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TMI Blog2020 (5) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... .DCIT Circle-2 (1) (1), Bangalore for assessment year 2013-14 on following grounds of appeal: Based on the facts and circumstances of the case and in law, Synamedia India Private Limited (hereinafter referred to as the 'Appellant') respectfully craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income-tax - Circle 2(1)(1) ('Assessing Officer' or 'AO') dated September 25, 2017 in pursuance of the directions issued by the Dispute Resolution Panel ('DRP'), Bengaluru dated August 23, 2017, under section 253 of the Income- tax Act, 1961 ('Act') on the following grounds: That on the facts and in the circumstances of the case and in law and based on the directions of the DRP: A. Grounds of appeal relating to transfer pricing matters specific to software development services segment The learned TPO/ learned AO have erred, in law and in facts, by not appreciating the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O have erred, in law and in facts, by not making suitable adjustments to account for differences in the risk profile of the Appellant vis-a-vis the comparables. 13. The learned TPO/ AO have erred, in law and in facts, by using the information by exercising powers under section 133(6) of the Act. B. Grounds of appeal relating to other matters 14. The learned AO has erred in law and in facts by restricting the credit for Minimum Alternate Tax while computing the total tax payable by the Appellant. 15. The learned AO has erred in law by levying interest of INR 7,78,07,682 under section 234B of the Act and INR 25,38,505 under section 234C of the Act, which is on account of the adjustments proposed to the returned income MODIFIED GROUNDS OF APPEAL 3. The learned TPO/ learned AO have erred, in law and in facts, by accepting/rejecting certain companies based on unreasonable comparability criteria: 3.1 following companies should not be treated as comparable companies: a) Larsen Toubro Infotech Limited b) Persistent Systems Limited c) CG - Vak Software Exports Limited 3.2 following companies should be treated as comparable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 510,37,00,051 TNMM Reimbursement of Expenses 13,21,56,997 92,56,375 Other Assets Received on Loan 96,10,596 Other Total 19,38,39,666 511,29,56,426 530,67,96,092 4. Ld.TPO observed that assessee used OP/TC as PLI for determining margin at 12.69% for software development service segment and 13.51% for pre-segment. TNMM was used as most appropriate method. Assessee used following set of 6 comparables with average margin of 13.17% for software dev S.No Comparables Margin 1. Akshay Software Technologies Ltd. 4.45% 2. Helio and Matheson Information Technology Ltd. 15.78% 3. R S Software (India) Ltd. 15.67% 4. Spry Resources India Pvt.Ltd. 21.01% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources India Pvt.Ltd., 11. Ld.CIT DR at this juncture, submitted that CG-VAK Software and Exports Ltd., was not raised by assessee before DRP. She submitted that assessee has not filed application for raising additional before this Tribunal under Rule 11 and therefore this comparable cannot be considered at this juncture. 12. Ld.AR at the outset filed application under Rule 11 seeking indulgence to consider comparable CG-VAK Software and Exports Pvt. Ltd., for exclusion from final list of comparables. We have perused submissions advanced both sides in light of records placed before us. 13. As rightly submitted, this comparable was not been raised for exclusion before DRP by assessee. However, this does not estop assessee from raising this plea before this Tribunal. We refer to decision of special bench of Chandigarh Tribunal in case of Quark systems reported in (2010)132 TTJ 1 (Chandigarh) (SB). 14. Accordingly we are inclined to admit this ground raised by assessee. 15. Ld.AR submitted that Grounds 1-13 are intermingled with comparables sought for inclusion/exclusion by assessee and therefore need not be considered separately. 16. On the basis of above submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. This comparable also owns huge intangibles and incurs expenditure to maintain the brand name which has earned 8 supernormal profits during the year. 23. On the contrary Ld.CIT.DR submitted that in case of CGI Information Systems and Management Consultants Pvt.Ltd vs DCIT reported in (2019) 101 taxman.com 294, this Tribunal has set aside this comparable to the file of Ld.TPO for fresh decision. She submitted that in case of CGI Information Systems and Management Consultants Pvt Ltd (supra) this Tribunal relying upon the case of Advice America Software Development Centre (P) Ltd reported in (2018) 94 Taxmann.com 179 and observations made therein. She thus submitted that this comparable should be sent back to Ld.TPO for verification. 24. We have perused submissions advanced by both sides in light of records placed before us. We have also perused decisions relied upon by Ld. CIT DR in order to understand the reasoning been this Tribunal for setting aside this comparable to Ld.TPO. There is no doubt that this comparable is a software development service provider. However, this comparable owns intangibles, unlike assessee who is a contract service provider that functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in light of records placed before us. We have also perused decisions relied upon by Ld. CIT.DR in order to understand the reasoning been this Tribunal for setting aside this comparable to Ld.TPO. Admittedly this comparable provides services across the entire life-cycle of software development which enables them to work for a wide range of customers. From the annual report of this company is also observed that this company earns income from royalty fee and is engaged in development of products which is not at all comparable with the services provided by assessee to its associated enterprise. 29. Accordingly we direct this comparable to be excluded from finalist. B. Comparables sought for inclusion a) Akshaya Software Technologies Pvt.Ltd 30. It has been submitted by Ld.AR that this company is functionally similar with that of assessee. Referring to the reply filed by this comparable under section 133(6) forming part of assessment proceedings before Ld.TPO, Ld.AR submitted that this comparable should be considered in finalist. Ld.AR submitted that observations of DRP that this comparable is engaged in providing professional services, procurement, installati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation of Ld.TPO is erroneous to the facts. He vehemently submitted that this comparable satisfies all relevant filters adopted by Ld.TPO and therefore deserves to be included. 35. Ld. CIT DR placed reliance on orders passed by authorities below. 36. We have perused submissions advanced by both sides in light of records placed before us. 37. It is observed that there is no other reason except for failing forex filter of 75% of sales for rejecting this company by Ld.TPO. From annual report of this company placed at page 1095. It is observed that this comparable earns revenue, only from export of services amounting to ₹ 181,82,05,708/- out of total revenue earned amounting to ₹ 184,35,26,541/- and that the revenue earned from export of services amounts to more than 75% of total revenue. Under such circumstances we do not find any reason to exclude this comparable as neither Ld.TPO nor has raised any objection regarding its functional similarity. 38. We therefore direct Ld. AO/TPO to be included this comparable in final list. c) Spry Resources India Pvt.Ltd., 39. This comparable was excluded by Ld.TPO by observing that this company has reported t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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