9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (3) TMI 1220 - AT - Income TaxTP Adjustment - Comparable selection - turnover filter - HELD THAT - Admittedly, on turnover filter, we are consistently holding that companies having above Rs.200 Crores turnover from the specified segment cannot be considered as comparables to assessee whose turnover in the said segment is less than Rs.200 crores. In the present case, there is no dispute that the turnover of the above companies is above Rs.200 crores as against the turnover of assessee company from the said segment is Rs.64.71 crores. See M/S. ACI WORLDWIDE SOLUTIONS PRIVATE LIMITED 2022 (5) TMI 1491 - ITAT BANGALORE We direct the AO/TPO to exclude 3 comparables in ITeS segment and 9 comparables in software development segment as the turnover are over Rs.200 crores. Ordered accordingly. Functional dissimilarity - Exclude the company M/s. Datamatics Business Solutions Ltd. from the list of comparables as this company is a KPO company and not comparable to assessee company. Manipal Digital Systems Pvt. Ltd. is directed to be excluded from the list of compar ables as functionally dissimilar. CES Limited be excluded from the list of comparables as it is providing both BPO and KPO services, cannot therefore be held as comparable. Charging of interest u/s 234A 234B - As submitted assessee filed return of income within the time stipulated in section 139(1) of the Act and as such there was no delay in filing the return of income - HELD THAT - The levy of interest u/s 234A of the Act is bad in law. In our opinion, this requires to be verified at the end of the AO if the return has been filed within the due date prescribed u/s 139(1) of the Act, there cannot be any levy of interest u/s 234A of the Act. With regard to levy of interest u/s234B of the Act, which is consequential and mandatory in nature and to be computed accordingly.
Issues Involved:
1. Transfer Pricing - Software Development Services Transaction and IT enabled Services Transaction. 2. Interest Levied Under Section 234A and 234B of the Income-tax Act. Issue-wise Detailed Analysis: 1. Transfer Pricing - Software Development Services Transaction and IT enabled Services Transaction: Grounds of Appeal: The assessee raised multiple grounds pertaining to the determination of the arm's length price (ALP) for international transactions, including the rejection and selection of comparable companies based on various criteria such as foreign earnings, employee cost, related party transactions, income from core services, turnover filter, accounting year, intellectual property, and extraordinary events. However, during the hearing, the assessee pressed only specific grounds (Nos. 14, 16, 18, and 19), and other grounds were dismissed as not pressed. IT Enabled Services Segment: The assessee sought the exclusion of three comparables (Infosys BPM Services Pvt. Ltd., SPI Technologies India Pvt. Ltd., and Tech Mahindra Business Services Ltd.) based on the turnover filter. The Tribunal consistently held that companies with a turnover above Rs. 200 crores cannot be considered comparable to the assessee, whose turnover in the segment is less than Rs. 200 crores. The Tribunal directed the exclusion of these companies. Software Development Service Segment: The assessee confined arguments to exclude eight comparables (L&T Infotech Limited, Mind Tree Limited, Persistent Systems Ltd., Infosys Ltd., Cybage Software Ltd., Tata Elxi Ltd., Nihilent Technologies Ltd., and R. Systems Ltd.) based on the turnover filter. The Tribunal applied the same consistent view and directed the exclusion of these companies as their turnover exceeded Rs. 200 crores. Functional Dissimilarity: The assessee argued for the exclusion of certain companies based on functional dissimilarity: - Datamatics Business Solutions Ltd.: The Tribunal found this company to be a Knowledge Process Outsourcing (KPO) service provider and directed its exclusion. - Manipal Digital Systems Pvt. Ltd.: The Tribunal noted that this company is engaged in multiple high-end services, including web development and mobile application development, and directed its exclusion. - CES Limited: The Tribunal observed that this company provides both BPO and KPO services and directed its exclusion. 2. Interest Levied Under Section 234A and 234B of the Income-tax Act: The assessee contended that the interest levied under section 234A was erroneous as the return of income was filed within the due date prescribed under section 139(1). The Tribunal directed the Assessing Officer (AO) to verify this claim. The interest levied under section 234B was deemed consequential and mandatory. Conclusion: The appeal was partly allowed, with the Tribunal directing the exclusion of certain companies from the list of comparables based on turnover and functional dissimilarity. The issue of interest under section 234A was remanded to the AO for verification, and the interest under section 234B was to be computed accordingly.
|
