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TMI Blog2015 (5) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... fit margin in case of the assessee comes within the permissible range and no upward adjustment would be required to be made. The nature of the service provided by Autodesk India Pvt. Ltd. were of different nature as compared to the services rendered by the assessee. Considering the facts and circumstances of the case effective ground of appeal is decided in its favour and additional ground is allowed for statistical purposes X X X X Extracts X X X X X X X X Extracts X X X X ..... ware software for its parent company. It filed its return of income on 28.11.2006,declaring total income of ₹ 36.42 lacs. During the course of assessment proceedings, the AO found that the assessee had entered into three international transactions. He made a reference to the Transfer Pricing Officer(TPO) for determination of Arms length price (ALP)u/s.92CA of the Act. Out of the three transactions, the TPO did not propose any adjustment with regard to two transactions that were entered into by the assessee with its Associated Enterprises(AE). 3.The TPO found that the assessee had furnished Transfer Pricing (TP) report in support of the ALP of 9.75% (on cost)with regard to software development services), that the assessee had selected the TNMM as the most appropriate method for benchmarking its transactions, that it had identified seven (7) companies as comparables. After considering the 3 years weighted average, PLI(operating profit/cost) was calculated @ 7.20%. Sl.No. Name of the Company Wtd. Avg. 1. Astro Bio Systems Ltd. 1.06 2. Goldstone Technologies Ltd. 6.26 3. Maars Software International Ltd. 6.35 4. Megasoft Ltd. 9.58 5. Orient Information Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 5. KALS Info Systems Limited 1.97 39.75 6. Mindtree Consulting Limited 448.79 14.67 7. Persistent Systems Limited 209.18 24.67 8. R. Systems International Ltd. 79.42 22.20 9. Sasken Communication Ltd.(seg.) 240.03 13.90 10. Tata Elxsi Ltd. (seg.) 188.81 27.65 11. Lucid Software Limited 1.02 8.92 12. Mediasoft Solutions P. Ltd. 1.76 6.29 13. R.S. Software (India) Ltd. 91.57 15.69 14. SIP Technologies & Exports Ltd. 6.53 3.06 15. Bodhtree Consulting Ltd. 5.32 15.99 16. Accel Transmatics Ltd.(seg.) 8.02 44.07 17. Synfosys Business Solutions Ltd. 4.49 10.61 18. Megasoft Ltd. 56.15 52.74 19. Lanco Global Solutions Ltd. 35.63 5.27 20. Flextronics Software Systems Ltd. 595.12 27.24 Average 20.68% 3.2 The TPO mentioned that all the figures were taken from the Annual reports, that the costs taken for the computation of margins were costs before interest charges, that forex gain /loss was not taken as part of the operating expenses, that forex gain was categorised as other income, that loss of sale of assets was not taken as expenditure. He allowed the working capital adjustment of 2.99% of the margin and revised the PLI at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for the year under appeal by the TPO. With regard to KALS Infosys,he stated that the assessee was engaged in the business of software development, that KALS was a product company, that comparison of KALS with the assessee was not proper. He referred to pg no.499, 500,502, 503,511, 715, 716 720, 726 of the paper book. He relied upon the cases of M/s. Triology E-business Software India Private Ltd. (ITA/1054/Bang/2011 dt.23/11/2012 and Intoto Software India Private Limited (ITTA No.233 of 2014 dt. 27/3/2014). He further contended that Megasoft Ltd. was following calendar year, that the assessee was following financial year while preparing the books of account, that comparables adopting different accounting year could not be basis for TP adjustments. He referred to pg-7 of the paper book and relied upon the case of Evonic India Pvt. Ltd. ITA/1125/Mum/2014 dt. 18. 09.2014. Departmental Representative(DR)argued that Megasoft Ltd. has been accepted as a comparable in other cases. He referred to ITA No.1108/Bang/2010 AY 06-07, dt.31.1.2013.He also referred to case of Autodesk India Pvt. Ltd.(TS 62 ITAT 2013/Bang) and HCL EAI Services Ltd.(TS-133 ITAT 2013.Bang).He also referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expected that while comparing the variables, same assessment is taken to arrive at the possible adjustment of international transactions. In the matter of Evonik India Pvt. Limited(supra),the issue of calendar year/march ending year has been deliberated upon. We would like to reproduce the relevant portion of the order of the said order. "4. It was the contention of learned AR that as per the balance sheet of CRISIL Limited placed on record, the company follows 31.12.2008 year ending which is different from that of the assessee which is 31.3.2009. Accordingly, in view of the decision of the coordinate bench in the case of Hapag Lloyd Global services (P) Ltd., (2013) 34 taxmann.com 241 (Mum Trib.), the same should be ignored. It was also argued by the learned AR that even though the CRISIL Limited was its own comparable, however, in view of the fact that it is not functionally comparable, he requested for exclusion of the same and for this purpose he placed reliance on the following decisions:- i) Quark Systems (P.) Ltd. (201 OJ 38 SOT 307 (CHD(SB) ii) Stream International Services Privale Limited 2013-T/1-42-ITAT-MUM-TP; iii) Techbook International Private Limited TS-117 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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