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TMI Blog2014 (11) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... odology adopted by Appellant in allocating the common/indirect costs among its various business segments. 3. The learned AO has erred in law and in fact, in disallowing the software expenses incurred amounting to Rs. 77,82,476 which were in the nature of 'reimbursements' and hence no taxes were required to be deducted in relation to such payments made. 3. The assessee is a company. It is engaged in the business of rendering software development services, besides marketing and sales support services, management services, etc. The assessee was entitled to claim deduction u/s. 10A and 10B of the Act. While computing the eligible deduction, the AO reduced from the export turnover communication expenses in the nature of lease line charges and internet charges from the export turnover. According to the assessee, such exclusion is not contemplated by the provisions of Explanation 2 (iv) to section 10A of the Act, which defines 'export turnover'. The assessee made an alternative prayer that in the event of such charges being excluded from the export turnover, the same should also be excluded from the total turnover, while computing deduction u/s. 10A/10B of the Act. 4. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards, the AO disregarded the methodology adopted by the assessee to allocate the common expenses among its business segments. The AO has reallocated the common expenses on the basis of the revenue (turnover) of each of the business segments (excluding the product replacement services segment as no common expenses are allocable as the entire operations of this segment having been outsourced). The AO, while adopting the turnover/revenue basis for apportionment of common expenses was of the view that the same is adopted for the sake of continuity as well as to follow commonly accepted and royal method to distribute the expenses. Further, the AO has opined that the revenue method has been held to be much superior to the head count method in as much as it takes care of all issues and revenue generating activity including asset base, marketing effort, complexity of the business, value creation and profitability of each individual segments of the business of the Assessee. 8. The DRP confirmed the action of the AO. 9. At the time of hearing, it was brought to our notice that in assessee's own case for the A.Y. 2008-09 in ITA No.1510/Bang/2012, by order dated 31.10.2013, has upheld the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is a plausible view though it could possibly be a debatable view. It was held that merely because there can be more than one method of apportioning common expenses between STPI and domestic unit, it cannot be said that the method of head-count followed by the assessee should be discarded that too midway even though it was not questioned at any time in the past. While referring to the observations of the Hon'ble Supreme Court in the case of Hukumchand Mills, the Hon'ble High court observed that where alternative methods of apportioning of expenses are recognized and there is no statutory or fixed formula, the endeavour can only be towards approximation without any great precision or exactness and if such is the endeavour, it can hardly be said that there is an attempt to distort the profits. Thus it can be seen that where two basis of apportionment are available, following one of the basis consistently is to be accepted. As the claim of deduction u/s 10A during the relevant assessment year is the 9th year in which the assessee is claiming the deduction u/s 10A and the revenue has accepted the method of allocation of expenses in all the earlier assessment years, we are of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source on payments made on software expenses which were claimed as revenue expenses. The assessee submitted that the software expenses were payments made by it to CSI and were reimbursements hence tax at source was not to be deducted. The AO however held that the absence of profit element in cross-charges as claimed by the Assessee was neither explained by assessee nor could it be independently verified and ascertained. The AO was of the view that as TDS has not been deducted on the revenue expenses claimed and therefore the said amount is liable for disallowance u/s.40(a)(ia) of the Income-tax Act. Thus a sum of Rs. 77,82,476/- being inter-company charges paid by the Assessee to CSI was accordingly brought to tax u/s.40(a)(ia) of the Act. The DRP confirmed the action of the AO. 13. At the time of hearing, a query was put to the ld. counsel for the assessee as to whether the debit notes raised by CSI for software purchase and the agreement for use of the software purchased from CSI were filed before the lower authorities and as to whether it was substantiated before the revenue authorities that payments in question are pure reimbursements with no profit element involved. