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TMI Blog2015 (2) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... systems (i.e. seats and seat trims) and interior parts. The assessee provides design and engineering support services along with embedded software development support services to group companies, and design and engineering services to automotive industry customers, like General Motors Ltd. and Mahindra & Mahindra (M&M). Apart from certain other international transactions, the assessee reported a payment of Rs. 1,99,22,532/- to its Associated Enterprises (AEs) towards 'Cost allocation'. On a reference being made by the AO, the Transfer Pricing Officer (TPO) noticed that the assessee had paid certain allocated costs to group companies. On being called upon to explain of nature of such payment, the assessee stated that these costs primarily related to certain softwares used by it and could be broadly classified into two parts. First part was stated to be the costs relating to pre-loaded desktop software on some of the computers of the assessee company as well as the costs of their maintenance. The assessee submitted that the cost for such desktop softwares and their maintenance were incurred by the group companies on a per computer basis to third parties and charged to the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under rule 29 of the ITAT Rules, 1963 seeking permission for filing additional evidence for consideration. After going through the entire gamut of the available material, but without commenting on such additional evidence, the Tribunal restored the entire issue to the TPO for taking a fresh decision in accordance with law. 2.4. Both the sides before us are in agreement that the facts and circumstances for the instant year are mutatis mutandis similar to those of the preceding year. It can be seen that for this year also, the assessee has moved an application under rule 29 of the ITAT Rules seeking to file some additional evidence. Without going into the merits of this issue and respectfully following the precedent, we set aside the impugned order on this score and send the matter back to TPO/AO for a fresh decision as per law after allowing a reasonable opportunity of being heard to the assessee. Needless to say, the assessee will be at liberty to file any fresh evidence before the authorities in such de novo examination. 3.1. The next issue raised before us is against the addition of Rs. 1,85,75,701/- on account of Transfer pricing adjustment for international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real transaction and allowability or otherwise of this amount. Here again, we clarify that the assessee will be at liberty to lead any fresh evidence in support of the deduction and simultaneously the AO will also be entitled to examine any aspect on this matter before reaching final conclusion about deductibility or otherwise of this expenditure. 4.1. The only other issue which remains in this appeal is against the addition of Rs. 1,90,92,020/- on account of TP adjustment in IEC Segment. 4.2. Briefly stated, the facts of this ground are that the TPO observed that the assessee was providing software development services to its AE under this segment. The assessee determined the ALP of this transaction by applying TNMM as the most appropriate method with Profit Level Indicator (PLI) of Operating Profit / Total Cost (OP/TC). The assessee showed its PLI at 10.86% against the average PLI of certain comparables on the basis of multiple year data at 12.74%. That is how, the assessee demonstrated that this international transaction was at the ALP. The TPO did not approve the application of multiple year data. After making certain inclusions and exclusions in/from the list of comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customer. f) Once the designs are approved, prototypes are made as per the designs. g) The prototypes are tested for functionality, and the same are then approved by the customer. h) Once the prototypes are approved, the tools and moulds to be used in the manufacturing process of each component, are manufactured. These tools and moulds are manufactured by suppliers (could be domestic or overseas), and in their selection, Lear Group may provide necessary assistance to the customer. The costs of manufacturing these tools and moulds are borne by the customer. Further, Lear Group may co-ordinate and oversee the manufacturing of these tools an moulds. i) Subsequent to the manufacture of tools and moulds, they are approved by the customer. Using these tools and moulds, samples are manufactured by the supplier and provided to the customer for approval. j) Having put the samples manufactured into application, the customer may suggest further modifications and changes. After the samples are finally approved, commercial production of the interiors begins. 4.5. The assessee is involved in stages c) and d) alone. In other words, the other stages in the provision of design and engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case as well. 4.7. The ld. DR opposed this contention by stating that Toluna India Pvt. Ltd., is engaged in a different activity and its model of remuneration is also different. It was submitted that Toluna India Pvt. Ltd., is both a service provider and also a software developer. 4.8. It is apparent from the order passed in the case of Toluna India Pvt. Ltd. (supra) that the assessee therein was engaged in the business of software development and also providing software related services to Greenfield Group. That assessee undertook provision of contract IT services to its AEs and was compensated on cost plus 15%. The tribunal found that assessee to be both a software related service provider and also a software developer. Due to common pool of the revenues of that assessee and getting compensated uniformly at cost plus 15%, the tribunal held that : 'the companies engaged either in software development or providing software service or doing both, are functionally comparable to the assessee.' 4.9. When we turn to the facts of the instant case, we find that the TPO has classified the assessee, and rightly so, as providing software development services. In our considered opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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