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TMI Blog2016 (8) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... l employed by the Appellant vis-à-vis the comparable companies." 1.1. We further find that apart from the grounds originally raised by the Revenue petition for admission of additional grounds was filed. The grounds originally raised read as under:-- 1. "Whether on facts and circumstances of the case and in law, Hon'ble DRP has erred in removing Zylog Systems and Quintegra Solutions Ltd. from list of comparables. 2. On facts and circumstances of the case and in law whether the comparables included by the Department can be rejected on the ground of being functionally different on the basis of characteristics which are also present in the comparables included by the assessee himself. In such an eventuality whether the comparables included by the assessee having similar characteristics need also be excluded. 3. Whether on the facts and circumstances of the case and in law, it would not be proper for Tribunal to set aside the matter to the file to the TPO for re-examination when it is found that both the departments' comparables and the comparables included by the assessee both suffered from similar functional dissimilarity." 1.2. By petition dated 07.04.2016 admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree Consulting Ltd; (b) Infosys Technologies Ltd.; (c) Tata Consultancy Services Ltd.; (d) WIPRO Ltd.; and (e) Zenith Infotech Ltd. is made. 3.2. The prayer for exclusion of the comparable in the 2 segments it was submitted is supported by the Annual Financial Reports of the comparable companies. Relying upon the FAR of the assessee as considered by the tax authorities and the judicial precedent as cited in the synopsis filed, it was his prayer that the claim of the assessee may be allowed. 4. Addressing the arguments for exclusion of APTICO Ltd. it was submitted that as a comparable the said company had been excluded by the DRP in 2011-12 A.Y. holding that this company is a functionally different entity and it hence does not make a good comparable to the assessee in MSS function". Copy of the order dated 21.09.2015 of the DRP in 2011-12 A.Y. it was submitted is at pages 1501-1508 and the relevant discussion is at page 1516. Apart from that it was submitted that for the exclusion of the said comparables, reliance was also placed upon the order of the ITAT dated 14.08.2014 in Stay Petition No. 130/Bang/2014 IT(TP)A No. 271/Bang/2014 in the case of M/s. Cisco Systems (India) vs. DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for 2008-09 A.Y.); (d) WIPRO Ltd.(excluded in assessee's own case in 2008-09 A.Y.); and (e) Zenith Infotech Ltd. (excluded in assessee's own case). It was submitted that since in the facts of the present case the retention of these comparables does not have any impact on the arm's length price then for the record and in order to keep the issue alive the assessee may be considered to have argued in favour of exclusion of these comparable in the year under consideration relying upon the past precedent available in assessee's own case and various other facts which are brought out in the synopsis and the chart therein filed reserving its right to subsequently argue for the exclusion of these comparables on a future date if so warranted. The issue in the present proceedings it was submitted for want of any adjustment required is academic and thus may not be required to be contested vigorously and seek adjudication. 7. Addressing the next grievance of the assessee i.e. working capital adjustment it was submitted by the ld. AR that the ITAT had directed working capital adjustments in assessee's case in 2008-09 and 2006-07 A.Ys. For the specific purposes, attention w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing opportunity to demonstrate that there was difference in the levels of working capital employed, vis-à-vis. the comparables. Following the same, we hold that the opening working capital deployed and the closing working capital deployed has to be taken into consideration for making any adjustment to the working capital deployed in the case of a comparable, of course, the assesses for availing the above benefit has to demonstrate that there was difference in the levels of working capital employed, vis-à-vis., the comparables. We thus set aside the matter of the file of the TPO to decide the issues accordingly after affording opportunity of being heard to the assessee. The ground No. 8 is thus allowed for statistical purposes." 