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TMI Blog2015 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... law in directing the Assessing Officer to exclude the case of M/s. KALS Information Systems Ltd. from the set of comparables adopted by TPO without appreciating the factual and legal matrix as brought out by the Transfer Pricing Officer (TPO) in the order dated 19.11.2012 under section 92A(3) of the Income-tax Act, 1961." 2. The facts in brief are that, assessee company is engaged in the business of creating and providing 3D animation software contents as a captive service provider to its associate enterprise (AE), Prana Holdings Inc., USA. During the relevant previous year the assessee has entered into following international transaction with the PLI of 14.49%:- S.N. Nature of Transaction Amount (Rs.) AY 2008-09 Method used OP/TC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Infomedia 17.00 Arithmetic Mean 21.03 Finally the adjustment of Rs. 4,17,85,681/- was made in the following manner:- Particulars Amount Sale of services as per Form 3CEB (export sales) (A) Rs.73,15,04,989/- Operating Cost (B) [(73,15,04,989/114.49)*100] Rs.63,89,24,787/- ALP (C=Bx1.2103) Rs.77,32,90,670/- 105% of transaction value Rs.76,80,80,238/- 95% of transaction value Rs.69,49,29,739/- Difference between ALP and Transaction value [C-A] Rs.4,17,85,681/- 3. Since, the only issue involved herein this appeal is, whether M/s. Kals Information System Ltd. should be excluded from the set of final comparables selected by the TPO or not, therefore, we are confining our self ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to by the Ld. Counsel for the assessee, the Mumbai bench of ITAT has held that this company was developing software products and not purely or mainly software development service provider. We therefore accept the plea of the assessee that this company is not comparable", 6.3 With these directions, it is apparent that KALS Information Systems Ltd. is not a comparable company and the same needs to be excluded from the set of comparables. It is further seen that with the exclusion of KALS, the assessee's margin comes within +/- 5%-of the margin of comparables in terms of second proviso to Sec. 92C(2) of I.T. Act, 1961. Accordingly, the AO is directed to delete the proposed adjustment. All other arguments of the Ld. AR becomes academic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s score. The assessee is a captive service provider, providing purely software services in the context of 3D animation to it's A.E. The sole dispute before us is, whether Kals Information System Ltd. should be taken as a comparable or not for the purpose of comparability analysis and bench making of the margin. From the perusal of the objections filed by the assessee before the DRP, as well as annual report of Kals, it is seen that the said company is engaged into development of software and software products and also running a training centre for training of software professionals. The said company offers variety of software products in the area of web solutions, e-commerce, software consultants, content management ERP applications etc. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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