TaxTMI 
TaxTMI 
2025 (5) TMI 2197
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....39;) and the Assessment Unit, Income Tax Department (hereinafter referred to as 'the Ld. AO'), under the directions issued by Hon'ble DRP, erred in making an addition to the Appellant's total income of Rs. 62,68,18,980 (based on the provisions of Chapter X of the Income-tax Act, 1961 ('the Act') and the said additions [i.e. Rs. 51,31,85,474 being the adjustment qua the software development service and related IT services, Rs 8,16,36,805 being the adjustment qua the IT enabled services Rs. 21,97,238 being addition in respect of Interest on AE receivables Rs. 1,87,73,151 being addition in respect of Management fees reimbursed by the Appellant and Rs. 1,10,26,312 being addition towards reimbursement of tax consultation expenses] being wholly unjustified are liable to be deleted. 2. On the facts and in the circumstances of the case and in law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in rejecting the transfer pricing analysis/ study prepared by the Appellant and conducting fresh benchmarking, without appreciating that none of the conditions mentioned in clauses (a) to (d) of Section 92C(....
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.... xii) Ace Software Exports Limited 5. Without prejudice to the above grounds on incorrect selection of functionally dissimilar comparable companies while benchmarking the software development segment and related IT services of the Appellant, on the facts and in the circumstances of the case and in law, the Ld. TPO erred in incorrectly computing the margin of the following comparable companies: i) Harbinger Systems Private Limited ii) Sagarsoft (India) Limited iii) Great Software Laboratory Private Limited iv) Tata Elxsi Limited v) Infosys Limited vi) Robosoft Technologies Limited vii) Aptus Software Labs Private Limited viii) Ezee Technosys Private Limited 6. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in not allowing risk adjustment in accordance with the provisions of Rule 10B of the Income-tax Rules, 1962 to account for differences between the international transactions undertaken by the Appellant, being a captive unit, and those undertaken by the comparables. ....
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....of the Ld. TPO in incorrectly rejecting the following companies while benchmarking the IT Enabled services segment of the Appellant which ought to have been included in the final set of comparables (without appreciating that the said companies were comparable to the Appellant): i) I Services India Private Limited ii) Virinchi Limited - segmental iii) NGA HR (India) Private Limited iv) R Systems International Limited - segmental v) Cheers Interactive (India) Private Limited vi) MAA Business Solutions Private Limited vii) Digicall Global Private Limited viii) Thomson Reuters International Services Private Limited ix) Global Healthcare Billing Partners Private Limited 11. Without prejudice to the above grounds on incorrect selection of functionally dissimilar comparable companies while benchmarking the IT Enabled services segment of the Appel lant, on the facts and in the circumstances of the case and in law, the Ld. TPO erred in incorrectly computing the margin of the following comparable companies: i) Microland Limited ii) Sundaram Business Services Limited iii) Infos....
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....receivables from AE. 17. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in making an adjustment with respect to interest on the receivables from AE without appreciating that the said adjustment is unwarranted and unjustified in view of the following grounds which are independent of and without prejudice to one and another viz (i) the Appellant is a debt free company (ii) the international transactions (i.e. AE sales) resulting in the said outstanding is at ALP. 18. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in considering the State Bank of India's ('SBI') short term deposit rates as the Comparable Uncontrolled Price (CUP) to benchmark the impugned interest on delay in receipt of outstanding receivables instead of LIBOR rate. MANAGEMENT FEES 19. On the facts and in the circumstances of the case and in law, the Ld. TPO erred in and the Hon'ble DRP further ....
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.... attributable to Birst India Private Limited ['transferor companies'] which were amalgamated with Appellant with effect from 01 April 2020. 22. On the facts and in the circumstances of the case and in law, the Ld. AO erred in short granting credit of tax deducted at source amounting to Rs. 2,14,127 attributable to the Appellant. 23. On the facts and in the circumstances of the case and in law, the Appellant prays for consequential relief in the interest levied under Section 234A, 234B and 234C of the Act basis the relief allowed in the aforesaid grounds of appeal. C. GENERAL GROUNDS 24. On the facts and in the circumstances of the case and in law, the Ld. AO, under the directions of the Hon'ble DRP erred in assessing total income of the Appellant at Rs. 152,09,25,358 as against Rs. 89,41,06,378, which was offered by Appellant in its return of Income. Instead of granting a refund to the Appellant, the Ld. AO erred in raising a demand of Rs. 24,67,70,909 (based On an addition of Rs. 62,68,18,980) which was also computed incorrectly. The said demand being wholly unjustified is liable to be deleted. 25. On the facts and in the circumst....
