9911796707
TMI Blog2015 (6) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... nication Technologies Ltd., Tata Elxsi Ltd. and Wipro Limited as comparables. 3. The learned CIT(A) in the facts and circumstances of the case erred in excluding the comparable company M/s Celestial Biolabs Ltd. on the basis of high profit margin. 4. The ld. CIT(A) erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 5. The ld. CIT(A) erred in not appreciating that the different year ending filter applied by the TPO is necessary to exclude companies which do not have the same or comparable financial cycle as the tested party. 6. The ld. erred in rejecting the employee cost filter applied by the TPO to select companies which are predominantly into software development services and thereby including M/s Indus Networks Ltd. as a comparable. 7. The learned CIT(A) in the facts and circumstances of the case erred in holding that M/s. Avani Cincom Technologies can be taken as a comparable. 8. The learned CIT(A) in the facts and circumstances of the case erred in holding that M/s KALS Informations Systems Ltd. being functionally different, cannot be taken as comparable ignoring the fact that it qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with fresh benchmarking analysis on his own conjectures and surmises. Thus, the Appellant prays that the fresh benchmarking analysis conducted by the TPO is liable to be quashed. 4 Comparability Analysis adopted by the TPO for determination of arm's length price a) The AO/TPO grossly erred on facts and the CIT(A) erred in confirming the benchmarking of transactions of software development services of the Appellant with companies operating as full fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the Appellant vis-à-vis comparable companies. b) The AO/TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparable to the Appellant, without establishing functional comparability and the Ld.CIT(A) also erred in confirming the same. c) The AO/TPO erred on facts in arbitrarily rejecting companies having onsite revenues more than 75% of total sales and the Ld.CIT(A) also erred in confirming the same. d) The AO/TPO grossly erred in law in deviating from the uncontrolled party transaction definition as per the Income-tax Rules and arbitrarily applying a 25% related par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he comparable companies. The Ld. CIT(A) erred in confirming the findings of the TPO/AO and not commenting on the depreciation adjustment claimed by the Appellant. 7 Variation of 5% from the arithmetic mean The AO/TPO erred in law and the Ld. CIT(A) erred in not granting the variation as per the proviso to Section 92C(2) of the Act. 8 Interest under section 234B of the Act On the facts, and circumstances of the case, and in law, the learned CIT(A) erred in not directing the learned AO on the specific ground taken in appeal that the learned AO had erred in levying interest under section 234B. 4. The assessee has also filed an additional ground of appeal which reads as follows:- "1. The lower authorities have erred in selecting Quintegra Solutions Ltd, Bodhtree Ltd, Thirdware Solutions Ltd and Lucid Software Ltd as comparables despite them being functionally different from the Appellant." 5. In the application for admission of additional ground, the assessee has submitted that the assessee did not object to the aforesaid companies being chosen as comparable before the TPO. However, the functional profile of these companies were considered which came at a later point of time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to section 92C(2) of the Act) range of the arithmetical mean of the comparables, the international transactions of the Appellant were claimed by the Assessee to be at arm's length. 10. The financial results of the assessee in its software development services segment were as follows:- Description Amount (Rs.) Operating revenues 669498745 Operating Expenditure (*) 603081554 Operating Profit 66417191 OP/TC 11.01% 11. Further to the above, the TPO issued a show-cause notice dated 14 October 2011, proposing to: a) reject 11 out of 20 comparable companies identified by the Appellant in the TP Study; b) select 17 new companies and proposed to compare the same with the Appellant; c) determine the arm's length margin of 32.07% (working capital adjustment not provided); and d) proposed a transfer pricing adjustment to the international transactions to the tune of Rs. 126,991,063. 12. In response to the above, the Appellant made detailed submissions on 27 October 2011, placing on record, all legal and factual arguments before the TPO. 13. The TPO passed an order under section 92CA of the Act, on 28 October 2011, determining the mean margin of the comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses 23.7 Price received vis-à-vis the Arms Length Price: The price charged by the tax payer to its Associated Enterprises is compared to the Arms Length Price as under: Arms Length Price (ALP) At 122.64% of operating cost Rs. 739619218 Price charged in the international transactions Rs. 669498745 Shortfall being adjustment u/s.92CA Rs.3,43,55,770 The above shortfall of Rs. 3,43,55,770/- is treated as transfer pricing adjustment u/s 92CA." 17. Aggrieved by the aforesaid order of the AO, the assessee filed appeal before the CIT(Appeals). The CIT(Appeals) accepted some of the contentions put forth by the assessee with regard