TaxTMI 
TaxTMI 
2024 (9) TMI 1797
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....d.JCIT (Transfer Pricing) for determining the Arms Length Price u/s. 92CA of the Act. Thereafter the Ld. TPO passed the order determining the TP adjustment of Rs. 13,32,47,187/-. Based on the TPO's reference, the AO issued a draft assessment order for which the assessee filed their objections before the Dispute Resolution Panel ('DRP'). The DRP also heard the assessee and considered the submissions made by the assessee but not accepted the objections and confirmed the draft assessment order and directed the AO to pass orders accordingly. Thereafter the AO passed the assessment order on 29/12/2022. Now the assessee is challenging the said assessment order before us and raised several grounds which is as follows: "ANNEXURE 1 to Form 36 Marvell India Pvt. Ltd. (hereinafter referred to as the 'Appellant' or 'Company)' objects to the final assessment order dated 29.12.2022 passed under section 143(3) read with Section 260 of the Income-tax Act, 1961 (hereafter referred to as the 'Act') by the Deputy Commissioner of Income Tax, Circle 4(1)(1), Bangalore on the basis of the directions dated 28.11.2022 of the Dispute Resolution Panel (hereinafter r....
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....g Officer has proceeded to not select the company, ignoring that data for FY 2015-16 and FY 2014-15 is available. Ground No. 5: Companies with different financial accounting year end 5. The Ld. Assessing Officer has erred in law and on facts in rejecting certain comparable companies on the basis that their financial year-end dates do not coincide with the Appellant's financial year-end date. The Ld. Assessing Officer has himself selected R Systems International Limited, a company having different FY as compared to the Appellant in the final set of comparable. Ground No. 6: Turnover filter should have an upper limit 6. The Ld. Assessing Officer has erred in law and on facts by incorrectly applying the turnover filter for non-exclusion of comparable having turnover more than Rs. 200 crores despite several rulings of coordinate bench including in appellant's own case: i. Nihilent Ltd. ii. Cybage Software Pvt. Ltd. iii. Mindware Ltd. iv. Larsen & Toubro Infotech Ltd. v. Infosys Ltd. vi. Persistent Systems Ltd.( Ground No. 7: Application of filter for ten times of Appellants turnov....
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....pellant, based on incorrect reasons: i. Agilisys IT Systems India Pvt. Ltd. ii. Sasken Communication Technologies Ltd. iii. Isummation Technologies Pvt. Ltd. iv. Evoke Technologies Pvt. Ltd. v. Minvesta Infotech Ltd. Ground No. 13: Rejection of additional comparable companies requested for inclusion by the Appellant during the course of assessment proceedings. 13. The Ld. Assessing Officer has erred in law and on facts in rejecting additional comparable companies requested for inclusion by the Appellant, during the assessment proceedings: i. Synfosys Business Solutions Ltd. ii. Maveric Systems Ltd. iii. E-Zest Solutions Ltd. iv. Batchmaster Software Pvt. Ltd. v. DCIS DOT COM Solutions India Pvt. Ltd. vi. Indianic lnfotech Ltd. vii. Nintec Systems Ltd. viii. Y Media Labs Pvt. Ltd. ix. Sybrant Technologies Pvt. Ltd. Ground No. 14: Computation of operating margins 14. The Ld. Assessing Officer has erred in considering provision for bad and doubtful debts for the purpose of computing the operating profit of comparable companie....
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....ppellant's appeal filed before the Hon'ble DRP: a) Addition of Rs. 3,26,32,148 being the difference in the gross value of services as per the final assessment order (Rs. 1,15,24,12,858) and the gross value of services disclosed by the Appellant for AY 2017-18 (Rs. 1,11,97,80,710); b) Addition of a customs duty payment of Rs. 6,04,933; c) Addition of Rs. 5,18,48,973 on account of unexplained imports, whereas total imports done by the Appellant during the year was only Rs. 64,90,685; and d) Addition of Rs. 3,03,86,087 on account of difference in closing WDV of fixed assets for AY 2016-17 and opening WDV of fixed assets for AY 2017-18. The Appellant prays that the impugned additions of Rs. 10,89,81,456 made by the Ld. Assessing Officer in the final assessment order should be deleted. Ground No. 20: The Ld. Assessing Officer has erred in levying interest under Section 234B of the Income-tax Act. 1961 and initiating penalty under Section 270A of the Income-tax Act. 1961. 21. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer erred in levying interest of Rs. 3,37,10,530 under secti....
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....,744.40 15. The ld. DR submitted that the application of upper turnover filter has been consistently held by the Tribunals and therefore ld. DR did not raise any objection in this regard . We have heard the rival submissions and perused the material on record. We notice that the coordinate bench of the Tribunal in the case BORQS Software Solutions Pvt. Ltd., IT(TP)A No. 310/Bang/2021 dated 25.10.2021 has considered the issue of TPO failing to apply upper turnover filter and has excluded the following comparable companies on this ground. The relevant observation of the Hon'ble ITAT is as under: - "8. As far as Ground No. 8.7 is concerned, the relevant provisions of the Act in so far as comparability of international transaction with a transaction of similar nature entered into between unrelated parties, provides as follows: 10B. Determination of arm's length price under section 92C.- (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following....
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....location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. (3) An uncontrolled transaction shall be comparable to an international transaction [or a specified domestic transaction] if- (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. 9. A reading of rule 10B(1)(e)(iii) of the Rules read with sec. 92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 10. Chapters I and I....
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....t was held that high turnover ipso facto does not lead to the conclusion that a company which is otherwise comparable on FAR analysis can be excluded and that the effect of such high turnover on the margin should be seen. The DRP therefore held that a company which is otherwise functionally comparable cannot be excluded only on the basis of high turnover. The Assessee has raised Grd. No. 4 before the Tribunal challenging the aforesaid view of the DRP. 12. On the issue of application of turnover filter, we have heard the rival submissions. The parties relied on several decisions rendered on the above issue by the various decisions of the ITAT Bangalore Benches in favour of the Assessee and in favour of the Revenue, respectively. The ITAT Bangalore Bench in the case of Dell International Services India (P) Ltd. Vs. DCIT (2018) 89 Taxmann.com 44 (Bang-Trib) order dated 13.10.2017, took note of the decision of the ITAT Bangalore Bench in the case of Sysarris Software Pvt. Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary i....
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....e hold that the turnover filter is very important and the companies having a turnover of Rs. 1.00 crore to 200 crores have to be taken as a particular range and the assessee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study." 42. The Assessee's turnover was around Rs. 110 Crores. Therefore the action of the CIT (A) in directing TPO to exclude companies having turnover of more than Rs. 200 crores as not comparable with the Assessee was justified. As rightly pointed out by the learned counsel for the Assessee, there are two views expressed by two Hon'ble High Courts of Bombay and Delhi and both are non-jurisdictional High Courts. The view expressed by the Bombay High Court is in favour of the Assessee and therefore following the said view, the action of the CIT (A) excluding companies with turnover of above Rs. 200 crores from the list of comparable companies is held to correct and such action does not call for any interference." 13. The Tribunal in the case of Autodesk India Pvt. Ltd. Vs. DCIT (2018) 96 Tax....
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.... Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt. Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S. NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (su....