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....f the assessee is related to exclusion sought by the assessee in SDS segment on account of 19 comparables. However, the Ld. AR submitted that if their claim for exclusion of 13 comparables is accepted by the Bench, then adjudication on other 6 comparables will become academic only. Out of these 13 comparables, the assessee is claiming exclusion of 12 comparables on the ground of variation in turnover and one comparable on the basis of functional dissimilarity. As far as the claim of the assessee regarding exclusion of 12 comparables on the basis of turnover filter is concerned, the Ld. AR submitted that the turnover of the assessee is SDS segment is Rs.536 crores and the turnover of the other 12 comparables are as under: S. No Name of the company Turnover (Rs.) 1 Mindtree Ltd 7,968 crores 2 Sagarsoft (India) Ltd 41 crores 3 LTI Mindtree Ltd 11,562 crores 4 Wipro Ltd 50,299 crores 5 Net4Nuts Ltd 2 crores 6 Systango Technologies Ltd 23 crores 7 CG-VAK Software & Exports Ltd 30 crores 8 Infosys Ltd 85,912 crores 9 Ksolves India Ltd 24 crores 10 Aptus Software Labs Pvt Ltd 8 crores 11 ....
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....bility. This Tribunal in assessee's own case for the A.Y 2018-19 (Supra) at para nos. 12 to 14 of the order has held as under : "12. We have considered these contentions in the light of the decided case law. Insofar as the turnover filter is concerned, Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.) Ltd. (supra), held that huge profit or a huge turnover, ipso facto does not lead to its exclusion; whereas in the case of Pentair Water India Pvt. Ltd. (supra), the Hon'ble Bombay High Court held that turnover is a relevant criteria for choosing companies as comparables in determining the ALP in Transfer Pricing cases. Hon'ble Karnataka High Court, however, in the case of Obopay Mobile Technology (supra), having noticed the view taken by the Hon'ble Delhi High Court in the case Chryscapital Investment Advisors (India) (P.) Ltd. (supra), and also the decision of the Hon'ble Bombay High Court in the case of M/s. Pentair Water India Pvt. Ltd. (supra), upheld the Tribunal order excluding certain entities from the list of comparables on the ground of huge turnover, while following the principle that where two views are po....
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.... to apply the turnover filter uniformly to all the comparables left after exclusion by this order. 8. As far as the exclusion of Tata Elxsi Ltd ("Tata Elxsi") is concerned, the Ld. AR submitted that though Tata Elxsi is engaged broadly in SDS but is involved in embedded design services and number of other diversified services i.e. industrial training, visualization etc., Further, the Ld. AR submitted that the exclusion of Tata Elxsi is covered by the decision in assessee's own case for the A.Ys 2014-15 to 2017-18. The Ld. AR further submitted that there is no change in the functionality of Tata Elxsi in the year under consideration as compared to A.Ys. 2014- 15 to 2017-18. Accordingly, the decision held in assessee's own case for the A.Ys. 2014-15 to 2017-18 regarding exclusion of Tata Elxis Ltd can be squarely applied to the assessee for the year under consideration. 8.1 Per contra, the Ld. DR relied on the order of the Ld.AO/TPO and submitted that Tata Elxsi has reported in its annual financial statement revenue from SDS segment only and no segment details are available in their annual report. It means that Tata Elxis is engaged in SDS segment only and therefore, ob....
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....ndtree Ltd., were excluded. 20. In the assessment year 2015-16, by order dated 19/ 10/2020 in ITA No. 1689/Hyd/2019, the Co-ordinate Bench excluded Infosys Limited, Larsen & Toubro Infotech Limited, Mindtree Ltd, Tata Elxsi Limited (seg), Persistent Systems Limited, and Cybage Software Private Limited on the ground that such entities were considered to be un-fit for comparison with the assessee in assessee's own case for the assessment years 2013-14 and 2014-15 and there was no change in the factual matrix of the case. 21. In ITA No. 198/Hyd/2021 the Co-ordinate Bench of the Tribunal took the view that Infosys Limited, Larsen & Toubro Infotech Limited, Tata Elxsi Limited (seg), Persistent Systems Limited and Cybage Software Private Limited are not at all comparable with the assessee while referring ITA TP No. 228/Hyd/2022 to the orders of the Co- ordinate Bench for the assessment years 2014-15 and 2016-17. 22. A perusal of the orders in Infor (India) Private Limited Vs. DCIT in ITA No. 2307/Hyd/2018 for the AY. 2014-15, Infor (India) Private Limited Vs. ACIT in ITA No. 1689/Hyd/2019 for the AY. 2015-16 and Infor (India) Private Limited Vs. DCIT in ITA....
