9911796707
TMI Blog2018 (7) TMI 1878X X X X Extracts X X X X X X X X Extracts X X X X ..... this assessee has raised the following grounds: - "Re.: Adjustment of Rs. 1,98,33,679/- on account of the software development services: 1.1 The Assessing Officer the Dispute Resolution Panel/ the Transfer Pricing Officer has in making an upward adjustment of Rs. 1,98,33,679/- to the total income of the Appellant by holding that the international transaction relating to the software development services entered into by the Appellant with its Associated Enterprise was not at an arm's length. 1.2 The Appellant submits that considering the facts and circumstances of its ease and the law prevailing oil subject the international transaction relating to the software development services entered into by the Appellant with its Associated Enterprise was at an arm's length and hence no adjustment in respect thereof was called for and the stand taken by the Assessing Officer/the Dispute Resolution Panel the Transfer Pricing Officer in this regard is misconceived, erroneous and incorrect. 1.3 The Appellant submits that the Assessing Officer be directed to delete the upward adjustment of Rs. 1,98,33,679/- made by him to the Appellant's total income and to re-compute its tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as worked out Operating Margin at 9.13%. The assessee has given 11 comparable but the TPO has rejected 10 out of 11 comparables, which were selected by the assessee and undertaken a fresh search on the database Prowess and capitaline. The TPO has shortlisted a set of following 23 companies as comparables, out of which one company is common with the assessee's set and worked out operating margin of comparable at 24.99% and thus made an addition of Rs. 1.98 Cr. Sr. No. Name of the Company Margins % OP/TC 1. Aarman Software Pvt. Ltd 1.41 2. Accel Transmatics Ltd. 15.72 3. Acropetal Technologies Ltd. 32.45 4. Aricent Technologies (holdings) Ltd. 7.57 5. AvaniCincom Technologies Ltd. 21.65 6. Bodhtree Consulting Ltd. 19.14 7. Celestal Labs Ltd. 87.94 8. E-Infochips Ltd. 30.32 9. E-Zest Solutions Ltd. 28.58 10. Igate Global Solutions Ltd. 13.12 11. Infosys Technologies Ltd. 28.58 12. Kals nformation systems ltd. 41.94 13. LGS Global solutions Ltd. 26.46 14. Mindtree Ltd. 15.34 15. Persistent System Ltd 15.3 16. Quintegra Solutions Ltd. 9.75 17. R Systems International Ltd. 15.3 18. Sasken communication Technologies Ltd. 12.83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Product company, rejected by TPO AY 2011-12 9. E-Zest Solutions 28.58 INfor (Bangalore) ITA 1550 10. Igate Global Solutions Ltd. 13.12 Dialogic ITAT Order aY 2009-10 11. Infosys Technologies Ld. 39.62 Infor (Bangalore) ITA 1550 12. KALS information System Ltd. 41.94 Infor (Bangalore) ITA 1550 13. LGS Global Solutiosn Ltd. 26.46 26.46 26.46 14. Mindtree Ltd. 15.34 15.34 15. Persistent System Ltd. 27.7 Infor (Bangalore) ITA 1550 16. Quintegra Solutiosn Ltd 9.75 Infor (Bangalore) 1550 17. R System International Ltd. 15.3 15.3 18. Sasken Communication Technologies Ltd. 12.83 12.83 19. Softsol India Ltd. 42.33 15 15 Arithmetic error, PTC Software ITA 1546 20. Tata Elxsi Ltd. 18.69 Infor (Bangalor) ITA 1550 21. Thirdware Solutions Ltd. 23.05 15.28 Infor (Bangalore) ITA 1550) 22. VGL Softech Ltd. 15.28 23. Wipro Ltd. 28.56 Infor (Bangalore) ITA 1550 24. Mean Margins 24.99 12.61 13.88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotel and restaurant booking engines etc as per Page 56, 57 & 58 of the assessee paper book. No revenue bifurcation between Software Development Services and products is given. The assessee relied on the Tribunal decisions for rejection of this company on the basis of being functionally non comparable to a software development service provider. 8. The third company is Bodhtree Consulting Ltd., which is engaged in providing Data management and Data warehousing services which are classified as lTES. Hence it is functionally not comparable. Further, segmental data is not available. Thus, it is difficult to identify the software services provided by Bodhtree. The company has its head office in Santa Carla, CA and has offshore delivery centers in India and is engaged in Product Engineering, Analytics Services, Cloud Services, Enterprise Services. The company has a workforce of 850+ and a Fortune 500 Customer base. Hence renders it functionally different from the assessee. During the year the company has undergone restructuring activity by hiving off its e paper business. Reference was invited in this regard to Pg. 69 of the paper book. It was further contended that this Company has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company was rejected by the TPO in its order for AY 2011-12 for being functionally not comparable to Dialogic by observing as under on page 4 point no 4:- "The company provides hardware designing services rendering it functionally different from the assessee. Further there is a mention of inventory in its balance sheet (1.24 crores). Further, as there is no separate reportable business segments, attribution of income cannot be performed among the diversified business activity." Hence, She vehemently argued that E-infochips should be rejected for being a product company and hence functionally non comparable. 