to the application of turnover filter, high profit margin, etc. and excluded 10 of the comparables chosen by the TPO. As a result of such exclusion, the following companies alone were retained for the purpose of determining the profit margin (arithmetic mean):- Sl. No Name of company OP on Cost as per OGE to CIT(A) order Adjusted Margin 1 Bodhtree Consulting Ltd. 19.14% 20.15% 2 e-zest Solutions Ltd. 28.97% 29.22% 3 LGS Global Ltd. 26.66% 25.93% 4 Quintegra Solution Ltd. 23.06% 20.35% 5 R S Software (India) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing as to how some of the comparable companies included by the CIT(A) are validly excluded based on the decisions rendered by the Tribunal in several cases. We shall deal with this argument by taking up individual companies chosen by the TPO and excluded by the CIT(Appeals). 16. (1) Avani Cincom Technologies Ltd. (2) KALS Information Systems Ltd. (3) Celestial Labs Ltd. The comparability of these companies with a software development service provider such as the assessee was considered in several decisions of the ITAT. These have been listed in the chart filed by the assessee before us. We, however, find that making a reference to all those decisions will not be of any help and making a reference to one such decision would be sufficient. In the case of 3DPLM Software Solutions Ltd. v. DCIT, IT(TP)A No.1303/Bang/2012 for A.Y. 2008-09, order dated 28.11.2013, this Tribunal has held as under on choosing this company as a comparable:- "7.0 Avani Cincom Technologies Ltd. 7.1 This company was selected by the TPO as a comparable. The assessee objects to the inclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative submitted that a co-ordinate bench of the Tribunal in its order in Curram Software International Pvt. Ltd., in its order in ITA No.1280/Bang/2012 dt.31.7.2013 has remanded the matter back to the file of the Assessing Officer / TPO to examine the comparability of this company afresh, by making the following observations at paras 9.5.2 and 9.5.3 thereof :- " 9.5.2 As regards the submission of the learned Authorised Representative, we are unable to agree that this company has to be deleted from the list of comparables only because it has been deleted from the set of comparables in the case of Trilogy E-Business Software India Pvt. Ltd. (supra). No doubt this company has been deleted as a comparable in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) and this can be a good guidance to decide on the comparability in the case on hand also. This alone, however, will not suffice for the following reasons :- (i) The assessee needs to demonstrate that the FAR analysis and other relevant facts of the Trilogy case are equally applicable to the facts of the assessee's case also. Unless the facts and the FAR analysis of Trilogy case is comparable to that of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained under section 133(6) of the Act. In this regard, the learned Authorised Representative took us through the relevant portions of the TP order under section 92CA of the Act and the show cause notices for both the earlier year i.e. Assessment Year 2007-08 and for this year and contended that the selection of this company as a comparable violates the principle enunciated in Curram Software International Pvt. Ltd. (supra) that a company can be selected as a comparable only on the basis of FAR analysis conducted for that year and therefore pleaded for its exclusion. The learned Authorised Representative also submitted that he has brought on record sufficient evidence to show that the functional profile of this company remains unchanged from the earlier year and hence the findings rendered by the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in other cases like Trilogy E-Business Software India Pvt. Ltd. (supra) are applicable to the year under consideration as well. 7.5 Per contra, the learned Departmental Representative supported the order of the TPO / DRP for inclusion of this company Avani Cincom Technologies Ltd. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils the employee cost filter. The TPO, however, brushed aside the objections raised by the assessee by stating that the objections of functional dissimilarity has been dealt with in detail in the T.P. order for Assessment Year 2007- 08. As regards the objection raised in respect of the employee cost filter issue, the TPO rejected the objections by observing that the employee cost filter is only a trigger to know the functionality of the company. 9.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable, as the company is into bio-informatics software product / services and the segmental break up is not provided. It was submitted that :- (i) This company is engaged in the development of products in the field of bio-technology, pharmaceuticals, etc. and therefore is not functionally comparable to the assessee; (ii) This company has been held to be functionally incomparable to software service providers by the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra); (iii) The co-ordinate bench of this Tribunal in its order in the case of Trilogy E-Business Software I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this year viz. Assessment Year 2008-09. To that extent, in our considered view, the selection process adopted by the TPO for inclusion of this company in the list of comparables is defective and suffers from serious infirmity. 