TaxTMI 
TaxTMI 
2023 (6) TMI 817
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....overseas Associated Enterprises (AEs). 4. Before us, learned counsel for the assessee submitted that the dispute is only with regard to selection of following three comparables: 1. Larsen & Toubro Infotech Ltd. 2. Infobeans Technologies Ltd. 3. Cybercom Datamatics Information Solution Ltd. 5. Before we proceed to deal with the acceptability or otherwise of the aforesaid three comparables challenged by the assessee, it is necessary provide a brief factual backdrop on the issue. The assessee is a resident corporate entity engaged in the business of provision of Information Technology Enables Services (ITeS) and Software Development (IT) Services. However, presently, we are concerned with the transfer pricing adjustment made to the Arm's Length Price (ALP) of the software development services segment. As stated, the assessee is engaged in development of modules as well as parts of modules of software being used by its overseas group in their products. The assessee also undertakes testing of the modules developed by it and maintenance support services, such as, bug fixing, carrying out maintenance support services on software used on products developed ....
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....ytics & information management platforms etc. Whereas, the assessee is simply providing software development services to its AEs. Further, he submitted, it is a product company, as, it owns various proprietary software products developed in-house, such as, Unitrax, REDaxis, iCEOn, RapidAdopt. He submitted, the company, in addition to software development services, also provides software product services. However, segmental information is not available. Further, he submitted, the company, being a part of Larsen & Toubro group, enjoys benefits on account of ownership of marketing intangibles and intellectual property rights. He submitted, being a part of Larsen & Toubro, it also has substantial brand value. Finally, he submitted, in the year under consideration, the company has transferred its Product Engineering Services (PES) division to another group entity and has also acquired another company, a captive unit of OTIS Elevator Company, USA. Thus, he submitted, due to such transfer and acquisition, the profitability of the company has been impacted. Thus, he submitted, due to the aforesaid reasons, it cannot be treated as comparable. In support, he relied upon the following decisio....
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....cturing of IT products and services, software and hardware systems to enterprise and embedded technologies. He submitted, the company is engaged in diversified activities of sale and advisory services in the nature of information/internet system and surveyors of information services. In this context, he drew our attention to the information contained in the Annual Report of the company. He submitted, as against the diversified activities of the comparable, the assessee is merely engaged in providing software development services. He submitted, the company is engaged in research and development activities and owns significant intangibles, which demonstrates that the company develops products. Whereas, segmental information is not available. Thus, he submitted, it cannot be treated as comparable. In support of such contention, learned counsel relied upon the following decisions: i. SAS Research & Development India Pvt. Ltd. Vs. DCIT, ITA No.255/Pun/2021, dated 01.11.2022 ii. EIT Services India Pvt. Ltd. Vs. ACIT, ITA No.2498/Bang/2019, dated 03.09.2021 iii. Zynga Game Network India Pvt. Ltd, ITA No.2573/Bang/2019, Dated 23.03.2021. 13. Learned Department....
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....nsidering the aforesaid fact, the Tribunal in case of Velocity Tech-Sol India Pvt. Ltd. (supra), has rejected this company as a comparable. He submitted, in case of Nethawk Networks India Pvt. Ltd. (supra), identical view was expressed by the Tribunal. He submitted, in case of Global Logic India Ltd. Vs. ACIT, ITA No.8726/Del/2019, dated 29.06.2020, the Delhi Bench of the Tribunal has rejected this company as a comparable considering the fact that it is engaged in diversified activities. Thus, he submitted, the company cannot be treated as comparable. 19. Learned Departmental Representative strongly relied upon the observations of the TPO and learned DRP. Drawing our attention to the Annual Report of the company, learned Departmental Representative submitted, like the assessee, the company is also engaged in software development services. Therefore, it cannot be said that the company is functionally dissimilar to the assessee. 20. We have considered rival submissions and perused the materials on record. From the Annual Report of the comparable as well as other materials on record, it is observed that the company, in addition to software development services, is providing vari....