2020 (2) TMI 1759

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....ct] by the ACIT, Circle 2(1)(1), Bangalore relating to assessment year 2012-13. 2. The only issue that arises for consideration in this appeal is with regard to addition made bey the AO consequent to determination of ALP in respect of an international transaction entered into by the assessee with its AE. The assessee is a company which is engaged in the business of rendering software development and related services. It is not in dispute that the assessee rendered software development services to its Associate Enterprise (AE), NDS, UK. The aforesaid transaction was an international transaction and as laid down under the provisions of section 92 of the Act and accordingly the income from the aforesaid transaction has to be determined keep....

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....         Total operating income 390,15,86,819 1,48,62,204 31,28,45,581 4229294604           Expenditure         Total Expenses 3,54,45,16,069 1,29,23,657 238,427,243 3795866969 Less: Provision for doubtful advances     27327365   : Bank charges     2794176   Total operating cost 3,54,45,16,069 1,29,23,657 208,305,702 3,765,745,428           Operating profit 357070750 19,38,547 104539879   Operating profit/ Operating cost 10.07% 15.00% 50.18%   4. As can....

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.... Arm's Length Mean Margin on cost 22.63% Less: Working Capital Adjustment 0.95% (As per Annex. C) Adjusted margin 21.68% Operating Cost 3544516069 Arms Length Price(ALP) 4312967153 121.68% of Operating Cost) Price Received 3901586819  Shortfall being adjustment u/s 92CA: 411380334 5% of price received 1950,79,341 Since the shortfall is exceeding the 5% of the International Transaction, adjustment is made The above shortfall of Rs. 41,13,80,334/- is treated as transfer pricing adjustment u/s 92CA in respect of software development segment of the taxpayer's international transactions." 7. Aggrieved by the order of TPO, which was incorporated in the draft order of....

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....ections of the DRP to consider foreign exchange gain as part of operating profits of the assessee. 9. Before us, the ld. counsel for the assessee seeks exclusion of 2 out of 4 comparable companies that remain after the order of DRP and order giving effect to the directions of the DRP passed by the TPO dated 24.11.2016. The 2 companies which the assessee seeks exclusion are L&T Infotech Ltd. and Persistent Systems Ltd. 10. The ld. counsel for the assessee filed before us an order of the Tribunal dated 21.12.2018 in IT(TP)A No. 216/Bang/2017 for AY 2012-13 in the case of Evolving Systems Network (I) P. Ltd. In this decision also with reference to the software development services provider such as the assessee where the very same 10....

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....ovider such as the Assessee in that case. (b) Larsen & Tourbro Infotech Ltd., was excluded from the list of comparable companies by relying on the decision of the Delhi Bench of ITAT in the case of Saxo India (P) Ltd. Vs. ACIT (2016) 67 taxmann.com 155 (Del-Tri). The discussion is contained in paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that L & T Infotech Ltd., was a software product company and segmental information on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal's order was dismissed by the Hon'ble Delhi High Court in ITA No. 682/2016. (c) Persistent Systems Ltd., was excluded from the list of comparable companies on the ground that this com....