9.4.2 Apart from relying on the afore cited judicial decisions in the matter (supra), the assessee has brought on record substantial factual evidence to establish that this company is functionally dissimilar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year also. We agree with the submissions of the assessee that this company is functionally different from the assessee. It has also been so held by coordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) as well as in the case of Trilogy E-Business Software India Pvt. Ltd. (supra). In view of the fact that the functional profile of and other parameters of this company have not changed in this year under consideration, which fact has also been demonstrated by the assessee, following the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of this contention, the learned Authorised Representative drew our attention to various parts of the Annual Report of this company. (v) This company is engaged not only in the development of software products but also in the provision of training services as can be seen from the website and the Annual Report of the company for the year ended 31.3.2008. (vi) This company has two segments; namely, a) Application Software Segment which includes software product revenues from two products i.e. 'Virtual Insure' and 'La-Vision' and b) The Training segment which does not have any product revenues. 10.3 Per contra, the learned Departmental Representative contended that the decision of the co-ordinate bench of the Tribunal in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) was rendered with respect to F.Y.2006-07 and therefore there cannot be an assumption that it would continue to be applicable to the year under consideration i.e. A.Y. 2008-09. To this, the counter argument of the learned Authorised Representative is that the functional profile of this company continues to remain the same for the year under consideration also and the same is evident from the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able too. 22. On the other hand, Ld DR filed a copy of the financial statement and argued vehemently stating that this company is not engaged in the software products. In this regard, Ld DR relied on the note no.3, relating to the relating to the revenue recommendation in Schedule 12, note no.5 relating to the segmental information etc to mention that the company is engaged in the software development only. However, the assessee argued vehemently stating that this company is engaged in the software based products. Further, Ld Counsel mentioned that the said company was already examined and was held as product based company by the TPO in the TP study of other case and the TPO cannot take different stand in this case. In this regard, we have perused the para 29 of the order of the Tribunal in the case of M/s. Wills Processing Services (I) P Ltd (supra) wherein it was mentioned that the TPO described this company is engaged in the business of software products, not the software development services. Relevant portions from the said para 29 of the order of the Tribunal is reproduced here under: 29.1 The Id Sr Counsel for the assessee has submitted that this company is engaged in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny was selected by the TPO as a comparable. Before the TPO, the assessee had objected to the inclusion of this company as a comparable on the ground that it was functionally different from the assessee. The TPO had rejected the objections raised by the assessee on the ground that as per the information received in response to notice under section 133(6) of the Act, this company is engaged in software development services and satisfies all the filters. 14.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It is submitted by the learned Authorised Representative that this company is engaged in 'e-Business Consulting Services', consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO, the assessee objected to the inclusion of this company in the set of comparables on the ground that this company is functionally different and also that there were peculiar economic circumstances in the form of acquisitions made during the year. The TPO rejected the assessee's objections holding that this company qualifies all the filters applied by the TPO. On the issue of acquisitions, the TPO rejected the assessee's objections observing that the assessee has not adduced any evidence as to how this event had any influence on the pricing or the margin earned. 18.2 Before us, the assessee objected to the inclusion of this company for the reason that it is functionally different and also that there are other factors for which this company cannot be considered as a comparable. It was submitted that, (i) Quintegra solutions Ltd., the company under consideration, is engaged in product engineering services and not in purely software development services. The Annual Report of this company also states that it is engaged in preparatory software products and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010 dt.9.11.2012) has held that if a company possesses or owns intangibles or IPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted form the list of comparables, as in the case on hand. 18.5 We also find from the Annual Report of Quintegra Solutions Ltd. that there have been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect on the performance of the company, then that company shall be removed from the list of comparables. 