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TMI Blog2019 (5) TMI 1699X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transactions entered into by the assessee with its AE in the period under consideration. The TPO, vide order under section 92CA of the Act dated 30.01.2014 proposed TP adjustment of Rs. 91,79,599/- in respect of the assessee's international transactions with its AEs in the software development services segment. The draft order of assessment for Assessment Year 2010-11 was concluded under section 143(3) r.w.s. 144C of the Act vide order dated 17.03.2014 determining the assessee's income at Rs. 1,38,48,766/-; which included the TP adjustment of R .91,79,599/-. The assessee filed its objections thereto before the DRP; who vide directions issued under section 144C(5) of the Act on 16.12.2014 allowed the assessee partial relief; i.e., by applying the upper turnover filter, allowed risk adjustment at 1% and thereby excluded certain companies from the TPO's set of comparables. By virtue of the relief granted to the assessee in the DRP's order, the TP adjustment proposed by the TPO was reduced to NIL and therefore the assessee, in its appeal before the Tribunal, did not file grounds on other issues related to transfer pricing; though it raised grounds on certain issues pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while filing an appeal before the Hon'ble Tribunal. 2. On facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO erred in objecting to the upper limit for sales turnover filter without providing any empirical analysis. In doing so, the Ld. AO / Ld. TPO erred in not appreciating that the software/business process outsourcing industry is clearly demarcated based on size. 3. Subject to the above, the Hon'ble DRP has erred in not adjudicating on the other grounds apart from the turnover filter, raised by the Assessee in case of the following comparable companies: a. Infosys Technologies Limited ("Infosys") The Hon'ble DRP ought to have adjudicated on the ground that Infosys is functionally not comparable as it is engaged in research and development activities and has brand presence in the market which results in creation of substantial Intellectual Property. b. Tata Elxsi Limited ("Tata Elxsi") - The Hon'ble DRP ought to have adjudicated on the ground that Tata Elxsi is engaged in hardware design and is hence functionally not comparable. c. Larsen and Toubro Infotech Limited ("L&T"): The Hon'ble DRP ought to have adjudicated on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paras 3.3.1 and 3.3.2 thereof, it was held as under: "3.3.1 We have heard both parties and perused and carefully considered the judicial pronouncements referred to (supra). Section 253(4) of the Act deals with the filing of COs. Rule 22 of the IT(AT) Rules, 1963 also lays dawn the procedure to be adopted for treatment of COs. The provisions of section 253(4) and Rule are extracted hereunder: - "Section 253(4) - The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) or the Assessing Officer in pursuance of the directions of the Dispute Resolution Panel has been preferred under sub-section (1) or sub-section (2) or sub-section (2A) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof; within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Assessing Officer (in pursuance of the directions of the Dispute Resolution Panel) or Deputy Commissioner (Appeals) or, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the learned AR for the assessee at the outset of the hearing before us submitted that these grounds are not being pressed by the assessee. In view of ground Nos. 1 to 3 of C.O. (supra) not be ng pressed by the assessee, they are rendered infructuous and are accordingly dismissed as not pressed. 6. Ground No.4 - Kals Information System Ltd., (Seg) ('Kals') 6.1 In this ground (supra), the assessee seeks exclusion of this company 'Kals' from the TPO's set of comparables. According to the learned AR, this company, 'Kals', was chosen as a comparable by the TPO and upheld by DRP, overruling the objections raised by the assessee to its inclusion on grounds of being functionally different as it is a product development company unlike the assessee in the case on hand who is merely a provider of software development services to its AE. It was submitted that in a catena of decisions, Co-ordinate Benches of this Tribunal have consistently held that 'Kals' is a product company and is not comparable to a company that is merely providing software development services. In support of this contention, the learned AR placed reliance on the decision of the Co-ordinate Bench of this Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have heard the Id. DR as well as Id AR and considered the relevant material on record. The Id. DR has not disputed the fact that comparability of this company has been examined by this Tribunal in a series of decisions including in the case of Trilogy e-business Software India Ltd. (supra) We further note that in the balance sheet of this company as on 31 3.2010, there are inventories of Rs. 60,47,977. Therefore, when this company is in the business of software products the same cannot be compared with a pure software development services provider. Accordingly, we do not find any error or illegality in the impugned findings of the DRP. 6.3.2 Respectfuly following the aforesaid decision of the Co-ordinate Bench of this Tribunal in the case of Cerner Healthcare Solutions Pvt. Ltd., (supra) for Assessment Year 2010-11, we hold that Kals Information Systems Ltd., is not a good comparable to the assessee in the case on hand, who merely provides software development services and therefore direct the AO/TPO to exclude it from the set of comparable companies. Consequently, ground No.4 raised by the assessee is allowed. 7. In the result, the assessee's cross objections for Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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