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TMI Blog2021 (2) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) TMI 86 - ITAT BANGALORE ] this company is engaged in providing professional services, implementation, support and maintenance of ERP products and other services. These are nothing but software development services, as is evident from the notes forming part of financial statements which is placed in paper book at page 1825. Further the revenue from software services accounts for 99.45% of the total revenue of the company is evident from the financial statements placed on record. Being so, we direct TPO to consider this company as comparable to assessee s case while selecting the comparables. Negative working capital adjustment without appreciating the fact that assessee is a captive service provider - We find that in the case of M/S. SOFTWARE AG BANGALORE TECHNOLOGIES PVT. LTD. [ 2016 (3) TMI 1384 - ITAT BANGALORE ] passed by this Tribunal, it has been held that negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis. We therefore direct Ld.TPO to compute the ALP in accordance with the directions contained in this order after affording assessee opportunity of being heard. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The learned AO I TPO and the learned DRP have erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant for having different accounting year (i.e. companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months); ii. The learned AO I TPO and the learned DRP have erred, by rejecting certain comparable companies identified by the Appellant using employee cost greater than 25% of the total revenues as a comparability criterion; iii. The learned AO / TPO and the learned DRP have erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant using export earnings greater than 75% of the sales as a comparability criterion; iv. The learned AO I TPO and the learned DRP have erred, in law and in facts, in applying only the lower cap on the turnover filter of ₹ 1 crore and not applying any upper cap for the comparability criterion; 6. The learned AO/ TPO and the learned DRP have erred, in law and in facts, by accepting rejecting companies based on unreasonable comparability criteria; 7. The learned AO / TFO and the learned DRP have erred, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. ( SDG US ) is responsible for developing the embedded software that in Novellus Group products that comprise the semiconductor chip marketing machinery. It focuses on three distinct areas in software development, comprising of: 1. Software related to equipment; 2. Software for proteus graphic user interface group; and 3. Product specific software. Lain India also supports the testing of the Software Product builds made by the SDG US/India. SPS Group is engaged in providing on-line product support to customers of Novellus machinery in the US, Japan, Korea, Taiwan and Europe. IT Enables (CAD/CAM) Services Lam India is engaged in rendering IT enabled services in the nature of CAD/CAM, to Novellus US. Lam India provides technical resolutions for QNs and supports Novellus US in creating ACOs in Wind-chill PLM system, based on design change requirements. Lam India supports Novellus US in terms of engineering documentation using CAD tools like pro/Engineer, Auto CAD and Interlink for specific engineering tasks based on the requirements of Novellus US. Lam India has also entered into an agreement with Novellus US to render SAP maintenance and enhancement services. 5. The Ld.TPO observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are (India) Pvt.Ltd. Mindtree Ltd. Larsen and Toubro Infotech Ltd. Persistent Systems Ltd. Tech Mahindra Ltd. 12. On the contrary, Ld.CIT.DR relied on orders passed by authorities below. 13. We have perused submissions advanced both sides in light of records placed before us. 14. One of the arguments by the assessee before the Ld.TPO as well as DRP was that these companies had turnover which was in excess of ₹ 200 crores and therefore these companies cannot be regarded as a comparable in the case of the assessee whose turnover was only ₹ 18 crores. The Ld.TPO as well as DRP took the view that the functional comparability of the companies were alone to be seen and turnover was not an important criterion. In ground No. 5(iv), the assessee has challenged the order of DRP in holding that higher turnover is not a relevant criterion for disregarding a company, when it is functionally found to be comparable. The question boils down on application of turnover filter in choosing comparable companies. As far as excluding the companies on the basis of turnover is concerned, the issue has been settled in several decisions of the Tribunal and has been elaborately discussed by this T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5-8-2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt. Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding coordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al services, implementation, support and maintenance of ERP products and other services. These are nothing but software development services, as is evident from the notes forming part of financial statements which is placed in paper book at page 1825. Further the revenue from software services accounts for 99.45% of the total revenue of the company is evident from the financial statements placed on record of paper book at page No. 1831. Being so, we direct TPO to consider this company as comparable to assessee s case while selecting the comparables. 19. Based on the above observation the objection raised by DRP cannot be upheld. Accordingly we direct Ld. AO/TPO to consider this comparable the finalist. 20. Ground No. 7 alleged by assessee is against providing negative working capital adjustment without appreciating the fact that assessee is a captive service provider. The grievance of the assessee is with regard to negative working capital adjustment carried out by the Ld.TPO which was confirmed by the DRP. It is the plea of the assessee that though the Ld.TPO has observed that the Assessee has a healthy margin, the Ld.TPO has erred in making an adjustment towards working capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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