11. The sixth company is E-Zest Solutions Ltd., which is engaged in providing KPO services (includes Business Research, Marketing Research, Pharmacy and Healthcare Research, Financial Services Research, Legal Research and IP Research), helpdesk services, infrastructure management, Vendor Management services, IT Asset management services, Multi- channel Support Solution: Voice/Email/Chat/Web, CRM, Knowledgebase, Remote Diagnostics, Data Centre Services etc. The following details are filed in assessee's paper book at page 91: * E-Zest has disclosed inventories worth Rs. 11.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ica, 9 are in the Asia-Pacific region and 6 are in Europe. Infosys also has revenue of Rs. 597 crores from the sale of products as can be seen from page 117 of paper book. Infosys provides comprehensive end-to-end business solutions that leverage technology. There service offerings include custom application development, maintenance and production support, package enabled consulting and implementation, technology consulting and other solutions, including business process management and solutions, product engineering solutions, infrastructure maintenance services, operations and business process consulting, testing solutions, and systems integration services. These offerings are provided to clients across multiple industry verticals including banking and capital markets, communications, energy, manufacturing and retail. They also provide a core banking software solution, Financial, and provide customization and implementation services around this solution. The assessee further relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 14. The ninth company is KALS Information Systems L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information. The company is engaged in producing Laboratory information systems (LIMS), Device monitoring Systems (DMS), etc. Further submitted that this Company has been rejected by the ITAT in assessee's own case vide order for AY 2009-10 as it is functionally dissimilar to the assessee for which attention was drawn to para 3.4. of the order. She relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 16. The eleventh company is Quintegra Solutions Ltd., which is engaged in product engineering and extensive Research and development. Quintegra's goodwill constitutes approximately 78 percent of its total assets as per Page 154 of Paper book. Dialogic does not have any goodwill/intangible assets. Hence the assessee prayed that the company should be dropped as a comparable since this shows that it is functionally not comparable. She relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 17. The twelfth company is Tata Elxsi Ltd., which is an engineering designing company provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctionally not comparable to a software development service provider. 20. The fifteenth company is Softsol India Ltd., and assessee pointed out that as per page 10 of the TP Order the TPO has made a mathematical error in computing the margins of Soitsol India Ltd. Softsol has a revenue of Rs. 18,99,40,746 and a cost of Rs. 16,51,65,066. Accordingly the net profit is Rs. 2,47,75,680 resulting into OP margin of 15%. The correct margin is therefore 15% and not 42.33% as has been incorrectly taken by the TPO. The same is also depicted on page 3 in the case of PlC Software (India) Private Limited Vs ACIT (2546/Pune/2012) (AY 2008-09) (Para 2.1 serial no 9). 21. On the other hand learned departmental representative relied on the order of the authorities below and vehemently argued that rejecting only 15 companies out of 23 will tantamount to cherry picking. He pointed out that one company Aricent Technologies (holdings) Limited has a high turnover but the assessee has not argued for exclusion of that company when the assessee is arguing for exclusion of similar high turnover companies. He further relied on two case laws for cherry picking: 1. UCIT Vs Panasonic AVC Networks India Co L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... associated enterprises to the tune of Rs. 13,53,11,573. The assessee is a 100% subsidiary of Dialogic Inc (Erstwhile Veraz Networks Ltd, USA). It set up an unit for development of telecommunication software for its group entities and which also provides marketing and customer services and back office support services (ITES) to its group companies. One of the segments is provision of software development services to its AEs based in