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TMI Blog2020 (3) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable amalgamation has resulted in a higher OP by TC is an aberration and thus, the tribunal has rightly excluded the said comparable. Fortune Infotech has unique web based software and provided niche services to its customers and thus, was dissimilar to the assessee and has been right excluded as a comparable. Infosys brand definitely results in higher profits and hence the ITAT has rightly excluded the same from the list of comparables. TCS E Serve International Ltd. dissimilarity to the assessee and thus, the exclusion of the above comparable cannot be faulted in any manner. TCS E Serve Ltd. comparable is functionally dissimilar and thus, has to be excluded. Benchmarking analysis by aggregating the IT and ITES segment of the Appellant - ITAT setting aside the matter for carrying out the benchmarking analysis by selecting the comparable companies involved in provision of both ITES and IT services - HELD THAT:- Keeping in view the fact that the Transfer Pricing Officer had in the preceding years accepted that the assessee was engaged in IT Services (i.e. including software development and ITES) as is evident from the assessment order and considering the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in the category of ITES in notification of CBDT dated 20.09.2009 and there is no further sub-classification of this segment? 5. Whether in the facts and circumstances of the case and in law, the Hon ble ITAT was correct in excluding M/s Fortune Infotech Ltd used as a comparable for determining the ALP in the case of the Assessee Company when the Assessee Company and comparable company are providing similar nature of services in the category of ITES as the services are notified in the category of ITES in notification of CBDT dated 20.09.2009 and there is no further sub-classification of this segment? 6. Whether in the facts and circumstances of the case and in law, the Hon ble ITAT was correct in excluding M/s Infosys BPO Ltd used as a comparable for determining the ALP in the case of the Assessee Company when the Assessee Company and comparable company are providing similar nature of services in category of ITES? 7. Whether in the facts and circumstances of the case and in law, the Hon ble ITAT was correct in excluding M/s TCS E-Service International Ltd used as a comparable for determining the ALP in the case of the Assessee Company when the Assessee Company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution Panel excluded only one comparable M/s. Infosys Ltd. from the list of comparable companies and the objections regarding the exclusion of other companies were rejected. The final assessment order U/s 143(3) of the Act was passed by the Assessing Officer on 30th January, 2015 at an income of ₹ 25,97,19,410/-. The assessee preferred an appeal before the ITAT. The ITAT accepted the submissions of the assessee that the comparables chosen by the Transfer Pricing Officer were functionally dissimilar and were liable to be rejected vide order dated 21st January, 2016. 6. Being aggrieved by the impugned order dated 21st January, 2016 of the Tribunal, the revenue is in appeal raising the above mentioned question for consideration. Re: Question No.1 Persistent Systems Ltd. 7. The Transfer Pricing Officer had taken Persistent systems Ltd. which had a margin of 29.02% holding that the company is engaged in Software Developing Services. The Dispute Resolution Panel rejected the claim of the assessee for its exclusion. Before the ITAT, the assessee submitted that the company was functionally different because it rendered outsourced product development services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti Group Services. Further, this company is also a subsidiary with Wipro Ltd. which company has a considerable brand name, therefore benefit accruing to this company from the brand name of Wipro cannot be denied. Therefore, relying on the decision of the Coordinate Bench in the case of Agnity Technology Pvt. Ltd. in ITA No.955/Del./2015 for A.Y. 2010-11 wherein the Infosys Owns of its own brand name was held to be incomparable on the same analogy brand value of Wipro does help this comparable hence, we direct TPO to excluded this comparable in its order accordingly. 