TaxTMI 
TaxTMI 
2023 (2) TMI 1425
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....ome at INR 1,76,11,99,090, as against returned income of INR 73,75,47,110. Transfer pricing grounds 3. Ld. AO/TPO pursuant to the directions of the Hon'ble DRP, erred in making addition of INR 78,56,31,349 to total income of Appellant alleging that prices charged by the Appellant for software development services and IT enabled services rendered to its associated enterprises ("AEs") and outstanding receivables thereon were lower than the arm's length price ("ALP") determined by the learned TPO; 4. Ld. AO/TPO pursuant to the directions of the Hon'ble DRP erred, in law and facts, by not accepting economic analysis undertaken by Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ("the Rules"), and in conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international transactions and holding that the Appellant's international transactions are not at arm's length; 5. Ld. AO/TPO pursuant to the directions of the Hon'ble DRP erred, in law and facts, by incorrectly applying the following quantitative and qualitative filters: a) Rejec....
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....Limited b) Rejecting the following comparable companies selected by the Appellant in its TP documentation even though the companies are functionally comparable to the Appellant: i. Kals Information Systems Limited ii. Evoke Technologies Limited iii. Sasken Communications Technologies Limited iv. RS Software (India) Limited v. Jindal Intellicom Limited c) Rejecting companies additionally proposed by the Appellant during the assessment proceedings even though they are functionally comparable to the Appellant: i. Sybrant Technologies Private Limited ii. Akshay Software Technologies Limited iii. Isummation Technologies Private Limited iv. Celstream Technologies Private Limited 6.2 IT enabled services a. Accepting the following companies that cannot be considered as comparable to the Appellant in law and fact, on one or more basis: i. Infosys BPM Services Private Limited ii. Ultramarine and Pigments Limited iii. SPI Technologies India Private Limited iv. Manipal Digital Systems Private Limited v. Vitae International Accounting ....
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....to the extent of INR 4,42,700 under section 80G of theAct. 11. Without prejudice to the above grounds, the Ld. AO pursuant to the directions of the Hon'ble DRP erred in law and in fact, by making an adjustment to the total income assessed as per the original return filed by the Appellant for the AY 2017-18 and not taking into consideration the revised return filed by the Appellant while determining the total taxable income in the final assessment order issued to the Appellant u/s 143(3) of the Act 12. Without prejudice to the above grounds the Ld. AO pursuant to the directions of the Hon'ble DRP erred in law and in fact, by arriving at the total income of INR 1,76,11,99,090 instead of INR 1,52,31,78,459 provided in the computation sheet accompanying the final assessment order issued to the Appellant u/s 143(3) of the Act for the AY 2017-18. Other grounds: 13. The Ld. AO has erred, in law and in facts, by levying interest of INR 8,15,66,025 under section 234B of the Act. 14. The Ld. AO has erred in initiating penalty proceedings under section 274 read with section 270A of the Act. The Appellant submits that each of above ....
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....tion technology outsourcing, development, support and maintenance services at 5% mark-up and Research and Development services at 10% mark-up from NTT DATA China Co.Ltd. Apart from that the taxpayer has entered into an Master Service Agreement with NTT DATA Services, LLC, USA for the receipt of monitoring, networking, application and infrastructure services (IT services), etc, at a mark-up of 7%. Apart from that Dell Business Process Solutions India Pvt. Ltd which also become part of NTT DATA IPSIP entered into a service agreement with Dell USA ALP with effect from 01.04.2014 to provide IT& ITES services at the markup- of 15%. During the year as per form No.3CEB, the following international transactions were undertaken by the assessee and method was adopted as under:- International Transactions Particulars Receivables/Received Payables/Paid Method Provision of software development services 7,33,02,03,300 TNMM Provision of IT enabled services 2,73,96,80,000 TNMM Trade receivables consider closely linked to the transaction of software development services 408817742 TNMM Trade receivables considered cl....
