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TMI Blog2015 (1) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.08%, that of Aztech Software Ltd. was 17.78% and that of Geometric Software Ltd. was 19.34%. Coordinate Benches of the Tribunal are consistently following 15% as cut off mark for applying the RPT filter. Accordingly, we direct exclusion of Megasoft Ltd., Aztech Software Ltd. and Geometric Software Ltd. from the comparables. The AO is, therefore, directed to re-compute the ALP after excluding the companies directed by this Tribunal in this order. - Decided in favour of assessee by way of remand. Computation of deduction u/s 10A - Held that:- Computation of deduction u/s 10A of the Act and to adjust both export turnover as well as total turnover by reducing 50% of data link charges of 33,96,939/- for computing deduction u/s 10A of the Act is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). Thus we allow the said ground of appeal of the assessee and direct the AO to exclude data link charges both from the export turnover as well as the total turnover for computing deduction u/s 10A of the Act. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 200 crores since the assessee's turnover is only ₹ 80 crores. The learned Departmental Representative, however, opposed the additional ground on the ground that the assessee has not adopted such filter at the time of its own TP study and selecting the comparables and has not raised any objection before the Transfer Pricing Officer (TPO) or the Disputes Resolution Panel(DRP). Therefore, according to him, the assessee is precluded from raising such a ground at this stage. 2.3 Having regard to the rival contentions and the material on record, we find that the additional ground raised by the assessee is for the adoption of the turnover filter in selecting the comparables for determination of the ALP of the international transaction. This Tribunal, in the case of Agile Software Enterprise Pvt. Ltd. in IT(TP)A No.1172/Bang/2010 dated 26/09/2014 for assessment year 2006-07 has held that this point can be raised at any stage of the proceedings. In view of the same, we admit the said additional ground of appeal for the turnover filter to be applied and the exclusion of the comparable companies from the list of comparable companies. The learned counsel for the assessee has filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable by the Tribunal in the case of Agile Software Enterprise Pvt. Ltd., (cited supra) wherein it was directed that these companies are to be excluded. He has drawn our particular attention to the relevant paragraphs of the said order. 3.1 The learned Departmental Representative, however, supported the orders of the authorities below. 3.2 Having regard to the rival contentions and the material on record, we find that Agile Software Enterprise Pvt. Ltd., is a company which is engaged in software development services and the relevant assessment year before the Tribunal is also assessment year 2006-07. In the case before us also, the assessee is a software development services company and not a software product company. Therefore, facts of the case before us are similar to the facts of the case before the tribunal in the case of Agile Software Enterprise Pvt.Ltd.(cited supra) In view of the same, the decision of the Tribunal in the case of Agile Software Enterprise Pvt.Ltd.(cited supra) is very much applicable to the case before us and respectfully following the decision of the co-ordinate bench of the Tribunal on similar set of facts, we hold that these companies are also to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aspect, assessee succeeds." Based on all the above, it was submitted on behalf of the assessee that KALS Information Systems Limited should be rejected as a comparable. We have given a careful consideration to the submission made on behalf of the Assessee. We find that the TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act. This information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.6.2010 to the TPO. We also find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. The ld. DR, on the other hand, relied on the order of the TPO. 50. We have considered the submissions and are of the view that the plea of the assessee that the aforesaid company should not be treated as comparables was considered by the Tribunal in Capgemini India Ltd (supra) where the assessee was software developer. The Tribunal, in the said decision referred to by the ld. counsel for the assessee, has accepted that this company was not comparable in the case of the assessees engaged in software development services business. Accepting the argument of the ld. counsel for the assessee, we hold that the aforesaid company should be excluded as comparables." 13. The facts and circumstances under which the aforesaid companies were considered as comparable is identical in the case of the Assessee as well as in the case of Triology E-Business Software India Pvt.Ltd. (supra). Respectfully following the decision of the Tribunal referred to above in the case of Triology EBusiness Software India Pvt.Ltd.(supra), we direct that the following companies (listed as Sl.No.4 & 15 of the list of comparable companies chosen by the TPO and listed in para-4 of this order) be excluded from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal held as follows:- "14. As far as comparable at Sl.No.6 & 24 are concerned, the comparability of the aforesaid two companies with that of the software service provider was considered by the Mumbai Bench of the Tribunal in the case of Telcordia Technologies India Private Ltd. (supra) wherein on the aforesaid two companies, the Tribunal held as follows:- "7.6 Flextronics Software Systems Ltd.: As per the statement of the learned AR, this company is also involved in the development of the software product and is also involved in BPO services, besides joint software consultancies for the use in telecommunication industries. Thus, being product and service company, it cannot be taken as comparable. However, the learned CIT DR has amply controverted the said contention of the learned AR by submitting before us a copy of profit and loss account of the company for the relevant assessment year, obtained from the public domain. From the perusal of the profit and loss account of the said company, it is seen that the revenue sales from services constitutes almost 90% and the product sales is only 10%. Thus, in this case also not much adjustment is required to be made for taking the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal in the case of EMC Data (supra). EMC Data was also doing software development services in one of its segments and TPO had considered Lucid Software Ltd. also for comparison. The coordinate Bench in the aforesaid decision held as under:- "14. The learned counsel for the Assessee brought to our notice that the comparable company chosen by the TPO at sl.No.10 of the chart given in para-4 of this order viz., Lucid Software Limited, has to be excluded as functionally not comparable with that of the assessee in view of the decision of the Mumbai Bench of the Tribunal in the case of Telcordia Technologies India Private Ltd. in ITA No.7821/MUM/2011, which was followed by the ITAT Bangalore Bench in the case of Logica Private Ltd. ITA No.1129/Bang/2011 for AY 07-08, wherein it was held as under:- "7.2 Lucid Software Limited It has been submitted before us that this company, besides doing software development services, is also involved in development of software product. The learned AR has tried to distinguish by pointing out that product development expenditure in this case is around 39% of the capital employed by the said company, and, therefore, such a company cannot be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above companies the RPT filter exceeded 15%. According to him, RPT filter has been upheld by this Tribunal in a host of decisions including that of EMC Data (supra). Per contra, the ld. DR supported the orders of authorities below. We have perused the orders and heard the rival contentions. Application of RPT filter while selecting the comparables has been held to be an appropriate criteria by this Tribunal in a number of decisions. In the case of EMC Data (supra), it was held as under:- 16. As far as comparable companies at Sl.No.1 & 2 &19 of the chart of comparable companies chosen by the TPO at page-4 of this order viz., Aztec Software Limited and Geometric Software Ltd. (Seg.) and Megasoft Ltd., is concerned, it is not in dispute before us that the related party transaction in the case of companies exceeds 15% and in view of the decision of the Tribunal in the case of 24 X 7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2010, followed by this Tribunal in the case of Logica Private Ltd. (supra) wherein it was held that where the RPT exceeds 15%, such companies should not be taken as comparable companies. Following the said decision, we hold that companies at Sl.Nos. 1 & 2 & 19 ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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