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TMI Blog2021 (1) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... a unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. - IT(TP)A No.38/Bang/2016, IT(TP)A No.58/Bang/2016 - - - Dated:- 4-1-2021 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Smt. Janmayee Rajkumar, A.R. For the Respondent : Shri Pradeep Kumar, D.R. ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: These cross appeals are directed against the assessment order dated 20-11-2015 passed by the assessing officer for assessment year 2011-12 u/s 143(3) r.w.s 144C of the Act in pursuance of directions given by Ld Dispute Resolution Panel (DRP). 2. The assessee has filed revised grounds of Appeal. At the time of hearing, the Ld A.R submitted that she is pressing only Ground No.3(b) abd 3(j). Accordingly, all other grounds are dismissed as not pressed. The above said two grounds pressed by the assessee relate to the addition made towards transfer pricing adjustment 3. The revenue is in appeal in respect of following issues:- (a) Relief granted by Ld DRP in respect of addition made on account of transfer pricing adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voke (from Capitaline) 14,48,69,912 13,39,96,568 8.11% 5 ICRA Techno Analytics Ltd. (in 000) 15,84,01,000 12,68,94,000 24.83% 6 Infosys Ltd 253850000000 177,030,000,000 43.39% 7 Larsen Toubro Infotech Ltd. 23318122096 19,764, 861,289 19.83% 8 Mindtree Ltd. (seg) 8,783,000,000 7,937,143,242 10.66% 9 Persistent Systems Solutions Ltd. 189,490,457 155,172,089 22.12% 10 Persistent Systems Ltd. 6,101,270,000 4,971,860,000 22.84% 11 R S Software (India) Ltd. 1,882,638,471 1,617,804,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the said aspect has been examined by the Tribunal, the decisions rendered by the Tribunal may be followed. 5.7 We heard Ld D.R and perused the record. We notice that, out of the ten comparable companies excluded by Ld DRP, the assessee now seeks inclusion of three companies, viz., M/s Evoke Technologies Ltd, M/s R S Software (India) Ltd and M/s Mindtree Limited. Hence the grievance of revenue would now remain with regard to the following seven companies only:- a) Acropetal Technologies Limited (b) E-Zest Solutions Limited (c) E-infochips Limited (d) ICRA Techno Analytics Limited (e) Infosys Limited (f) Tata Elxsi Ltd (seg) (g) Larsen Toubro Infotech 5.8 We have heard rival contentions and perused the record. The Ld A.R submitted that all the above said companies have been directed to be excluded by the co-ordinate bench in the case of Applied Materials India P Ltd (supra) and also in the case of Electronic Imaging (I) Pvt Ltd (supra). We notice that the co-ordinate bench of Tribunal has followed the decision rendered in the case of Elecronic for Imaging (I) P Ltd (supra) while deciding the appeal in the case of M/s LG Soft India P Ltd (IT(TP)A No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (I) Pvt. Ltd. v. DCIT, ITA No.614/Mds/2016, this company was held to be engaged in Knowledge Process Outsourcing (KPO) and cannot be regarded as a SWD services company. 13. The Tribunal in the case of DCIT v. Ikanos Communication Pvt. Ltd. in ITA 137/Bang/2015 excluded the company, ICRA Techno Analytics Ltd. , on the ground that it was engaged in engineering and consulting services, besides licensing and sub-licensing and no segmental information was available to compare the margins of SWD services segment. 14. The Mumbai Tribunal in the case of Ness Technologies (I) Pvt. Ltd. v. DCIT in ITA No.696/Mum/2016 held Infosys Ltd. to be not comparable for the reason that this company was engaged in manufacturing of software products and was a giant company assuming various risks. As far as Larsen Toubro Infotech Ltd ., is concerned, vide paragraph-8 page-16 of the order in the case of Electronics for imaging India Pvt. Ltd., (supra) this tribunal excluded this company on the ground of presence of onsite revenue of more than 50% and that the related party transaction was more than 15% (18.66%). 15. Respectfully following the aforesaid decisions, we uphold the exclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India Ltd, Mindtree Limited, the ground of revenue in respect of above said three companies are allowed. 