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TMI Blog2021 (2) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that such free of cost import services indeed form international transaction as per provisions of the Act. The fact however remains that the impugned addition made in the TPO's order has not taken into account any comparable or market condition(s) regarding captive service provider segment. Nor the TPO has adopted any of these methods, direct or indirect, provided in the Income Tax Rules so as to make the impugned adjustment. We find no reason to sustain the same on merits therefore. This impugned adjustment is directed to be deleted. Working capital adjustment - We accept assessee's working capital adjustment in principle and direct the TPO to verify the necessary facts as per law. - ITA No. 1700/Hyd/2019 and S.A. No. 118/Hyd/2020 in ITA No. 1700/Hyd/2019 - - - Dated:- 18-2-2021 - S. S. Godara, Member (J) And L. P. Sahu, Member (A) For the Appellant : Danish Bafna, Adv. For the Respondents : Sibendu Moharana, DR ORDER This assessee's main appeal ITA 1700/Hyd/18 as well as its Stay Application S.A. No. 118/H/2020 for A.Y. 2015-16 arise from Asst. Commissioner of Income Tax (Appeals), Circle 1(2), '[ACIT]', Hyderabad's assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating application of turnover filter for accepting companies having turnover in the range of INR 1 crores to INR 200 crores. 4.2. On the facts and in the circumstances of the case, and in law, the Ld. AO/Ld. DRP/Ld. TPO has erred in considering companies incurring significant onsite expenditure as comparable company. 4.3. On the facts and in the circumstances of the case, and in law, the Ld. AO/Ld. DRP/Ld. TPO has erred in not considering information available on website of companies as reasonable source of information for determining the functional comparability of companies. 4.4. On the facts and in the circumstances of the case and in law, Ld. AO/Ld. TPO/Ld. DRP erred in including the following companies in the comparable set which are not comparable to the SDS segment's functions, asset base and risk profile: a) Infosys Ltd. b) Cybage Software Pvt. Ltd. c) Persistent Systems Ltd. d) Aspire Systems (India) Pvt. Ltd. e) Inteq Software Pvt. Ltd. f) Nihilent Technologies Ltd. g) Infobeans Technologies Ltd. h) R S Software (India) Ltd. i) Larsen Tourbo Infotech Ltd. j) Mindtree Ltd. k) Tata Elxsi Limited (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, Ld. AO/Ld. TPO/Ld. DRP erred in excluding the following companies in the comparable set which are comparable to the MSS Segment's functions, asset base and risk profile: h) Marketing Consultants Agencies Limited i) MCI Management India Pvt. Ltd. j) Empire Industries Limited - Trading seg k) Office Care Services Limited 5.3. On the facts and in the circumstances of the case, the Ld. AO/Ld. DRP/Ld. TPO have erred in computing the operating margin of final set of comparable companies for MSS segment for A Y 2015-16. 5.4. On the facts and in the circumstances of the case, the Ld. AO/Ld. DRP/Ld. TPO have erred in not allowing the Appellant, the benefit of an adjustment for the differences in the level of risk borne by the comparables and the Assesses and the adjustment to account for differences in the level of working capital between the Assesses vis- -vis comparable companies. The Appellant prays that the TP analysis conducted by the Appellant ought to be accepted and consequently the TP adjustment in relation to MSS segment ought to be deleted. 6. On the facts and in the circumstances of the case, and in law, the Ld. AO/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's argument is that M/s. Infosys Ltd. is also engaged in software product services as well as research development and therefore, assessee's stand seeking its exclusion on latter count deserves to be rejected since the corresponding revenue derived therefrom is only miniscule to the extent of 6.3% and 1.6%; respectively. 3. We have given our thoughtful consideration to rival pleadings against and in support of the impugned inclusion of M/s. Infosys Limited in learned lower authorities' order(s). We notice during the course of hearing that this tribunal's co-ordinate bench decision(s) in Infosys India P Ltd. Vs. ACIT ITA 1689/H/2019 for the very A.Y. 2015-16 has held that the very entity M/s. Infosys Ltd. to be not a valid comparable in view of the following factors. 6.2. In respect of Infosys Ltd., Larsen Toubro Infotech Ltd. and Mindtree Ltd. this tribunal has considered the issue in assessee's own case for the A.Y. 2013-14 to 2014-15 and excluded the comparables with a finding that these companies are giant companies in the area of development of software. For the sake of clarity and convenience, we extract paras 7.4 to 7.6 in assessee's own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of cost assets received from AE 3,19,74,945/- ALP(Median margin of comparable set) 27.37% Adjust u/s. 92CA(3) on account of margin on the free of cost assets received from AE 87,51,542/- 3.3. Mr. Bafna argued that the TPO has erred in making impugned adjustment alleging import of free of cost software for the purpose of testing services. His case is that assessee has already accounted the revenue from testing services and the impugned addition over and above the cost of services would amount to double addition only. Learned CIT DR has sought to defend the impugned addition by submitting that section 92B of the Act in chapter X is in the nature of special provision having seen amendments from time to time and the latest position in view thereof is that an international transaction includes all sorts of the arrangements be it on cost to cost or free of cost, whatsoever. 4. We have heard rival contentions against and in support of the impugned addition. We express our agreement with the Revenue's arguments supporting the TPO's conclusion that such free ..... X X X X Extracts X X X X X X X X Extracts X X X X
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