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TMI Blog2019 (10) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract, etc., the same cannot be considered as functionally comparable with the assessee. Further, this company also earns income from outsource product development. In the absence of any segmental data of this company, we do not find any error or illegality in the findings of the DRP that this company cannot be compared with the assessee and the same is directed to be excluded from the set of comparables. In view of the aforesaid decision of the ITAT, we are of the view that the aforesaid company should be excluded from the list of comparable companies. No other grounds of appeal were pressed for adjudication in the assessee s appeal. Deduction u/s 10A - reducing the travel and telecommunication charges from the export turnover without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os.3 & 4 raised by the Revenue in its appeal reads as follows: "3. Whether in the facts and circumstances of the case and in law, the Hon'ble CIT(A) was justified in seeking exact comparability while searching for comparable companies of the Assessee under TNMM method whereas requirement of law and international jurisprudence require seekiong similar comparable companies. 4. Whether the Hon'ble CIT(A) was right in not accepting the quantitative filters and qualitative filters of the TPO and applied functional matrix which is narrower than the functionality matrix originally used by TPO." 2. The assessee is a subsidiary of NVIDIA International Inc. ("NVIDIA International") US. The Assessee provides software development service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Larsen & Toubro Infotech Limited 19.33% 19.13% 3. LGS Limited 11.95% 7.42% 4. Mindtree Limited (Seg) 14.83% 14.45% 5. Persistent Systems Private Limited 3 0.35% 29.21% 6. RS (Software) India Limited 10.29% 9.96% 7. Sasken Communication Technologies Limited 17.36% 17.17% 8. Thinksoft Global Services Limited 17.05% 15.60% 9. Zylog Systems Limited 19.06% 15.69% 10. Evoke Technologies Private Limited 18.75% 18.14% 11. e-Zest Solutions Limited 16.79% 13.86% 12. Kals Information Systems Limited (Seg) 38.37% 34.10% 13. Persistent Systems & Solutions Ltd 15.38% 11.88% 14. Tata Elxsi 21.88% 19.35% Arithmetic Mean 21.17% 19.27% 6. The TPO computed the ALP in the following manner: Arm's Len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies which were erroneously computed by the TPO. The assessee argued for inclusion of certain companies forming part of TP documentation which was rejected by the CIT(A) on the following reasons: Sl. No. Comparable Reason for rejection by CIT(A) 1. Akshay Software Technologies Limited The CIT(A) has rejected this company on the basis of functional difference (page 23-25 of the CIT(A) order) 2. CG-VAK Software & Exports Limited The CIT(A) has rejected this company on the basis of failing employee cost filter of 25% (page 25-27 of the CIT(A) order) 3. Goldstone Technologies Limited The CIT(A) has rejected this company on the basis of lack of segmental information (page 27-28 of the CIT(A) order) 4. Helios and Matheson Infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. However the Special Bench, ITAT, Chandigarh, in the case of DCIT Vs. Quarks Systems Pvt. Ltd., 42 DTR 414 (Chandigarh-SB) has held that there cannot be estoppel against law and that non-comparable companies even if selected by the assessee in TP study can be sought to be excluded by the assessee based on functional comparability or other valid reasons. In view of the aforesaid decision of the special Bench, we admit the additional ground for adjudication. 11. The learned Counsel for the assessee however submitted that out of the 3 companies sought to be excluded in the additional grounds of appeal, exclusion of Persistent Systems Ltd., from the list of comparable companies would alone be sufficient. As far as exclusion of Persistent S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been disputed before us. 11. There, when this company is engaged in diversified activities and earning revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, etc., the same cannot be considered as functionally comparable with the assessee. Further, this company also earns income from outsource product development. In the absence of any segmental data of this company, we do not find any error or illegality in the findings of the DRP that this company cannot be compared with the assessee and the same is directed to be excluded from the set of comparables." 12. In view of the aforesaid decision of the ITAT, we are of the view that the aforesaid compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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