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TMI Blog2016 (2) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Cisco Systems (Ind) Pvt.Ltd(Supra) was so different from that of the assessee so as to erode the comparability of the comparable companies considered in the said case with that of the assessee. In our opinion, assessee is justified in relying on the said decision which was also for the very same assessment year. Hon’ble Delhi High Court in the case of CIT Vs M/s Agnity India Technologies Pvt. Ltd. (2013 (7) TMI 696 - DELHI HIGH COURT ) had affirmed an order of this Tribunal were M/s Infosys Technologies Ltd was directed to be excluded from the list of comparables considering the peculiar features of the said company. Hence, no purpose will be served in remitting the question of comparability of M/s Infosys Tech.Ltd back to the TPO/AO. In view of the above discussion, we direct exclusion of M/s Bodhtree Consulting Ltd., M/s Tata Elxsi Ltd.(Seg.) and M/s Infosys Tech.Ltd from the list of comparables. Working capital adjustment - Held that:- AO cannot force an artificial limitation to the actual working capital adjustment ratio derived from the comparable companies considered for the arm’s length study. The restriction of working capital adjustment based on PLR of SBI will be appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the verticals/horizontals. Learned TPO, thereafter, for various reasons cited by him in the show cause notice issued to the assessee, rejected all but 8 of the comparables chosen by the assessee and added three of his own which he selected from the very same database. The new companies added by him were M/s Kals Information Systems Ltd, M/s Bodhtree Consulting Ltd and M/s Tata Elxsi Ltd (Segmental). The final list of comparable considered by the TPO and their margin as a percentage of profit of cost read as under; Sl. No. Name of the comparable Sales (in Rs.) Cost (in Rs) Margin 1 Kals Information Systems Ltd. 2,14,04.686 1,87,93,813 13.89% 2 Akshay Software Technologies Ltd. 12,23,21,483 11,31,49,350 8.11% 3 Bodhtree Consulting Ltd. 16,05,75,212 9,89,56,821 62.27% 4 R.S.Software (India)Ltd. 1,49,57,12,634 1,36,01,02,589 9.97% 5 Tata Elxsi Ltd (Segmental) 3,78,43,03,000 3,14,63,15,000 20.28% 6 Sasken Communication Technologies Ltd (Seg.) 4,05,31,20,000 3,18,69,97,000 27.91% 7 Persistent Systems Ltd 5,19,69,10,000 3,67,52,70,000 41.40% 8 Zylog Systems Limited 7,34,93,51,475 6,81,69,98,160 8.81% 9 Mindtree Ltd (Seg.) 7.93,22,79,326 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO, placed at paper book page no.527 - 633 specifically page no.591. Further, as per the learned AR, assessee had before the CIT(A), also assailed the comparability of M/s Infosys Technologies Ltd. vide submissions dated 07-08- 2014 placed at paper book page nos.253 to 323 specifically page nos.294 & 295. Learned AR also pointed out that the assessee had objected to inclusion of M/s Bodhtre Consulting Ltd. and M/s Tata Elxsi Ltd(Seg.) from the list of comparables before the TPO as well as before the CIT(A), since these companies were functionally different from the assessee. According to him learned CIT(A) brushed aside these objections. 6. As per the learned AR, M/s Bodhtree Consulting ltd, M/s Tata Elxsi Ltd and M/s Infosys Tech. Ltd were having activities which were not comparable to that of the assessee who was solely doing software development services. According to him, the co-ordinate Bench of this Tribunal in the case of M/s Cisco Systems (Ind.) Pvt. Ltd Vs DCIT (In IT(TP)A No.271(B)/2014 dated 14-08-2014 had held that these companies could not be considered as comparable in the software development services segment. As per the learned AR M/s Bodhtree Consulting Ltd w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue to show that the functional profile of M/s Cisco Systems (Ind) Pvt.Ltd(Supra) was so different from that of the assessee so as to erode the comparability of the comparable companies considered in the said case with that of the assessee. In our opinion, assessee is justified in relying on the said decision which was also for the very same assessment year. 10. Vis-à-vis M/s Bodhtre Consulting Ltd, the observation of this Tribunal as it appeared at page no.26.1 of the order in the case of M/s Cisco Systems (Ind.) Pvt.Ltd. read as under; "26. COMPANIES INCLUDED IN THE FINAL LIST OF COMPARABLES WHICH THE ASSESSEE WANTS TO BE EXCLUDED:- 26.1 Bodhtree Consulting Ltd.:- As far as this company is concerned, it is not in dispute that in the list of comparables chosen by the assessee, this company was also included by the assessee. The assessee, however, submits before us that later on it came to the assessee's notice that this company is not being considered as a comparable company in the case of companies rendering software development services. In this regard, the ld. counsel for the assessee has brought to our notice the decision of the Mumbai Bench of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and engineering services and visual computing labs and system integration services segment. There is no sub-services break up/information provided in the annual report or the databases based on which the margin from software services activity only could be computed. The company has also in its response to the notice u/s.133(6) stated that it cannot be considered as comparable to any other software services company because of its complex nature. Hence, Tata Elxsi Ltd., is to be excluded from the list of comparables. 20. On the other hand, the learned DR supported the order of the lower authorities regarding the inclusion of Tata Elxsi and Flextronics Software Systems Ltd., in the list of comparables. He reiterated the contents of para 14.2.25 of the TPO's order. He also read out the following portion from the TPO's order : "Thus as stated above by the company, the following facts emerge : 1. The company's software development and services segment constitutes three sub-segments i) product design services; ii) engineering design services and iii) visual computing labs. 2. The product design services sub-segment is into embedded software development. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in the case of M/s. TDPLM Software Solutions Ltd. v. DCIT, ITA No.1303/Bang/2012, by order dated 28.11.2013 with regard to this comparable has held as follows:- "11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the company in the set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the assessee on the grounds that turnover and brand aspects were not materially relevant in the software development segment. 11.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee in the case on hand. The learned Authorised Representative drew our attention to various parts of the Annual Report of this company to submit that this company commands substantial brand value, owns intellectual property rights and is a market leader in software development activities, whereas the assessee is merely a software service provider operating its business in India and does not possess either any brand value or own any intangible or intellectual pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. (supra) for Assessment Year 2007-08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. The decision rendered as aforesaid pertains to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Respectfully following the decision of the Tribunal referred to above, we hold that Infosys Ltd. be excluded from the list of comparable companies". 13. No doubt, in so far in the case of M/s Infosys Tech.Ltd. is concerned, it was one among the many companies chosen by the assessee itself. However, in view of the special Bench decision in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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