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TMI Blog2016 (1) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... e STPI authorities and related orders of the STPI authorities. The assessee is directed to furnish necessary details and the TPO is directed to examine the same after giving reasonable opportunity of being heard to the assessee. Needless to mention, the TPO shall also decide all other related issues with the TP adjustments relating to working capital adjustments and differences in the risks.- Decided in favour of assessee for statistical purpose. - I.TA No. 1482/Mum/2014 - - - Dated:- 10-11-2015 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri M.P. Lohia Shri Nikhil Tiwari For The Respondent : Shri N.K. Chand ORDER PER N.K. BILLAIYA, AM: This appeal by the assessee is directed against the assessment order dated 23.01.2014 made u/s. 143(3) r.w. Section 144C of the Act. 2. The assessee has raised 17 grounds of appeal which also includes additional grounds. 3. Ground No. 1 2 are of general in nature and need no separate adjudication. 4. Ground No. 3 is not pressed and accordingly it is dismissed as not pressed. 5. Ground No. 4, 5 6 relate to the Transfer Pricing Adjustment made by the TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnologies and Exports Limtied -10.07% 17 Softsol India Limited 14.95% 18. V M Softech Limited 2.08% 19. Zylog Systems Limited 16.63% Arithmetic mean 11.47% 5.3. The operating margin was computed as under: FY 2008-09 Particulars Amt. (in Rs.) INCOME Income from Services rendered 16,03,85,489 Prior period income 37,14,056 Total Operating Income 16,40,99,545 EXPENDITURE Administrative, sales promotion and other expenses 3,57,17,522 Personal expenses 9,25,75,200 Foreign Exchange loss 56,62,994 Depreciation 36,93,991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not accepted for the simple reason that in Form No. 3CEB as well as in the agreement, the assessee has stated its services as Research Development Services. Further drawing support from the Annual Financials of the assessee, the TPO was convinced that the assessee is rendering R D services to the AE and as per the agreement, the assessee is an economic owner of such IP development. 5.7. The comparable selected by the assessee were outrightly rejected by the TPO who proceeded by taking his own comparables. Sl. No. Name of the Comparable OP/TC 1. Acropetal Technologies Ltd. 71.92% 2. Coral Hubs Ltd. 38.69% 3. Eclerx Services Ltd. 50.43% Arithmetic Mean 53.68% 5.8. Based on the above comparable companies, the TPO concluded by making adjustments as under: Operating cost for services ₹ 14,25,58,269/- Operating profit @ 53.68% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product produced by the assessee in itself is of a complex nature which required skill work force. The assessee was rightly turned a high end performer in field of Computor Software and therefore there is no error in the comparables selected by the TPO. 10. We have given a thoughtful consideration to the rival submissions and have carefully perused the orders of the authorities below. We have also considered the relevant documentary evidences brought on record. In our considered opinion, the entire dispute revolves around the nature of business of the assessee. The assessee claims itself to be a Software Development Service Provider whereas the TPO has treated the assessee as engaged in providing contract Research Development Services. This dispute gets strength from the nomenclature used by the assessee in Form No. 3CEB and also in its Transfer Pricing Study Report. However, the documentary evidences filed in the form of copies of Softex Forms and the order of the STPI authorities paint an altogether different picture. In our considered opinion, these documents have not been properly appreciated by the Revenue authorities. Had these documents been examined qua the nature of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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