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TMI Blog2020 (2) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies should be restored to the file of the AO / TPO for examining the claim of the assessee for their inclusion as comparables. Accordingly, we restore these two companies to the file of the AO / TPO. Exclusion of Larsen Toubro Infotech Limited and Persistent Systems Limited - The assessee is a captive service provider of software services to its AE. There is no dispute that the facts are identical in the assessee s case and in the cases decided by the co-ordinate bench. Accordingly, respectfully following the decision of the co-ordinate Bench rendered in the case of CGI Information Systems and Management Consultants P Ltd [ 2018 (4) TMI 1755 - ITAT BANGALORE] we direct the AO / TPO to exclude Larsen Toubro Infotech Limited and Persistent Systems Limited from the final list of comparables. Since the ALP of the international transaction relating to software development services are to be determined afresh in the light of our decisions rendered above, we restore this issue to the file of the AO / TPO. - IT(TP)A No.1838/Bang/2016 - - - Dated:- 5-2-2020 - Shri B.R.Baskaran, AM And Shri Pavan Kumar Gadale, JM For the Appellant : Smt.Tanmayee Rajkumar, Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd services to the global semiconductor industry. 4. The issues urged herein relate to the transfer pricing adjustment made in respect of providing of software development services by the assessee to its AE. The assessee had adopted TNMM method as the most appropriate method and operating cost by total cost as profit level indicator. The TPO accepted the TNMM method as well as profit level indicator of the assessee. The assessee had computed arithmetical mean of 12.52 % in respect of comparables owing PLI of the assessee was 18.16%. Accordingly, the claim that its international transactions relating to software development services is at arm s length. 5. Rejecting the TP study of the assessee, the TPO selected following 10 comparables:- Sl. No. Name of the Company Mark-up on Total costs (WC-unadj) (in %) Mark-up on Total costs (WC-adj) (in %) 1. Datamatics Global Services Ltd. 14.57 15.25 2. Genesys International Corporation Ltd. 30.09 25.94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the DRP. Aggrieved by the order so passed, the assessee filed this appeal before the Tribunal. 9. The ground No.4 relates to the claim of the assessee that sub-contracting charges incurred by the assessee should be given pass-through status and hence, should be excluded from the operating cost and income while computing arm s length price. The learned AR fairly admitted that the assessee made identical claim in the immediately preceding assessment year, i.e., assessment year 2011-2012 and it has been rejected by the Tribunal. 10. We heard the learned Departmental Representative on this issue and perused the record. We noticed that identical issue was considered by the co-ordinate Bench of the Tribunal in assessee s own case for assessment year 2011-2012 in IT(TP)A No.17/Bang/2016 dated 21.09.2016 and the same has been decided against the assessee with the following observations:- 7. We have considered the rival submissions as well as the relevant material on record. Undisputedly, the assessee is charging a mark up on the software development services provided to the AE being captive service provider. Therefore the assessee is not acting as an agent or distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has, in fact, furnished relevant financial data of these companies before Tax Authorities, but they have overlooked the same. The learned AR submitted that the assessee has furnished the financial details of these companies in the paper book filed by the assessee. 13. We heard the learned DR on this issue and perused the record. Since the assessee submits that the financial details of these two companies are available on record, we are of the view that these two companies should be restored to the file of the AO / TPO for examining the claim of the assessee for their inclusion as comparables. Accordingly, we restore these two companies to the file of the AO / TPO. 14. In ground No.5.13, the assessee seeks exclusion of two companies, viz., Persistent Systems Limited and Larsen and Toubro Infotech Limited. The learned AR submitted that these two companies have been excluded in assessee s own case in assessment year 2011-2012 by the Tribunal. However, in respect of assessment year 2012-2013, these two companies have not been considered as good comparables by the Tribunal in the case of M/s.CGI Information Systems and Management Consultants Pvt. Ltd. v. ACIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal s order was dismissed by the Hon ble Delhi High Court in ITA No.682/2016. (c) Persistent Systems Ltd., was excluded from the list of comparable companies on the ground that this company was a software product company and segmental information on SWD services was not available. The Tribunal in coming to the above conclusion referred to the decision rendered by ITAT Delhi Bench in the case of Cash Edge India Pvt.Ltd. Vs. ITO ITA No.64/Del/2015 order dated 23.9.2015 and the decision of Hon ble Delhi High Court in the case of Saxo India Pvt.Ltd. (supra). The findings in this regard are contained in Paragraphs 4.14 to 4.16 of its order. 30. Respectfully following the decision of the Tribunal we hold that the aforesaid 3 companies be excluded from the final list of comparable companies for the purpose of arriving at the arithmetic mean of comparable companies for the purpose of comparison with the profit margins. In this regard we are also of the view that the plea of the learned DR for a remand of the issue to the DRP on the ground that the DR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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