2015 (11) TMI 1582 - ITAT MUMBAI

Transfer pricing adjustment - selection of comparable - Held that:- 3D PLM Software Solutions Ltd.- TPO is directed to verify the related party transactions of 3D PLM and if the contention of the assessee, that the RPT of 3D PLM is more than 25%, is found to be correct, 3D PLM Software Solutions Ltd. will be excluded from the final set of companies comparable to the assessee

Bodhtree Consulting Ltd. being a software product manufacturer, is not comparable to the assessee company.

Genesys International Corporation Ltd. is engaged in the business of providing Geospatial Information System or GIS services, which comprises of photogrammetric remote sensing, cartography, data conversion related computer based services and other related computer based services and that, therefore, this company is also functionally not comparable to the assessee company.

Genesys is engaged in the business of providing Geospatial Information System services, which is not at all the calling of the assessee. To reiterate, the assessee company is engaged in the business of providing low and contract software development services to its AE. Therefore, on this very basis, Genesys needs to be excluded from the set of comparables.

As seen if the Forex gain and the first three comparables, i.e., 3D PLM, Bodhtree Consulting Ltd. and Genesys International Corporation Ltd. are excluded, the OP/OC of the remaining nine comparable companies, as taken by the TPO, works out at 19.56%, as against the assessee’s OP/OC of 18.15%, which falls within the +/- 5% range, as provided in the proviso to section 92C(1) of the Act. Therefore, we find no need to go into the merits of the comparability of the remaining two companies, i.e., Cosmic Global Ltd. and Infosys Ltd. and we are not doing so.

deduction u/s 10A computation - Held that:- Net foreign exchange fluctuation gain booked by the assessee in its books of account is directed to be included in the export turnover for computing deduction u/s 10A of the Act.

For computation of deduction u/s 10A of the Act, the total turnover in the denominator and the export turnover in the numerator have to be read in the same manner. Therefore, the assessee is correct in contending that an equivalent amount of foreign exchange gain attributable to the delivery of goods outside India, as included in the total turnover by the AO, is also entitled to be included in the export turnover for proper computation of the deduction u/s 10A of the Act.