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TMI Blog2018 (6) TMI 1568X X X X Extracts X X X X X X X X Extracts X X X X ..... in of the assessee would fall within + 5% range vis-à-vis margin of the residual comparables and thus in view of proviso to Sec.92C(2) of the Act, no addition would survive and therefore even other grounds raised would be rendered infructuous. We therefore direct the AO to re-compute the margins of comparables by excluding E-Infochips Limited from the list of comparables and thereafter compute the TP adjustment, if any, in the hands of assessee. Thus, the grounds of the assessee are allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961 ("the Act") in pursuance of the directions of the learned Dispute Resolution Panel, Pune ("DRP") for the Assessment Year ("A Y") 2011- 12 on the following among other grounds: 1. General : The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in making an adjustment amounting to INR 1,71,78,297/- to the value of international transactions entered into by the Appellant with its associated enterprise ("AE") with respect to provision of software development support services. 2. Erroneous selection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and circumstances of the case in confirming the following companies as the comparable companies: 2.1 E Infochips Limited 2.2 Persistent Systems Limited 2.3 Sasken Communication Technologies Ltd 2.4 Acropetal Technologies Ltd 3. Erreneous rejection of comparable companies The learned DCIT, pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in rejecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of AE 3,05,178 TNMM As per the TPO Report, it was noticed that assessee had selected five companies as comparables and had followed TNMM method for bench marking analysis. The five comparables selected by the assessee were rejected by the TPO and after considering the submissions of the assessee, considered the following companies as comparables. S.No. Name of Company Unadjusted PLI Adjusted PLI 1 Akshay Software Technologies Ltd. 0.89 4.65 2 Acropetal Technologies Ltd. 21.78 21.78 3 Infosys Technologies Ltd. 43.74 47.73 4 LGS Global Limited 13.57 14.19 5 L & T Infotech 18.19 21.54 6 Mindtree Ltd. (Segment IT Services) 12.05 12.05 7 Persistent Systems Ltd 23.08 25.05 8 Sasken Communication Tech. Ltd. 24.00 26.90 9 Thirdware Solutions Ltd. 16.15 17.52 10 E-Infochips Ltd. 56.46 58.46 11 Silverline Technology 17.26 20.12 12 R S Software 16.20 19.07 AVERAGE 21.95 24.09 On the basis of the comparables selected by him, TPO determined the adjustment on account of international transactions at ₹ 2,48,67,246/-. Before DRP, assessee objected to the selection of comparables made by the TPO. DRP after considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Primary Segment, wherein it was stated that it is primarily engaged in Software Development and IT enabled services and products, which is considered to be the only reportable business segment. He thereafter pointed to the Schedule of Income at page 753 of the Paper Book and pointed out that it has revenue from software development, hardware maintenance, information technology consultancy and information technology services. He therefore submitted that E-Infochips Limited cannot be considered as comparable with assessee. He thereafter submitted that Hon'ble Kolkata Bench of the Tribunal in the case of DCIT Vs. M/s. Philips India Limited for A.Y. 2011-12 in ITA Nos.863 & 539/Kol/2016 dt.15.12.2017 after considering the fact that E-Infochips Limited is engaged in manufacturing of printed circuit electronic boards and having income from software development, hardware maintenance, information technology consultancy and information technology services has held that due to functional differences, non-availability of segmental data, non-involvement of R & D activities and as an exceptional year of operation, held that E-Infochips Limited cannot be considered as comparable company and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's submission that if E-Infochips Limited is excluded, then international transactions will be within the Arms Length Price and no adjustment to the ALP would be required. It is an undisputed fact that assessee is engaged in providing software development services only to it's Associated Enterprises (A.Es), who were located in United States. We find that TPO has included EInfochips Limited as a comparable company to assessee company on the directions of DRP. The Annual Report of E-Infochips Limited which is placed by the assessee in the Paper Book reveals that EInfochips Limited is engaged in diversified activities and is having income from software development, hardware maintenance, information technology consultancy and information technology services and is also engaged in the manufacturing and trading of printed electronic circuit boards. The annual accounts of EInfochips Limited placed in Paper Book also reveals that it is engaged in trading and manufacturing activities. It is also a fact that segmental information in relation to the various activities of the E-Infochips Limited are not available in the Annual Report. In view of the fact about non-availability of segmental ..... X X X X Extracts X X X X X X X X Extracts X X X X
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