18.6 Respectfully following the decision of the co-ordinate bench of the Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (supra), we direct that this company i.e. Quintegra Solutions Ltd. be excluded from the list of comparables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Special Bench on this aspect would hold the field. Reference was also made to the OECD TP Guidelines, 2010 wherein it has been observed as follows:- "Size criteria in terms of Sales, Assets or Number of Employees: The size of the transaction in absolute value or in proportion to the activities of the parties might affect the relative competitive positions of the buyer and seller and therefore comparability." 12. The ICAI TP Guidelines note on this aspect lay down in para 15.4 that a transaction entered into by a Rs. 1,000 crore company cannot be compared with the transaction entered into by a Rs. 10 crore company. The two most obvious reasons are the size of the two companies and the relative economies of scale under which they operate. The fact that they operate in the same market may not make them comparable enterprises. The relevant extract is as follows [on Rule 10B(3)]: "Clause (i) lays down that if the differences are not material, the transactions would be comparable. These differences could either be with reference to the transaction or with reference to the enterprise. For instance, a transaction entered into by a Rs. 1,000 crore company cannot be compared with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a turnover of Rs. 1.00 crore to 200 crores have to be taken as a particular range and the assessee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study." 15. It was brought to our notice that the above proposition has also been followed by the Honourable Bangalore ITAT in the following cases: 1. M/s Kodiak Networks (India) Private Limited Vs. ACIT (ITA No.1413/Bang/2010) 2. M/s Genesis Microchip (I) Private Limited Vs. DCIT (ITA No.1254/Bang/20l0). 3. Electronic for Imaging India Private Limited (ITA No. 1171/Bang/2010). It was finally submitted that companies having turnover more than Rs. 200 crores ought to be rejected as not comparable with the Assessee. 16. The ld. DR, on the other hand pointed out that even the assessee in its own TP study has taken companies having turnover of more than Rs. 200 crores as comparables. In these circumstances, it was submitted by him that the assessee cannot have any grievance in this regard. 17. We have considered the rival submissions. The provisions of the Act and the Rules that are relevant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction has actually been undertaken shall be deemed to be the arm's length price. (3) Where during the course of any proceeding for the assessment of income, the Assessing Officer is, on the basis of material or information or document in his possession, of the opinion that- (a) the price charged or paid in an international transaction has not been determined in accordance with sub-sections (1) and (2); or (b) any information and document relating to an international transaction have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or (c) the information or data used in computation of the arm's length price is not reliable or correct; or (d) the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D, the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him:" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. (3) An uncontrolled transaction shall be comparable to an international transaction if- (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. (4) The data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into : Provided that data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included this company in the set of comparables. 13.2 Before us it was reiterated by the learned Authorised Representative that this company is not functionally comparable to the assessee as it performs a variety of functions under software development and services segment namely - a) product design, (b) innovation design engineering and (c) visual computing labs as is reflected in the annual report of the company. The learned Authorised Representative submitted that, (i) The co-ordinate bench of the Mumbai Tribunal in the case of Telecordia Technologies Pvt. Ltd. (supra) has held that Tata Elxsi Ltd. is not a functionally comparable for a software development service provider. (ii) The facts pertaining to Tata Elxsi Ltd. have not changed from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 and therefore this company cannot be considered as a comparable to the assessee in the case on hand. (iii) Tata Elxsi Ltd. is predominantly engaged in product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment 'software development servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly." 26. Wipro Ltd.: As far as this company is concerned, this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) held that this company is not comparable with software development service provider such as the assessee. The relevant observations are as follows:- "12. Wipro Ltd. 12.1 This company was selected as a comparable by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the list of comparables on several grounds like functional dis-similarity, brand value, size, etc. The TPO, however, brushed aside the objections of the assessee and included this company in the set of comparables. 