9911796707
TMI Blog2016 (7) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... of AO. - Decided in favour of assessee for statistical purposes. Deduction u/s 10A computation - Held that:- The total turnover is sum total of export turnover and domestic turnover and therefore, as a consequence, if an amount is excluded from export turnover, the total turnover also goes down by the same amount. See CIT Vs M/s Tata Elxsi Ltd., reported in [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] - IT (TP) A No. 1290(Bang) 2010 - - - Dated:- 24-6-2016 - Shri A. K. Garodia, Accountant Member And Shri Vijay Pal Rao, Judicial Member For the Assessee : Shri P.K Prasad Shri Umashankar, CA For the Revenue : Shri P. Chandrasekar, CIT ORDER Per Shri A. K. Garodia, AM This is assessee's appeal directed against the order of the AO/TPO as per the directions of Dispute Resolution Panel, Bangalore for the assessment year 2006-07. 2. The assessee has raised the following grounds; The grounds mentioned herein are without prejudice to one another. Transfer Pricing Related 1. That the order of the learned Income Tax Officer, Ward 11(2), Bangalore ('Assessing Officer or 'AO') to the extent prejudicial to the Appellant, is bad in law an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs). 4.3. Upholding the rejection of comparability analysis of the Appellant in the TP documentation and confirming the comparability analysis as adopted by the learned TPO in the TP Order by applying additional filters and introduction of companies as comparables that are either functionally dissimilar or have differing asset base and risk profile, and also rejection of other potentially comparable companies. 4,4. Concluding that the amended proviso to section 92C(2) of the Act under Finance (No 2) Act. 2009, would be applicable for Assessment Year 2006-07 and in not appreciating that even if the arms' length price falls outside the 5% tolerance band the and statement would have to be reckoned after allowing the benefit of +/- 5% variation as provided in proviso to Section 920(2) of the Act. while determining the arms' length price. Other than Transfer Pricing Related 5. That the order of the learned Assessing Officer (AO') is contrary to the provisions of law and liable to be quashed. 6. That the learned AO erred in not allowing deduction under section 10A of the Income tax Act, 1961 ('the Act') in respect of the entire profit of the undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e analysis based on the detailed Functional Asset and Risk analysis performed with due diligence and the data available at the time of conducting the comparability analysis. 3.That the learned AO and the learned Panel erred in ignoring the limited risk nature of the services provided by the Appellant as detailed in the TP documentation and in upholding the conclusion of the learned TPO that no adjustment on account of risk differential is required while determining the Arm's Length Price of the international transactions of the Appellant. 4. That the learned AO and the learned Panel erred both in facts and law in confirming the action of the learned TPO of making an adjustment to the transfer price of the Appellant by ₹ 1, 03, 97 ,210 holding that the international transactions do not satisfy the arm's length principle envisaged under the Act and in doing so grossly erred in: 4.1. Upholding the act of the learned TPO of collecting selective information of the companies by exercising power granted to him under section 133(6) of the Act, that was not available to the Appellant in the public domain and relying on the same for comparability purposes in denial of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of his contention, reliance was placed on the Tribunal's order rendered in the case of M/s Agnity India Technologies Pvt. Ltd., in ITA No.3856(Del.)/2010 (AY: 2006-07) (copy available on pages 868-874 of the case laws compendium. Respectfully following this Tribunal order, we hold that this company also cannot be considered as comparable because of its functional dissimilarity. 9. For the fifth comparable M/s Kals Info Systems Ltd., the argument of the ld. AR of the assessee is that this company is also functionally dissimilar because it derives its revenue primarily from software services and software products and segmental information was not available. In support of his contention, reliance was placed on Tribunal's order rendered in the case of M/s Onward Technologies Ltd., 26 ITR (Trib.) 734(ITAT (Mum) for AY: 2006-07. Respectfully following this Tribunal's order, we hold that this company cannot be considered as comparable in the present case, because of functional dissimilarity. 10. For the sixth comparable M/s Mindtree Consulting Limited., it was submitted by the ld. AR of the assessee that the assessee is not objecting to inclusion of this company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Regarding 11th to 15th comparables as per the chart, i.e. M/s Lucid software Ltd., M/s Mediasoft Solutions Pvt. Ltd., M/s SIP Technologies Exports Ltd, M/s Bodhtree Consulting Ltd., the ld. AR of the assessee has no objection regarding the inclusion of these companies as comparable in the present case. We hold accordingly. 15. For comparable no.16 i.e. M/s Accel Transmatics Ltd., (Seg.), it was submitted by the ld. AR that this company had to be excluded for the reason that the RPT percentage is in excess of 15% and the same is in fact 31%. The second argument is that this company should be excluded for this reason also that it is functionally dissimilar. In this regard, when we examine page 389 of the paper book containing page no.188of the TPO's order, we find that percentage of RPT to sales of this company is noted by the TPO at only14.46% which less than 15% as against the claim of the assessee that the RPT percentage of this company is 31%. Hence, on this account, we find no merit in the argument of the ld. AR of the assessee. Regarding his second contention that this company is dissimilar, reliance had been placed on a Tribunal order rendered in the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and is functionally dissimilar and by respectfully following the Tribunal order cited by the ld. AR of the assessee as noted above, we hold that this company cannot be considered as comparable in the present case. 20. As per the above discussion, we find that nine companies are to be excluded from the list of twenty comparables and these nine companies are M/s Aztec Software Ltd., 2) Geometric Software Ltd.(Seg.) 3) M/s iGate Global Solutions Ltd.,(Seg.) 4) M/s Kals Info Systems Ltd., 5) M/s Persistent Systems Ltd., 6) M/s Tata Elxsi Ltd.,(Seg.) 7) M/s Accel Transmatics Ltd (Seg.) 8) M/s Megasoft Ltd and 9) M/s Flextronics Software Systems Ltd., 20.1 The average PLI of the remaining 11 comparables have been worked out by the ld. AR of the assessee at 12.02% before working capital adjustment and 10.40% after working out adjustment as against operating profit to cost ratio of the assessee company at 10.36%. We hold that the AO/TPO should check the working of the assessee and if the same is correct that the average PLI of remaining 11 comparables is only 12.02% then the same is within +/ - 5% range and as a consequence, no TP adjustment is called for and for the limited purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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