TaxTMI 
TaxTMI 
2026 (7) TMI 1485
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....rnished the same. Thereafter the Ld.TPO had issued a show cause notice and the assessee also submitted their objections. 3. The assessee in its TP document, had taken the 9 comparables in respect of software development services by applying certain filters and TNMM as the most appropriate method. The Ld.TPO had rejected the TP study of the assessee since the same has not applied the appropriate filters. The Ld.TPO had, issued show cause notice on that basis. The assessee also submitted their detailed objections. The assessee had selected 9 companies as comparables on the basis of search conducted in the public database viz., Prowess and Capitaline. The Ld.TPO also searched the databases viz., Prowess and AceTP and on the search result, the Ld.TPO had taken 18 companies as comparables. The Ld.TPO had considered the various filters adopted by him for selecting the 18 comparable companies. Based on the said final list of comparables, the Ld.TPO had determined the arms length price at Rs. 3,52,78,84,782/- as against the price received Rs. 3,25,51,77,861/- and treated the shortfall of Rs. 27,27,06,921/- as the transfer pricing adjustment u/s. 92CA of the Act in respect of software de....
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.... through the Prowess database had selected these companies as comparables and therefore the finding of the Ld.TPO is contrary to the TP study conducted by the assessee through the Prowess database. The Ld.AR further submitted that the assessee company as well as the two companies are functionally comparable companies and satisfied all the filters proposed by the TPO and therefore the exclusion of the two companies by the Ld.TPO is not in order. The Ld.AR further submitted that the assessee had demonstrated before the Ld.DRP that both the companies are appearing in the Prowess database and forms part of the search matrix and also submitted a screenshot of the search matrix in support of their contention. The Ld.AR relying on the annual report of the said companies and submitted that both the companies are functionally comparable to the assessee and therefore the company should be included for the purpose of arriving the arms length price. The Ld.AR also submitted that both the companies qualifies all other filters mentioned by the Ld.TPO in its order and therefore the non-inclusion of the said companies are bad in law. The Ld.AR also relied on the decision of this Tribunal in the ca....
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.... base and gave a finding that the said companies were not found place in the said database and therefore not taken the two companies as comparables while computing the arms length price. To disprove the said contention, the assessee had relied on the same Prowess database in which both the companies are available and in fact filed a screenshot of the database and therefore the non-availability of the companies in the database is not a genuine one. Further, when similar dispute arose in the appeal of another assessee for the very same A.Y. 2021-22, the Tribunal had given the following findings. "18. So far as five (5) comparables are concerned included by the assessee and rejected by the TPO i.e. i. Rate Gain Travel Technologies Ltd. ii. Toxsl Technologies Pvt, Ltd., iii. CES Ltd. (Segment Data of IT Services), iv. Infomile Technologies Ltd and v. Bennett Technologies Pvt. Ltd; 18.1 The assessee had provided the audited financials and functional profile of these comparables, and further raised that it was not the case that Ld. TPO did not find these comparables to be functionally dissimilar. All these comparables met the....
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....ionally dissimilar to the assessee. At the time of hearing, the Ld.AR made a submission that they are pressing to exclude the three companies Net4Nuts Ltd., Aptus Software Labs Pvt. Ltd. and Consilient Technologies Pvt. Ltd. since they are functionally dissimilar to the assessee. In support of their submissions, the assessee had also relied on the very same order of the Coordinate Bench of this Tribunal cited supra wherein this Tribunal had deleted the said companies as functionally dissimilar and therefore the same should not be taken as comparable companies. The relevant finding of the Tribunal is as follows: "24. Net4Nuts Ltd. The functional profile of this company is enclosed at Page 121 of the Factual PB-II. Perusal of the same reveals that, this company is engaged in the business of providing enterprise-wide solutions across multiple industries, ERP, cloud computing, custom software development, off-shore engineering services, designing, architecting developing and maintenance of high availability software products / solutions, mobile value-added services. The provision of such diversified services differs greatly from the SWD services provided by this company is thu....
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.... optimization services. Thus, it is not exclusively into software development and the provision of its services is diversified than the SWD services provided by the assessee. This company is thus not functionally comparable. 27.1 In view of the above detailed discussion, we direct the TPO to work out the PLI of the assessee, select the comparables as discussed above and workout the arm length price of the assessee with respect to the international transactions carried out by the assessee with its AE. Hence, the ground of appeal of the assessee is hereby partly allowed." 15. The cited order relates to the A.Y. 2021-22 and therefore the said findings are applicable to the facts of the case and we direct the AO to delete the above said companies from the list of comparables. 16. Insofar as ground no. 7 about the computation of notional interest on delayed receivables, the contention of the assessee is that the transactions are not international transactions and in any event, it cannot be treated as a separate international transaction independent of the principle transactions. The another contention made by the assessee is that they are not charging any interest on trad....