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.... he started fresh search for comparables after applying following filters . i. Use of current year data wherever available. ii. Companies having different financial year or data of the company which does not filed within 12 month period were rejected iii. Companies whose income was less than 1 crore were excluded iv. Companies whose SWD/IT service income is less than 75% of its total operating revenue were excluded v. Companies who have more than 25% related party transactions were excluded vi. Companies who have export service income is less than 75% of the sales were excluded v. Companies with employee cost less than 25% of turnover were excluded 5.1 The TPO selected 25 companies for SWD segment and calculated median at 26.32%. The TPO issued show-cause notice to the taxpayer. The taxpayer furnished the reply against the show-cause notice on different dates. The assessee filed objections which were dully considered by the ld. TPO. The following companies were accepted by the ld.TPO from the taxpayer's selection for the SWD segment of the comparable companies. i. CG-VAK Software & Exports Ltd. ii.H....
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....Ltd. vi. Datamatics Business Solutions Ltd. vii. CES Ltd. 7. The TPO issued show cause notice to the assessee and the assessee submitted objections which were dully considered by TPO and finally he selected '13' companies after including the above seven companies and calculated Median at 24.37% which is as under:- SI. No. Name of comparable company Weighted average unadjusted margin 1. Sundaram Business Services Ltd. 2.08% 2. Jindal Intellicom Ltd 7.41% 3. Fuzen Software Pvt. Ltd 15.93% 4. Microland Ltd. (seg) 17.53% 5. Tech Mahindra Business Services Ltd. 22.37% 6. Datamatics Business Solutions Ltd. 22.64% 7. Infosys BPM Services Pvt Ltd. 24.37% 8. Vitae International Accounting Services Pvt Ltd 27.13% 9. Manipal Digital Systems Pvt Ltd. 27.41% 10 CES Ltd 31.45% 11. Ultramarine & Pigment Ltd 34.41% 12. SPI Technologies India Pvt Ltd. 36.95% 13. Inteq BPO Services Private Limited 39.51% 35th Percentile 22.37% Median 24.37% 65th Percentile 27.41% B.1. Accordingly the arm's length price calculated by th....
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....Mindtree Ltd. 24.17% 10) R Systems International Ltd. 24.40% 11} Infobeans Technologies Ltd, 25.20% 12} Persistent Systems Ltd. 26.17% 13) Tata Elxsi Ltd. 26.19% 14) Aptus Software Labs Pvt. Ltd 26.46% 15) Nihilent Ltd 29.82% 16) OFS Technologies Ltd. 29.93% 17) Cygnet Infotech Private Limited 30.19% 18) Infosys Ltd. 39.33% 19) Threesixty Logica Testing Services Pvt Ltd. 41.94% 20) Cybage Software Pvt.Ltd. 27.82% 21) Copnsilient Technolgies Pvt.Ltd. 65.14% 35th Percentile 21.24% Median 25.20% 65th Percentile 26.46% 10. The ld. TPO after direction of the ld. DRP calculated the adjustment made as under: Particulars Amount (INR) Arm's length median margin as per comparable set 25.20% Operating Cost (OC) 635,08,44,392 Arm's Length Price ('ALP') = 125.20% of OC 795,12,57,179 Price Received 734,58,90,423 Short fall being adjustment u/s. 92CA 60,53,66,756 11. In respect of the ITeS segment the '16' comparables were considered and Median calculated at 22.50% as under:- SI. No. Name of comparable comp....
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....on different grounds with the assessee company. 1. Infosys Limited. 1. Functionally different Infosys ('the Company') is a leading provider of consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and lifecycle solutions and business process management); consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle(r), its banking solution; and offerings in the areas of analytics, cloud, and digital transformation.(Page 2131 of PB-II- Part 2) These services are not comparable to the services provided by the Appellant. 2. Derives revenue from sale of products as well. The company has derived revenue from sale of product to the tune of INR 32 crores (Page 2161 of PB-II-Part 2), However, the Appellant does not derive any such....