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee filed a Transfer Pricing analysis. The Assessee adopted TNMM as the most appropriate method. The Profit Level Indicator (PLI) chosen was Operating profit to operating cost. The assessee proposed 17 comparable companies out of which the TPO accepted 5 comparable companies and rejected the 12 comparables. On his own, the TPO selected 6 companies and arrived at a final set of 11 comparables and their operating margins as follows:- Sl. No. Name of the Comparable Sales (in Rs.) Cost (in Rs.) Margin 1. Kals Information Systems Ltd 2,14,04,686 1,87.93,813 l3.89% 2. Akshay Software Technologies Ltd. 12,23,21,483 11,31,49,350 8.11% 3. Bodhtree Consulting Ltd. 16,05,75,212 9,89,56,821 62.27% 4. R S Software (India) Ltd. 1,49,57,12,634 1,36,01,02,589 9.97% 5. Tata Elxsi Ltd. (segmental) 3,78,43,03,000 3,14,63,15,000 20.28% 6. Sasken Communication Technologies Ltd. 4,05,31,20,000 3,18,69,97,000 27.91% 7. Persistent Systems Ltd. 5,19,69,10,000 3,67,52,70,000 41.40% 8. Zylog Systems Ltd. 7,34,93,51,475 6,81,69,98,160 7.81% 9. Mindtree Ltd. (seg) 7,93,22,79,326 5,74,06,73,058 5.52% 10. Larsen and Toubro Infotech 19,50,83,81,374 15,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perating Income Income from software development services Other Income (Forex Gain) Operating Revenue ('OR') Expenditure Segmental cost Less: Interest Cost Add: Miscellaneous Expenses 9,65,43,04,981 - 9,65,43,04,981 37,89,23,185 9,65,43,04,981 10,03,32,28,166 890,42,73,643 1,75,11,868 8,90,42,73,643 1,75,11,868 888,67,61,775 1,78,20,078 888,42,73,643 1,75,11,868 Operating Cost ('OC') 8,90,45,81,853 8,90,45,81,853 Operating Profit ('OP') 74,97,23,128 1,12,86,46,313 OP/OC 8.42% 12.67% 20. The DRP, however, did not agree with the submissions made by the assessee and it held as follows:- " ........ However, the decision of the TPO to exclude foreign exchange gain/loss is correct for the reasons summarized below. * All the decisions cited by the taxpayer pertain to the issue of whether foreign exchange gain/loss is an allowable expense or whether it forms part of sale. There is no dispute regarding whether exchange gain is business income of foreign exchange loss is business expenditure. The issue is whether the foreign exchange gain/loss forms part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is given as Annexure-I to this order. It can be seen from the aforesaid chart given by the assessee that the total foreign exchange gain on account of realization of proceeds from debtors, taken to creditors, inter-company statements etc. was a sum of Rs. 179,01,08,756. Out of the above, the assessee on his own has excluded foreign exchange fluctuation on account of advances towards share capital charged to P&L account and foreign exchange fluctuation in the matter of purchase of fixed assets charged to P&L account. It is thus clear from the chart that a sum of Rs. 37,89,23,185 which was sought to be added as part of the operating income on rendering software development services is only on account of transactions of rendering software development services by the assessee to its AE and the foreign exchange fluctuation at the time of realization of the payment for rendering software development services. It is therefore clear that the foreign exchange fluctuation in question has to be treated as part of the operating income of software development services segment of the assessee and the operating profit to operating cost has to be determined accordingly. The DRP has refuse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. ITO, ITA No.7633/Mum/2012, order dated 6.11.2013. In this case, the Tribunal followed the decision rendered by the Mumbai Bench of the Tribunal in the case of Wills Processing Services (I) P. Ltd., ITA No.4547/Mum/2012. In the aforesaid decisions, the Tribunal has taken the view that Bodhtree Consulting Ltd. is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology. The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid decision of the Mumbai Bench of the Tribunal, we hold that Bodhtree Consulting Ltd. cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.3856 (Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and market leader assuming all risks leading to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case. Reference was made to the Pune Bench Tribunal's decision of the ITAT in the case of Bindview India Private Limited Vs. DCI, ITA No. ITA No 1386/PN/1O wherein KALS as comparable was rejected for AY 2006-07 on account of it being functionally different from software companies. The relevant extract are as follows: "16. Another issue relating to selection of comparables by the TPO is regarding inclusion of Kals Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185-186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185-186 of the Paper Book from the website of the company to establish that it is engaged in providing of I T enabled services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus on this aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from the list of comparables. (ii) Flextronics Software Systems Ltd. : The learned TPO has considered this company as a comparable based on 133(6) reply wherein this company reflected its software development services