TaxTMI 
TaxTMI 
2019 (8) TMI 1868
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....('AEs'). 2. On the facts and in the circumstances 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 ris....
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....T and ITES services rendered by it to its AEs on an aggregated basis. As per the TP study maintained by the Assessee, the key conclusions were as under: * The 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 Averag....
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....r the assessee claims that the report is available. We find from the submission of the assessee that though the annual report of the company is available the company was rejected as comparable in A.Yr. 2013-14 by the DRP on the ground that the company has employee cost less than 20%. Since the facts in the current year are the same 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....
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....ftware hence, the claim of the assessee that company is not functionally similar to the business of the assessee is rejected. Merely because the company has IP's, one cannot reject the comparable. Hence, the claim of the assessee is rejected. (d) Thirdware Solutions Ltd. The assessee claims that the company is into high end software development and functionally not similar. Further the company has its product sales reported and IPs in 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 regar....
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....ct activity and is solely into software services. It has been further submitted that in several case laws, Thirdware Solutions Ltd., has been held to be a company not engaged in software development services. In the ITAT Delhi Bench decision in the case of St-Ericsson India (P.) Ltd. vs. Asst. CIT[2017] 79 taxmann.com 207 (Delhi - Trib.) it was held that the substantial revenue of this company is from sales and operating sales of licence, software services, export from SEZ unit, export from STPI unit and revenue from subscription. So, when this company's substantial 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....