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....nclusion of 12 companies as per Ground No.4 will be academic only. Accordingly, we do not propose to adjudicate Ground No.4 of the assessee. 12. Ground No.9 of the assessee relates to ITES segment, where the assessee is seeking exclusion of 12 comparables. However, in the Bar, the Ld. AR submitted that they are pressing for exclusion of only 7 comparables viz. Infosys BPM Ltd. ("Infosys BPM"), Sutherland Global Services Private Ltd. ("Sutherland"), Inteq BPO Services Private Ltd. ("Inteq BPO"), Integra Software Services Private Ltd. ("Integra"), Vitae International Accounting Services Private Ltd. ("Vitae"), Interactive Manpower Solutions Private Ltd. ("Interactive") and MPS Ltd. ("MPS"). The assessee is seeking the exclusion of Infosys BPM, Sutherland and Inteq BPO on the basis of turnover filter and seeking the exclusion of Integra, Vitae, Interactice and MPS on the ground of functional dissimilarity. 13. As far as the exclusion of Infosys BPM, Sutherland and Inteq BPO are concerned, we found that, the turnover of the assessee in ITES segment is Rs. 71 crores and the turnover of Infosys BPM, Sutherland and Inteq BPO are Rs. 5450 crores, 1722 crores and Rs. 2.5 crores respec....
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.... 14.1 The Ld. DR, on the other hand, relied upon the decision of the Ld. AO/TPO. The Ld. DR further submitted that ITES is an umbrella and all the information technology services are fall under the broad concept of ITES. Only due to insignificant variations in the nature of services, the company should not be excluded from the segment of ITES. 14.2 We have heard the rival contentions and gone through the records in the light of the submissions made by either side. We have gone through the Page Nos. 2332 to 2334 & 2337 of the paper book forming part of the annual financial statement of Integra and found that, Integra is engaged in Accounting, Health and E- Publishing services. We have also gone through Page Nos. 2356 to 2359 forming part of the annual financial statements of Vitae and found that Vitae is involved in Accounting, Auditing & Book keeping Services. We have also gone through Page Nos. 2376 to 2382 of the paper book forming part of the annual financial statements of MPS and found that MPS is involved in content development and transformation. We have also gone through Par No.6 of the decision of the Coordinate Bench of the Tribunal in the case of Rage Frameworks India ....
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....In support of their submission, the Ld. AR invited our attention to Page Nos. 2370 & 2374 of the paper book forming part of annual financial statements of Interactive and demonstrated that Interactive is involved in Offshore recruitment and staffing solutions. The Ld. AR further invited our attention to Para No.32 of the decision of the Coordinate Bench of the Tribunal in the case of Mavenir India (P) Ltd vs. DCIT in ITA No.801/Del/2021 dated 17/05/2022 and submitted that the Hon'ble Tribunal has held that Interactive is not a suitable comparable for ITES segment. Accordingly, the Ld. AR prayed to exclude Interactive from the set of comparables. 15.1 The Ld. DR, on the other hand, relied upon the decision of the Ld. AO/TPO. 15.2. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through Page Nos. 2370 & 2374 of the paper book forming part of the annual financial statements of Interactive and found that at page no. 2370 it has also been mentioned that Interactive is engaged in Support services in the category of executive/retained search service. In our view, the services are in the nature....
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.... has excluded I Services inadvertently on the basis of FAR analysis of another company i.e. Virinchi Ltd. The Ld. AR also invited our attention to relevant part of rectification application placed at page No. 1346 to 1348 of the paper book and submitted that, the rectification application in this regard is pending before the Ld. DRP. The Ld. AR also invited our attention to the order of the Ld. DRP for A.Y 2017-18(para no.2.63), A.Y 2018-19(para no. 2.58) and A.Y 2020-21(para no. 2.42.1 to para no.2.42.3) placed at page Nos. 1853/1854,2676 and1686 respectively of the paper book and submitted that in all these years, the Ld. DRP has included I Services as comparable to the assessee. Finally, the Ld. AR prayed before the Bench to include I Services in the list of comparables. In their alternate submission, the Ld. AR prayed before the Bench to make suitable direction to the Ld. DRP to dispose of their rectification application. 17.1 Per contra, the Ld. DR has submitted that they have no objection, if the issue is set aside to the Ld. DRP for fresh adjudication. 17.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by eith....