Israel and USA. In consideration of the services provided, the assessee received compensation at cost +12% markup during the year amounting to Rs. 13,53,11,573/-. For benchmarking the transaction the assessee has used Transactional Net Margin Method ('TNMM') as the most appropriate method and the profit level indicator ("PLI") was taken as Operating Profit to Total Cost (OP/TC). The TPO has accepted the method used by the assessee's TNMM and accepted the PLI i.e. OP/TC used by the assessee. The assessee has worked out Operating Margin at 9.13%. The assessee has given 11 comparable. The TPO has rejected 10 out of 11 comparables which were selected by the assessee and undertaken a fresh search on the databases Prowess and capitaline. The TPO has sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the company foils the employee cost to sales filter of 25% applied by the TPO himself. The relevant extracts of annual report are provided in page 339 & 352 of the paper book. We also found that in case of this company 73% of the total expenditure was in foreign currency under the head "onsite development expenses". 25. Not only this, we noted that as per the annual report of this company on page 35 of paper book, the Company has inventory worth Rs. 1.1 Crores as on 31 March 2008 and is into the business of sale of products. As per page 8 of the TP order, the TPO himself rejected Lucid software on the basis of its dealing in software products. The company is engaged in Education services (includes Digital Learning, Mobile Learning, education applications), Healthcare services (Patient Life cycle Management, Hospital Administration Management, Drug Discovery, Disease Life cycle Management), Manufacturing CPG and retail (R&D, New Product Development, Global Supply chain management), Enterprise development, Product development and Enterprise business services. This company thus in our view cannot be regarded to be comparable as it not only fails two of the initial filters appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70fBangJ2014 (Para 16) also held as under: "In the light of the aforesaid decision of the Special Bench and in view of the admitted position that the assessee follows Fixed Price Project model where revenues from software development is recognized based on software developed and billed to clients, there is a possibility of the expenditure in relation to the revenue being booked in the earlier year. The results of Boclh tree from FY 2003 to 2008 excluding F)' 2007 as given by the learned counsel for the assessee were also perused. Perusal of the same shows, that there has been a consistent change in the operating margins. The chart filed by the assessee in this regard is given as on annexure to this order. It appears to us that the revenue recognition method followed by the assessee is the reason for the drastic variation in the profit margins of this company. In the given circumstances, we ore of the view that it would be safe to exclude Bodhtree Consulting from the final list of comparables chosen by the assessee. We hold and direct accordingly.' We therefore hold that this company is to be excluded from comparable selected by TPO and we direct the AO accordingly. 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and products as is apparent from annual report at page 86 of paper book. Further, we noted as contended by the Id. counsel as per annual report of this company at page 87 of the paper book, the company has only one reportable segment which is into software services as well as IT enabled services. No separate segmental data is available for software development services. This is a fact that TPO himself as per page 8 of TP Order rejected Lucid software on the basis of it dealing in software products under the similar facts. This Company has been rejected by the TPO in assessee's own case vide order for AY 2011-12 for being functionally non comparable to assessee by observing as under on page 4 point no 4:- "The company provides hardware designing services rendering it functionally different from the assessee. Further there is a mention of inventory in its balance sheet (1.24 crores). Further, as there is no separate reportable business segments, attribution of income cannot be performed among the diversified business activity." We, therefore, hold that this company can also not be regarded to be comparable to assessee's case and exclude the same from comparable as selected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end technical services which come under the category of KPO services. It has been held by the co-ordinate bench of this Tribunal in the case of Capital IC Information Systems (Indio) (P) Ltd. Supra) that KPO services are not comparable to software development services and ore therefore not comparable, Following the aforesaid decision of the coordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e- Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. / TPO is accordingly directed." Respectfully following the decision of coordinate Bench, we hold that this company be excluded from comparables as selected by TPO and direct the AO accordingly. 