revenues to be more than 75% of the "software products and services" segment revenues. Flextronics has a hybrid revenue model and hence should be rejected as functionally different. Based on the information provided under "Revenue recognition" in its annual report, it can be inferred that the software services revenues are earned on a hybrid revenue model, and the same is not similar to the regular models adopted by other software service providers. The learned representative pleaded that a regular software services provider could not be compared to a company having such a unique revenue model, wherein the revenues of the company from software/product development services depends on the success of the products sold by its clients in the marketplace. Hence, it would be inappropriate to compare the business operations of the assessee with that of a company following hybrid business model comprising of royalty income as well as regular software services income, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e list of six comparables and hence there remains only four companies as comparables, as listed below:" 26.5. Following the aforesaid decision of the Tribunal, we hold that M/S.Tata Elxsi Ltd. should not be regarded as a comparable. 27. LIST OF COMPANIES WHICH WERE CHOSEN AS COMPARABLE BY THE ASSESSEE, BUT WHICH WERE REJECTED AS COMPARABLE BY THE TPO, WHICH THE ASSESSEE WANTS TO INCLUDE IN THE LIST OF COMPARABLE:- 27.1 Evoke Technologies Pvt. Ltd. 27.2 Maverick Systems Ltd. 27.3 Quintegra Solutions Ltd. 27.4 Goldstone Technologies Ltd. (A) The TPO rejected the aforesaid companies as not comparable for the reason that more than 75% of the revenues is not from exports. In this regard, at para 3.5 of the TPO's order, the TPO adopted a filter by which he excluded companies where the software development services revenue is less than 75% of the total operating revenues. On this basis, the aforesaid 4 comparables were excluded. The DRP confirmed the order of the TPO. The submission of the ld. counsel for the assessee before us was that in case of Evoke Technologies Pvt. Ltd. and Maverick Systems Ltd., admittedly, the export revenues during the previous year relevant to A.Y. 2009-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 31.12.08 for including it in the list of comparables. It was, however, stressed that this case ought not to have been excluded on this count alone, when it was otherwise comparable. The ld. DR opposed this contention by placing reliance on certain decisions in which it has been held that if the data for the financial year of the comparable case similar to that of the tested party is not available, then, such case should be expunged from the list of comparables. 11.3. In order to appreciate the rival submissions on this issue, it would be apt to note the relevant part of sub-rule (4) of Rule 10B which is as under:- '(4) The data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into.' 11.4. On circumspection of the above part of this sub-rule, it comes to fore that the comparability of an uncontrolled transaction can be analysed with the 'data relating to the financial year' in which the transaction has been entered into. As per this mandate, it is clear that if the tested party has March ending, then the comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the data of the financial year in which the assessee has entered into an international transaction can be easily deduced, then there is no reason for excluding such an otherwise comparable case. 11.7. We find that R. Systems International Ltd. has been excluded by the TPO solely for the reason that its financial year is different without considering that the data for the financial year adopted by the assessee can be easily compiled from the audited statements of such company. We, therefore, set aside the impugned order on this issue and remit the matter to the TPO/AO for including the case of R. Systems International Ltd. in the list of comparables by working out the figures relevant to the financial year ending 31.3.09 from the audited accounts of R. Systems International Ltd." 27.7. Following the aforesaid decision of the Tribunal, we direct the TPO to cull out the financial results of these two comparable companies for the period relatable to the assessee's financial year and thereafter consider these two companies as comparables. We hold and direct accordingly. 27.8 CG-Vak Software & Exports Ltd. (D) (i) As far as this company is concerned, the TPO rejected the same by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronment with most of the risk being assumed by its AE. The Appellant bears lesser limited business risks than independent comparable companies due to the nature of its revenue model as it is guaranteed profits by way of a mark-up on costs incurred, in provision of the software development services. However, the independent companies have to bear the vagaries of the economic and business factors that are prevailing in the industry and thus could either incur losses or earn profits based on market conditions. 