11. The finding of fact has not been shown to be perverse in any manner, the comparable excluded has a turnover which is 24 times that of the assessee and has also the benefit of the brand name of Wipro and the assured revenue from its agreement with Citi Technology Services. Thus, the comparable has been rightly excluded. Re: Question No.3 M/s. Zylog Systems Ltd. 12. The Transfer pricing Officer had included Zylog System Ltd. which had a margin of 25.07% as it was functionally similar to the assessee according to the Transfer Pricing Officer. The DRP concurred with the TPO before the ITAT, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcing. Further, the company is providing software in a service in health care outsourcing area. The company also developed software products in BPO Management and Healthcare. Therefore it is functionally dissimilar to the assessee. The assessee also conducted that comparable had significant amount brand and IPR and further, it did not contain segment wise results. Further, it was submitted by the ITAT during the financial year 2009-10, there was an amalgamation in the comparable company which was an extra ordinary event and therefore it affected overall profitability of the company. The ITAT while excluding the comparable returned a finding as under:- We have considered the rival contention during the year that this comparable has gone into substantial business restructuring resulting into extraordinary circumstances during F.Y. 2009-10 subsidiary of ASCENTIA got amalgamated with this company and the figure of the business results for the year ending 31st March, 2010. In this case also excluded the figures of amalgamated company due to which comparable has high OP by TC margin . 15. The finding of fact recorded by the tribunal has not been shown to be perverse in any manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and definitely result of this brand goes to this comparable. Therefore, the brand of Infosys definitely results in opening higher profits to this company. In view of the following decision the same is required to be excluded and hence is ordered accordingly . 20. The findings of the ITAT have not been shown to be perverse in any manner. The brand of Infosys definitely results in higher profits and hence the ITAT has rightly excluded the same from the list of comparables. Re: Question No.7. TCS E Serve International Ltd. 21. The Transfer Pricing Officer had included the comparable which had a margin of 54.02% holding it to be comparable. The contention of the assessee that the company was functionally dissimilar was rejected by the TPO and the DRP. Before the ITAT the contention of the assessee was that in addition to BPO Services the comparable company was engaged in providing technical services like software testing, common verification and validation of software which falls under Software Development Activity which includes transaction process, technical services, therefore, it was functionally dissimilar. Further it was also contended that there was no segmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar and thus, has to be excluded. 25. The findings of fact by the ITAT regarding exclusion of the comparables are thus upheld and thus the same do not merit any interference. The questions of law are answered against the revenue and in favour of the assessee. Similar views have been taken by the Bombay High Court in the case of CIT Vs. PTC Software 395 ITR 176 and in the case of Principal Commissioner of Income Tax Vs. Barclays Technology Centre India Pvt. Ltd. 409 ITR 108 and by the Karnataka High Court in Principal Commissioner of Income Tax Vs. Softbrands India Pvt. Ltd. 406 ITR 513. ITA No. 405 of 2016 26. The appeal filed by the Revenue for A.Y. 2011-12 has assailed the order of the ITAT dated 31st May, 2016 whereby the exclusion of comparables mentioned below is disputed: i) M/s. Persistent Systems Ltd. ii) Wipro Technology Services Ltd. iii) Zylog Systems Ltd. iv) Accentia Technology Ltd. v) Infosys BPO vi)TCS E Service Ltd. 27. The following questions of law have been raised :- 1. Whether in the facts and circumstances of the case and in law, the Hon ble ITAT was correct in excluding M/s Persistent Systems Limited used as a comparable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and merits no interferences. ITA No. 405 of 2018 30. The present appeal has been filed by the assessee for A.Y. 2013-14 raising the following substantial question of law:- i) Whether the Hon ble ITAT erred in rejecting the segmental information pertaining to IT and ITES presented by the Appellant? ii) Whether the Hon ble ITAT erred in law in setting aside the matter for carrying out the benchmarking analysis by aggregating the IT and ITES segment of the Appellant? iii) Whether the Hon ble ITAT erred in law in setting aside the matter for carrying out the benchmarking analysis by selecting the comparable companies involved in provision of both ITES and IT services?. iv) Whether the Hon ble ITAT erred in law in not giving sufficient time to the Appellant, during the course of proceedings, for placing relevant evidence on records? 31. The brief facts leading to the present appeal are that the Appellant is a company engaged in IT Services and IT Enabled Services which has been accepted by the assessing officers and the Transfer Pricing Officer vide orders for A.Y. 2010-11 and 2011-12, however, for the present year i.e. A.Y. 2013-14, the Transfer Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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