31. The seventh comparable which has been disputed before us is Igate Global Solutions Ltd. appearing at serial No.10 in the above table. We find that the assessee earns total revenue of Rs. 13.5 crores in the relevant Assessment Year while as per the annual report of iGate, this company has earned net sales revenue of Rs. 781 crores which is roughly 58 times that of the assessee. This proves that the scale of operations in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation development, maintenance and production support, package enabled consulting and implementation, technology consulting and other solutions, including business process management and solutions, product engineering solutions, infrastructure maintenance services, operations and business process consulting, testing solutions, and systems integration services. These offerings are provided to clients across multiple industry verticals including banking and capital markets, communications, energy, manufacturing and retail. Infosys also provide a core banking software solution. We do agree this company lacks comparability based on scale of operations. Even functionally also it is different from assessee. Similar view has been taken in various cases relied on and referred to by the learned counsel. We, accordingly, hold that this company be excluded from comparable as selected by TPO and direct the AO accordingly. 33. The ninth comparable, which is in dispute before us is KALS Information Systems Ltd. as appearing at serial No. 12 of the above table. This company has reported its operations under two segments; Application software segment and Training segment. The revenue from produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory information systems (LIMS), Device monitoring Systems (DM5), etc. We noted that this Company has been rejected by the ITAT in assessee's own case videorder for AY 2009-10 held as it is functionally dissimilar to the assessee by observing as under:- 3.4 So however, the other pleas of the assessee that the said concern is non comparable due to difference in functions is quite potent. Ostensibly, the said concern is involved in not only rendering software development services, but also in safe of products, as is evident from the Annual Report placed in the Paper Book. More importantly, the Annual Report also shows very qualitative difference in the activities undertaken by the said concern. Notably, it is involved in creating research development centre in partnership with Indiana University USA, for development and research in life sciences, products lifecycle services, medical research, chemistry, bio-informatics, etc. It is also involved in developing specialized medical applications jointly with Washington University. It is also undertaking virtual observatory India project in collaboration with foreign institutions. Putting all these features together, it is quite evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in preparatory software products and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendered by the company are described as under : " Leveraging its proven global model, Quintegro provides a full range of custom IT solutions (such as development, testing, maintenance, SAP, product engineering and infrastructure management services), proprietary software products and consultancy services in IT on various platforms and technologies." (iii) This company is also engaged in research and development activities which resulted in the creation of Intellectual Proprietary Rights (1PRs) as can be evidenced from the statements made in the Annual Report of the company for the period under consideration, which is as under: Quintegra has taken various measures to preserve its intellectual property. Accordingly, some of the products developed by the company ...............have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks." (iv) The TPO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcluded from the list of cam parables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider." Although the Ld. Counsel has referred various other decision but no contrary decision was brought to our knowledge by Id. Dr. We therefore, respectfully following the decision of coordinate bench hold that this company cannot be regarded to be comparable and hold that this company is excluded from comparable as selected by TPO and we direct the AO accordingly. 