TaxTMI 
TaxTMI 
2020 (4) TMI 922
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....the Income Tax Act, 1961 ('the Act') on the following grounds: That on the facts and circumstances of the case and in law: 1. The learned AO/Transfer Pricing Officer ('TPO'), based on the directions of the DRP, erred in law and in facts, by making an addition of Rs. 221,11,804 on account of adjustment to the arm's length price in respect of the international transaction relating to provision of software development services by the Appellant to its Associated Enterprise ('AE'); 2. The learned AO/TPO and the learned DRP have erred, in law and in facts, by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act, read with the Income Tax Rules, 1962 ('Rules'), conducting a fresh economic analysis for the determination of the Arm's Length Price ('ALP') in connection with the impugned international transaction of software development services, and holding that the Appellant's international transaction is not arm's length; 3. The learned AO/TPO has erred, in law and facts, by exercising his powers under section 133(6) of the Act to obtain informa....
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....stment without appreciating the fact that the Appellant is a captive service provider of the AE; 7. The learned AO/TPO and learned DRP have erred, in lawand in facts, by not making suitable adjustments on account of differences in the risk profile of the Appellant vis-à-vis the comparables, while conducting comparability analysis; 8. The learned AO/ TPO and the learned DRP have erred, in law and in facts, by computing the arm's length price without giving benefit of +/-3 percent under the proviso to section 920(2) of the Act; 9. The learned AO has erred, in law and in facts, in imposing the interest under Section 234A and Section 234B of the Act; 10. The learned AO has erred, in law and in facts, by initiating penalty proceedings u/s 271(1)(c) of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the la....
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....en Technologies Limited (Segmental) 17.30% 22 Silverline Technologies Ltd 14.25% 23 Thinksoft Global Services Limited 13.73% 24 Thirdware Solutions Limited 18.12% 25 Ybrant Digital Limited (Ermerly known as LGS Global Ltd) 13.60% 26 Zylog Systems Limited 29.04% Arithmetical Mean 12.83% As average margin of these comparables were 12.83% is, assessee held its transaction to be at arms length. 6. Ld. TPO applied following filters to comparables selected by assessee and accepted comparables viz., Larsen and Toubro Infotech Ltd, mind tree Ltd, persistent systems Ltd, RS software (India) Ltd and CG-VAK Software and Exports Ltd. S. No. Filters 1 Companies whose data for FY 2012-13 is not available - excluded 2 Companies whose Software development service income < Rs. 1 Crore - excluded 3 Companies whose software development services revenue is < 75% ofthe total operating revenues - excluded 4 Companies which have more than 25% related party transactions of the sales - excluded 5 Companies which have less than 75% of the sales as export service income - excluded 6 Companies ha....
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....f these comparables have not been analysed/verified. 10.3. Considering the submissions advanced by both sides, we note that comparable arises out of assessment records and no new facts needs to be referred to for adjudicating the same. We also refer to the decision of Special Bench in case of DCIT us Quark Systems, reported in (2010) 38 SOT 307, wherein it was held that; " ..... even if assessee had taken 'D' as a comparable in its transfer pricing audit, still it was entitled to point out to Tribunal that said enterprise had wrongly been taken as a comparable." 10.4. In lieu of the above, respectfully following the ratio is laid down by Hon'ble Supreme Court in case of Jute Corporation India vs CIT reported in 187 ITR 688 and National Thermal Power Corporation vs CIT reported in 229 ITR 383, and DCIT vs Quark Systems (supra), we admit additional ground raised by assessee. Accordingly Additional ground no.11 raised by assessee stands admitted. 11. Before we undertake the comparability analysis, it is sine qua non to understand functions performed, assets owned and risks assumed by assessee under this segment. 11.1. Functions: In TP study at pa....
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....both sides in light of records placed before us. 12.3.1. Annual report of this comparable has been placed at page 510-713 of paper book. Profit and loss account at page 610 reveals that assessee earns revenue from operations amounting to Rs. 12, 945.12 crores. Scheduled 22 shows that the entire revenue has been earned from sale of software services. At page 616 of paper book in notes forming part of consolidated financial statements suggest that revenue recognition also involves revenue from royalty. It is also clear at page 603 that this company is exposed to risks unlike assessee that is a captive service provider. Under such circumstances we do not find it appropriate to consider this comparable in the finalist. It is noted that in preceding assessment year this Tribunal has excluded this comparable on these dissimilarities. Assessee has been found to be a captive service provider even during the year under consideration and a high risk bearing company cannot be considered to be a comparable with assessee which is a risk mitigated company. Accordingly we direct Ld. AO/TPO to exclude this company from final list. 13. In additional ground assessee seeks exclusion of Larse....