TaxTMI 
TaxTMI 
2020 (9) TMI 1324
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....ome of Rs.30,3826,180/- under normal provisions of I.T.Act, 1961 and a book profit of Rs.25,7732,716/-. During the assessment proceedings u/s 143(3), AO observed that during the year under consideration, assessee had entered into international transactions with its Associated Enterprise (AE) and with regard to software development services it had entered into a transaction of Rs.104,14,41,828/-. Therefore, AO referred the determination of the ALP of the transaction to the TPO u/s 92CA of the Act. The TPO examined the TP report of the assessee and as per the audit statement of accounts for the FY 2013-14, the OP/OC of software development services was reported at 18.67% as against the margin of comparables selected by assessee at 13.63%. However, the TPO was not satisfied with the T.P. study of the assessee. Accordingly, he rejected the TP study of the assessee and conducted fresh search and selected 12 companies as comparable to assessee and arrived at the OP/OC of the companies at 34.32%. Thereafter the TPO did not allow the working capital adjustment claimed by assessee and proposed the adjustment of Rs.13,73,77,352/- u/s 92CA of the Act. Accordingly, draft assessment order was p....
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....imited; 5. On the facts and in the circumstances of the case and in law, Ld. AO/ Ld.TPO/Hon'ble DRP erred in excluding following companies in the comparable set which are comparable to the Appellant's functions, asset base and risk profile: * Akshay Software Technologies Limited; * Bells Softech Limited; * Locuz Enterprises Solutions Limited; * CSS Corp Private Limited; * Sasken Communications Technologies Limited - (Software service segment); * Maveric Systems Limited; * Sagarsoft (India) Limited; * Sankhya Infotech Limited; * Trianz I T & Cloud Solutions Private Limited; * Nucleus Software Exports Limited; * FCS Software Solutions Limited; * Evoke Technologies Private Limited; and * Covidh Technologies Limited; 6. On the facts and circumstances of the case and in law, Ld. DRP/TPO/Ld. AO has erred in not considering certain cost components as operating/non-operating for comparable companies and considering miscellaneous income as operating in nature; 7. On the facts and in the circumstances of the case and in law, Ld. AO / Ld. TPO/....
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....on of the above 5 companies from the final list of comparables. 5. Ld.DR on the other hand supported the orders of the authorities below. 6. Having regard to rival contentions and material placed on record, we find that the assessee is into providing Software Development Services and M/s Kony India Private Ltd. was also into similar business of providing Software Development Services to it's AE, we also find that the TPO has taken the very same 12 companies as comparables in the case of Kony India Ltd. Since the relevant AY is also 2014-15, the facts and circumstances under which those companies have been held to be not comparable to M/s. Kony India Private Limited are also the same, the said decision is also applicable to the case before us. 6.1. In view of the same, respectfully following the decision of Coordinate Bench of this Tribunal to which one of us (i.e. J.M.) is a signatory, we direct the exclusion of above mentioned companies from the final list of comparables. For the sake of ready reference, the relevant paragraphs from the order of this Tribunal are reproduced hereunder:- "9. We have heard the rival submissions and carefully perused the materials on....
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....ntenance related services to M/s. Kony Group of Companies, we are of the view that M/s. E-infochips Limited cannot be considered as a comparable company because of the reasons stated hereinabove. (ii) Thirdware Solutions Limited: (a) As argued by the Ld. AR it is evident from the Annual Report (page No.235 of PB-II) that the company has derived revenue from sale of products amounting to Rs. 206.75 Crs. Further, there is no revenue from sale of services during the previous year. The assessee has also purchased stock amounting to Rs. 40.21 Crs. While as the assessee company is not engaged into any activity of producing physical goods. page No.235 of PB-II (b) It is also apparent that the company is receiving revenue from various streams and none of them were pertaining to software development services. As apparent from page 237 of PB-II, the company has received Revenue from training and subscription amounting to Rs. 59.32 lakhs and sale of licenses Rs. 7.98 lakhs. The assessee company is only engaged in ITES. Extraction from page no.237 of PB-II: (c) It is also apparent from page no. 217 of PB-II that the company has not di....
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....he operation / services by the respective units only. Intangible assets internally developed by the company are capitalised at the total cost attributable towards the development of the product and is amortised on the straight-line method over its estimated useful life of three years, as perceived by the management." 10.1. In the case of the assessee company neither such expenses are incurred, or any intangibles are acquired during the relevant period. 11. Since the assessee company is primarily engaged in custom-built mobile applications and software support and maintenance related services to M/s. Kony Group of Companies, we are of the considered view that M/s. Third-ware Solutions Limited cannot be considered as a comparable company because of the reasons stated hereinabove. (i) M/s. Infobeans Technologies Limited: - (a) From the Annual Report Page No.276 of the PB-II it is apparent that the assessee has also been engaged in sale of goods along with rendering of services because the turnover is reported on export of goods / services calculated on FOB basis. (b) The company also has MODVAT deposits and sales tax de....
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....rmance of our subsidiaries. The audited financial statements and related information of subsidiaries will be available on our website,www.infosys.com." Extraction from page 349 of PB-II 2.10.1 Investment in Lodestone Holding AG On October 22, 2012, Infosys acquired 100% of the outstanding share capital of Lodestone Holding AG, a global management consultancy firm headquartered in Zurich, Switzerland. The acquisition was executed through a share purchase agreement for an upfront cash consideration of Rs. 1,87 crore and a deferred consideration of up to Rs. 608 Cr. The deferred consideration is payable to the selling shareholders of Lodestone on the third anniversary of the acquisition date and is contingent upon their continued employment for a period of three years. The investment in Lodestone has been recorded at the acquisition cost and the deferred consideration is being recognized on a proportionate basis over a period of three years from the date of acquisition. An amount of Rs. 228 Crore and Rs. 85 Cr representing the proportionate charge of the deferred consideration has been recognized as an expense during the years ended Marc....
