsumed in the computation of the Working Capital Adjustment. In the event, the receivables stands subsumed, no adjustments deserves to be made. On the contrary, if any trade payables falls outside the credit period of 90 days, adjustment on such receivables would be restricted to LIBOR + 300 basis points. 13. In support of this above view, we rely on the observations of Coordinate Bench of this Tribunal in case of M/s. Zynga Game Network India Pvt. Ltd. vs. DCIT in ITA No. 2573/Bang/2019 by order dated 23/03/2021 for A.Y. 2015-16 which is placed at page 4436 of the legal paper book. Accordingly Ground no. 4.14 raised by assessee stands allowed for statistical purposes. 14. All other issues in respect of the transfer pricing adjustment alleged in the present appeal is kept open. 15. The assessee has raised the following additional grounds. "In addition to the grounds of appeal raised be....
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....the Ld.CIT.DR though opposed admission of the additional grounds, could not bring anything on record which would challenge such a right available to assessee under the Act. 15.3 We have perused the submissions advanced by both sides in light of records placed before us. 15.4 The Ld.DR did not object for the additional grounds being admitted. 15.5 We note that one of the additional grounds is directly connected with the main issue of disallowance and no new facts needs to be investigated for adjudicating the same. Another issues alleged by the assessee is a legal issue that does not require investigation of any facts. 15.6 Considering the submissions and respectfully following the decisions of Hon'ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional ground raised by the assessee. Accordingly, the additional grounds raised by assessee stands admitted. 16. The Ld.AR at the outset, submitted that the above issue have been considered by Coordinate Bench of this Tribunal in assessee's own case for A.Ys. 2010-11 & 2011-12 in IT(T....