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TaxTMI 
TaxTMI 
2019 (2) TMI 2085
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.... to be decided is with regard to correctness of determination of arms length price in respect of international transaction of rendering software development services and information technology enabled services (ITES) by the assessee to its associated enterprise. The addition made on determination of ALP in the Software Development Segment (SWD) was sum of Rs. 2,68,45,350/- and in ITES segment sum of Rs. 51,36,018/-. The Most Appropriate Method (MAM) chosen by the Assessee and accepted by the TPO was Transactional Net Margin Method (TNMM). The profit level indicator chosen for the purpose of comparison was Operating profit to Operating Cost (OP/OC). Software Development Services Segment: 3. As far as determination of ALP in Software De....
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....anies out of 7 companies that remain after the order of the DRP. The 3 comparable companies which the assessee seeks to exclude are: 1) Acropetal Technologies 2) E-Infochips Ltd., 3) ICRA Techno Analytics Ltd., 7. The ld counsel for the assessee brought to our notice that in respect of companies engaged in software development such as the assessee, comparability of these 3 companies has already been considered by this Tribunal in relation to Assessment year 2011-12. Our attention was drawn to the decision of ITAT Bangalore Bench in the case of M/s Applied Materials India Pvt. Ltd., Vs. ACIT, IT(TP)A No.17 & 39/Bang/2016 order dated 21/9/2016, wherein this Tribunal held on comparability of Acropetal Technologies....
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....al precedence cited by the ld counsel for the assessee, the above 3 companies namely Acropetal Technologies Ltd. (seg.), E-infochips and ICRA Techno Analytics Ltd. are directed to be excluded from the list of comparable companies. The AO is directed to compute the ALP after excluding the aforesaid in the software development segment. ITES Segment 11. As far as ITES segment is concerned, the TPO had chosen the following set of 10 comparable companies whose arithmetic mean of profit margin was as follows:- 12. The TPO computed ALP and consequent addition to the total income as follows:- 13. The above shortfall of Rs. 41,73,731/- is treated as transfer pricing adjustment u/s 92CA in respect of IT enabled services segment ....
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....as more into engineering design services, it was held to be not functionally comparable. 17. As far as ICRA Online Ltd., is concerned, in the case of Swiss Re Shared Services India Pvt. Ltd., (Supra) the Tribunal held that this company was into knowledge process out sourcing and online software. The Tribunal took a view that this company was functionally comparable. However in the case of Zyme Solution Pvt. Ltd., Vs. ACIT, IT(TP)A No.85/Bang/2016 dated 28/4/2017, this Tribunal remanded the issue with regard to existence of related Party Transactions and thereafter directed comparability of this company and exclude this company if the RPT is more than 15% of the total revenue. As far as Jeevan Scientific Technology Ltd., is concerned this....
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....18. The ld DR relied on the order of the DRP. 19. After considering rival submissions, we are of the view that based with judicial precedent cited by the ld counsel for the assesee, Accentia Technologies Ltd., and Acropetal Technologies Ltd., should be excluded from the list of comparable companies. As far as ICRA Online Ltd. is concerned, the RPT in the case ICRA Online Ltd., needs to be verified by the TPO and if the RPT is more than 15% of the total revenue of this company then the same should be excluded. As far as Jeevan Scientific Technology is concerned, the TPO is directed to examine the comparability of this company as was directed by the Tribunal in the case of Swiss Re Shared Services India Pvt. Ltd., (Supra). 20. The TPO i....