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....arch Matrix of the TPO and inclusion of Thomson would lead to cherry picking. The Ld. AR further invited our attention to page No.113 of the order of the Ld. DRP, wherein the Ld. DRP inadvertently rejected the inclusion of Thomson on the ground that Thomson fails RPT filter as per the order of the TPO and the assessee did not provide bifurcation of related party figures of cost and revenue. Accordingly, the Ld. AR submitted that, there was an apparent mistake in the order of the Ld. DRP. Therefore, the assessee filed rectification application before the Ld. DRP for which the Ld. AR invited our attention to the relevant para of the rectification application placed at page Nos. 1351 and 1352 of the paper book. Finally, the Ld. AR prayed before the Bench to make suitable direction to the Ld. DRP to dispose of their rectification application. 18.1 Per contra, the Ld. DR submitted that they have no objection, if the issue is set aside to the Ld. DRP for fresh adjudication. 18.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through page Nos. 129 & 130 of the order of the Ld. TPO, which is to th....
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....d the inclusion of Thomson on the ground that Thomson fails RPT filter as per the order of the TPO and the assessee did not provide bifurcation of related party figures of cost and revenue. Accordingly, in our view, there is an apparent mistake on the part of the Ld. DRP. We have also gone through the relevant part of the rectification application placed at page nos. 1351 & 1352 of the paper book and found that the assessee has filed rectification application before the Ld. DRP for rectification of the said mistake. As there is apparent mistake on the part of the Ld. DRP and the rectification application of the assessee is pending before the Ld. DRP, we direct the Ld. DRP to pass appropriate order as per law after considering the rectification application of the assessee. 19. As far as inclusion of Global Healthcare is concerned, the Ld. AR invited out attention to page No. 129 of the order of the TPO and submitted that the Ld. TPO has rejected the inclusion of Global Healthcare due to the reason that no income has been reported under " Total Revenue from sales of services" and the revenue reported under "miscellaneous other operating revenue" is Rs. 116.37 crores of the financi....
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....016-17 to 2018-19, this issue has been restored to the file of the Ld. AO/TPO for fresh adjudication. Accordingly, the Ld. AR prayed before the Bench to set aside the issue for this year also to the file of the Ld. AO/TPO for fresh adjudication. 20.1 Per contra, the Ld. DR submitted that they have no objection if the issue is remanded to the file of the Ld. AO/TPO for re-adjudication. 20.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through Para No. 17 & 18 of the order of this Tribunal in assessee's own case for the A.Y 2018-19 in IT(TP) 193/Hyd/2023 dated 26/10/2023 which is to the following effect: 17. We have gone through the observations of the Co-ordinate Benches of the Tribunal on the issue relating to the management fee for the assessment year 2016-17 in ITA No. 198/Hyd/2021, wherein this issue is covered by Ground No. 14. For the sake of completeness, we refer hereunder the relevant observations,- "11. Next comes assessee's identical substantive grounds No.14th and 15th seeking to allow management and consultancy fee involving ALP adjustments of Rs.3,9....
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.... issue in ITA(TP) No. 198/Hyd/2021. We hold and direct so. Ground No. 12 is accordingly treated as allowed for statistical purposes. 20.3 On perusal of the above, we found that, this Tribunal had remanded the issue to the file of the Ld. AO/TPO to re- examine the issue in the light of the findings on this issue in ITA- TP No.198/Hyd/2021. Respectfully following the decision of this Tribunal(supra), we also restore the issue to the file of the Ld. AO/TPO to re-examine the issue in the light of the findings on this issue in accordance with the directions of this Tribunal in assessee's own case (cited Supra). 21. Ground No.20 of the assessee relates to the Tax Consultation Fee. In this regard, the Ld. AR has submitted that the corresponding evidences related to the claim of Tax Consultation Fees are required to be verified by the Ld. AO/TPO. Accordingly, the Ld. AR prayed before the Bench to set aside the issue to the file of the Ld. AO/TPO for re-adjudication after verification of corresponding evidences. 21.1 Per contra, the Ld. DR submitted that they have no objection if the issue is remanded to the file of the Ld. AO/TPO for re-adjudication. 21.2 We have heard the ....