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....71 419 232 Office equipment ^(2) 276 117 - 393 159 56 - 215 178 117 Computer equipment ^(2)(3) 1,525 672 19 2,178 1,053 520 19 1,554 624 472 Furniture and fixtures ^(2) 518 161 - 679 345 96 - 441 238 173 Vehicles 10 3 - 13 5 2 - 7 6 5 8,001 2,381 21 10,361 3,576 1,086 20 4,642 5,719 4,425 Intangible assets Intellectual Property Rights 59 - - 59 31 15 - 46 13 28 59 - - 59 31 15 - 46 13 28 Total 8,060 2,381 21 10,420 3,607 1,101 20 4,688 5,732 4,453 Previous year ^(4) 7,173 1,422 535 8,060 ....
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....ntres, publishing focused technology points of view, implementing proofs of concepts driven by our focus on client value, and conducting client workshops. Additionally, we have set up innovation centres with a number of our clients, university partners, and industry research consortia to drive co-creation. Infosys Labs focuses on developing significant new intellectual property to enhance the productivity and quality of our services while enabling differentiation in client offerings. During fiscal year 2014, Inlosys Labs filed 79 unique patent applications in the United States Patent and Trademark Office(USPTO),the Indian Patent Office and other jurisdictions. On a standalone basis, our research and development expenses for fiscal years 2014, 2013 and 2012 were Rs. 873 crore Rs. 907 crore and Rs. 655 crore, respectively." Extraction from Page 311 of PB-II "Research and development expenditure The R&D centers of the Company (Finacle and Infosys Labs) located at Bangalore, Bhubaneswar, Chandigarh, Chennai, Pune, Hyderabad, Mysore and Thiruvananthapuram have been accorded approval for weighted deduction by the Department of Scientific and Industrial....
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....areas: Products (IP Business), Platforms (Solutions Integration) AND Services (Product Engineering). Your company has decided to brand the product business separately from the Persistent brand and has named it 'Accelerite' (www.accelerite.com). Accelerite will be headquartered in the Silicon Vally and will help your Company provide clarity - the Persistent brand is for product development and the Accelerite brand is for products. Your company has organized the development and engineering teams around three strategies. Account-Led, Platform-Led and Product-Led. Further, Account-Led teams are organized as Named Accounts and Growth Accounts. Driven by growth in the platform based solutions and IP led business, the consolidated revenue of your Company recorded an increase of 15.2% in the US Dollar terms and 28.9% in the Rupee term during the year under review. The consolidated EBIDTA increased by 28.4% and the net profit after tax went up by 32.9% during the same period." (b) It is also evident from page no.701 of PB-II that the company is also engaged in R & D Activities and has incurred Revenue and Capital expenditure towards the same for Rs. 3.96 Crs....
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....nies after excluding functionally dissimilar companies would be as follows:- Sl No. Name of the company OP / OC 1 Tata Elxsi Ltd (Seg) 22.29% 2 Mindtree Ltd 21.64% 3 R S Software (India) Ltd 24.03% 4 Larsen & Turbo Infotech Ltd 24.04% 5 CG-VAK Software & Exports Ltd 9.55% Arithmetic Mean 20.31% 15. Since, the assessee had declared profit margin on cost @ 21.45% which is above the Arm's Length price of 20.31% as per the second proviso to section 92C(2) of the Act, we are of the considered view that TP Adjustment is not required in the case of the assessee towards assessee's international transaction with respect to software development services." 7. Further, the Ld.Counsel for the assessee strongly argued Ground No.5 for inclusion of Sagar Soft (India) Ltd. in the final list of comparables. He submitted that the TPO has held this company to be a persistently loss making company and hence has not taken it as comparable, even though it was functionally similar. The Ld.Counsel submitted that this finding of the TPO is not correct as the said company has incurred losses only in the 2 AYs prior ....
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....carrying amount [Member] Accumulated amortization and impairment [Member] 01/04/2013 to 31/03/2014 01/04/2012 to 31/03/2013 31/03/2012 01/04/2013 to 31/03/2014 01/04/2012 to 31/03/2013 01/04/2013 to 31/03/2014 Disclosure of intangible assets [Abstract] Disclosure of intangible assets [LineItems] Reconciliation of changes in intangible assets [Abstract] Changes in intangible assets [Abstract] Additions to intangible assets [Abstract] Additions other than through business combinations intangible assets 57,65,627 72,01,901 $7,65,627 72,01,901 Total additions to intangible assets 57,65,627 72,01,901 57,65,627 72,01,901 Amortization intangible assets 56.14,619 35,11,038 56,14,619 Unless otherwise specified, all monetary values are Company total intangible assets [Member] Document 3 Consumption of stores and spare parts 0 Power and fuel 1,76,75,943 1,56,03,024 Rent 3,24,66,674 1,76,32,543 Repairs to building 44,38,551 35,11.491 Repairs to machinery 0 Insurance 4,28,303 4,88,335 Rates and taxes excluding taxes on income [Abstract] Cost taxes other levies by government local authorities 63,30,511 38,65,244 Total rates and....