TaxTMI 
TaxTMI 
2026 (10) TMI 152
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....on order and involve interconnected issues, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. The brief facts of the case emanating from the records are that the assessee is a company engaged in the business of implementing and customising SAP software for customers located across the globe, principally in the Middle East. For the assessment year under consideration, the assessee filed its return of income on 29.11.2016 admitting a total income of Rs. 6,41,35,760/-. The return was processed u/s. 143(1) of the Act and the case was thereafter selected for scrutiny. 4. As the assessee had entered into international transactions with its associated enterprises, a reference was made to the Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act. In its transfer pricing study, the assessee benchmarked the provision of information technology related services applying the Transactional Net Margin Method ("TNMM") as the most appropriate method, selected eleven comparables and arrived at a weighted average PLI of the comparables at 8.84% as against its own operating margin of 9.62% on operating costs, and accordingly claimed th....
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....companies from the final set. (c) The inclusion of R Systems International Ltd. was upheld, subject to a direction to the assessee to furnish the quarterly audited results and to the TPO to recompute the financial results on a financial-year basis therefrom. (d) The rejection of the assessee's own comparables, namely, TVS Infotech Ltd., Evoke Technologies Pvt. Ltd., Sankhya Infotech Ltd., Tejora Technologies Ltd., Globaledge Software Ltd. and Cheers Interactive (India) Pvt. Ltd., was upheld. (e) In respect of Symantec Software Solutions Pvt. Ltd., Synfosys Business Solutions Ltd. and Xoriant Solutions Pvt. Ltd., the matter was restored to the file of the TPO/AO for verification of the related party transaction filter, the persistent loss filter and the availability of data in the public domain respectively, and inclusion or exclusion as the case may be. These grounds were allowed for statistical purposes. (f) The ground relating to relief under sections 90/91 of the Act was allowed, following the decisions of the Hon'ble Karnataka High Court in Wipro Limited [2015] 62 taxmann.com 26 and CGI Information Systems and Management Consultants (....
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....d on differences in turnover, shareholding pattern, assets deployed, borrowing cost, selling and general administrative expenses and manpower cost were uniformly rejected by the ld.CIT(A) on the express reasoning that the net profit indicator under TNMM is less affected by transactional differences and does not require adjustment on account of routine costs. The upper turnover filter of ten times was upheld by placing reliance on Benu Networks Packet Switch (P.) Ltd. [2024] 168 taxmann.com 589 (Hyd.-Trib.), CIT v. Pentair Water India Ltd. [2016] 69 taxmann.com 180/381 ITR 216 and CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289/219 Taxman 26 (Del.). To that extent, the impugned order is entirely in accord with the very principle the Revenue canvasses before us. 14. The exclusion of the four comparables rests on an altogether different and narrower footing, namely, functional dissimilarity coupled with the absence of segmental results. Tolerance of routine cost differences under TNMM does not dispense with the threshold requirement of comparability of functions performed, assets employed and risks assumed prescribed by Rule 10B(2) of the Income Tax Rules, 1962....
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....nd the functional profile of each company. Nothing has been placed before us to demonstrate that any of these findings is contrary to the record, or that the decisions relied upon are distinguishable on facts. In our considered view, the conclusion reached by the ld.CIT(A) is a plausible view on the material available, and indeed the correct one. It calls for no interference. 17. Insofar as the restoration of the issues concerning Symantec Software Solutions Pvt. Ltd., Synfosys Business Solutions Ltd. and Xoriant Solutions Pvt. Ltd. to the file of the TPO/AO is concerned, we may observe that the ld.CIT(A) has not returned any final finding on inclusion; he has merely directed verification of the satisfaction of the relevant filters, the related party transaction filter, the persistent loss filter as understood in ACIT vs. MOL Maritime (India) (P.) Ltd. [2020] 120 taxmann.com 245 (Mum. - Trib.), and the availability of three years' data in the public domain. Such a direction causes no prejudice to either party, since the outcome will depend entirely upon the facts that emerge on verification. In view of the above, we uphold the directionsgiven by the ld.CIT(A). 18. The ass....
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....research, analytics and sales and marketing solutions in the case of Cheers Interactive (India) Pvt. Ltd. The assessee cannot ask that a strict test of functional comparability be applied to the Revenue's comparables and a relaxed one to its own. 21. The grounds relating to the profit level indicator, the computation of the median and the quantification of the adjustment are consequential to the composition of the final comparable set and require no separate adjudication; they will work themselves out when the TPO gives effect to the directions contained in the impugned order. 22. The grounds urging that the draft and the final scrutiny assessment orders were passed beyond the period of limitation and without jurisdiction are without substance. For the assessment year 2016-17, where a reference is made to the TPO, the extended period for completion of assessment expired on 31.12.2019, and the draft order u/s. 144C(1) of the Act was passed on 18.12.2019, well within time. The DRP having treated the objections as invalid by its order dated 26.02.2020, the final order dated 27.02.2020 is squarely within the period contemplated by section 144C(4) of the Act. No infirmity atta....