12.2 Before us, the learned Authorised Representative of the assessee contended that this company i.e. Wipro Ltd., is not functionally comparable to the assessee for the following reasons:- (i) This company owns significant intangibles in the nature of customer related intangibles and technology related intangibles, owns IPRs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010) has held that a company owning intangibles cannot be compared to a 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." 27. Respectfully following the aforesaid decision, we direct that Wipro Ltd. be excluded from the list of comparable companies. 28. (1) Thirdware Solutions Ltd. (2) Lucid Software Ltd. Comparability of these companies with a software development service provider such as the assessee was considered by this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) and it was held as under:- "15. Thirdware Solutions Ltd. (Segment) 15.1 This company was proposed for inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of comparables for the period under consideration in the case on hand. 16. Lucid Software Ltd. 16.1 This company was selected as a comparable by the TPO. Before us, the assessee has objected to the inclusion of this company as a comparable on the grounds that it is into software product development and therefore functionally different from the assessee. In this regard, the learned Authorised Representative submitted that - (i) This company is engaged in the development of software products. (ii) This company has been held to be functionally different and therefore not comparable to software service providers by the order of a co-ordinate bench of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A No.845/Bang/2011), following the decision of Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (ITA No.7821/Mum/2011). (iii) The rejection of this company as a comparable to software service providers has been upheld by the co-ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. (ITA No.1121/Bang/2011) and CSR India Pvt. Ltd. [ IT(TP)A No.1119/Bang/2011 ] and by the Delhi Bench of the Tribunal in the case of Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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." 29. Respectfully following the aforesaid decision, we direct that the aforesaid companies be excluded from the list of comparable companies. 30. Persistent Technologies Ltd.: As far as this company is concerned, this Bench in the case of 3DPLM Software Solutions Ltd. (supra) held that this company is not functionally comparable with a software development service provider such as the assessee. Following are the relevant observations:- "17. Persistent Systems Ltd. 17.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable for the reasons that this company being engaged in software product designing and analytic services, it is functionally different and further that segmental results are not available. The TPO rejected the assessee's objections on the ground that as per the Annual Report for the company for Financial Year 2007-08, it is main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (supra) that in the absence of segmental details / information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year under consideration. It is ordered accordingly." 31. In view of the aforesaid decision, we direct that Persistent Technologies be excluded from the list of comparables. 32. Helios & Matheson Information Technology Ltd. : This company was a comparable included by the CIT(Appeals) in the impugned order. The application of employee cost filter of 25% of the sale is an accepted filter. In the case of First Advantage Offshore Services, ITA No.1086/Bang/2011, this Tribunal has held that the aforesaid filter is a valid filter and has to be accepted for choosing comparables. In the light of the aforesaid decision and in view of the admitted factual position that the employee cost in the case of this company was less than 25% of its sales, this company has to be excluded from the list of comparables. We hold and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. As far as ground No.2 is concerned, we have already given reasons as to why size and turnover was a relevant criterion for choosing companies as a comparable. The decisions referred to while deciding the relevant filter have taken the view that turnover and size is a relevant criterion for deciding the comparables. Accordingly, this objection of the Revenue is found to be without any merit. 37. As far as ground No.3 is concerned, this company was excluded as functionally not comparable in the case of 3DPLM Software Solutions Ltd. (supra) and therefore it is not necessary to go into the grievance projected by the Revenue in this regard. 38. As far as ground Nos.4 & 5 are concerned, the grievance of the Revenue is misconceived as the CIT(Appeals) did not apply any of the norms as stated in these grounds. 39. As regards ground No.6, we have already held, following the decision of the Tribunal in the case of First Advantage Offshore Services (supra) that 25% employee cost to sales is a valid filter and therefore ground No.6 raised by the Revenue is without any substance. 40. As far as ground Nos.7 & 8 are concerned, we have already excluded these companies following the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