17.2 Rule l0B(l)(e)(iii) of the Rules provides that an adjustment should be made to the profit margin of independent comparable companies to take into account the differences in functions and risks. The OECD Transfer Pricing guidelines also recognize adjustments to be made to account for differences between controlled and uncontrolled situations that would significantly affect the price charged or return required by independent enterprises. Accordingly, controlled and uncontrolled transactions are comparable only when adjustments with respect to significant differences between them in terms of risks assumed is made. 17.3 In the submissions made to the leaned TPO, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be made for want of method to do so nor has it been established that there is a material effect that is affecting the comparisons due to risk level. If the taxpayer is suggesting that there exists a difference in the risk level assumed by the tested party and uncontrolled comparables, it is academic in nature and not based on any study whose results has been validated. It is not out of place to reiterate that single customer risk is a huge risk which the uncontrolled comparables are not assuming. By having more customers, the risk is shared or spread. In other words, if one customer goes out of business still there are others which will sustain the business of the tested party. But in case of the taxpayer there being only one client, the entire risk is concentrated on one client, and therefore. if the client is out of business the taxpayer will also be out of business. Earlier the argument given about the country risk was that EU & US are having better credit rating as compared to India. This argument is no longer valid as their credit rating is also on a downward trend. and moreover in case of uncontrolled comparables we are taking the filter of export sales >75%. Most of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived, the assessee submitted as follows:- "4.2 Functions Buys spare parts from Cisco Keeps inventory Supplies to end customers at its own cost Ships back replacement to Cisco 4.3 Assets Employs own assets. The taxpayer keeps a huge inventory as shown below. Opening stock as on 01-04-2007 : Rs. 2,252,138,000/- Closing Stock as on 31-03-2008 : Rs. 1,14,89,47,000 The other assets employed include manpower costs. storage costs, logistics costs etc. 4.4 Risks The taxpayer is claimed to be a Contract service provider with assured but very low markup. In fact as discussed below in detail the taxpayer carries out all the functions of a trader/distributor. It bears the risk relating to inventory carrying. It is subjected to customs and Vat etc on the goods purchased and sold etc. the actual characterization of the taxpayer has been discussed below in detail. 4.5 Justification of Transfer Price by Taxpayer Taxpayer has furnished the following segmental accounts in its TP analysis. Particulars Amount Income from Sale of goods and provision of services - OPERATING INCOME 2233620846 Total cost OPERATING COSTS 2413930963 OPERATING PROFIT l80310117 Cost of goods sold 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 404.51 208.15 - 6.23 145.45 56.47 13.96% Arithmetic mean margin 9.26% 4.13 Computation of Arms Length Price: Arm's Length Mean Margin on cost 9.26% Operating Cost 2,413,930,963 Arms Length Price (ALP) 109.26% of Operating Cost 2,637,460,970 Price Received 2,463,723,146 Shortfall being adjustment u/s. 92CA 173,737,824 The above shortfall of Rs. 173,737,824/- is treated as transfer pricing adjustment u/s. 92CA in respect of Product Replacement Services segment of the taxpayer's international transactions. 36. The DRP confirmed the order of the TPO. At the time of hearing, it was brought to our notice that in the case of assessee for the A.Y. 2006-07, similar issue regarding determination of ALP in respect of product replacement services segment had come up for consideration in ITA No.1410/Bang/2010 and the Tribunal, in its order dated 30.8.2011, has held as follows:- "7.1. Having heard both the parties and having considered the rival contentions, we find that the determination of ALP of the international transaction between the assessee and the AE in USA as regards the 'product replacement service' is before us. It is not in dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises from an associated enterprise is to be resold to an unrelated party. 7.3 In the case before us, the purchase from and sale to is the same associated enterprise. The reason given by the TPO for adopting the re-sale price method is that the assessee is a trader/distributor of the spares of its associated enterprise. We are not able to agree with this finding of the TPO. A trader is a one who purchases the goods by transfer of ownership over the goods and is free to fix the re-sale price and also is free to choose the customers to whom he would sell the goods. Likewise, in the case of distribution also the re-sale price can be fixed by the distributor and seller has no influence whatsoever in fixing such a resale price. However, in the case before us, though the assessee is becoming the owner of the goods imported, but, by virtue of the product replacement services agreement, he has no right to fix the resale price or to choose the customer to whom the products are to be sold. It is clear from the agreement that the assessee purchases the spare parts to be sold to its associated enterprise only and for doing so, it earned 1% of mark up on the value of the products and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while billing the US company for the sale of the products. The services provided by the assessee are akin to that of the C & F agents who are responsible for the safe keeping and transport of the goods to the clients on the direction of the principal. The comparables adopted by the assessee are also performing similar functions. 