2018 (3) TMI 2039

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.... of international transaction pertaining to software development services 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 sharin....

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....lant has concealed / furnished inaccurate particulars of income, without appreciating the fact that the adjustment is not made in accordance with the law. The appellant craves leave 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....

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....e support services. The Assessing Officer / TPO giving effect to the directions of DRP worked out the adjusted margins of comparables at 21.52% as against 15.10% declared by the assessee in the 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 &#3....

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....ly to companies within group. The assessee was engaged in the business of providing software development services and back office support services to the entities in the Principal Financial Group. The assessee 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 Lt....

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....engaged in providing software development services and its margins were compared with a company which were involved in both software development services as well as sale of software products, held that the said concern was to be rejected from final set of comparables. 16. The 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 (sup....

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.... become academic. 20. The second aspect of transfer pricing adjustment is in respect of provision of back office support services by the assessee to its associated enterprises. The assessee herein has only submitted that Jindal is to be included for benchmarking international transactions. The 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 t....