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TMI Blog2016 (7) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant at INR 1,39,12,291/- as against the returned income of INR NIL by making an upward adjustment of INR 1,39,12,291/- with respect to Arm's Length Price of the international transaction. 3 That on facts of the case and in law, the Ld. TPO/AO have erred in not complying with the directions of the Hon'ble DRP while passing the impugned order. 4 That on facts of the case and in law, the DRP/TPO/AO have erred in arbitrarily rejecting the segmental accounts prepared by the Appellant for benchmarking the international transaction pertaining to provision of software consulting and support services. 5 That on facts of the case and in law, the DRP/TPO/AO have erred in rejecting the economic analysis undertaken by the Appellant wherein the Appellant had applied Cost Plus Method ('CPM') to compare the gross margins earned by the Appellant from provision of software consulting and support services to associated enterprises and non-associated enterprises. 6 That on facts of the case and in law, the Ld. TPO has erred in applying Transactional Net Margin Method (TNMM') as the Most Appropriate Method ('MAM') for benchmarking the international transaction ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. 15. That on the facts and in the circumstances of the case, the Ld. AO has erred in charging interest under section 234 of the Act, as a consequence of the addition made in the impugned order passed under section 143(3) read with section 144C of the Act." 2. In the present case, ground nos. 1 and 2 are general in nature. Ground nos. 3 and 9 to 15 were not pressed so these grounds do not require any comments on our part. 3. Vide ground no. 4 to 7, the grievance of the assessee relates to the arm's length price adjustment (ALP) by applying Transactional Net Margins Method (TNMM) as most appropriate method for bench marking the International Transaction instead of Cost Plus Method (CPM) adopted by the assessee and selecting the companies in final set off alleged comparables which have different benefit / operative models than the assessee and rejecting the segmental accounts prepared by the assessee for benchmarking the international transaction pertaining to provosion of Software Consulting and Support Services. 4. Facts of the case in brief are that the assessee derived income from Software Consulting and Support Services, it is a 100% subsidiary of Seven N A/S, Den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Software Technologies Ltd. 0.86% ii E-Infochips 56.44% iii Evoke Technologies Pvt. Ltd. 8.11% iv E-Zest Solutions 39.98% v Infosys Ltd. 43.39% vi Larsen & Toubro Infotech Ltd. 18.40% vii LGS Global Limited 14.11% viii Persistent Systems & Solutions Ltd.(Merged) 21.51% ix Persistent Systems Ltd. 23.08% x R S Software (India) Ltd. 16.20% xi Sasken Communications Technologies Ltd. 24.33% xii Wipro Technology Services Ltd. (Merged) 54.42% xiii Celstream Technologies Ltd. Ltd. 13.20% xiv Acropetal technologies Ltd. (Seg.) 22.06% xv Mindtree Ltd. (Seg) 10.29% xvi Sankhya Infotech Limited (Seg.) 26.20% xvii Tata Elxsi Ltd. (Seg.) 26.20% xviii Thirdware Sol (Seg) 18.30% xix Zylog Systems Limited 28.74% Average 23.81% 6. The TPO worked out the adjustment on account of arm's length price as under :- Particulars Amount (INR) Operating Cost 7,11,10,000 Arm's Length Margin (%) 23.81% Arm's Length Margin Rs. 1,69,31,291 Arm's Length Price 8,80,41,291 Price charged by the assessee 7,41,29,000 5% of Price charged in international transaction 37,06,450 Difference between ALP and Price charged by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth price ("ALP") of the international transaction pertaining to provision of software consulting and support services by the Appellant to its AE which was upheld by the Dispute Resolution Panel ("DRP") vide directions dated 31 August, 2015. AO passed the final assessment order dated 26 October, 2015 in line with the directions of DRP. 7. That the Appellant had benchmarked its 'international transaction' pertaining to rendering of software consulting and support services by using Cost Plus Method. The TPO however rejected the most appropriate method applied by the Appellant for benchmarking the subject transaction, by erroneously concluding that segmental data was not available with respect to the services provided by the Appellant to the AE & non-AEs. In this regard, we respectfully submit that segmental data was duly available & produced before the TPO (segmental details are produced at para 5 on page 3 of TPO's order). 8. We respectfully submit that during the proceedings before the TPO, the Appellant was asked to furnish segmental data. Accordingly, the Appellant filed segmental data before the TPO, and vide its submissions dated 8 January, 2015 (Page 24 of the paper book) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TPO in applying TNM Method. The DRP merely observed that TNMM gives a very pointed and straight comparison as ultimately it is the margins from a transaction that help in determination of it being at arm's length or not, therefore, the Appellant's objections were dismissed by the DRP as untenable. 14. Being aggrieved by the final assessment order dated 26 October, 2015, the Appellant preferred the present appeal before this Hon'ble Tribunal which has been registered as ITA no. 6192/Del/2015. 15. We wish to submit that once Profit Margin of AE & Non-AE segments are available for the purpose of benchmarking the subject international transaction, internal comparables ought to have been preferred as it is now a settled position in law that internal comparables are preferred over external comparables." 9. The reliances is placed on the following case : " a) Tecnimont ICB (P) Ltd. V. ACIT, ITA No. 4608 & 5085/Mum/2010, ITAT Mumbai (Third Member) b) Birlasoft India Ltd. V. DCIT, 44 SOT 664, ITAT Delhi c) Sony Ericsson Mobile Coomunications India Pvt. Ltd. Vs. CIT-III [(2015) 374 ITR 118] (Del HC) d) Diageo India Private Limited vs. DCIT Mumbai (ITA Nos. 7932/Mum/2011) e) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income-tax (Appellate Tribunal) Rules, 1963 (Rules) for admission of audited segmental results as additional evidence. 4. That as per the general practice followed by Seven N Consulting Private Limited and in terms of AS-17, the company was not required to maintain separate segmental accounts in-as-much as the nature of services in respect of transactions undertaken with Seven N A/S, Denmark (related party) and the unrelated parties. However during the course of Transfer Pricing Assessment the Transfer Pricing Officer had rejected the Most Appropriate Method selected by Seven N Consulting Private Limited on the ground that the segmental data was not audited. Hence, on advice in the appeal before the Hon'ble Tribunal the audited segmental results have now been obtained from an independent Chartered Accountant." 12. During the course of hearing the ld. Counsel for the assessee reiterated the contents of the aforesaid application move for admission of the additional evidences and further submitted that at the time of proceedings before the TPO audited segmental accounts were not available, therefore, the assessee was prevented by reasonable cause for producing the same befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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