7.1. It was also his submission that the TPO in assessee's own case in 2011-12 & 2012-3 A.Ys. has allowed working capital adjustment to the assessee. Apart from judicial precedent in assessee's own case, reliance was placed upon Mercer Consulting India Pvt. Ltd. (ITA No. 966/Del/2014) for A.Y. 2009-10; Agilent Technologies International Pvt. Ltd. (ITA No. 1837/Del/2014); Navisite India Pvt. Ltd. (ITA No. 5329/Del/2012) [Para 72 page 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is comparable and accordingly it may be included. Reliance was placed upon the TPO's order who has discussed the issue at page 43. Relying on the same it was submitted that the objections of the assessee that it was engaged in a wide variety of services has been rejected by the TPO holding that functional profile is identical. The DRP it is seen has directed the exclusion of the said comparable on the ground that the company has shown abnormal growth of 67% as compared to preceding years. On FAR profile the DRP held that it is engaged in produced engineering, analytical service & enterprise services which are essentially similar to those of the assessee. The very purpose of selecting sufficient number of comparables it was argued was to have all kinds of comparables. 8.3. Addressing the comparables addressed in the Software Development Segment which were directed to be retained by the DRP namely Quintegra Solutions Ltd. and Zylog Systems Limited. The Ld. CIT DR drew attention to the chart of issues brought out in internal pages 7 and 8 of the DRP's order. A perusal of the same it was submitted would show that the inclusion of these two companies has been directed on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Nature of transaction Value of transaction Method adopted 1. Provision of Software Development Services 2,85,97,82,441 TNMM 2. Payment of data linkage charges 1,98,75,759 TNMM 3. Provision of marketing sales support services 13,88,45,364 TNMM 11.2. The assessee in its TP study in the Marketing Sales Support Services selected TNMM as the most appropriate method using OP/TC ratio as the PLI. The assessee selecting 13 comparables using multiple year data arrived at the average PLI of 9.87% of the comparables and comparing it to the assessee's PLI of 26.06% claimed that the transactions were at arms length. 11.3. The functions performed by the assessee in respect of marketing support services were explained as under:-- - "Marketing activities - Adobe India undertakes marketing activity in India under the guidance of Adobe Ireland. In inter alia performs the following activities; - Visit distributors & direct customers to inform them about existing Adobe application products to be licensed by Adobe Ireland. - Visit distributors direct customers and strategic partners to inform them and explain new Adobe Application products to be licensed in India. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the direction of the DRP the TPO carried out the following corrections:-- 7. Marketing & Sales Support Services: "Following comparables have been used by the TPO for Marketing & Sales Support Services in the order dated 30.01.2013 for computation of Arm's Length Price of the international transaction:-- S.No. Name of the Company OP/TC (%) 1. APTICO Limited 37.70% 2. Global Procurement Consultant 35.89% 3. IDC (India) Limited 14.95% 4. Priya International Limited (Segmental) 20.17% 5. TSR Darashaw Limited 26.98% Arithmetic Mean 27.13% 8. Computation of OP/TC of Marketing Support Services Segment:-- DRP vide its order dated 03.12.2013 directed to include ICRA Management Consulting Limited in the list of comparables and exclude Global Procurement Consultants Limited for the benchmarking of the Provision of Marketing Support Services Segment. S.No. Name of the Company OP/TC (%) 1. APTICO Limited 37.72% 2. ICRA Management Consulting Ltd. 1.12% 3. IDC (India) Limited 14.95% 4. Priya International Limited (Segmental) 20.17% 5. TSR Darashaw Limited 26.98% Arithmetic Mean 20.18% 9. Mean margin of comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve reasoning, the exclusion of this comparable is directed. 11.10. Considering the grievance qua TSR Darashaw, we find that the said company apart from being engaged in payroll processing, record management is also engaged in depository related services. The nature of activity cannot be said to be comparable to marketing support services. It is further seen that the DRP has also excluded the said comparable in 2008-09; 2010-11 and 2011-12 A.Ys. and no appeal it is stated has been filed by the Revenue in these respective years on exclusion of the said comparable. 11.10.1. Accordingly, in the light of the above facts, we find that the said comparable cannot be said to be comparable to the assessee and is directed to be excluded. 12. Addressing the departmental ground wherein inclusion of Quintegra Solutions Ltd. and Zylog Systems Limited. Has been carried out on the direction of the DRP which is being opposed by the Revenue relying on past precedent, we find that in the light of the submissions of the Ld. AR the departmental ground is to be allowed. While so holding, we record that the issue is not vigorously contested by the assessee as on account of non impact on the arms length ..... X X X X Extracts X X X X X X X X Extracts X X X X
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