9911796707
TMI Blog2018 (10) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... long with attachments to establish its case that the said concern SIP Technologies and Exports Ltd. was not persistent loss making. - ITA No.1539/PUN/2014 And ITA No.1578/PUN/2014 - - - Dated:- 24-10-2018 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Assessee : Shri M.P. Lohia For The Revenue : Shri Rajeev Kumar ORDER PER SUSHMA CHOWLA, JM: The cross appeals filed by assessee and Revenue are against order of CIT(A)-IT/TP, Pune, dated 20.05.2014 relating to assessment year 2009-10 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The cross appeals filed by assessee and Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No.1539/PUN/2014 has raised the following grounds of appeal:- Grounds of appeal pertaining to transfer pricing adjustment: 1. Inappropriate transfer pricing adjustment even though the pricing of all international transactions of the Appellant was at arm's length Erred in making/ confirming transfer pricing adjustment by rejecting the analysis undertaken by the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consultancy services even though the companies satisfied all the comparability criteria/ filters applied while conducting the transfer pricing study. 8. Inappropriately considering functionally different companies as comparable to the Appellant Erred in adopting an incoherent approach and identifying certain inappropriate additional non-comparable companies as comparable to the Appellant on an ad-hoc basis (cherry picking). 9. Inappropriately rejecting adjustment to account for differences in functions and risk profile of the Appellant vis-a-vis the comparable companies Erred in comparing full-fledged risk bearing entities with the Appellant's captive operations without making any risk adjustment for differences between the functional and risk profile of comparable companies considered as comparable vis-a-vis the risk profile of the Appellant. 10. Erred by not considering the fact that Appellant is availing tax holiday under section 10A of the Act Erred in ignoring the fact that since Appellant is availing tax holiday under section 10A of the Act, there is no intention to shift the profits out of India, which is one of the basic intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s)- IT/TP has erred on facts and in law in directing the A.O. to apply the Turnover filter of ₹ 1 crore to 200 crore in view of the UN and OECD guidelines. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in directing the A.O. to adopt the comparables (companies) other than the AO/TPO has adopted. 4. For this and such other reasons as may be urged at the time of hearing, the order of the Id. CIT(A) may be vacated and that of the Assessing Officer be restored. 6. Briefly, in the facts of the case, the assessee was engaged in provision of software development services to its associated enterprises. The assessee had furnished return of income declaring total income of ₹ 55,37,245/-. The Assessing Officer made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) for determining the arm's length price of international transactions undertaken by the assessee. The value of international transactions of provision of software development services to associated enterprises was ₹ 48,29,13,194/-. The assessee had applied TNNM method and the assessee was being remunerated at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. was also included in final set of comparables. The assessee further wanted Comp-u-learn India to be included but the same was not accepted by CIT(A). Further, exclusion of KALS Information Systems Ltd., as pleaded by assessee was not accepted and the said concern was held to be comparable. Another concern Thinksoft Global Service Ltd. was held to be not comparable and the same was excluded, then there is finding in respect of other companies. The CIT(A) also did not allow the benefit of risk adjustment to the assessee. 8. Both the assessee and Revenue are in appeal against the order of CIT(A). 9. The first issue raised by assessee against order of CIT(A) vide modified ground of appeal No.4 is against exclusion of SIP Technologies and Exports Ltd. from final set of comparables being functionally not comparable. The assessee by way of modified ground of appeal No.8 has sought exclusion of two concerns i.e. Bodhtree Consulting Ltd. and KALS Information Systems Ltd. 10. The Revenue by way of ground of appeal No.2 is aggrieved by the order of CIT(A) in directing Assessing Officer to apply turnover filter of ₹ 1 crore to 200 crores. The ground of appeal No.3 raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment would become academic. 12. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of Assessing Officer / CIT(A). 13. We have heard the rival contentions and perused the record. The assessee was engaged in providing software development services to its associated enterprises. The total international transactions undertaken by assessee were ₹ 48.29 crores. The assessee had applied TNNM method and there is no dispute about application of said method. The TPO however had applied revised filters; as against the concerns selected by assessee in its TP study report, another set of comparables were finally selected by TPO and the same were confronted to the assessee. The assessee is aggrieved by exclusion of one concern SIP Technologies and Exports Ltd., against which it has filed modified ground of appeal No.4. The said concern was excluded by TPO/Assessing Officer on the ground that it was persistent loss making concern. However, if we look at the details filed by assessee i.e. summary of operating profit margins for three years of SIP Technologies and Exports Ltd., then in assessment year 2007-08, unadjusted operatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argins of the said concern over the period of years and the Tribunal in the case of DCIT Vs. Barclays Technology Centre India (P.) Ltd. reported in 72 taxmann.com 351 (Pune-Trib.) has directed the exclusion on this account. He further referred to the decision of Hon ble Bombay High Court in the case of CIT Vs. PTC Software (I) Pvt. Ltd. in Income Tax Appeal No.732 of 2014, judgment dated 26.09.2016, wherein the concern KALS Information Systems Ltd. have been held to be not functionally comparable to a concern providing software development services to its AEs. 17. Further, Pune Bench of the Tribunal in the case of John Deere India (P.) Ltd. Vs. DCIT (supra) while deciding the appeal for assessment year 2009-10 vide order dated 27.10.2016 it was held that the said concern Bodhtree Consulting Ltd. was engaged in the sale of software product apart from providing software services and no segmental data was available in the said context. Following the same parity of reasoning, we hold that the concern Bodhtree Consulting Ltd. is to be excluded from the final set of comparables. 18. Now, coming to the next concern i.e. KALS Information Systems Ltd., the Tribunal in Nihilent Ltd. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f John Deere India Pvt. Ltd. in ITA No. 2236/PN/2012 for assessment year 2008-09 it was held that the said concern was not functionally comparable since it was engaged in the product engineering and content engineering services, which were in the nature of ITES services and was not comparable with the assessee s activity of providing software development services. The relevant findings of the Tribunal are in para 19 at pages 25 to 28 of the order, which are being referred but not being reproduced for the sake of brevity. 12. Further, Pune Bench of the Tribunal in the case of John Deere India (P.) Ltd. Vs. Deputy Commissioner of Income Tax (supra) while deciding the appeal for assessment year 2009-10 vide order dated 27.10.2016 it was again held that the said concerns Bodhtree Consulting Ltd. was engaged in the sale of software product apart from providing software services and no segmental data was available in the said context. Following the same parity of reasoning i.e. in the case of assessee and the in the case of John Deere India (P.) Ltd. (supra) we hold that the concern Bodhtree Consulting Ltd. is to be excluded from the final set of comparables. 13. Another aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
