TaxTMI 
TaxTMI 
2025 (5) TMI 2277
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.... Income-tax Act, 1961 ('the Act') for the impugned Assessment Year 2021-22, on 14th October 2024, which is beyond the time limit as specified u/s. 153 of the Act which expired on 31' December 2023. Ground No. 2: GENERIC LEGAL ISSUES 2.1 The learned AO erred in making a reference to learned Transfer Pricing Officer ('TPO') for determining arm's length price without demonstrating as to why it was necessary and expedient to do so and the Honourable DRP erred in confirming the action of the learned AO. 2.2 The learned AO erred in making reference of the Appellant's case to the learned TPO, without applying his mind and without recording his satisfaction, thereby making the entire process of referring the matter to the TPO as invalid; 2.3 The Learned TPO erred in rejecting the TP study of Appellant and conducting fresh Search Process in determination of arm's length price without providing any cogent reasons Ground No. 3: RELATING TO TP ADJUSTMENT ON SOFTWARE DEVELOPMENT SERVICES 3.1 The Learned TPO erred in not considering the following comparables selected by the Appellant merely for the re....
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....receivables of the Assessee for FY 2020-21; b) Re-characterisation of the net outstanding receivables as on 31 March 2021 as a deemed loan and benchmarking the same; c) Not appreciating that the outstanding receivables were consequent to the principal international transaction and could not be considered as a separate international transaction; d) Not appreciating that Appellant does not have a policy of charging interest from other unrelated parties in similar transactions nor has it paid any interest on its outstanding trade payable at year end to related vendors. e) not appreciating that interest cannot be levied on delayed receivables when the Assessee company is debt free. f) Without prejudice, interest rate should be restricted only to the LIBOR rate without adding any further basis points; and g) Without prejudice, no separate adjustment for interest on delayed receivable is required where the margin of the international transaction is held to be at arm's length price Each of the above Grounds of Appeal are without prejudice to each other. The Appellant craves leave to add, amend, delete, rectify, su....
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....ying the upper limit for the turnover filter, though the TPO himself applied lower sales turnover filter. He submits that applying the upper turnover filter is upheld by many decisions of the Tribunal. The ld. TPO rejected this contention wherein he held that in the software industry assessee has no influence on the margins earned and economies of scale are relevant only in capital intensive companies. As in the software development segment there is no substantial investment in the form of plant & machinery and what matters is human capital only, the upper turnover filter is not relevant as it does not impact the margins.. The ld. TPO also gave the examples of Infosys, Wipro and Tata Consultancy Services. Accordingly he rejected request of assessee to apply upper turnover filter. Arguments of the assessee 6. The ld. AR further submitted that before the DRP also, the assessee objected to the TP adjustment stating that the order of the ld. TPO is incorrect. The ld. DRP relied upon the decision of the Hon'ble Delhi High court in the case of Chrys Capital Investment Advisory (India) Pvt. Ltd. that the company which is otherwise functionally comparable cannot be excluded merely on....
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.... for application of upper turnover filter of 200 crores is accepted, the margins of assessee would fall within the ALP and other grounds will become academic. 9. We have carefully considered the rival contentions and perused the orders of ld. lower authorities. The assessee is a captive software development centre of Yokogawa group. It is a 100% EOU. It has entered into international transaction of software development services of Rs. 43,78,33,262/-. The assessee on the above segment in the TP study report adopting PLI of Operating Profit / Operating Cost [ OP/OC] of 18.07%, which on analysis of financial statement by the ld. TPO was computed at 19.07%. The TP study report by selecting 16 comparables applying Transactional Net Margin Method [TNMM] held that the international transaction of the assessee is at arm's length. The ld. TPO examined the filters applied by the assessee and held that assessee has not applied proper filters and therefore carried out fresh search on the basis of various filters, accepted the same PLI and the most appropriate method, determined the margins of the assessee and issued a show cause notice. After considering objections, the ld. TPO took 18....