36. The twelfth comparable, which is under dispute is Tata Elxsi Ltd. This company is an engineering designing company providing embedded product design services, industrial product design services, animation and visual effects, and system integration services as is apparent from page 163 of Paper-book. Thus this company is functionally different from assessee. We also noted that this company is having a turnover of Rs. 342 Crores as against assessee' turnover of Rs. 13.5 Crores. Thus this company's turnover is approximately 25 times that of assessee's turnover. We do agree that this company cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. is clearly functionally different I dis-similar from the assessee and therefore ought to be omitted from the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4.2 We have heard both parties and carefully perused and considered the material an record. From the details an record, we find that this company is predominantly engaged in product designing services and not purely software development services. The details in the Annual Report show that the segment "software development services" relates to design services and are not similar to software development services performed by the assessee. 13.4.2 The Hon'ble Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. V AOT (ITA No. 7821/Mum/2011) has held that Tata Elxsi Ltd. is not a software development service provider and therefore it is not functionally comparable. In this context the relevant portion of this order is extracted and reproduced below :- ".... Tata Elxsi is engaged in development of niche product and development services which is entirely different from the assessee company. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables on the ground that its turnover was in excess of Ps. 500 Crores. Before us, the assessee has objected to the inclusion of this company as a comparable for the reason that apart from software development services, it is in the business of product development and trading in software and giving licenses for use of software. In this regard. the learned Authorised Representative submitted that:- (i) This company is engaged in product development and earns revenue from sale of licences and subscription. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. In the case of E-Gain communications Pvt Ltd. (2008- TII- 04-I TA T-PUNE- TP), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company The Learned A.R prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra). this company ought to be omitted from the list of comparables. 15 2 Per contra, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Para nos. 12.1 to 12.4.2 of the order which reads as under 12. 1 This company was selected as a comparable by the TPO. Before the TPO. The assessee had objected to the inclusion of this company in the list of comparables on several grounds like functional dis-similarity, brand value, size, etc. The TPO, however, brushed aside the objections of the assessee and included this company in the set of comparables 12.2 Before us, the learned Authorised Representative of the assessee contended that this company i.e. Wipro Ltd., is not functionally comparable to the assessee for the following reasons'- (i) This company owns significant intangibles in the nature of customer related intangibles arid technology related intangibles, owns lPRs and has been granted 40 registered patents and has 62 pending applications and its Annual Report confirms that it IT(TP)A. 1 550/Bang/2012 Page - 30 owns patents and intangibles. (ii) the ITAT, Delhi observation in the case of Agnity India Technologies Pvt. Ltd. in ITA No 3856(Del)/2010 at pare 5.2 thereof that infosys Technologies Ltd. being a company and a market leader assuming all risks leading to higher profits, cannot be considered as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co-ordinate bench of the tribunal i.e. 24/7 customer Coin Pvt. Ltd. (supra). we hold that this company cannot be considered as a comparable to the assessee. we, therefore, direct the Assessing officer / TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration''. We therefore, hold that this company be excluded from comparable as selected by TPO and we direct the AO accordingly. 39. The fifteenth comparable which has been disputed before us is Softsol India Ltd. We find that at page 10 of the TPO's Order, the TPO has made mathematical error in computing the margin of Softsol India Ltd. Softsol has a revenue of Rs. 18,99,40,746 and a cost of Rs. 16,51,65,066. Accordingly the net profit is Rs. 2,47,75,680 resulting to a OP margin 15%. But TPO has taken 42.33% incorrectly. The DR has not disputed this fact. We therefore, direct the revenue to take 15% OP margin in the case of this company while working out the OP margin in the case of the assessee. We have gone through the case laws as relied on by the Id. DR, in our view both the case laws are not applicable to the facts available in the case of the assessee. The facts In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of comparables and we are of the opinion that in the present case if there is exclusion of the comparables mode by the TPO following the decision of coordinate bench of this tribunal in the case of Symphony Marketing Solutions India Pvt ltd (supra), the assessee will be within +/-5% range and hence the DRP/AO have erred in making TP adjustment. Accordingly, we allow the ground taken by the assessee and direct the AO accordingly. 