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TMI Blog2015 (9) TMI 1669X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent by: Shri K R Vasudevan ORDER Amit Shukla, The aforesaid appeal has been filed by the assessee against final assessment order passed in pursuance of direction given by Dispute Resolution Panel (DRP) u/s 144C(5) for the assessment year 2009-10. The assessee is mainly aggrieved by Transfer Pricing Adjustment of ₹ 2,59,53,826/- in respect of international transaction with the Associated Enterprise (AE) on software development services on the ground of inclusion of certain comparable companies by the TPO to benchmark the profit margin of the assessee on such transactions. 2. The assessee company is a subsidiary of Somero Enterprises Inc Mauritius, which in turn is a subsidiary of Dassault Systems France which is premier global software developer and product like Cycle Management Solutions. It is the holding company of Delmia Corporation, USA. The assessee was established as 100% export oriented Unit registered under STPI. It is mainly engaged in the provision of software developer and other related services primary to its group companies. The international transactions reported in the Audit Report in Form 3CEB by the assessee during the year were as under :- Intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,77,30,334 Arm's Length Price (128.15% of Operating Cost) 38,15,41,423 Price charged in international transactions 34,32,61,561 Short fall being adjustment u/s 92CA 3,82,79,862 Shortfall being adjustment u/s 92CA in crore 3.83 5. From the stage of the DRP, two additional comparables were selected and included in the final list, which were as under: Sl. No. Company Name Unadjusted Margins FY 2008-09 1 FCS Software Solutions Limited 16.27% 2 Thinksoft Global Services Limited 15.83% Thereafter, DRP gave direction to give adjustment for working capital. After giving effect to the DRPs direction, the computation of Arm's length Price was determined in the following manner :- Description Amount (INR) Arm's length Mean Margin 24.32% Price charged in international transactions 34,32,61,561 Operating Cost 29,77,30,334 Operating Profit on Costs 4,55,31,227 Arm's Length Margin based on DRP directions 24.01% Revised Arm's Length Price 36,92,15,387 Transfer Pricing Adjustment as per directions 2,58,53,826 6. Before us, the Ld. Counsel submitted that most of the comparables are either not objected to or have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR on the other hand, submitted that, once in earlier two years, this company has been found to be comparable in assessee's own case, which has been upheld by the Tribunal in AYs 2007-08 & 2008-09, then, such a comparable should not be rejected. 7.2 After considering the rival submissions and on perusal of the Tribunal order for the earlier years, we find that in AY 2008-09, the Tribunal has rejected the assessee's contention for excluding the said comparable and directed the AO to include the said comparable after observing and holding as under :- "We gave heard both parties and perused and carefully considered the material on record. Admittedly, there is no disputing the fact that the assessee had never objected to the inclusion of this company in the set of comparables in earlier proceedings before the TPO and the DRP. It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds challenging the inclusion of this company in the list of companies. In fact in the assessee's own case for Assessment Year 2007-08, this company was selected as a comparable by the assessee itself. We, therefore, find no merit in the contentions raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the contention of the learned Authorised Representative that the nature of product developed and services provided by this company are different from the assessee as have been narrated in para 6.6 above. Even the segmental details for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company as fit for comparability analysis for determining the arm's length price for the assessee, hence, should be excluded for the list of comparable portion". As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to … Per contra, the General Departmental Representative supported the stand of the TPO in including company in the list of comparable". Thus, there being no material change in facts, we direct the AO not to include Tata Elxi Ltd in the list of comparables sand accordingly, the assessee's plea on this issue is accepted. 9 Infosys Techno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rall profit margins and accordingly, it cannot be held that the margin of the Sasken can be held to be comparable to the assessee; and lastly, in AY 2007-08 this company has been held not to be included in the list of comparable by the Tribunal owing to the turnover filter. Accordingly, we direct the Assessing Officer to reject the said company from the final list of comparables. 11. Larson & Toubro Infotech Limited. :- Before us, the Ld. Counsel submitted that this company cannot be held to be comparable for the reason that it has a huge turnover of more than ₹ 1,950 crores, whereas the assessee's turnover is only ₹ 34.23 crores. Thus, on this ground alone this company cannot be held to be comparable. On the other hand, the Ld. DR strongly relied upon the order of the TPO as well as DRP. 11.1 After considering the submission and on perusal of the material on record, we find that L&T Infotech Ltd. have huge turnover of ₹ 1,905.83 crores which itself proves that the Assets deployed and Risks assumed are quite different as compared to the assessee. In the case of Airbus Operation India P Ltd in ITA No. 35/Bang/2014, the Tribunal has rejected this comparable on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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