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....s, we note that Infosys is a high-risk bearing entrepreneur and the high revenues/ profits can be said to be commensurate to the kind of risks undertaken by Infosys. Hence, Infosys should not be compared to a risk mitigated entity like NTT Data IPS.(Page 2091 of PB-II-Part 2) 9. Significant Foreign expenditure In this regard, we wish to submit that Infosys has incurred significant foreign expenditure which works out to 67%, 73.95% and 64.36% of total expenditure incurred for FY 2016-17, FY 2015-16 and FY 2014-15 respectively. Considering this, it is clearly evident that Infosys has significant onsite activities outside India. Accordingly, given that the Appellant predominantly carries out its operations within India and does not incur any significant foreign expenses, it is evident that Infosys follows a different operating model (which also impacts the profitability) and hence, could not be compared with the Appellant.(Page 2072 of PB-II-Part 2, Page 60 of AR for FY 2015-16 and Page54 of AR for FY 2014-15) Judicial precedents relied upon: Functional comparability- 1)Yahoo Software Development India Pvt. Ltd.vs JCIT[IT(TP)A No. 178/Bang/....
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....tagline - 'Let's Solve' encapsulates the ability and willingness to solve complex challenges for the clients through your Company's real-word expertise and technological prowess. The new brand is truly a brand for the converging world.(Page 3722 of PB-II-Part 4) Whereas the Appellant, being a captive service provider, does not own any brand value like L&T, the brand image if any is of the parent and the same has no impact on the revenue of the Appellant as the Appellant does not cater to 3rd parties. Further, the company owns huge intangibles including intangibles under development. (Page 3789, 3799 and 3800 of PB-II-Part 4) 5. Acquisition and Amalgamation During the year, the scheme of Amalgamation for "GDA Technologies Limited" was sanctioned by the High Court. Thus, we believe that the synergies obtained through this acquisition would have an impact on the overall margin of the company and thus L&T should not be considered as comparable to the Appellant for the FY 2016-17. The company was amalgamated with L&T with effect from September 2, 2016 and entire assets were transferred with effect from April 1, 2016 (relevant extracts reproduced below) Pursuan....
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....ial precedents relied upon: Functional comparability- 1)Yahoo Software Development India Pvt. Ltd.vs JCIT[IT(TP)A No. 178/Bang/2022 for AY 2017-18](Page 6268-6272 of Paperbook III) 2)SanDisk India Device Design Centre Pvt. Ltd vs JCIT [IT(TP)A No. 288/Bang/2021 for AY 2016-17(Page 6308 of Paperbook III) 3) ADP Pvt. Ltd Vs. DCIT [ITA Nos. 227 & 228 /H/2021 for AY 2016- 17](Page 6331-6333 of Paperbook III) 4) Infor (India) Private Limited vs DCIT [I.T.A-TP. No. 198/HYD/2021 for AY 2016-17](Page 6416-6419 of Paperbook III) 5) Citrix R&D India Pvt Ltd vs DCIT [ IT(TP)A No.2428/Bang/2019 for AY 2015-16](Page 6452-6458 of Paperbook III) 6) Cypress Semiconductor Technology India Pvt Ltd [IT(TP)A No.2427/Bang/2019 for AY 2015-16](Page 6498-6499 of Paperbook III) 7) M/s. Microsoft Research Lab India Pvt. Ltd.[IT(TP)A No.3131/Bang/2018 for AY 2014-15](Page 6525-6526 of Paperbook III) 8) GlobalLogic India Pvt. Ltd. vs. DCIT [ITA No. 868 (Delhi) of 2021 for AY 2016-17]-(Page 6679-6681 of Paperbook III) 9) M/s. Hewlett Packard (India) Software Operation Pvt. Ltd.,[IT(TP)A No.2866/Bang/2017 for AY 2013-14](....
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....612-3614 of PB-II-Part 4) Given that no such transactions were undertaken in the case of NTT Data IPS which would impact the margins earned by the Appellant, considering the tainted margins of Mindtree would distort the benchmarking analysis. Accordingly, we humbly wish to submit that Mindtree be excluded from the final set of comparable companies. 5. Investment in Technology absorption We observed that Mindtree is focused on strategic and emerging technologies and innovation and has continued to invest in technologies. During the FY 2016-17, these efforts have strengthened the Centre of Excellences ('CoEs') of Mindtree. In these CoEs, the emerging technologies such as Internet of Things, Cognitive Computing and Deep learning, Automation, Blockchain, Augmented/ Virtual Reality, Collaboration Solutions etc. were explored in depth and several re-usable assets were built to enable delivery (refer annual report extracts below). However, we wish to submit that no such activities were undertaken by the Appellant, accordingly, given that the above investments in technology would impact the profitability of Mindtree, the same could not be considered for comparability anal....