40. Secondly, issue in this appeal of assessee is against the order of AO/TPO/DRP is as regards to the upward adjustment made to the international transactions entered into by the assessee with its associate enterprise as the same are not at arm's length price and made an adjustment relation to international transactions to global call center services at Rs. 22,07,311/-. For this assessee has raised the ground No. 2 : - "Re.: Adjustment of Rs. 22,07,311/-on account of the global call center services: 2.1 The Assessing Officer! the Dispute Resolution Panel/ the Transfer Pricing Officer has erred in making an upward adjustment of Rs. 22,07,311!- to the total income of the Appellant by holding that the international transaction relating to the global c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable selected by the TPO. However, detailed discussion was restricted by her to rejecting 11 out of the 21 companies identified by the TPO. The Id representative further argued that even if we exclude 9 of these companies which are covered by two judicial precedents Flextronics Technologies (India) ITA(TP) No. 1559/Bang/2012 and Symphony Marketing Solutions India Pvt Ltd. Vs ITA No. 1316/Bang/2012, the assessee will be through. The Ld representative of the assessee submitted the following table representing different scenarios with respect to the contentions of the assessee being accepted or not: Sr. No. Name of the company Margins Scenario 1 (Accepting all contentions of assessee) Scenario 2 (excluding 11 cos) Scenario 3 (excluding 9 cos based on Flextronics Main argument/ case law relied on for scenario 2 1. Accentia Technologies Ltd. 41.76 Flextronics Technologies 1559 2. Acropetal Technologies Ltd. 35.3 Flextronics Technologies 1559 3. Aditya Birla Minacs worldwide Ltd. 2.2 2.2 2.2 2.2 4. Asit C Mehta Financial Services Ltd. 9.42 9.42 9.42 9.42 5. Caliber Point Business Solutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. We find that this company is functionally different from the assessee and cannot be compared. Further this view of ours is Supported by the decision of this Tribunal in the cases of Flextronics Technologies (India) Pvt Ltd ITA(TP) No. 1559/Bang/2012 (Para 12), Symphony Marketing Solutions India Pvt Ltd. Vs ITO PTA No. 1316/Bang/2012 (Para 10) & Capital IQ Information Systems Pvt Ltd Vs ACIT ITA No. 124/Hyd/2014 (Para 21). Respectfully, following the decision of coordinate bench of this Tribunal in the case of Flextronics Technologies (India) Pvt. Ltd (Supra), we direct the AO to exclude this company from comparables. 44. The second comparable which is in dispute before us is Acropetal Tecnologies Ltd., and the learned Counsel for the assessee stated the facts that the ITES segment is divided into 3 segments education, healthcare and manufacturing. In education the company provides distance/mobile learning, digital learning. Under healthcare they do patient life cycle management, physician and clinical life cycle management, hospital administration management, etc. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two cases were rightly excluded." In view of the observations made by the DRP as well as the decision of the ITAT Mumbai in the case of Maersk Global Service Centre, (supra), we accept that this company cannot betoken as o comparable." The assessee relied on the judicial precedents for rejection of this company on the basic being functionally non comparable to a ITES provider. We find that the assessee has relied on co-ordinate Bench decision in the case of Ftextronics Technologies (India) Pvt Ltd ITA(TP) No. 1559/Bang/2012 (Para 14) & Symphony Marketing Solutions India Pvt Ltd. Vs ITO ITA No. 1316/Bang/2012 (Para 14). No contrary decision was brought to our knowledge or referred to us and therefore we hold that this company has to be excluded from comparables as selected by the TPO. 46. The fourth comparable which is in dispute before us is Crossdomain Solutions Ltd. Before us, the learned counsel for the assessee stated that facts that this company is engaged in building the brand EXDION to target the insurance industry in US as per page 226 of paper book. It is engaged in KPO services in insurance, Healthcare, HR & accounting as per page 228 of paper book. The company is engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, Datamatics fails the initial export revenue filter of 75 % applied by the TPO, as the only export is ITES Services which are 36.23% of revenue (Page 246 of Paper