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TMI Blog2019 (2) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... t functionally comparable. 3. On the facts and in the circumstances of the case, whether the learned DRP was right in law and on facts in excluding functionally comparable companies on the ground of non availability of segmental data, when the entire range of activity of the comparable was in the field of software services. 4. On the facts and in the circumstances of the case, whether the learned DRP was right in law and on facts for not considering that onsite and offsite revenue differences are material for deciding the functional comparability of a company and that assets and risk profile, pricing as well as prevailing market conditions are different in predominantly onsite companies from predominantly offshore companies. 5. On the facts and in the circumstances of the case, whether the learned DRP was right in law and on facts in excluding companies which are considered as functionally comparable by the assessee himself. 6. Did the learned DRP fall into error in not appreciating the safe harbour guidelines issued by CBDT regarding turn over criteria. 4. The learned Authorized Representative for the assessee pointed out that the assessee was captive service provider to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also explained the reason for delay in filing the appeal late by 14 days before the Tribunal. 6. We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the assessee was international developer, publisher, distributor of interactive entertainment products. The assessee provided development and quality assurance services to Ubisoft. The assessee had entered into international transactions with its associated enterprises for total value of Rs. 24.70 crores. Reference under section 92CA(1) of the Act was made to the Transfer Pricing Offer (TPO). The TPO adopted revised filters and as against 14 companies selected by assessee as comparables, finally selected 10 concerns as comparable in the software development services segment. The assessee had shown margins of 8.53% as against which mean margins of comparables finally selected worked out to 24.87%. The TPO thus, proposed an upward adjustment of Rs. 2,30,36,700/-. The assessee filed objections before the DRP after receipt of draft assessment order, who in turn gave certain directions. The final set of comparables after the DRP directions were as under:- S. No. Name of the Companies Margin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wned significant intangible assets which comprised of 49% of its total fixed assets and Acropetal Technologies Ltd. also incurred significant R&D expenditure. In the first instance, it may be mentioned that the Pune Bench of Tribunal in assessee's own case in ITA No.351/PUN/2015, relating to assessment year 2010-11, vide order dated 28.06.2017 had rejected Acropetal Technologies Ltd. being functionally not comparable to the assessee. In view of the aforesaid, where the concern Acropetal Technologies Ltd. was engaged in similar line of business as in the preceding year and following the same parity of reasoning as held in assessee's own case for assessment year 2010- 11, we hold that the said concern is functionally not comparable to the assessee and hence, cannot be included in the final set of comparables. Further, the said concern also owns significant intangible assets comprised of 49% of its total fixed assets and also was incurring significant R&D expenditure. Hence, the concern could not be held to be comparable to the assessee. Accordingly, we direct the Assessing Officer / TPO to exclude the concern Acropetal Technologies Ltd. from final set of comparables. The ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ground of appeal No.7, under which the assessee is aggrieved by non inclusion of Maveric Systems Ltd. The said ground of appeal No.7 part reads as under:- "7. erred in rejecting .... Maveric Systems Limited on the basis that they failed the export earnings filter of 75% of revenues i.e. their export turnover were less than 75% of respective revenues." 16. The learned Authorized Representative for the assessee in this regard pointed out that the TPO had rejected Maveric Systems Ltd. as comparable on the ground that it failed the export turnover filter and RPT filter. The DRP accepted the contention of assessee that Maveric Systems Ltd.'s RPT was merely 9.52% of total sales and hence, the contention of TPO in this regard was incorrect. However, the DRP upheld the order of Assessing Officer in rejecting the said concern on the basis of said concern failing export turnover filter. The learned Authorized Representative for the assessee before us pointed out that in the TP study report the export turnover filter of 25% was applied, which was modified by the TPO to 75%. The first plea which was raised was that the application of filter of 75% was arbitrary and in assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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