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TMI Blog2019 (11) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... comparables that need to be included/excluded in the final list of comparables. Accordingly, ground Nos. 6 and 7 of the appeal are dismissed. Method of computation of operating profit margin - HELD THAT:- Assessee deserves the benefit of adjustment in operating margins on account of substantial salary and travel cost in initial year of operation. The ground Nos. 8 and 9 of the appeal are restored back to the file of Assessing Officer/TPO for recomputation of operating margin after allowing adjustments as mentioned above. The assessee is directed to produce all relevant documents before the Assessing Officer/TPO in support of its claim. Non considering multiple year data - HELD THAT:- It is a well settled legal position that only data relevant to the corresponding single year has to be considered. We do not find any merit in ground No. 10 of the appeal. Comparable selection - Lanco Global Systems Limited and Gebbs Infotech Limited - HELD THAT:- We do not find any infirmity in the order of CIT(A) in including the said companies in the list of comparables. The objection raised by the assessee i.e. information in respect of Gebbs Infotech Limited is not available in publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provision of consultancy services by T-systems International on behalf of T-systems India 19,58,465 Procurement of IBM laptops from T-systems Singapore 17,20,795 Reimbursement of expenses and set up costs for the EPCOS project to T-systems Singapore 40,94,404 Payment of apartment rental fees to T-Systems International 1,35,075 Payment of guarantee fees to T-systems International 10,000 Procurement of licenses for software from T-systems International 4,41,352 Knowledge transfer from T-systems International 35,98,331 Provision of services by T-systems International in respect of validation and ABC analysis of curriculum Vitaes of prospective SAP consultants for T-systems India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n public domain. Therefore, use of such information secretly is against the provisions of the Act. The ld. AR further submitted that the services rendered by the assessee to its group companies cannot be compared with Syntel India as the level of operation of both the companies is at variance. The ld. AR vehemently reiterated the contentions raised in paras 3.1 to 3.10 of the appeal against rejection of CUP as the most appropriate method. For the sake of ready reference we are reproducing the same : 3.1 Ignoring the fact that differences in volume of fixed assets and turnover between the Appellant and Syntel India did not materially affect its prices in the market and therefore use of CUP was appropriate; 3.2 Ignoring the significance of the average software industry billing rates published by software industry bodies and the comparability of such billing rates with the billing rates of the Appellant; 3.3 Concluding that the billing rates in the master service agreement between the Appellant and T- Systems Enterprise Services Gmbh ('T - Systems Germany') should have been determined by factoring first year incremental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service model and billing rates between Syntel India and T-Systems Germany (instead of comparing the Master Service Agreement between the Appellant and TSystems Germany and between the master service agreements; and 3.10 Not considering the certificate provided by T-Systems Germany certifying that the software development services provided by the Appellant and Syntel India to T-Systems Germany are similar in nature. 5. In respect of ALM Services, the ld. AR submitted that the assessee had selected 19 companies as comparables in the TP study having average arithmetic mean of 6.08%. The TPO in transfer pricing proceedings accepted only two companies from the list of 19 companies selected by the assessee i.e. Sasken Network Systems Limited and VMF Softech Limited. The TPO selected two more companies i.e. Asian CERC Information Technology Limited and Bodhtree Consulting Ltd. The final set of comparables as per TPO are as under : Sr. No. Name of the company PBIT/Operating Cost 1 Asian CERC Informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,14,33,854 47,35,20,494 96,45,18,087 1,78,52,65,951 3,28,47,38,386 Operating Cost 8,96,43,362 41,60,79,784 88,82,28,064 1,39,14,76,239 2,78,54,27,449 Travel Cost 3,59,37,113 8,35,49,049 12,33,99,805 20,46,94,855 44,75,80,822 Personnel Cost 4,36,52,943 23,85,82,773 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. The ld. AR submitted that the assessee has merely reiterated the contentions raised before the CIT(A). The CIT(A) has considered all the submissions of assessee and has thereafter passed an order. The CIT(A) has granted substantial relief to the assessee by including some of the comparables that are now being agitated by the Department in the cross appeals. 7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The assessee is providing services to its overseas group companies under two segments i.e. : i. Software Development; and ii. Application Lifestyle Management (ALM) Services. Software Development segment 8. Under this segment the assessee to benchmark its international transactions had selected CUP as the most appropriate method. The TPO rejected CUP applied by the assessee and adopted TNMM as the most appropriate method. The findings of TPO were upheld by the CIT(A). The contention of assessee is that the TPO had secretly received information from Syntel India. The said information was not available in publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (supra) and M/s. Saggezza India P Ltd. Vs. DCIT (supra). Taking into consideration entirety of facts and the decisions mentioned above, we are of considered view that the assessee deserves the benefit of adjustment in operating margins on account of substantial salary and travel cost in initial year of operation. The ground Nos. 8 and 9 of the appeal are restored back to the file of Assessing Officer/TPO for recomputation of operating margin after allowing adjustments as mentioned above. The assessee is directed to produce all relevant documents before the Assessing Officer/TPO in support of its claim. The Assessing Officer/TPO shall grant reasonable opportunity of hearing to the assessee before re-adjudicate the issue, in accordance with law. The ground No.8 and 9 of the appeal are allowed for statistical purpose. 12. In ground No. 10 of the appeal, the assessee has assailed the action of authorities below in not considering multiple year data. It is a well settled legal position that only data relevant to the corresponding single year has to be considered. We do not find any merit in ground No. 10 of the appeal. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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