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TMI Blog2019 (1) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, Ground Nos. 1 to 13 are partly allowed for statistical purpose. Adjustment on account of advance billing to be allowed in favour of the assessee by the decision of the Co-ordinate Bench in asessee’s own case for Assessment Years 2008-09 & 2007-08. Adjustment on account of business promotion and conference - Held that:- These business promotion expenses were incurred wholly and exclusively for the purpose of business and were necessitated in view of commercial exigency and are earned year on year. Hence, the Ld. AR prayed that the same may be allowed as business expenses u/s 37 - issue is covered in favour of the assessee in assessee’s own case for Assessment Year 2009-10. - I.T.A. No. 318/DEL/2015 - - - Dated:- 28-1-2019 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. Ravi Sharma, Adv And Sh. Anubhav Rastogi, Adv For The Respondent : Sh. H. K. Choudhary, CIT(A) DR ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the Assessment Order dated 13/11/2014 passed by the Assessing Officer u/s 143 (3) read with Section 144C of the Income Tax Act, 1961 for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant u/s 92D of the Income Tax Act, 1961 ( the Act ) read with Rule 10D of the Income Tax Rules, 1962 ( the Rules ), without providing any cogent reason and arbitrarily applying additional filters. 6. On the facts and in law, the Ld. TPO/ Ld. AO and Hon ble DRP violated the provisions of Rule 10B(2) of the Rules by arbitrarily rejecting the companies selected by the Appellant in the TP documentation/ fresh search which are functionally comparable to the Appellant. 7. On facts and in law, the Ld. TPO/ Ld. AO erred in not accepting the comparables, namely CG-Vak Software Export Ltd and Goldstone Technology Limited identified by the Appellant in its TP documentation when the same were accepted in the prior year(s) and that there is no change in facts of the Appellant s case in the current year. 8. On the facts and in law, the Ld. TPO/ Ld. AO and Hon ble DRP violated the provisions of Rule 10B(2) of the Rules by arbitrarily introducing companies namely, Accelya Kale Solutions Ltd., Kuliza Technologies Pvt. Ltd., Thinksoft Global Services Ltd., Larsen and Tubro Infotech Ltd., Persistent Systems and Solutions Limited and Wipro Technology Services Limited, disre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in disregarding the regular and the consistent method of accounting being followed by the Appellant in recognizing the revenue from maintenance, enhancement and support services provided by the Appellant to its customers. Adjustment on account of Business promotion expenses - INR 4,197,074 16. On the facts and in the circumstances of the case and in law, the Ld. AO erred in making and the Hon ble DRP erred in confirming an ad-hoc disallowance of ₹ 4,197,074 being business promotion expenses treating them to be of capital in nature and having an enduring benefit and therefore amortising them over a period of five years. 17. On facts and in law, the Ld. AO and the Hon ble DRP completely erred in not appreciating that business promotion expenses constitute revenue expenditure for the applicant. 18. On the facts and in law, the Ld. AO erred in initiating penalty proceedings u/s 271(1 )(c ) of the Act. The above Grounds of Appeal are independent and without prejudice to each other. The Appellant craves leave to supplement, withdraw, amend, add and/or otherwise alter or modify, any or all, grounds of the appeal stated hereinabove an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able license authorizing the affiliate to use the software for internal business, demonstrate, market distribute or sublicense the software for end to end customers. The assessee company s benchmarking approach is summarized below: Particulars Software Development Page Ref Software Trading Page Ref. No. of Comparables 12 1265 5 1259 Comparable Mean Margin 13.27 1265 1.87 1259 Appellant s Margin 15.37% NA 4.79% NA 4. The reference was made to the TPO by the Assessing Officer in respect of international transactions and the TPO after taking into consideration. The details given by the assessee merged the segment of software trading with software development which consist of software development, competency centre and IT Support Services. The TPO applied his own filters and rejected/modified the quantitative and qualitative filter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic customers Associated Enterprise Risk Assumed Assessee bears market risk, price risk, credit risk, etc. Assessee is low risk bearing captive service provider Thus, the Ld. AR submitted that the TPO changed the characterization which is not proper in respect of the Transfer pricing issues. The Ld. AR further submitted that the TPO has incorrectly stated that the assessee has a fullfledged manufacturing facility . In-fact, the assessee is only engaged in duplicating the PLM Software and reselling such softwares in the Indian market. For such trading/re-selling activities, it cannot be characterized as a manufacturer. The Ld. AR further submitted that the assessee had followed the same approach i.e. bench marking the Software Trading Segment and Software Development Segment separately and the same was accepted by the TPO in all earlier years as well as in preceding year. The Ld. AR submitted that adjustment in Trading Segment resulted adjustment in Third Party Transactions. Since under the purchase of Software Segment, the Revenue was derived from sale to unrelated parties, imputing a mark-up on co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of Transfer Pricing Adjustment will also be decided by the TPO/A.O. according to the decision of aggregation/segregation of these two segments. Therefore, Ground Nos. 1 to 13 are partly allowed for statistical purpose. 9. As regards Ground Nos. 14 15 relating to adjustment on account of advance billing, the Ld. AR submitted that this issue is already covered in favour of assessee vide order passed by the Co-ordinate Bench of the Tribunal in ITA Nos. 584 585/Del/2006 322/Del/2007 for Assessment Years 2001-02 to 2003-04 in UGS India Pvt. Ltd. Vs. ACIT and also in assessee s own case for Assessment Year 2008-09 and 2007-08 (90 Taxman.com 165). 10. The Ld. DR relied upon the order of the TPO/A.O but could not distinguish the factual aspect of the Tribunal s decisions. 11. We have heard both the parties and perused the material available on record. This issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in asessee s own case for Assessment Years 2008-09 2007-08. Thus, Ground Nos. 14 15 are allowed. 12. As regards Ground No. 16 17 relating to adjustment on account of business promotion and conference, the Ld. AR submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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