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....t comparable to NTT Data IPS since it is predominantly engaged in outsourced product development. The Annual Report of Persistent clearly mentions the key products and services which company deals with, which includes (i) Enterprise Digital Transformation (ii) Product engineering services and solutioning for Internet of things (iii)Product and Engineering services to ISV's and enterprises and (iv) IP products. (Page 1709 of PBII- Part 1) Given the above it is evident that the company's major portion of income is derived from both sale of software services and products. Further, page 302 of Annual Report FY 2016-17also clarifies that the company specializes in software products, services and technology innovation and that the company offers complete product life cycle services, as opposed to Appellant's routine software development services. (Page 1850 of PB IIPart 1) Notes forming part of consolidated financial statements 1. Nature of operations Persistent Systems Limited (the "Company" or "PSL") is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (the "Act"). The shares of the Company are liste....
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....bsp; Services Digital Alliance Accelerite (Products) Total Revenue Year ended Mar-31-2017 13,086.58 4,704.91 8,466.11 8,466.11 28,784.39 It is important to note that Persistent has generated approximately 55% of its revenue for FY2016-17 from activities other than services. Accordingly, given the non-availability of segmental information at standalone level for FY 2016- 17, FY 2015-16 and FY 2014-15,Persistent shall be excluded from the final set. 3. Acquisitions during the year During the FY 2016-17, Persistent has acquired one of the leading salesforce partner and cloud application development firm viz. PRM Cloud Solutions and a digital solutions-based start-up viz. GenWi, which has augmented the capabilities of Digital Unit. (Page 1620 of PB-IIPart 1) 4. Significant Foreign expenditure In this regard, we wish to submit that Persistent has incurred significant foreign expenditure which works out to 37.94%, 22.15% and 26.83% of total expenditure incurred for FY 2016-17, FY 2015-16 and FY 2014-15 respectively. Considering this, it is clearly evident that Persistent has significant onsite activities ....
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....chnologies Private Limited [IT(TP)A No 3374/Bang/2018 for AY 2014-15](Page 6662-6665 of Paperbook III) 4. Nihilent Technologies Private Limited Functionally Different Based on a review of the company's annual report for FY 2016-17, it is seen that the company services cover a broad spectrum of services, which include enterprise transformation and change management, digital transformation services and enterprise IT services. (Page 1442 of PB-IIPart 1) Further, the website of the company provides that Nihilent is engaged in providing high-end IT services in the area of business transformation, digital transformation, brand and marketing transformation, platform and technology transformation etc., which is not comparable to the activities undertaken by the Appellant. The following is the relevant extract from company website(https://nihilent.com/our-services/) The service portfolio of company includes Consulting, Analytics and provision of technology related assistance. From a review of company's profile in public domain it nowhere mentions that it is engaged in the provision of software development services. The company is engaged....
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....in IT(TP)A No. 350/Bang/2021 order dated 21.10.2022. 14.2 Further in the case of "Nihilent Technologies Private Limited the ld.AR submitted that this company is functionally not comparable as per the annual report for financial year 2016-17, it was seen from the financial statement that the company services cover a broad spectrum of services, which include enterprise transformation and change management, digital transformation services and enterprise IT services significant R&D activities and Mergers and Acquisitions were taken place, significant Foreign expenditure incurred& major parts of revenue is derived from out of India. He further submitted that the issue is covered by the judgement of co-ordinate bench of Tribunal in the case of SanDisk India Device Design Centre Pvt. Ltd vs JCIT [IT(TP)A No. 288/Bang/2021 for AY 2016-17](Page 6309-6310 of Paperbook III). 14.3 Further in case of Info beans Technologies Ltd. ld.AR submitted that the company is not functionally comparable since - a) Functionally different - it is engaged in high end services such as custom application development, content management systems, enterprise mobility and data analytics which are classi....
