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TMI Blog2014 (12) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... pment services, in as much as, R&D facilities have been used by it in relation to development of a software for discovery of new drugs - It was engaged in bioforma and biotech manufacturing of customised I.T. solutions, manufacturing of trucks, and contract research activities. KALS Information Systems – Held that:- The Tribunal directed the AO to exclude this comparable on the ground that there is a difference in the asset base of both the companies. Flextronic Software Systems Ltd.- Ishir Infotech Ltd.- Held that:- The Tribunal held that the company cannot include a comparable as there is a clear contradiction in the contents of the annual report and the information obtained u/s 133(6), hence this comparable has to be excluded for the same reason. Sasken Communication Technologies Ltd. – Held that:- The company has to be excluded as it owns IPRs and had branded products. Tata Elxis Ltd. – Held that:- The Tribunal directed the exclusion of this comparable for the reason that the software developed by this company were used as tools in development of new softwares – Decided partly in favour of assessee. - IT(TP)A No. 5865/Del/2012 - - - Dated:- 31-10-2014 - SHRI J.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant had used 18 comparables in the software segment which had a margin of 13% (based on three year's weighted average) and 7 comparables in Market Support Services segment with a margin of 11% (based on three years weighted average) [see Table 1 above]. Therefore, the margin earned by the appellant was held to be at arm's length by the TP study. The approach adopted by the TPO: 5.3. The TPO rejected the comparable analysis conducted by the appellant. TPO also gathered information from various industry studies to understand the business profile of the industry. TPO arrived at his own independent conclusions based on such studies. He rejected some of the comparables of the appellant. The TPO conducted a fresh search for the comparables. While doing so, TPO used different quantitative filters to find a closer set of comparable companies. In the process, TPO used power u/s 133(6) to gather additional information from some of the comparable companies. TPO issued a detailed show cause notice to the appellant. The appellant replied to such show cause notices. The 1 PO considered the reply filed by the appellant before passing the order. TPO used single year data and allowed wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr.Peeyush Jain, on the other hand, opposed the contentions of the assessee. He submitted that: (a) On the issue of employee cost filter, the TPO had laid down that all companies which have employee cost which is greater than 25% of their total revenues would be taken as comparables and this view of the TPO was upheld by the Delhi Bench of the Tribunal in the case of Navisite India Pvt.Ltd., in ITA no.2329/Del/2012 2013-TII-153-ITATDEL- TP. He pointed out that the author of the order in the case of Navisite India Pvt.Ltd. and in the case of Motorola (supra) was the same. (b) He relied on the decision of the Delhi A Bench of the Tribunal in the case of Avaya India (P) Ltd. in ITA No. 5150/Del/2010 (2011-TII-139- ITAT-DEL-TP) specifically at para 19 and submitted that it was the TPO in that case who fixed the range of 30% to 60% for picking up comparables with filter of wages to sales ratio and it was only this decision of the TPO which was upheld. He further relied on the case of Vedaris Technology Pvt.Ltd. ITAT Delhi H Bench of the Tribunal in ITA 4372/Del/2009 order dt. 31.3.2010 specifically at para 5.3. The sum and substance of his submission is that the Tribunal in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning, came to a conclusion that these comparables should be eliminated. On a query from the Bench he agreed that in the case where employee cost filter has to be applied, the issue if necessary, may be restored to the file of the TPO for verification. 7. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, on perusal of material on record, order of lower authorities and case laws cited, we hold as follows. 8. We are bound by the order of the Co-Ordinate Bench of the Tribunal in the case of Motorola (supra) for the reason that the facts as well as the order of the T.P.O. are identical. 8.1. We now consider each comparable by referring to the order of the ITAT in the case of Motorola (supra). (i) Accel Transmatic Ltd.:- The Tribunal in the case of Motorola Sales (supra) at para 89 restored the issue to the file of the TPO to consider the inclusion/exclusion of this comparable depending upon the finding of RPT. Consistent with the view taken therein, we restore the matter to the file of AO for following the decision of the Tribunal in the case of Motorola (supra). (ii) Avani Cimcon Technologies Ltd:- The Tribunal directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., we restore this comparable also to the file of the TPO. (x) Lucid Software Ltd.:- As the comparable has been excluded by the TPO himself for the AY 2008-09 the TPO is directed to exclude the comparable as in the case of Motorola (supra). (xi) Sasken Communication Technologies Ltd.:- The company has to be excluded as it owns IPRs and had branded products by following the decision of the Tribunal in the case of Motorola (supra) at para 111. (xii) Tata Elxis Ltd.:- The Tribunal directed the exclusion of this comparable for the reason that the software developed by this company were used as tools in development of new softwares at para 113.1 of the order. Consistent with the view taken therein, we direct the AO to exclude this comparable. (xiii) Wipro Ltd.:- For the reasons given while directing exclusion of Infosys Ltd., as a comparable we direct the AO to exclude this comparable also. (xiv) Persistent Systems Ltd.:- This should be excluded on the same grounds on which the Ld.CIT(A) has excluded the case of Megasoft. 9. The sum and substance of our order is that the TPO as well as the AO are directed to follow the judgement of I Bench of the Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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