TaxTMI 
TaxTMI 
2018 (3) TMI 2039
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....vices provided by the appellant to its AE's as Rs. 608,977,505/- against Rs. 576,781,184/- as determined by the Appellant and accordingly made an upward adjustment of Rs. 32,196,321/- and determining the arm's length price of international transaction pertaining to back office support services provided by the appellant to its AE's as Rs. 200,216,996/- against Rs. 185,497,012/- as determined by the Appellant and accordingly made an upward adjustment of Rs. 14,719,984/-. 2.2 rejecting comparable companies which are in fact comparable to the Appellant; 2.3 selecting companies as comparable which are in fact not comparable to the appellant. 2.4 cherry picking the high margin companies and rejecting the low margin companies and inconsistently applying the benchmarking criteria; 2.5 disregarding the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per Section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('the Rules') 2.6 not sharing the search strategy adopted for selection of alleged comparable companies during the course of assess....
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....ve to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Ld. AO to decide this appeal according to law. 3. The issue arising in the present appeal is against transfer pricing adjustment of international transactions undertaken by the assessee with its associated enterprises. 4. The ground of appeal No.1 raised by the assessee is general in nature and hence, the same is dismissed. 5. The learned Authorized Representative for the assessee at the outset pointed out that ground of appeal No.3 is against disallowance made under section 14A of the Act, is not pressed and hence, the same is dismissed as not pressed. 6. Vide ground of appeal No.2, the assessee has raised several issues with regard to transfer pricing adjustment made in the hands of assessee i.e. provision of software development services to the associated enterprises, an upward adjustment of Rs. 3,21,96,321/- and pertaining to back office support services provided by the assessee to its associated enterprises at Rs. 1,47,19,984/-. 7. Briefly, in the facts of the case, the assessee had furnished the return of income d....
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....segment of provision of software services and made an upward TP adjustment of Rs. 3.21 crores. Similarly, in the segment of provision of back office support services, as per directions of DRP, revised margin of comparables worked out to 24% as against 15.15% shown by the assessee and hence, upward TP adjustment of Rs. 1.47 crores was made in the hands of assessee. 9. The assessee is in appeal before us in respect of both segments. 10. The learned Authorized Representative for the assessee pointed out that the limited issue which needs to be addressed in the present appeal is exclusion/inclusion of certain comparables and in case the same are so excluded or included, then the margin shown by the assessee would be +/- 5% range of mean margins of comparables finally selected. In respect of segment of provision of software development services, he pleaded that the concerns Cybermate Infotek Ltd. (in short 'Cybermate') and Cybercom Datamatics Information Solutions Ltd. (in short 'Cybercom') are to be excluded from final list of comparables. In respect of Cybermate, it was pointed out that it was functionally different and was a product company and was also engaged in s....
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....ssessee had applied TNMM method to benchmark two international transactions undertaken by it, for which segmental details were available i.e. provision of software services and provision of back office support services. 13. First, we shall take up the transaction of provision of software services of the assessee. In this regard, the assessee had selected certain comparables which were modified by the TPO and thereafter, certain directions were given by the DRP and the final set of comparables were worked out which are as under:- Sr. No. Name of the Company Adjusted Margins as per Ld. TPO 1 Mindtree Ltd. 13.60% 2 Cybermate Infotek Limited 39.32% 3 Infobeans Systems Pvt. Ltd. 25.75% 4 E-Zest Solutions Ltd. 16.79% 5 Cybercom Datamatics Information Solutions Ltd. 46.50% 6 Evoke Technologies Ltd. 11.92% 7 Thirdware Solutions Limited 26.81% 8 RS Software (India) Limited 15.55% 9 Sasken Technologies Ltd. 11.77% 10 Spry Resources Ltd. 7.31% Arithmetic Mean 21.52% 14. The assessee is aggrieved by inclusion of two concerns i.e. Cybermate and Cybercom. In respect of Cybermate, the assessee has pointed out that it was engaged in sale of software products an....
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....Mumbai Bench of Tribunal in Ness Technologies (India) Pvt. Ltd. Vs. ACIT in ITA No. 7016/Mum/2012, relating to assessment year 2008-09, order dated 24.09.2014 had excluded Cybermate as not comparable to the company providing software development support services to associated enterprises. The learned Authorized Representative for the assessee has pointed out that profile of concern Cybermate for assessment year 2008-09 and in the year under appeal i.e. assessment year 2012-13 is the same and hence, the said proposition is to be applied. We find merit in the plea of assessee in this regard. 17. We further find that Pune Bench of Tribunal in MSC Software Corporation India (P.) Ltd. Vs. ACIT (2017) 80 taxmann.com 55 (Pune-Trib) while deciding the case of exclusion of a product company had held as under:- "18. On perusal of record and the order of Tribunal in John Deere India Pvt. Ltd. Vs. ACIT (supra), we find that the concern E-zest Solutions Ltd. is a product company and is engaged in both the provision of software services and sale of software services. On the other hand assessee is engaged in Software development services where the segmental details are not available, according....
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....he learned Authorized Representative for the assessee pointed out that merely because the said concern had shown losses in one year would not make the said concern to be persistent loss making and consequently, the margins of said concern should be included in the final set of comparables. In this regard, the learned Authorized Representative for the assessee has filed tabulated details that the margins of said concern for assessment year 2010-11 was 14.94%, for assessment year 2011-12 was 13.50% and for assessment year 2012-13 was (-) 0.38%. In this regard, he placed reliance on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. M/s. Welspun Zucchi Textiles Ltd. (supra). 21. On perusal of record, we find that the TPO had excluded the said concern from final set of comparables, against which the assessee filed objections before the DRP, who directed the Assessing Officer to include the same on satisfaction of certain conditions. However, while passing the final assessment order, the Assessing Officer / TPO excluded the said concern as being not comparable on the ground of being persistent loss making. The perusal of margins of said concern from year to year reflec....