book). Further, from the annual reports it is evident that no segmental data is available for the ITES segment and hence rendering it impossible to calculate margins. In view of the above, the assessee prayed to drop Datamatics as a comparable. In this, she relied on the decision of Hyderabad Bench of this tribunal in the case of HSBC Electronic Data Processing Ltd -ITA No. 1624/Hyd/2011 (Para 11) for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us, no contrary decision is brought by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO 48. The sixth comparable under dispute is Eclerx Services Ltd. Before us the learned counsel for the assessee stated that the company is a leading third party data analytics KPO as per page 270 of paper book. Hence, functionally non comparab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides geographical information service Photogrammetry, Remote Sensing, Cartography, Data Conversion, related Computer based Services and other related services. As per page 46 & 47 it has only one reportable segment Geographical Information Service (page 287 of paper book). During the year, the business of engineering and Information technology division was transferred - and de-merged (Pg. 41 of the annual report).A review of the Annual Report of Genesys reveals the fact that intangible assets constitute 22.57 percent of the total fixed assets of the company. On the other hand, the assessee has no intangible assets. This showcases that the assets used by the assessee and that used by Genesys are different and the dissimilarity in assets showcase differences in the functional profile of Genesys vis-a-vis the Company. in view of the above the learned counsel for the assessee argued that Genesys is not functionally comparable to the assessee. In this regard, she relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a lTES provider. We find from the case laws relied on by the learned counsel for the assessee that the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006. The company now has 11 delivery centers across Bangalore, Pune, Chennai, Jaipur and Gurgaon in India, Brno in Czech Republic, Hangzhou in China, Manila in Philippines, Monterrey in Mexico, Lodz in Poland and Bangkok in Thailand. The company started the year with 11,226 employees and closed the year with 16,295 employees as of March 31, 2008. In view of all of the above, the learned counsel for the assessee submitted that Infosys BPO ought to be rejected as a comparable of the assessee. She, in this regard relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt Ltd ITA(TP) No. 1559/BangJ2Ol2 (Para 18) & Symphony Marketing Solutions India Pvt Ltd. Vs ITO ITA No. 1316/BangI2012 (Para 24). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 53. The eleventh comparable under dispute is Wipro Ltd. Before us the learned counsel for the assessee stated that from the annual report of the company it is evident that they have earnings from export of Rs. 1,288.5 crores, and their revenue is Rs. 1,781.9 crores, i.e, 72% of annual revenue. Hence, failing the export to revenue filter of 75% applied by the Learned TPO. The standalone (abridged) financials indicate that the Company is engaged in Personal Computer, IT Software, Vegetable fats and Oils. Wipro does not have a BPO segment on a standalone level and hence, it cannot be considered as a comparable to the IT support services rendered by the assessee The company has operations in more than 35 countries through more than 75 subsidiary companies, joint ventures and associate companies. Further it was submitted that the Scheme of Amalgamation for merger of Wipro Infrastructure Engineering Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expenditure of Rs. 1,35,83,493/- claimed by the Appellant while computing its income from its domestic undertaking (which is not entitled to claim deduction uls of the Income-tax Act, 1961). 3.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the whole expenditure of Rs. 1,35,83,493/- claimed by the Appellant while computing the income from its domestic undertaking was incurred wholly and exclusively in connection with the domestic undertaking and the stand taken by the Assessing Officer the Dispute Resolution Panel in this regard is misconceived, erroneous and incorrect. 3.3 The Appellant submits that the Assessing Officer be directed to allow a deduction for the whole amount of Rs. 135,83,493/- as claimed by it while computing income from its domestic undertaking and to recompute its total income accordingly." 55. Brief facts are that the assessee has both 10A units and non 10A unit. Since the non 1OA (PSE) unit has a loss, the AO under para 7.4 of the order did not agree with the expenses incurred and noted that higher expenses have been allocated to non 10A units as compared to 10A units. Though the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