8.1 As already brought out by the counsel for the assessee the assets employed and the risk undertaken by the assessee are nil. All these factors are to be considered while selecting the comparables, but the TPO has not considered these aspects before rejecting the comparables selected by the assessee. As regards the comparables selected by the TPO, as rightly pointed out by the counsel for the assessee, three of these comparables except Iris Computers are involved in trading and manufacturing activities and the segmental break up is not given. Further, the assets employed and the risk undertaken by these companies are also higher than the assessee. Therefore, we are in agreement with the learned counsel for the assessee that these companies have to be rejected as the comparables. The only comparable which can be accepted is Iris Computers and is to be acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning to the F.Y. ended 31.03.2009. The Financials of the Assessee in this segment which was bifurcated into two by the Assessee were as follows: Segment - Profit % as per TP Documents: Description Admin & Other Support Services Management Services Revenue 1491900613 12502544745 Total Cost 1374404584 1136594862 Operating Profit 117496029 113659883 Mark up on Cost 8.55% 10.00% 39. The TPO, however, did not agree with the TP analysis carried out by the assessee. He firstly held that it was necessary to distinguish management functions from advisory functions while choosing comparable companies. According to him Management services belong to a separate group of services and cannot be clubbed with advisory functions. He found that the Assessee in its TP study had considered comparable companies the underlying nature which has been treated as a common point was either advisory in nature, software services or marketing services. According to the TPO the above functions rendered were clearly distinguishable from the management services provided by the assessee. The TPO therefore rejected the comparable companies chosen by the Assessee. He thereafter held that fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and management services transaction are more in the nature of marketing support services and hence the TP study of the Assessee is proposed to be rejected was not correct. In this regard, the Assessee submitted that it had considered companies engaged in array of support services to benchmark its administrative support services transaction. In relation to management services transaction, the Assessee had considered companies engaged in consulting, analytics and advisory services for the purpose of benchmarking this transaction. Accordingly, the Assessee submitted that the observation of the TPO that comparables selected by the Assessee for both administrative support services and management services transaction are more in the nature of marketing support services was inappropriate and the documentation maintained by the Assessee should be accepted. 42. The TPO however rejected the TP analysis carried out by the Assessee holding that under the provisions of Sec. 92C(3)(C) read with Sec. 92CA of the Act the TPO may determine the arm's length price on the basis of such material or information or document available with him, if on the basis of material or information or documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03 ARITHMETIC MEAN MARGIN 24.11 45. The TPO computed the ALP as follows:- "8. Computation of ALP In view of the above discussion, it is concluded that the information as well as the data used in computation of the arms length price is not reliable and correct. Thus the provisions of Sec. 92C(3)(c) are invoked and the TP document is proposed to be rejected. The TPO proceeds to determine arm's length price of the international transactions entered into by you Administrative Services as under. 8.1 Methodology: TNMM as selected by you. 8.2 Profit Level Indicator: The TPO has also considered the same PLI as adopted by you in respect of Administrative Services. The Profit before interest and tax is considered for computing the operating margins. But, the incomes and expenses related to the operations of the relevant financial year alone is considered for the computation of operating margins of the comparables 8.3 Comparables: As discussed above 8.4 Data used: Data pertaining to the FY 2008-2009 as mandated under Rule 10B(4). 