TaxTMI 
TaxTMI 
2024 (8) TMI 543
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.... the assessee. 3. The brief facts of the case are that the assessee company, M/s. Pegasystems Worldwide India (P) Ltd is a wholly owned subsidiary of Pegasystems Inc. USA . The company is engaged in providing software development services to Pega US and is remunerated on a cost plus mark-up basis. The assessee has filed its return of income for the A.Y 2011-12 on 7.10.2011 disclosing 'nil' income after claiming deduction of Rs. 7,79,30,465/- u/s 10AA of the I.T. Act, 1961 in respect of its exports from SEZ Unit. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has entered into international transactions with its AEs for providing software development services and receivables from AE. During the course of assessment proceedings, the issue of international transaction entered into by the assessee was referred to the TPO to determine the Arms' Length Price (ALP) of international transaction of the assessee with its AE. The TPO vide order u/s 92CA(3) dated 31.10.2014 determined the ALP for the provision of software development services and arrived at higher value of Rs. 2,229,53,557/- being transfer pri....
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....Counsel for the assessee further referring to the annual reports of Akshay Software Technologies Ltd submitted that the company earned 99.5% of revenue from software services and it has satisfied all the filters applied by the learned TPO. Therefore, the DRP is erred in exclusion of the above company by Suo motto applying onsite revenue filters without giving any reasons as to how onsite development of software is a reason for exclusion of any company when other criteria are satisfied or fulfilled. He further submitted that likewise, the learned DRP excluded Mindtree Ltd and R.S. Software India Ltd by applying on site revenue filter only on the ground that it has incurred huge expenditure at foreign branches which indicate substantial activities are undertaken onsite. But fact remains that M/s. Mindtree Ltd has incurred 65% of its expenses domestically and from the above, it is very clear that, substantial services are rendered offshore similar to Pegasystems Worldwide. Further, the learned DRP excluded Mindtree Ltd on the ground that there are extraordinary events of merger and investment in the year. The fact remains that when both the appellant and TPO accepted a particular comp....
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....mited in IT(TP)A No.187/Bang/2016 dated 30th July, 2020. We therefore, direct the TPO/Assessing Officer to include Evoke Technologies (P) Ltd in the list of comparables. 9. In so far as the exclusion of Akshay Software Technologies Ltd, Mindtree Ltd and R.S Software India (P) Ltd, the DRP Suo motto applied on site revenue filters and excluded the above companies on the ground that these companies are engaged in predominantly onsite development and is not comparable to appellant company. First of all, the DRP cannot Suo motto apply new filter which the appellant in their TP study and TPO has not applied the above filters. Further, the DRP is completely erred in observing that above companies are predominantly providing onsite development services only on the basis of expenditure incurred at foreign branches, but fact remains that even if go by the reasons given by the learned DRP that 65% of the expenses are incurred domestically , it can be concluded that substantial services are rendered offshore similar to Pega India. Further onsite development is part of software development activity and nature of services and functions performed remains the same irrespective of whether the ser....
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....gn services. Although the above two companies are not comparable to the appellant company, the learned DRP without any reason included the above company. Therefore, he submitted that the above two companies should be excluded from the final set of comparables. 13. The learned DR, on the other hand, supporting the orders of the DRP submitted that Persistent Systems Ltd is into product development in India like Pega India. The company had long term contract with 297 customers like appellant. Sasken Communication Technologies Ltd is also functionally comparable to the appellant company. Therefor, the DRP has rightly included the above two companies and their order should be upheld. 14. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. We have also carefully considered the relevant annual reports submitted by the appellant to ascertain the nature of services rendered by the appellant company and nature of services rendered by Persistent Systems Ltd. On perusal of the details filed by the assessee, we find that Persistent Systems Ltd derives revenue from sale of software products and sale of software services....