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....n the case of Synamedia India Pvt. Ltd., Vs. DCIT, Circle-6(1)(2) cited supra in which it has been held as under:- 4. The Ld.AR submitted that Coordinate Bench of this Tribunal in assessee's own case in IT(TP)A No. 2657/Bang/2018 & IT(TP)A No. 2365/Bang/2019 for A.Ys. 2014-15 & 2015-16 by order dated 28.02.2020 excluded Infosys Ltd., Mindtree Ltd., L&T Infotech Ltd. and Persistent Systems Ltd. by observing as under: "32. At the time of hearing, the ld. counsel for the assessee has prayed for exclusion of 4 comparable companies that remain after the order of the DRP viz., Persistent Systems Ltd., Infosys Ltd., Mindtree Ltd. and L&T Infotech Ltd. He brought to our notice that as far as Persistent Systems Ltd. is concerned, the reasoning given for excluding this company for AY 2014-15 will equally hold good for the present year as well. In this regard, our attention was drawn to page 601 of the assessee's PB wherein in the annual report of this company, Notes forming part of financial statement in Note (i) which gives the description of income from software services, there is a reference to revenue from licensing & software, which sufficiently indicates that the ....
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....Ltd for AY 2005-G6 in IT (TP)A 1372/B/11 & 20/2012 dated 28.03.2013 following its own decision in the case of M/s. Actis Advertisers Pvt. Ltd vide ITA No.5277/De1/2011 dated 12.10.2012. On perusal of the Annual Report of Persistent, we observe that the company has RPT in excess of 25% of the sales. The calculation of the same has been provided below for your ease of reference: RPT to Sales ratio for FY 2014-15 Particulars Amount (INR Million) Sale of services 2,410.02 Commission received 10.26 Purchase of software 1.49 Cost of technical professional 1,339.1 Commission paid on sales 111.79 Traveling and conveyance 19.27 Total related party transactions (A) 3,891.93 Total Sales (B) 12,424.98 RPT % of Sales (A/B) 31.32% From the above computation, it is clear that the controlled transactions of Persistent constitutes 31.32% of sales. Based on the above, it can be seen that Persistent fails the `RPT to sales ratio' filter applied by the learned TPO and should therefore not be considered as ....
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....e cost and other costs. 65. The next objection of the Assessee is with regard to Assets employed. The companies, which predominantly generate revenues from onsite activity, do not have significant assets as most of the work is carried on the site of customer outside India. The argument that the TPO has himself observed that software service providers do not require much assets cannot be basis to accept the Assessee's plea. Those observations are made by the TPO in the context of application of turnover filter and have been quoted out of context by the Assessee. 66. The next argument of the Assessee is that TPO has held that margins are lower in onsite software services and that margin is not a criteria to select or reject a comparable under Rule I0B(2) of the I.T. Rules. We are of the view that this argument again ignores the fact that the approach of the TPO has been to highlight the fact that there can be no functional comparability, if the assets employed and risks assumed are taken into consideration. It is in that context the TPO has referred to the margins. 67. The companies who generate more than 75% of the export revenues from onsite operation....
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.... company is sought to be excluded viz., that it is a product company and there is no segmental data between product and services segment, presence of onsite activity and the impact of extra-ordinary event of acquisition during the relevant previous year. Therefore, this company is directed to be excluded from the list of comparable company. 38. As far as L&T Infotech Ltd. is concerned, the ld. counsel for the assessee brought to our notice the decision of ITAT Delhi Bench in the case of Saxo India Pvt. Ltd. v. ACIT, ITA No.6148/Del/2015 for AY 2011- 12, order dated 5.2.2016, wherein the Tribunal took note of the fact that this company was also trading in software and owned insignificant intangible assets. The company was excluded from the list of comparable companies with reference to SWD services provider such as the assessee. The ld. Counsel pointed out that though this decision was rendered with reference to AY 2011-12, the same reasoning would apply to AY 2015-16 also and in this regard, he drew our attention to page 696 of assessee's PB, which gives the details of the revenue generated by this company without any segmental break-up. Our attention was also drawn to....
