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TMI Blog2018 (5) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee company filed its e-return of income for the A.Y. 2008-09 on 29.09.2008 admitting income of ₹ 8,10,43,090/-. The case was selected for scrutiny. Notices u/s 143(2) and 142(1) were issued and served on the assessee. In response to the notices issued, Chartered Accountant and Authorized Representatives of the assessee appeared and filed the information called for time to time. Reference u/s 92CA of the Income Tax Act, 1961 was made by the Assessing Offier to the TPO vide reference dated 30.07.2010. The TPO passed order u/s 92CA(3) of the Act vide order dated 28.10.2011. The draft Assessment Order dated 20.12.2011 was passed and forwarded to the assessee as per the provisions of Section 144C(1). The assessee company filed objection with the DRP-I and intimated the Assessing Officer about the same. The DRP-I vide direction dated 26.09.2012 issued u/s 144C(5) of the Income Tax Act, 1961 directed the Transfer Pricing Officer to recalculate the transfer pricing adjustment calculation in the case of the assessee company for the A.Y. 2008-09 under consideration. The Transfer Pricing Officer in compliance to the directions dated 26.09.2012 of the DRP-I, has recalculated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 crores. It was further submitted that Infosys develops/owns proprietary products like Finacle which is not so in the case of the assessee company. It was further submitted that Infosys's brand value stood at ₹ 22,915 crores, while the assessee has no brand value in India. The Ld. AR has also submitted that Infosys has a significant Advertising/Sales promotion and brand building expenditure of INR 499 crores (i.e. 5.53% of revenue). On the ITA No. 2587/Del/2014 AY: 2007-08 other hand, the assessee does not undertake any AMP expenditure. 5.01.1 It is seen that the ITAT Delhi Bench in Agnity India Technologies P. Ltd. vs. ITO Ward 12(1) in ITA No. 3856/Del/2010 for AY 2006-07 ordered to exclude Infosys from the list of comparables by citing - It is argued that the case of the assessee is not comparable with Infosys Technologies Ltd., the reason being that the letter is joined in the area of development of software and assumes all risks, leading to higher profit. On the other hand, the assessee is a captive unit of its parent company in the USA and it assumes only limited currency risk. Having considered these points, we are of the view that the case of aforesaid Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. 5.02.1 The Pune Bench of the ITAT in the case of Bindview India P. Ltd. vs. DCIT in ITA No. 1386/PN/2010 for AY 2006-07 has held that, Another issue relating to selection of comparables by the TPO is regarding inclusion of KALS Information System Ltd. The assessee has objected to its inclusion on the basis that functionally the company is not comparable. With reference to pages 185 - 186 of the Paper Book, it is explained that the said company is engaged in development of software products and services and is not comparable to software development services provided by the assessee. The appellant has submitted an extract on pages 185 - 186 of the Paper Book from the website of the company ITA No. 2587/Del/2014 AY: 2007-08 to establish that it is engaged in providing of IT enabled Services and that the said company is into development of software products, etc. All these aspects have not been factually rebutted and, in our view, the said concern is liable to be excluded from the final set of comparables, and thus, on this aspect, assessee succeeds. ITAT Bangalore Bench in Hewlett - Packard (India) Globalsoft P. Ltd. vs. DCIT in IT (TP) No. 1031/Bang/2011 followed the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tley Systems India Pvt. Ltd. [TS-559- ITAT-2015(DEL)], Ness Innovative Business Pvt. Ltd. [TS-177-ITAT- 2014], DE Shaw India Software (P) Ltd. [TS- 19-ITAT-2015(HYD)], Ciena India Private Ltd. vs. ITO (ITA No. 1453 of 2014 2948/3324 of 2013). ITAT Delhi Bench in Ciena India Private Ltd. vs. ITO (ITA No. 1453 of 2014 2948/3324 of 2013) has held, when the position of accounts of Bodhtree is such that it does not properly match expenses with Revenue, it loses its credibility for making a logical comparison with a company that accounts for expenses matching with the Revenue. Once it is held that the profits of Bodhtree Consulting Ltd. do not represent fair profitability on year to year basis, this company loses its tag of an effective comparable. We, therefore, order for the exclusion of this company from the final list of comparables. Drawing support from the above said judicial precedents we direct exclusion of this company from the final set of comparables. 5.07. Ground No. 5 is decided in favour of the assessee in terms of our observations as aforesaid. Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude Bodhtree Consulting Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by this company are different from the assessee as have been narrated above. Even the segmental details for Revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded from the list of comparable parties. Following the aforesaid decisions, this company cannot be considered as comparable with the assessee and we direct exclusion of the aforesaid company from the final list of comparables while determining ALP. Accordingly in light of the above judicial precedent, we direct the TPO/AO to exclude Tata Elexi Ltd. from the final list of comparables. 3.13 Avani Cincom Technologies Ltd. :- The Ld. AR submitted that this comparable company is dealing in both software products and services and segmental data is also not available. The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows: i. Global Logic India (P) Ltd. vs. DCIT (TS-274-ITAT-2015(DEL)-TP) A.Y. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. AR relied upon the various decision of the Tribunal of various benches which are as follows: i. 3DPLM Software Solutions Ltd. (TS-359-ITAT-2013(Bang)-TP) A.Y. 2008- 09 ii. Hewlett-Packard (India) Globalsoft Operation P. Ltd. (TS-446-ITAT- 2015(Bang)-TP) A.Y. 2007-08 iii. Novell Software Development (India) P. Ltd. (TS-257-ITAT- 2016(Bang))A.Y. 2007-08 iv. Barclays Technology Private Limited vs. ACIT (TS-91-ITAT-2016(PUN)-TP) A.Y. 2008-09 iv. Softbrands India Pvt. Ltd. vs. DCIT (TS-693-ITAT-2016(Bang)-TP) v. Emptoris Technologies India Pvt. Ltd. vs. DCIT (TS-91-ITAT-2016(PUN)- TP) 3.17 The Ld. DR relied upon the order of the TPO/AO as well as DRP. 3.18 We have heard both the parties and perused all the relevant records. It is pertinent to note that this comparable company deals in software products development services and high end technical services which falls under KPO services. This company cannot be held as comparable company as the assessee company is not a KPO service. Thus, functional profile is different of this comparable to that of the assessee company. Therefore, we direct the TPO/AO to exclude E-Zest Solutions Ltd. from the final list of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributable to the earning of rental income viz. 23,37,991/- is to be excluded and the margins to be recomputed. . We, accordingly, direct the ld. TPO to recomputed the margin of this comparable and determine the average margins accordingly. In the present assessee s case also the TPO has not taken into account the correct margin of the comparable company therefore, we direct the TPO/AO to recomputed the margin of Softsol India Ltd. and determine the average margins accordingly. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. 4. In result, appeal being ITA No. 410/DEL/2013 for A.Y. 2008-09 filed by the assessee is partly allowed for statistical purpose. 5. Now we are taking up the appeals for A.Y. 2009-10 filed by the Assessee as well as the Revenue being ITA No. 1484/DEL/2014 (by assessee) and ITA No. 1204/DEL/2014 (by Revenue). 6. The Ld. AR submitted that in A.Y. 2009-10, the TPO/AO as well as DRP has included Bodhtree Consulting Limited, KALS Information Systems Limited and Infosys Technologies Limited. The Assessee submitted that these comparable companies are not at all comparable to the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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