TaxTMI 
TaxTMI 
2024 (8) TMI 809
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....red by rejecting the following comparable companies selected by the Appellant, on unjustifiable grounds even though they are functionally comparable to the assessee : (i) Sagarsoft (India) Limited (ii) Athena Global Technologies Limited (iii) Akshay Software Technologies Limited (iv) Batchmaster Software Private Limited (v) Celstream Technologies Private Limited (vi) Isummation Technologies Private Limited (vii) Evoke Technologies Private Limited (viii) DCIS DOT COM Solutions India Private Limited (ix) Maveric Systems Limited (x) Orangescape Technologies Limited (xi) Sasken Communication Technologies Limited (xii) Infomile Technologies Limited (xiii) E-Zest Solutions Limited Ground No. 3: The Ld. TPO and Hon'ble DRP erred on facts and law by comparing the Appellant with the following companies having high turnover, despite the same failing the legally accepted criteria of turnover being greater than Rs. 200 crores in various judicial precedents: (i) Larsen & Toubro Infotech Limited (Seg) (ii) Tata Elxsi Limited (Seg) (iii)....
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.....2019 suggested total TP adjustments u/s 92CA on international transactions for A.Y. 2015-16 totaling to Rs. 1,22,00,037/-, in respect of software development services at Rs. 1,04,23,539/- and interest on delayed receivables at Rs. 17,76,498/-. 3.1. Accordingly, the Assessing Officer passed the draft assessment order on 30.10.2019 u/s 92CA(3) of the Act. Aggrieved such draft assessment order, assessee preferred objections before the Dispute Resolution Panel (DRP) and pursuant to the directions of the DRP dt. 16.02.2021, Assessing Officer finalized the assessment, by making addition of TP adjustment and thereby assessed the total income at Rs. 2,78,45,897/-. Hence, this appeal 4. With respect to ground Nos.1 and 2, ld. AR has submitted that the TPO has rejected the following comparables : (i) Sagarsoft (India) Limited (ii) Athena Global Technologies Limited (iii) Akshay Software Technologies Limited (iv) Batchmaster Software Private Limited (v) Celstream Technologies Private Limited (vi) Isummation Technologies Private Limited (vii) Evoke Technologies Private Limited (viii) DCIS DOT COM Solutions India Pri....
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....cted as comparables. However, TPO selected companies which have higher turnover as compared to the assessee company and held that turnover is not a relevant filter since there is no impact of turnover on the cost plus margin method. 7.2. In support of its case, ld. AR has filed written submissions, which are to the following effect : "First and foremost, we would like to draw the Hon'ble Bench's attention towards the following provision of the Income Tax Rules and OECD Guidelines wherein the emphasis is laid on the eliminating material differences for the purpose of comparability: Determination of arm's length price under section 92C 10B. (1). . . . (e) transactional net margin method, by which,- (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (2....
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....Court case of Pentair Water India as well as Rule 10B and OECD Guidelines and decided that high turnover is a ground for exclusion of companies. Relevant extract is reproduced below: "19. The Tribunal in the case of Autodesk India Pvt.Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. . . . . . . . In view of the aforesaid decision, we hold that the 8 companies listed in Sl.No.(a) to (i) in paragraph -13 of this order, which the assessee seeks exclusion and whose turnover in the current year is more than Rs. 200 Crores should be excluded from the list of comparable companies" (i) M/s. Auriga Software Technologies Private Limited vs ITO, Bangalore ITAT, IT(TP)A No. 178/Bang/2021, AY 2016-17, 03/02/2022 - Appendix AT (ii) M/s. Prism Networks Private Limited vs ACIT, Bangalore ITAT, IT(TP)A No. 349/Bang/2021, AY 2016-17 - Appendix AU (iii) M/s. Capco Technologies Private Limited vs DCIT....
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....Karnataka High Court in the case of PCIT vs. M/s. Obopay Mobile Technology India Private Ltd., ITA No. 586/2016 c. The Hon'ble Delhi High Court in the case of PCIT vs. New River Software Services (P) Ltd., IT APPEAL NO. 924 OF 2016 d. The Hon'ble Delhi High Court in the case of PCIT vs. Oracle (OFSS) BPO Services (P) Ltd., IT APPEAL NO. 124 OF 2018 e. The Hon'ble Hyderabad ITAT in the case of TNS India (P) Ltd., vs. DCIT, IT APPEAL NO. 573 (HYD.) OF 2017 f. The Hon'ble Hyderabad ITAT in the case of S&P Capital IQ (India) (P) Ltd., vs. DCIT, IT(TP)APPEAL NO. 1652 (HYD.) OF 2019 g. The Hon'ble Karnataka High Court in the case of Acusis Software India (P) Ltd., vs. ITO, IT APPEAL NO. 223 OF 2017 h. The Hon'ble Karnataka High Court in the case of PCIT vs. Swiss Re Global Business Solutions India (P) Ltd., IT APPEAL NO. 384 OF 2017 * In the above-mentioned case of Infor India, the coordinate bench has in its order dated October 26, 2023 clearly stated that: "13. In these circumstances, following the foot prints of the Hon'ble Karnataka High Court in the case of Obopay Mobile Technology India Private Ltd., (supra), w....
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....heard both sides and perused the material on record. This Tribunal has continuously been following the turnover of the filter of ten times x and 1/10th of the turnover of the assessee on both the sides. In view of the above, we deem it appropriate to remand back this issue to the file of Assessing Officer / TPO with a direction to apply ten times filter lower and upper on both the sides. The companies which are having turnover of more than 10 times are required to be excluded from the list of comparable and similarly, the companies whose turnover are less than 1/10th of the turnover of the assessee are also required to be excluded from the list of comparable. In the light of the above, the TPO is directed to exclude the comparable in the light of the above said directions. Thus, this ground is allowed for statistical purposes. 10. Ground No.4 is with respect to exclusion of various comparable. The ld.AR the outset, had insisted only for exclusion of Infobeans Technologies Limited at Sl.No.vi on the ground that the lower authorities have rejected the plea of the assessee for exclusion of Infobeans Technologies Ltd on the wrong presumption that this company is functionally compara....
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....re, if we look into the financials of the company wherein the company's overview was mentioned as under : (Page 2141) "Company Overview : InfoBeans operating at CMMI level 3, is a software services company specializing in business IT Services. Our business is primarily engaged in providing custom developed services to offshore clients. InforBeans provides software engineering services primarily in Custom Application Development (CAD), Content Management Systems (CMS), Enterprise Mobility (EM), Big Data Analytics (BDA)." 12.2. From the conjoint reading of the above, it is clear that this company was into software development services and cannot be said to be a KPO for any purposes. When the TNMM method is applied to benchmark the transaction, then the slight / little variation in the profile of the comparable company are required to be permitted for applying TNMM method, otherwise, the other methods as available are required to apply if the transaction entered by the assessee with its AE matches with the profile of the comparable company. Therefore, we do not find any error in the order passed by the lower authorities. Accordingly, the ground raised by the asses....