TaxTMI 
TaxTMI 
2026 (4) TMI 723
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....sessment Order") of the Income-tax Act, 1961 ("the Act") by Assessment Unit, Income Tax Department ("Ld. AO") pursuant to the direction of Dispute Resolution Panel, Bengaluru ("Hon'ble DRP"), on the following grounds, each of the grounds is referred to separately, which may kindly be considered independent/ without prejudice of each other. In the facts and circumstances of the case and in law, the Ld. AO/ Learned Transfer pricing officer (" Ld. TPO") and the Hon'ble DRP has: General Grounds: 1. Erred in law and in facts, in computing the assessed income at INR 7,60,38,820 as against the returned income / (loss) of INR (2,79,48,903) filed by the Appellant under normal provisions of the Act. 2. Erred in making an addition of INR 10,39,78,433 to the total income of the Appellant on account of adjustment in the arm's length price ("ALP") for international transactions entered by the Appellant with its Associated Enterprises ("AEs") as follows: a) Adjustment of INR 10,25,38,320 in respect of provision of software development services; and b) Adjustment of INR 14,40,113 in respect of interest on delayed receivables. ....
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....ngescape Technologies Private Limited 3.6. Erred in not undertaking objective comparative analysis and inter-alia selecting the following companies as comparable which are functionally not comparable to the Appellant: (a) Infosys Limited (b) Wipro Limited (c) Tata Consultancy Services Limited (d) Nihilent Limited (e) Tata Elxsi Limited (f) Cybage Software Private Limited (g) L&T Infotech Limited (h) Consilient Technologles Limited (i) Net4Nuts Limited (j) Aptus Software Labs Private Limited (k) CG-Vak Software & Exports Ltd (l) Mindtree Limited (m) Great Software Laboratory Private Limited 3.7. Erred in not excluding companies which are earning supernormal profits. 3.8. Erred in not adjusting the net margins of comparable companies for differences in working capital in accordance with the provisions of rule 10B(1)(e) of the Rules. 3.9. Erred in not adjusting the net margins of comparable companies for differences in financial and risk position in accordance with the provisions of rule 10B(1)(e) of the Rules. 4. Adjustment ....
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....of income for the year was filed within the due date specified u/s 139(1) of the Act and the same ought to be deleted. 5.2 The Assessment Unit has erred in law and on facts by levying interest under section 234B of the Act, which is consequential to the aforementioned additions and disallowances. 6. Ground on erroneous initiation of penalty under section 270A of the Act 6.1 The Ld. AO was not justified and rather grossly erred in law and in facts by initiating penalty proceedings under section 274 read with 270A of the Act on account of under reporting income. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal. Prayer: The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. 2. The facts of the case indicate that the Assessee is a Private Limited Company and a wholly owned subsidiary of M/s. MatchMove Pay Pte Ltd, Singapore. The Assessee operates in two distinct business segments: distribution....
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....,474/-, he computed the arm's length price considering the taxpayers PLI of 12.69% at Rs. 36,15,63,684/- and made an adjustment of Rs. 10,92,15,210/-. 7. For the outstanding receivable, he noted that there is delay in recovery from associated enterprises through adopting a SBI PLR at the rate of 12.27% and computed the arm's length price of the interest at Rs. 1,53,90,857/- adopting SBI PLR. Total adjustment proposed at Rs. 12,46,06,067/- by order dated 28.10.2023. 8. Consequently, the draft Assessment Order passed on 20.11.2023 which was objected to before the Ld. Dispute Resolution Panel and the Ld. Dispute Resolution Panel passed its direction on 29.08.2024. On the basis of the direction of the Ld. Dispute Resolution Panel, the Ld. Transfer Pricing Officer passed an order giving effect to the direction of the Ld. Dispute Resolution Panel on 25.09.2024 wherein the arm's length price of software development international transaction was retained at Rs. 10,25,38,320/- and interest on overdue outstanding receivable was computed at Rs. 14,40,113/- resulting in the total transfer pricing adjustment of Rs. 10,39,78,433/-. The final Assessment Order was passed on 27.09.2024 determ....
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....if the working capital adjustment is granted to the Assessee, which was claimed before the Ld. Transfer Pricing Officer, no separate transfer pricing adjustment is warranted. Even otherwise, he submitted that the rate of interest taken by the Ld. Dispute Resolution Panel and Ld. Transfer Pricing Officer are State Bank of India PLR rate which could not have been taken because invoices are made in foreign currency. 13. The Ld. Departmental Representative Dr. Divya K, J-CIT vehemently supported the order of the Ld. Transfer Pricing Officer and the direction of the Ld. Dispute Resolution Panel. It was submitted that Assessee did not furnish the information before the Ld. Transfer Pricing Officer of segmental margins. Further, when the segmental margins were produced before the Ld. Dispute Resolution Panel, it had several flaws as pointed out by the Ld. Dispute Resolution Panel at para no. 3.3 of the direction. She further submitted that how it could be possible that there is a huge loss in case of a non-AE transaction and huge profit in case of AE transaction. Even the audited statement did not show which allocation key has been used for allocating the expenditure. In absence of all....
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....ties. Further, we also find that while preparing the AE segment and non-AE segment, segmental profitability statements are assessed, what is the allocation key and on what basis the expenses are stated to be only pertaining to non-AE segment. All these answers are required to be provided by the Assessee before his segmental financial statement can be further looked into. Further, the Ld. Dispute Resolution Panel also could not have rejected the same statement that it is not an audited financial statement. Neither is there a provision of law, nor is it also a requirement. Assessee in its own interest has got this segmental analysis certified by a Chartered Accountant. Further, merely the wide variance could not have been the reason for rejection of the same. It should have been the first point of testing or investigating the segment financial statements. Throwing away the evidence at the threshold by the Ld. Revenue Authorities is not acceptable. The evidence produced by the Assessee must be thoroughly examined, there should be subjective evaluation of these evidences, if required further investigation, confrontation with the assessee from findings and based on this an independent d....