8.5 Computation of Arms Length Price: The arithmetic mean of the Profit Level indicators is taken as the arms length margin. (Please see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V - India BO to be at arm's length. (3) CSS BV - India BO being a branch office of a foreign company, is also taxed at a corporate income tax rate of 40% (excluding surcharge and cess). Whereas, Cisco India being a domestic company, is taxed at a corporate income tax rate of 30% (excluding surcharge and cess). Accordingly, if the TPO is considering the receipt of administrative support services not to be at arm's length in Assessee's hands, it would lead to a situation where CSS BV - India BO would need to pay a higher remuneration to Assessee for the receipt of the services. This would lead to a situation where in CSS BV - India BO expenses would increase leading to a lower taxable income and hence lower income being offered to tax (at the higher corporate tax rate of 40%). However, such income in the hands of Assessee from provision of administrative support services would be taxed at the rate of 30%. Accordingly, the Assesses submitted that there was no 'tax arbitrage' that the Cisco group would attain as a whole by receiving an arm's length remuneration for provision of services to CSS BV - India BO. 47. Besides the above, the assessee also submitted that the comparables ulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that the approach adopted by the TPO of combining the Administrative Support services and management/marketing services and making a comparison of the combined results has to be upheld as both the segments were inter connected. With regard to the comparability criteria adopted by the TPO, we have gone through the order of the TPO and also the nature of services rendered by the comparables chosen by the assessee. The chart showing all the details of the comparables chosen by the assessee and the comparables chosen by the TPO is annexed as Annexure-II to this order. We will now deal with the comparability of each of the companies and their comparability with that of the Assessee. 53. A COMPANIES CHOSEN BY THE ASSESSEE IN ITS ADMINISTRATIVE AND OTHER SUPPORT SERVICES: 53.1 Hindustan Housing Company Ltd.: This company is engaged in providing administrative services, house keeping services and other administration support services to Bajaj group of companies of which it is a part. This company has related party transactions to the extent of 88.23% and cannot be regarded as a comparable. 53.2 IDC India Ltd. : This company is in the business of market research and management co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting of electrical equipments and therefore cannot be regarded as comparable with that of the assessee. 53.11 PAE Ltd.: This company is in the business of distribution of lead acid storage batteries to provide power storage in power back-up systems. This company cannot be regarded as a comparable. 53.12 Salora International Ltd.: The Infocom Division of this company was selected for the purpose of comparison. This division is involved in the distribution of mobile handsets, laptops, LCD projectors, etc. and cannot be regarded as a comparable with that of the assessee. 53.B COMPARABLE COMPANIES IN MANAGEMENT SERVICES SEGMENT SELECTED BY THE ASSESSEE: 53.13 Akshay Software Technologies Ltd.: This company is involved in procurement, installation, implementation, support and maintenance of ERP products and services and providing professional services. It also offers SWIFT infrastructure, integration and outsourcing services to SWIFT users. This company, in our view, can be regarded as a comparable with that of the assessee. 53.14 Crisil Risk & Infrastructure Solutions Ltd.: This company is in the business of rating research. It also provides integrated risk management solutions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., cannot be regarded as a comparable with that of the assessee. 53.24 Synetairos Technologies Ltd.: This company is engaged in obtaining and executing development projects for development and maintenance of computer software and to provide systems and services in automation, computerization and related activities. In our view, this company cannot be regarded as comparable functionally, as rightly held by the TPO. 53.25 Computech International Ltd: This company is engaged in the business of software development and data processing, besides computer monitors and computer systems and therefore, cannot be regarded as a comparable with that of the assessee. 53.26 H S India Ltd.: This company is engaged in the operation of hotels and restaurant business, providing parking facilities, conference rooms, etc. It cannot be regarded as a comparable with that of the assessee. 53.C COMPANIES CHOSEN BY THE TPO AS COMPARABLE FUNCTIONALLY PROVIDING ADMINISTRATIVE AND OTHER SUPPORT SERVICES AND MANAGEMENT SERVICES. 53.27 Apitco Ltd.: This company is engaged in the activities of skills development, tourism research studies, micro enterprise development, cluster development, energy related se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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