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TMI Blog2016 (9) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal challenging the direction of the DRP excluding the following comparables considered by the TPO. i) Kals Information Systems Ltd. ii) Spry Resources India Pvt Ltd. iii) Taksheel Solutions Ltd., 3. The facts of the issue are that in the Transfer Pricing Adjustments, the TPO had arrived at Arm's Length Price (ALP) of operating margin of comparable companies at 23.87% as against operation profit on total cost of the assessee at 14.51%. On this basis, TPO has determined shortfall in PLI of the assessee at 9.36% and an upward adjustment of Rs. 81,48,600/- was made to the international transactions relating to rendering of software development to its AE. 4. Before the DRP, the assessee objected the following comparables selected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Resources India Pvt Ltd In respect of this comparable, assessee contends that revenue is earned from software consultancy and sale of software products whereas the assessee company is engaged in development of captive software. Segmental information is not available. TPO has stated the profit & Loss account for the year ended 31.3.2010 of this comparable showed that it has earned income in foreign exchange from software development to the tune of Rs. 2.29 crores. Since breakup of software sales and services is not available, AO/TPO is directed to exclude this comparable. (e) Taksheel Solutions Ltd The assessee contends that in respect of this comparable, employee cost to the total revenue is 2.83%, whereas in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on the reason that the financials of the comparable company does not show the breakup of revenue from sale of software and from provision of software services. According to ld.D.R, the comparable is into providing software development service only and the observation in the financial on the method of recognition of revenue with respect to software development and sale of software is more generic in nature and does not prove that the entity is generating revenue from sale of software in any significant manner. The DRP for that matter has approved the TPO's choice of M/s.Akshay Software Tech Ltd as a comparable, even though the financials of the said comparable also has a similar remark on recognition of revenue from provision of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt Ltd., Taksheel Solutions Ltd., is very meager as against the turnover of Rs. 1,000/- crores of assessee's company. 7. We have heard both the parties and perused the material on record. In this case, in our opinion as rightly observed by the DRP, no segmented data of Kals Information Systems Ltd. is available on public dominion. Even before us, the ld.D.R is not able to show that Segmented Data of Kals Information Systems Ltd. could be made available to TPO. Hence, rightly pointed out by the ld.A.R Kals Information Systems Ltd. derives its revenue primarily from software services and software products. It is also getting income from training, unless and until the segment data is available regarding providing software services, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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