TaxTMI 
TaxTMI 
2023 (3) TMI 1610
X X X X Extracts X X X X
X X X X Extracts X X X X
....rections u/s. 144C of the Act. The AO passed a final assessment order u/s. 143(3) r.w.s. 144C on 26.02.2015. Aggrieved the assessee again preferred further appeal before the ITAT. The Tribunal, on the ground that the DRP has not passed a speaking order, restored the matter to the ld. DRP for fresh adjudication, vide its order dated 10.08.2015. Consequently, the DRP issued directions on 31.08.2016 u/s. 144C(5) of the Act. The assessing Officer passed an order on 25.10.2016 giving effect to the directions of the DRP dated 31.08.2016. Being aggrieved, the assessee again filed appeal before the Hon'ble ITAT, Kolkata. As per order in ITA No. 505/Kol/2015 dated 27.06.2017, ITAT, Kolkata were restored the file to DRP for fresh adjudication as per law the issues of adjustment in respect of ALP for software services segment, AMP and lease rental disallowances." 3. The present appeal arises from the consolidated order by the ITAT, Kolkata vide order dated 27.06.2017 in ITA No. 505/Kol/2015 (department appeal) arising from DRP, Kolkata order dated 31.12.2014 and in ITA No. 2408/Kol/2016 (assessee appeal) arising from DRP, Delhi order dated 31.08.2016. 3.1. Grounds raised by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to retain the said comparable. For the third comparable of Persistent Computers Ltd. (Persistent), Ld. DRP directed Ld. TPO to verify the P&L Account of Persistent to identify if it has only one stream of revenue and consider software service segment if segment data is available, otherwise it should be excluded. The relevant direction of Ld. DRP are reproduced as under: "2. Software services segment: With regard to the TPO's adjustment, Hon'ble ITAT, Kolkata (in assessee's appeal No. 2408/Kol/2016 has directed as under: 14. Ground no. 4 is on the issue of determination of ALP for Software segment. The only contention raised before us is whether the DRP is right in holding that M/s. TATA Elxsi Ltd. and Persistent Systems Ltd. are comparable companies. The DRP had not adjudicated the assessee's contentions that these two companies are not functionally comparable and that both these companies have R&D activity and hence should be eliminated from the list of comparable companies for the purpose of determination of ALP. In the case of Persistent Systems Ltd., it was further submitted before the DRP that there is no segmental data and that it has related ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re is any stock in trade, and if so consider software services segment if segment data is available, and if not it should be excluded." 5. Before us, Shri P. J. Pardiwalla & Shri Ketan Ved, AR represented the assessee and Shri G. Hukugha Sema, CIT represented the revenue. 6. On the first two issues relating to upward adjustment towards ALP and following the Rule of Consistency, it was submitted that the issue is recurring in nature from AY 2011-12 to AY 2016-17 and is covered in favour of the assessee by the decision of Coordinate Bench of ITAT, Kolkata in assessee's own case, in all these assessment years. Ld. Counsel also referred to the recent decision in assessee's own case for AY 2016-17 in ITA No. 226/Kol/2021 dated 06.09.2022 wherein also this issue has been held in favour of the assessee by following the earlier decision in assessee's own case. 6.1. Relevant extract on this issue from the order of AY 2011-12 in ITA No. 863 & 539/Kol/2016 dated 15.12.2017 is extracted below for ease of reference: "43. We have heard the rival submissions and perused the materials available on record. The primary issue here arises whether the AMP expenses constitute the inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee and delete the addition made in this respect. 8. On the next issue relating to upward adjustment in respect of software service segment, we note that during the TP proceedings, the ld. TPO had rejected six out of seven comparable companies identified by the assessee in its transfer pricing study report and had selected two new comparable companies namely, Sasken and Tata Elxsi for the purpose of determining ALP of the said transaction. The Profit Level Indicator (PLI) was revised by the Ld. TPO at 22.32% compared to 10.53% reported by the assessee. Subsequently, Ld. DRP gave its directions as noted above, wherein Sasken was directed to be removed as a comparable. Tata Elexi was directed to be retained as a comparable and Persistent was also held to be not comparable by the Ld. DRP vide its directions dated 28.09.2018. Thus, after the directions of Ld. DRP only one comparable namely, Tata Elexi remained in the comparable set. Ld. Counsel for the assessee submitted that the adjusted margin of Tata Elexi is computed at 13.61% as against 10.53% reported by the assessee. 8.1. He stated that by considering the benefit of tolerance limit of +/- 5% as available u/s. 92C(2) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er that if the variation between the arm's length price so determined and price at which the international transaction has actually been undertaken does not exceed five per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price." 11. Applicability of second proviso to Section 92C(2) of the Act in a situation where only one comparable is available for benchmarking was considered by the Coordinate Bench of ITAT, Mumbai in the case of The Development Bank of Singapore (supra), wherein it was held that the second proviso has to be read distinctly from the 1st proviso and the words "so determined" in the 2nd proviso should apply to ALP determined under the main sub-section (2) by which the tolerance band also becomes available where only one price is determined as ALP. The relevant extract from the decision of the Coordinate Bench of ITAT, Mumbai (supra) is reproduced for ease of reference : "11. At this juncture, we consider it expedient to note that the above quoted proviso to section 92C(2) has been substituted by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009 with two provisos.....