TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 1868
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....mstances of the case and in law, the Ld. DRP/Ld. AO/Ld. TPO erred in: 2.1. Disregarding the transfer pricing documentation maintained by the Appellant as per Section 92D of the Act and the benchmarking analysis undertaken by the Appellant; 2.2. Using data, which was not contemporaneous and which was not available in the public domain at the time of preparing the TP documentation; 2.3. Disregarding application of multiple year/prior year data as used by the Appellant in the TP documentation; 2.4. Disregarding certain filters as applied by the Appellant in selection of the comparable companies at the time of TP documentation. 2.5. Introducing/modifying certain filters while undertaking comparability analysis; 2.6. Including companies in the comparability analysis which are different from the Appellant in functions, asset base and risk profile; 2.7. Excluding companies taken by the Appellant in its TP Study which were similar to Appellant in functions, asset base and risk profile; and 2.8. Not making suitable adjustment to account for differences in the risk profile of the Appellant vis-a-vis the comparables; 3. On the facts and in the circumstances of the case and i....
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....e Assessee inter alia depicted a detailed FAR analysis and methodical economic analysis for benchmarking its international transactions with its AE. * Considering the FAR analysis and looking at the available comparable data in the public domain, the Assessee after a careful and judicious application of Section 92C of the Act read with Rule 10C and Rule 10B, selected Transactional Net Margin Method ('TNMM') as the Most Appropriate Method for determining ALP in respect of its international transaction with its AE. * The profit level indicator ('PLI') used to test the Assessee's result is Operating profit / Total cost ('OP/TC). * The weighted average and single year margins of the Assessee's comparable companies are given in table below :- Nature of Transactions Operating Profit / Total Cost of the Assessee Operating Profit / Total Cost of comparable companies as per TP Study report No. of Comparables selected as per the TP Study report Weighted Average Margins Updated Margins Low end Software development and localisation service 16.87% 9.57% 12.39% 8 7. During the course of the TP assessment proceedings, in response to the notice issued ....
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.... it is seen that the company was rightly rejected by the TPO. R Systems International limited The TPO rejected the comparable as the company follows different accounting year. Since the company does not follow the same accounting year as the assessee does and as there are other similar comparables available, the said comparable was rightly rejected by the TPO. Allsec Technologies limited The TPO rejected the comparable as the company Fails export turnover filter. Since the company fails export filter it is noted that the said comparable was rightly rejected by the TPO. Lycos Internet ltd. (Formerly Ybrant Digital The TPO rejected the comparable as the company Fails export turnover filter. Since the company fails export filter it is noted that the said comparable was rightly rejected by the TPO. Microgenetic Systems Ltd. The TPO had rejected the comparables as the company fails turnover filter. Since the fails turnover filter it is noted that the said comparable was rightly rejected by the TPO. The TPO rejected the comparable as the company is having unallocated foreign exchange gain which requires allocation. Since the allocation of foreign exchange income of th....
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....the accounts, hence the said comparable need to be rejected. It is noted that merely because the company has some product sales and IP's, one cannot reject the comparable. Hence, the claim of the assessee is rejected." 12. Now in appeal before us, learned Counsel of the assessee has confined his argument towards following comparables :- i) Thirdware Soloutions Ltd. :- Learned Counsel of the assessee contended that exclusion of Thirdware Solutions as a comparable has been accepted by the ITAT in its order for A.Y. 2013-14. For the same reasoning learned counsel contended that this comparable should not be considered as a valid comparable. ii) Aspire Systems India Pvt. Ltd.:- In this regard learned Counsel of the assessee submitted that this company has related party transaction (RPT) of more than 25%. This comes out of financials of the company. Learned counsel submitted that the TPO himself has applied this filter. Hence, learned counsel submitted that this company should be excluded as a valid comparable. Learned counsel made further written submission. iii) Cignity Technologies Ltd. :- Learned Counsel of the assessee submitted that this company is not function....
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....al revenue is from other various business segments like sale of licence, software services and segmental results are not available, this company cannot be a valid comparable for benchmarking the international transaction. This decision of the ITAT had been upheld by the Hon'ble Delhi High Court in ITA No. 821 0/2017 vide order dated 31.01.2018. For similar proposition, the Id. Counsel of the assessee cited CIT vs. IVY Computech Ltd. (in ITA No. 707 of 2014 (AP PIC) and CIT vs. Intoto Software India Pvt. Ltd. (ITTA No. 233 of 2014 (AP HC). Following the above precedent, we hold that this is not a valid comparable in the present case." Co. engaged in sale of software products is not comparable to Co. rendering software development service unless segmental data is available: * CIT vs. PTC Software (I) Pvt. Ltd. (2017) 395 ITR 176 (Bom HC) * CIT vs. Intoto Software India Private Limited-ITA No. 233/2014-(AP HC)" 15. Respectfully following the above we direct that Thirdware Solutions Ltd. should not be considered as comparable. 16. As regards exclusion of Aspire Systems India Pvt. Ltd., we note that it is the plea of the assessee that the TPO has himself applied quantitative....