TaxTMI 
TaxTMI 
2026 (7) TMI 793
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....sessee also selected the Transactional Net Margin Method as the most appropriate method for analysing the arms length. The assessee company selected 14 comparable companies for benchmarking the above international transactions. In respect of the outstanding receivables, the assessee had treated the same as not constituting a separate international transactions since the balances are closely linked to the principle transactions of provision of software development services. 3. For the A.Y., the assessee filed their return of income on 19/01/2021. The said return was processed u/s. 143(1) of the Act and some additions were made. Thereafter the return was selected for complete scrutiny due to the fact that large payments made u/s. 194J and high risk international transactions. Notice u/s. 143(2) was issued and the assessee had also filed their responses from time to time. After considering the said submissions made by the assessee, the AO had referred the case to the transfer pricing officer u/s. 92CA of the Act. The TPO also called for various details and the assessee also submitted the details as required by the TPO. Finally, the TPO rejected the transfer pricing document and pas....
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....n Rs. 200 crores and if this turnover filter has been adopted, the companies listed out in ground no. 7 would go since the said companies would impact on the margin on account of difference in size and turnover. The Ld.AR further submitted that if the ground no. 7 has been adjudicated, all other grounds in respect of the software development would be an academic one. 8. The Ld.AR also submitted that the adjustment towards the outstanding receivables could not be made subject matter of the TP adjustment as the same is not covered under the provisions of section 92B of the Act. The Ld.AR further submitted that the outstanding receivables are related to the primary services rendered by the assessee and therefore separately determining the arms length price is not warranted as the same is subsumed in the arms length price of the principle transaction. The Ld.AR also relied on the judgments of the Hon'ble Delhi and Karnataka High Courts and the orders of the Coordinated Benches of Bangalore and Mumbai. The Ld.AR also submitted that the assessee is a debt free company and therefore they do not have any borrowings from external sources and therefore they were not required to pay intere....
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....urnover filter on the reason that these comparables have high turnover i.e. more than Rs. 200 crores. a) Infosys Ltd. b) L&T Infotech Ltd. - 24.83 c) Persistent Systems Ltd. d) Asper System India Pvt. Ltd. e) Thirdware Solutions Ltd. f) Cybage Pvt Ltd. g) Nihilent Technologies Ltd. 14. We have heard the rival submissions and perused the materials available on record. This Tribunal consistently holding that the turnover filter to be applied between Rs. 1 crore to Rs. 200 crores and if the comparable from the software development segment exceeds Rs. 200 crores, the same to be excluded from the list of comparables. Accordingly, we direct the AO/TPO to consider the segmental financials of the above company and if it is more than Rs. 200 crores, those companies to be excluded in view of the order of the Tribunal in the case of Autodesk India Pvt. Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore - Trib), wherein held as under:- 17.7 We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital ....
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....ini India (P.) Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regul....
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.... most of the companies turnover is more than 10 times of the assessee's company. Considering the said fact, the Coordinated Benches had deleted the said companies from the list of comparable companies. If the above companies are excluded, the submission of the assessee that they would fall within the range of the 35th percentile and the 65th percentile of the data set and consequently, the international transaction of the provision of software development services would be at arms length seems to be a reasonable one. Since the AO had included the above said companies while arriving the arms length price, we direct the AO to recompute the arms length price by deleting the above said companies mentioned in ground no. 7 and thereafter, if necessary, arrive the correct arms length price by following the due process of law. 18. The another dispute raised by the assessee is about the outstanding receivables could not be subjected to TP adjustment since the same are not international transactions. We have also considered the judgments of the Hon'ble Delhi and Karnataka High Courts in support of their said submissions. We have also considered the another submission that the assessee is ....