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TMI Blog2019 (6) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (hereinafter referred to as the Act ). 2. The brief facts of the case as emanating from records are: The assessee-company is a wholly owned subsidiary of M/s. Starent Network Corporation, USA. The assessee is engaged in research and development relating to software solutions. The assessee-company is a captive service provider to its US parent company. The assessee is having three units in India registered under Software Technology Park Scheme. The assessee is claiming tax benefit u/s.10A of the Act in respect of two units. The assessee entered into international transactions with its Associate Enterprises (AEs) for software services. To benchmark Arm s Length Price (ALP) of international transactions, the assessee in its TP study report selected 18 companies as comparables. The assessee applied Transactional Net Margin Method (TNMM) as most appropriate method to benchmark the transactions. The Profit Level Indicator (PLI) of the assessee (OP/TC) was determined at 14.95%, as against PLI of comparables (OP/TC) at 14.28%. The Transfer Pricing Officer (TPO) rejected 8 companies selected as comparables and thereafter, determined the average margin of the comparabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Goldstone Technologies Ltd. 3.31 3 L G S Global Ltd. 6.95 4 Larsen Toubro Infotech Ltd. Telecom Segment 17.87(*) 5 Mindtree Ltd. 16.17 6 Acropetal Technologies Ltd. (Seg) 33.92(*) 7 Kals Information System Ltd. 24.56 (*) 8 Third-ware Solutions Ltd. 31.87 9 Persistent System Ltd. 27.89 10 Infosys 44.56 11 R S Software (India) Ltd. 10.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal difference. The Revenue has accepted the same. No appeal was filed by the Department against the findings of DRP before the Tribunal. The TPO in assessee s own case for assessment year 2009-10 excluded FCS Software Solutions Limited by relying on the directions of DRP for assessment year 2008-09. Now, the Revenue cannot assail the findings of DRP without there being any change in facts and seek inclusion of FCS Software Solutions Limited. The ld. AR further submitted that FCS Software Solutions Limited is functionally different. The said company is engaged in various activities such as IT consultancy, education and infrastructure management services. The segmental data at page 30 and 31 of the annual report of the company would reflect that comparable services provided by FCS Software Solutions Limited constitutes less than 75% of the total revenue and thus, it fails to qualify the filter applied by the TPO i.e. the company having income from software services less than 50% of the total operating revenue to be excluded. The ld. AR further draws our attention to the operating margin of the company over the period of 5 years starting from financial year 2007-08. The ld. AR point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TPO in drawing final list of comparables. The ld. DR submitted that Thinksoft Global Services Ltd. was rejected in assessee s own case for assessment year 2009-10. The assessee never contested the rejection of said company from the list of comparables. Now, the assessee cannot assail exclusion of the company on same set of facts. To maintain consistency, the said company cannot be considered as comparable in the subsequent assessment year. 6.1. In respect of FCS Software Solutions Limited, the ld. DR submitted that the said company was selected as comparable in the assessment year 2008-09 and 2009-10. To maintain consistency, the said company may be retained as comparable. 6.2 The ld. DR vehemently contested the findings of DRP in excluding Infosys Technologies Limited and FCS Software Solutions Ltd and inclusion of Thinksoft Global Services Ltd. in the final list of comparables. 7. We have heard the submissions made by representatives of rival sides and perused the orders of Authorities below. The Revenue in appeal has assailed the findings of DRP qua inclusion of Thinksoft Global Services Ltd. and exclusion of FCS Software Solutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the final list of comparables once the said company is held to be functionally different. C. Infosys Technologies Limited : The Department is seeking inclusion of Infosys Technologies Limited in the final list of comparables. The DRP has excluded the said company by applying turnover filter. The total turnover of the assessee during the period relevant to the assessment year under appeal is ₹ 104.05 Crore as against the turnover of Infosys Technologies Limited ₹ 21,140 Crore. Undisputedly, the scale of operation of the two companies is at variance. It is a well settled law that for selecting comparables turnover is an important filter. The company with exceptionally higher turnover cannot be compared with a company operating at smaller range. Accordingly, we find no infirmity with the findings of DRP in excluding the aforesaid company from the list of comparables. Hence, ground No.3 raised in appeal by the Department is dismissed being devoid of any merits. 8. Ground No.1, 4 and 5 of the appeal are general in nature and hence, requires no adjudication. 9. In the result, the impugned order is upheld and appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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