TaxTMI 
TaxTMI 
2020 (9) TMI 1330
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....rprises ("AEs"). In terms of Sec. 92B(1) of the Act, the transaction of providing SWD Services and MSS were "international transaction" i.e., a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. In terms of Sec. 92(1) of the Act, the Any income arising from an international transaction shall be computed having regard to the arm's length price. In this appeal by the Assessee, the dispute is with regard to determination of Arms' Length Price (ALP) in respect of the aforesaid two international transaction of (i) rendering SWD services to the AE and (ii) rendering of MSS to the AE. We shal....
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.... Mindtree Ltd. (seg) 10.66 10.70 9 Persistent Systems & Solutions Ltd. 22.12 22.66 10 Persistent Systems Ltd. 22.84 23.09 11 R S Software (India) Ltd. 16.37 17.68 12 Sasken Communication Technologies Ltd. 24.13 26.00 13 Tata Elxsi Ltd. (seg) 20.91 20.42 AVERAGE MARK-UP 24.82 25.29 5. The TPO computed the Addition to total income on account of adjustment to ALP as follows:- Computation of arm's length price by TPO and the adjustment made Arm's Length Mean Margin on cost 24.82% Less: Working Capital Adjustment -2.71% Adjusted mean margin of the comparables 27.53% Operating Cost Rs. 33,77,24,506/- Arm's length Price (127.53% of Operating Cost) Rs. 43,07,00,063/- Price Received Rs. 39,04,51,674/- Short fall being adjustment u/s. 92CA Rs. 4,02,48,389/- Thus a sum of Rs. 4,02,48,389/- was added to the total income of the Assessee on account of determination of ALP for provision of SWD services by the Assessee to its AE. 6. The Assessee filed objections before the Disputes Resolution Panel (DRP) against the draft assessment o....
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....Pvt. Ltd. in ITA 137/Bang/2015; Ness Technologies (I) Pvt. Ltd. v. DCIT in ITA No. 696/Mum/2016 which are also decisions rendered in relation to AY 2011-12 in the case of a companies providing SWD services such as the assessee in the present appeal. It is also relevant to point out that the very same comparable companies chosen by the TPO in the present appeal had been chosen by the TPO as comparable companies in the case of Electronic for Imaging (I) Pvt. Ltd. (supra). The Tribunal in its order dated 14.7.2017 in the aforesaid case dealt with the comparability of these companies. 11. As far as Acropetal Technologies Ltd. is concerned, vide para 8 of the order of Tribunal in Electronics for Imaging (I) Pvt. Ltd. (supra), exclusion of Acropetal was upheld on the ground that this company was into development of computer products. The Tribunal also held that L&T Infotech Ltd. had RPT at 18.66% and since the RPT was beyond the threshold limit of 15%, this company was directed to be excluded from the list of comparable companies. The Tribunal further excluded Tata Elxsi Ltd. from the list of comparables on the ground that this company was engaged in diversified activities ....
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....of being heard. MARKETING SUPPORT SERVICES SEGMENT (MSS) 10. As far as the provision of MSS is concerned, the Assessee filed a Transfer Pricing Study (TP Study) to justify the price paid in the international Transaction as at ALP by adopting the Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) of determining ALP. The Assessee selected Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator (PLI) for the purpose of comparison. The OP/OC of Assessee was 10.90%. The Assessee chose a set of comparable companies whose average profit margin was 9.83%. Since the Assessee's profit margin was much more than that of the comparable companies, the Assessee claimed that the price charged in the international transaction was at Arm's Length. The TPO to whom the determination of ALP was referred to by the AO, accepted TNMM as the MAM and also used the same PLI for comparison i.e., OP/OC. The TPO rejected all companies chosen as comparable company by the Assessee and on his own chose three companies and worked out the average arithmetic mean of their profit margins and adjustment to ALP as follows: E.6. Comparables selected by TPO and their ari....
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....vices (India) P Ltd [IT(TP)A.No.461/Bang/2015 dt 26.8.2016 for a y 2010-11 is extracted as under : "28. For this segment, the assessee is seeking exclusion of two comparables i.e. M/s Acentia Technologies Ltd., and M/s ICC International Agencies Ltd., The claim of assessee regarding exclusion of M/s Acentia Technologies Ltd. is also covered in favour of the assessee by the same Tribunal order rendered in the case of M/s Electronics for Imaging India (P)Ltd.,(Supra) and respectfully following the same Tribunal order, we direct the AO/TPO to exclude this company from the list of final comparable because the ld. DR of the revenue could not point out any difference in facts. 29. Regarding exclusion of second company, it was submitted by the learned AR of the assessee that i.e. M/s ICC International Agencies Ltd., (Supra) this is the claim of the assessee that annual report of this company available on page-1100 & 1104 of the paper book. As per the same, we find that this company is deriving income from trading activity and also maintaining inventories. Both these arguments are supported by annual report of this company available on page-1100 & 1104 of the paper book. ....