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....ssee. 41. The next company sought to be excluded is Mindtree Ltd. The submissions made before us were as follows:- "Functionally dissimilar, diversified operation, significant R&D spend, ownership of intangibles. - Also engaged in business of rendering IP-Led revenue, infrastructure management, package implementation, consultancy services, etc. constituting 45% of overall revenue during FY 2014-15. - Diversified operation i.e. engaged in infrastructure management services, business process management, technology consulting, product engineering and SAP services. Also lacks segmental data. - Significant research & development activity. By incurring R&D expenses, it was able to deliver IP based video surveillance management, recording and analytic products and solutions. It has filed 4 patents in India and US so far in the area of Video analysis. - Ownership of intangibles in the form of intangible property. Significant onsite activity: - 46% of revenue earned under Onsite model. - Incurred overseas branch office expenses amounting to INR 1582 crores - Receives incentives from State of Florida in relation....
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....nd back to the file of the AO/TPO/DRP for the re-consideration in light of the above judgment for de-novo consideration and decide the issue as per law. In the result this ground No. 6.1(a) is partly allowed for statistical purpose. Ground No.6.(1)(b) and 6(1)(c) did not argued by the assessee, hence it is dismissed as not pressed. ITES Segment 18. Ground No.6. 2(a) - The assessee has challenged 7 companies for exclusion. Since he has not contested all the 7 companies, we have decided the comparables of the companies only the ld.AR contested. 18.1 The ld.AR reiterated the submissions made before the lower authorities. He further submitted that the Infosys BPM Services Private Limited and S P I Technologies India Private Limited should be excluded on FAR basis and he submitted that in assessee's own case in ITA No. 297/Bang/2021 for the AY 2016-17 it has been excluded from the list of comparables, and filed written synopsis which is as under:- Re: Ground 6.2 (a) in the appeal Infosys BPM Services Private Limited 1. Significantly higher turnover when compared to Appellant In this regard, the Appellant wishes to bring to your good self's at....
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....nd Fulfilment (S&F), Industry Solution (IS) and Digital Business Services (DBS), while Vertical (Industry) solutions include Financial Services and Insurance (FSI), Manufacturing (MFG), Energy & Utilities, Communication and Services (ECS), Retail, Consumer packaged goods and Logistics (RCL) and Life Sciences and Healthcare (LSH)." 3. Market Leader Infosys BPM is an established player in the BPO industry and also a market leader and is constantly ranked as the leading BPO companies in India by industrial bodies such as Global Outsourcing 100, FAO Today and Nelson Hall. The rewards and recognition obtained by the company over the years are evident of the leadership position of the company.(Page 5034 of PB-II-Part 7) Considering the above, a market leader in existence from a long period of time and having won many awards and accolades is not comparable to the Appellant. 4. Significant selling & marketing expenses and brand building expenses Infosys BPM has incurred huge sales and marketing expenditure to the tune of INR 156 crores and have also invested significant amounts in brand building expenses amounting to INR 6 crores during the year....
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....e- 1. Rampgreen Solutions private Limited Vs Commissioner of Income tax(ITA 102/2015)(Page 6921-6966 Of Paperbook III) SPI Technologies India Pvt Ltd 1. Significant Intangibles SPI Technologies has significant intangible assets. It consists of internally generated intangible assets, those arising from business combinations and acquisitions. (Page 5351 to 5353 of PB II-Part 7) Further, the company's website also highlights the cutting-edge technology that it has developed and is being used in delivering of services to its customers. 2. Extra ordinary event The wholly owned subsidiary of SPI Technologies, Laser words Private Limited was amalgamated with SPI Technologies with the appointed date being April 01, 2014. Laser Words Private Limited provides comprehensive pre-press data processing services like typesetting, composition and copy editing to educational and professional publication houses across the globe. Pursuant to the scheme of amalgamation, assets and liabilities of the amalgamating company were vested in SPI Technologies at their respective fair values. Such amalgamation is expected to lead to economies of sc....
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....ervices, on-line information and data retrieval services, Electronic Data Interchange (EDI) service, web search portal content services, Code and protocol conversion services etc. Entire revenue of the company is derived from data processing, hosting & related activities. It primarily provides services in the typesetting business, including transformation of unedited manuscripts into final print-ready files, supply of structured data for electronic publishing and providing end-to-end project management services. The abovementioned services are not comparable to the support services provided by the Appellant and hence SPI Technologies shall be rejected as a comparable.(Page 5307 &5375 of PB-II-Part 7) Based on the above, it can be concluded that the technological solutions provided by the market leader is not comparable to a risk mitigated entity like that of the Appellant. Accordingly, the company is functionally not comparable due to the difference in the risk profile of the Appellant vis-à-vis the comparable company. Based on all of the above detailed reasons, the Appellant humbly submits that SPI Technologies should be rejected as a comparable company fo....
