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TMI Blog2015 (6) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Dispute Resolution Panel (DRP). 2. Brief facts of the case are that the assessee-company, which is engaged in the business of software development and application services provider, has filed its return of income for the assessment year 2008-09 declaring nil income after claiming deduction u/s 10A of the Act. The assessee had entered into international transaction with its Associated Enterprise (AE) during the relevant assessment year and therefore determination of the arm s length price (ALP) of the international transaction was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act. The TPO made a transfer pricing adjustment of ₹ 2,40,00,290/-. The AO, thereafter, passed draft assessment order incorporating the said transfer pricing adjustment, against which, the assessee preferred objections before the DRP and the DRP confirmed the transfer pricing adjustment proposed by the AO. In compliance thereto, the AO passed the final assessment order against which the assessee is in appeal before us. 3. At the time of hearing, the learned counsel for the assessee filed a chart showing the various comparable companies which are to be excluded for the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the said decision to the case before us, it is necessary to examine whether the nature of services rendered by both the companies under the respective international transactions are similar. The assessee herein is the subsidiary of VSi Services Holdings Pvt. Ltd., Mauritius and is engaged in providing software support solutions to VSI group companies. The international transaction which has been considered for ALP adjustment is software support or development services. In the case of 3DPLM also, the international transaction considered for ALP adjustment is in respect of software development services and the relevant assessment year is 2008- 09. Therefore, in our opinion, the decision of the Tribunal in the case of 3DPLM Software Solutions Ltd., is applicable to the case before us. Therefore the relevant paragraphs of the above referred decision are reproduced hereunder for ready reference: i ) Celestial Biolabs Ltd. 9.4.1 We have heard both the parties and perused and carefully considered the material on record. While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. iii) Tata Elxsi Ltd . 13.4.1 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely software development services. The details in the Annual Report show that the segment software development services relates to design services and are not similar to software development services performed by the assessee. 13.4.2 The Hon'ble Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. V ACIT (ITA No.7821/Mum/2011) has held that Tata Elxsi Ltd. is not a software development service provider and therefore it is not functionally comparable. In this context th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low risk captive service provider who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the co-ordinate bench of the Tribunal i.e. 24/7 Customer.Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration. v) KALS Information Systems Ltd . 10.4 We have heard both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected on the basis on any search process carried out by the TPO but only on the basis of information collected under section 133(6) of the Act. Apart from placing reliance on the judicial decision cited above, including the assessee's own case for Assessment Year 2007-08, the assessee has brought on record evidence that this company is functionally dis-similar and different from the assessee and hence is not comparable. Therefore the finding excluding it from the list of comparables rendered in the immediately preceding year is applicable in this year also. Since the functional profile and other parameters by this company have not undergone any change during the year under consideration which fact has been demonstrated by the assessee, following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record details to demonstrate that the factual and other circumstances pertaining to this company have not changed materially from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09. In this factual matrix and following the afore cited decisions of the co-ordinate benches of this Tribunal and of the ITAT, Mumbai and Delhi Benches (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand. x) Quintegra Solutions : 18.3.1 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details brought on record that this company i.e. Quintegra Solutions Ltd. is engaged in product engineering services and is not purely a software development service provider as is the assessee in the case on hand. It is also seen that this company is also engaged in proprietary software products and has substantial R D activity which has resulted in creation of its IPRs. Having applied for trade mark registration of its products, it evidences the fact that this company owns intangible assets. The co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration in the case on hand. The A.O./TPO is accordingly directed. xii) Softsol India Ltd . 19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2011. As the facts for this year are similar and material on record also indicates that RPT is 18.3%, following the aforecited decisions of the coordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand. Respectfully following the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd.,(cited supra) on similar set of facts, we direct the AO to exclude these companies from the list of comparables and re-compute the ALP in accordance with law. 5. In the result, the assessee s appeal is allowed. Pronounced in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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