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TMI Blog2019 (2) TMI 1731X X X X Extracts X X X X X X X X Extracts X X X X ..... s order that the Tribunals have not examined the issues highlighted in its order is a general sweeping statement bereft of any basis. How to compute the working capital adjustment and the extent of adjustment to be granted to a particular assessee would depend on the facts of each individual case X X X X Extracts X X X X X X X X Extracts X X X X ..... that the delay if any should not be condoned, we are of the view that the question of delay is only a technical as the assessee has filed the appeal within the time on 1.3.2017 though the same was defective. Accordingly, we hold that the appeal filed is within time and in any event there was a reasonable cause for the delay in filing the appeal." 4. In view of the above conclusion, we are of the view that the appeal which requires adjudication is IT(TP)A No.2735/Bang/2017 and therefore the appeal in ITA No.1418/Bang/2017 is dismissed as superfluous and infructuous. 5. As far as the merits of the appeal filed by the assessee is concerned, the issue raised therein is with regard to determination of arm's length price (ALP) in respect of international transaction of rendering software development services by the assessee to its Associated Enterprise (AE) u/s. 92 of the Income-tax Act, 1961 ["the Act"]. As far as determination of ALP of international transaction is concerned, it is not in dispute that TNMM is the most appropriate method of determination of ALP and that the Profit Level Indicator (PLI) chosen for the purpose of comparison was profit margins of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee submitted before us that in the case of software development services provided by the assessees such as the assessee in the present case, the exclusion of aforesaid 3 companies have been considered and decided by this Tribunal in several decisions for the very same Assessment Year viz., AY 2013-14. 11. As far as L&T Infotech Ltd. and Persistent Systems Ltd. are concerned, our attention was drawn to the decision of ITAT Hyderabad Bench in the case of M/s. EPAM Systems (I) P. Ltd. v. ACIT, ITA No.2122/Hyd/2017 for AY 2013-14, order dated 20.11.2017. Vide para 12 of the decision, the Tribunal took the view that Persistent Systems Ltd. was into software products and software solutions and no segmental details were available and therefore the profit margin in the software development services segment could not be compared with the assessee's profit margin. As far as L&T Infotech Ltd. is concerned, the Tribunal vide para 17 of the aforesaid order came to a similar conclusion to hold that L&T Infotech should not be regarded as a comparable company. In the light of judicial precedents which remain uncontroverted, we are of the view that the aforesaid two comparable com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies 16. Apart from the above, the assessee also seeks to include Akshay Software Technologies Ltd. in the list of comparable companies. As far as this company is concerned, our attention was drawn to the annual accounts of this company which is at pages 742-753 of assessee's PB. This company was excluded on the ground that in response to notice u/s. 133(6) of the Act, this company had mentioned that it was engaged in providing professional services, procurement, installation, implementation, support & maintenance of ERP products and services. Since the above services were not in the nature of software development, the TPO considered this company as not comparable. The ld. Counsel for the assessee drew our attention to pages 742 to 743 of the assessee's PB which contains the financial statements of this company. Our attention was drawn to Note No.20 to the financial statements wherein income from software services forms more than 98% of assessee's total revenue. Further in Note 29 to the financial statements, export of software services is shown at ₹ 18.65 crores out of the total revenue from operations of ₹ 19.94 crores. Pointing out to the above details, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er IT services etc. for the purposes of defining the functionality for carrying out TP studies. The report discusses entire IT sector and the services which would come within its purview rather than what is software development services and what is not. So, these objections of the assessee do not have any merit. Considering above, the objection of the assessee is not accepted." 18. In the rejoinder, the ld. Counsel for the assessee submitted that every implementation of ERP also includes development of ERP for a client and has to be regarded as software development services. 19. We have considered the rival submissions and we are of the view that the reasons assigned by the DRP for regarding this company as not comparable are correct and does not call for any interference. When the nature of services are doubtful, it is always better to exclude a company from the list of comparable companies. In that view of the matter, we uphold the order of DRP and dismiss the relevant ground of appeal of the assessee. 20. The last submission of the ld. Counsel for the assessee was that the TPO while concluding his order u/s.92CA of the Act, allowed adjustment on account of working capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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