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2018 (8) TMI 1202 - AT - Income TaxTransfer pricing - arm s length price of international transaction related to provision of I.T. services - selection of comparable - inclusion and exclusions - Held that - In so far as E-Infochips Bangalore Ltd is concerned From a careful perusal of the profit of this company we find that this company is equipped to carry out high-end technology driven services and product development which is not the Profile of the assessee. This company has been rightly excluded from the final set of comparables by the DRP. Hence no interference is called for. Coming to Infinite Data Systems Private Limited tt can be safely concluded that the business profile of the Infinite Data Systems Private Limited does not match with that of the assessee. Therefore the DRP has rightly excluded this company from the final set of comparables. No interference is called for. Decided against the revenue.
Issues:
1. Grievance of the Revenue against the order of the DRP directing reduction/deletion of addition on account of arm's length price of international transaction related to provision of I.T. services. 2. Examination of international transactions by the TPO and determination of arm's length price. 3. Consideration of comparables for provision of I.T. enabled services and software development services. 4. Exclusion of specific comparables by the DRP and its justification. 5. Analysis of business profiles of excluded comparables in relation to the assessee's business. Issue 1: The Revenue appealed against the DRP's order to reduce/delete the addition on account of arm's length price of international transaction related to I.T. services. The Tribunal noted the Revenue's grievance but emphasized that allowing a new ground of appeal after the limitation period would be inappropriate unless for typographical errors. The Tribunal dismissed the Revenue's appeal, citing that the grievance lacked merit and could not alter the subject matter of the appeal. Issue 2: The TPO examined the international transactions of the assessee, focusing on provision of I.T. enabled services and software development services. The arm's length price for I.T. services was computed at INR 42,22,40,319, with a proposed adjustment of INR 2,19,48,198. For software development services, the arm's length price was INR 37,16,60,657, with a proposed adjustment of INR 3,65,02,107. The cumulative adjustment under section 92CA was determined at INR 5,84,50,305. Issue 3: The Tribunal considered the comparables used for I.T. enabled services, directing the exclusion of specific companies by the DRP. E-Infochips Bangalore Ltd and Infinite Data Systems Pvt. Ltd were excluded based on detailed analysis. E-Infochips was engaged in high-end technology services not matching the assessee's profile, while Infinite Data Systems' business profile did not align with the assessee's services. The Tribunal upheld the DRP's decision to exclude these comparables. Issue 4: The DRP justified the exclusion of E-Infochips and Infinite Data Systems from the comparables for I.T. enabled services. E-Infochips' focus on high-end technology services and product development, and Infinite Data Systems' technical consulting and infrastructure services were not in line with the assessee's business activities. The Tribunal concurred with the DRP's reasoning and upheld the exclusion of these comparables, finding no reason to interfere with the decision. Issue 5: After analyzing the business profiles of the excluded comparables, the Tribunal concluded that the DRP's decision to exclude E-Infochips and Infinite Data Systems was appropriate. The disparities in services provided by these companies compared to the assessee's offerings justified their exclusion from the final set of comparables. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the DRP's decision regarding the exclusion of specific comparables. This detailed analysis of the legal judgment covers the issues involved comprehensively, highlighting the key aspects of the Tribunal's decision and the reasoning behind the exclusion of specific comparables by the DRP.
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