5.11 In the appeal of the assessee, the assessee seeks exclusion of all the three companies retained by Ld DRP, viz., M/s Persistent Ltd, M/s Persistent Systems Solutions Ltd and M/s Sasken Communications Ltd. 5.12 The above said three companies, viz., M/s Persistent Ltd, M/s Persistent Systems Solutions Ltd and M/s Sasken Communications Ltd have been dealt by the co-ordinate bench in the case of LG Soft India P Ltd (supra), in which the decision rendered in the case of Electronic for Imaging (I) P Ltd (supra) has been followed. For the sake of convenience, we extract below the observations made in the case of LG Soft India P Ltd as under:- 16. Now we shall take up the appeal of the assessee. The assessee in ground No.13 seeks exclusion of 3 companies viz., Persistent Systems Solutions Ltd., Sasken Communication Technologies Ltd. and Persistent Systems Ltd. Exclusion of these 3 companies was considered by the Tribunal in the case of Electronics for Imaging (I) Pvt. Ltd. (supra). In para 8 of the order, this Tribunal held that Persistent Systems Solutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia P Ltd (supra):- 11. The next ground of assessee's appeal is regarding seeking inclusion of some of the comparables in the set of comparable companies which are as under : (i) Akshay Software Technology Ltd. (ii) Powersoft Global Ltd. (iii) R Systems International Ltd. (i) Akshay Software Technology Ltd . 12.1 This company was selected by the assessee in the TP Study however the TPO rejected this company on the ground that its functions appear to be more in the nature of support services or ITES. The DRP has confirmed the rejection on a different ground by applying a filter that the expenditure in foreign currency was higher when compared to its total revenue. Thus DRP was of the view that this company was predominantly engaged in the on site development of software. The ld. AR has submitted that such filter was neither applied by the TPO nor sought to be applied by the assessee. Therefore the DRP was not asked to apply this filter. Secondly the DRP did not arrive at the finding that the said company was in fact engaged in on site development of software. The finding of the DRP are based mainly on the assumption that because of its expenditure in forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Related Party Transaction, volume of M/s. Akshay Software Technologies was not provided by the assessee, leading to its rejection, we find that assessee had at para 5.172 and 5.173 of its objections before DRP, submitted that RPT of the said company was 4.33% only, compiling the figures from previous years data available in Annual Report of Financial Year 2010- 11 of the said company. This working stands unrebutted. We are, therefore of the opinion that the assessee has to succeed in its claim that M/s. Akshay Software Technologies Ltd, is a proper comparable. We direct the TPO to include the said company as a comparable along with the two comparables, namely, M/s. R. S. Software (India) Ltd and M/s. Thinksoft Global Services Ltd, and rework the mean PLI. ALP adjustment, if any, required shall be based on such mean PLI, after considering the working capital adjusted. Ordered accordingly. Ground 12 of the assessee is allowed. 09. Vide its ground 13, we find that assessee is aggrieved that DRP had directed treatment of foreign exchange loss/gain as non-operating in nature. We find that DRP had at para 2.9 of its directions dated 26.11.2014 directed inclusion of foreign exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchases and personnel cost at page 39 of the Annual Report as a combined expenditure as under : Purchases Personnel Cost : ₹ 250,61,55,607. Therefore the cost of employee is not separately reported by this company. Further it is not clear whether the goodwill is self-generated or acquired intangible asset. Accordingly, this issue is set aside to the record of the Assessing Officer/TPO to verify the relevant facts to ascertain the employee cost and then decide the functional comparability. Needless to say the information under Section 133(6) may be obtained for the purpose of ascertaining the annual employee cost of this company. 5.18 We notice that the above said decision has been rendered for AY 2011-12 and hence we prefer to follow the same. Accordingly, following the above said decision, we hold that M/s Akshay Software Technology Ltd is not a good comparable. Following the above said decision, we restore M/s LGS Global Ltd to the file of AO/TPO with similar directions. 5.19 Accordingly, we direct the AO/TPO to compute the ALP of the international transaction in accordance with the directions given above, after affording adequate opportunity of bei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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