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....s and retail, consumer packaged foods, logistics and life services. Further in the annual report it has been mentioned that this comparable provides services that are different from routine back-office services. This noting itself makes this comparable not functionally similar with that of assessee. Accordingly, we direct this comparable to be excluded from finalist." 5.1 In view of the above order of the Tribunal, we are inclined to direct the AO/TPO to exclude Infosys BPO Ltd. from the list of comparables to determine the ALP. (c) SPI Technologies India Pvt. Ltd. Functionally dissimilar 11. We have heard the rival submissions and perused the materials available on record. The main contention of the Ld. A.R. is that TPO rejected the NPS Ltd. which is engaged in the business of providing publishing solutions namely typesetting, data digitisation commission for overseas publisher and support international publisher through every stage of the author to reader publishing process and provides the digital first strategy for publishing contents, production and transformation, delivery and customer support. Thus, NPS Ltd. Has been rejected based on functional in....
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....ing receivables should not be considered as a separate international transaction. Further, it is humbly submitted that determination of ALP in respect of delayed receivables from inter-company transactions is not required since ALP of inter-company transactions of provision of services has been already determined and no separate adjustment is necessary in this regard. Outstanding receivables cannot be treated as a separate international transaction The Appellant has provided Software Development services and IT enabled services to its AEs and amount outstanding as trade receivables merely represent the dues which are to be received by the Appellant against the services provided. As a business practice, the Appellant did not charge any interest on delayed realisation of invoice from AEs nor paid any interest on delayed payables. Early or late realization of service proceeds is incidental to the transaction of sale/ service, and not a separate transaction in itself. In other words, these represent the consequence of an international transaction and not an international transaction per-se. If the ALP in respect of an international transaction of service is determined, then th....
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.... did a similar analysis on the comparable set proposed by the learned TPO. It was observed that the average receivable days of the learned TPO's set came up to 72 days. On comparing the same with the Appellant's data, it was observed that the comparable companies are allowing higher credit days than the Appellant. Determination of ALP is based on uncontrolled (third-party) scenario The Appellant wishes to submit that it is engaged in provision of services to AE as well as non-AEs. The Appellant would like to draw your attention to the fact that the Appellant does not charge any interest from third party customers. Also, it does not pay any interest to its creditors (including the AE) hence no interest should be charged on intercompany receivables balance of the AE as well. Outstanding receivables from AEs cannot be re-characterised as loan advanced to AEs The Appellant wishes to humbly submit that outstanding/ delayed receivables from AEs cannot be treated as unsecured loans advanced to AEs and interest cannot be imputed on the same. Account receivables arising from an international transaction are closely linked to the main transaction ....
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....3. In ground No.10, the ld.AR of the assessee raised issue that the AO has not given deduction U/s 80G for donation of Rs. 9,17,700/- without giving any reason. This issue is remitted back to the AO for the eligibility of the deduction u/s 80G and the assessee shall provide necessary documents. The AO is directed to decide this issue as per law. This ground is allowed for statistical purposes. 24. Ground No.1 & 2 is general in nature, hence does not require any adjudication. 25. Ground No.3 to 5 not argued by the ld.AR of the assessee, hence dismissed as not pressed. 26. Ground No.11 and 12 though it was incorporated in the written synopsis, the same was argued by the ld.AR, hence it is dismissed as not pressed. 27. Ground No.13 and 14 is consequential in nature. 28. In the result, appeal of the assessee is partly allowed Order pronounced in court on 28th day of February, 2023 Order pronounced on this 28th day of February, 2023. ============= Document 1 EXPERTISE SOLUTIONS INDUSTRIES CNOW US BETTER INSICHTS GLOBAL MIESENCE CAREERS Nihilent Software Product Development is a staged and unique process that brings in enterprise wide transformation.....