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TMI Blog2021 (5) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... see is allowed. Exclude Cybermate Infotek Limited, Infobeans Systems Private Limited from the final list of comparable companies as regards the assessee as functionally dissimilar. Cybercom Datamatics Information Solutions Limited - It is an undisputed fact, the assessee had submitted annual report for AY 2013-14 and not for AY 2012-13. Thus, qualitative as well as quantitative data regarding this company i.e. Cybercom Datamatics Information Solutions Limited was not available before the Ld. CIT(Appeals) for proper adjudication to decide whether this company should be excluded from the final list of comparables or not. In view thereof, in the interest of justice, we set aside the order of the Ld. CIT(Appeals) on this comparable and remand the same to the file of the AO/TPO to determine from company's annual report for the year under consideration in respect of Director's report, notes of accounts and audit report regarding the functional comparability of the company. Thirdware Solutions Limited - As DR submitted that this issue may be remanded to the file of the AO/TPO for detailed factual verification based on annual report and other relevant documents in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the arm's length price using the financial information of comparable companies available at the time of assessment proceedings although such information was not available at the time of when the Appellant complied with the transfer pricing regulations. 3. Inappropriate modification of export earning filter applied by the Appellant Erred in appropriate modification of export earnings filter applied by the Appellant rejecting companies having export earning less than 75% of operating revenue as against the filter of 25% applied by the Appellant. 4. Inappropriate rejection of the turnover filter applied by the Appellant Erred in inappropriately rejecting the turnover filter of ₹ 1 Crore to ₹ 200 Crores applied by the Appellant while conducting its transfer pricing study for FY 2011-12 and inappropriately applying a turnover filter of ₹ 1 Crore to ₹ 500 Crores. 5. Inappropriate consideration of companies earning super normal profit as comparable to the Appellant Erred by considering super normal profit making companies as comparable for AY 2012-13 6. Inappropriately rejecting certain functionally comparable companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal memo specifically mentioning the concerned companies which reads as follows: Modified grounds of appeal 8. Inappropriately rejecting certain companies identified in the transfer pricing study Erred by rejecting following company from the set of comparable companies identified by the Appellant in its transfer pricing study report for benchmarking its international transaction pertaining to software development and consultancy services even though this company satisfied all the comparability criteria/filters applied while conducting the transfer pricing study. Thinksoft Global Services Limited 9. Inappropriately considering functionally different companies as comparable to the Appellant Erred in adopting an incoherent approach and identifying following inappropriate additional non-comparable companies as comparable to the Appellant on an ad-hoc basis (cherry picking). Cybermate Infotek Limited Infobeans Systems Private Limited and Cybercom Datamatics Information Solutions Limited The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal any time before or at the time of hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round Nos. 8 9 which has been further modified and the same is extracted hereinabove vide Para 5 of this order. 11. The brief facts in this case are that the SAS R D is wholly owned subsidiary of SAS Institute Inc. (SAS US). SAS R D was established on 28th July 2000 as a private limited company under the Indian Companies Act, 1956. During the year under consideration, SAS R D is primarily engaged in providing software development and software consultancy services to AEs. These services have been collectively referred as 'Software services'. The assessee has entered into the following international transactions with its AEs during the year under consideration: Nate of Transaction Amount (Rs.) Method 1 Software Development Services 73,13,58,400 TNMM 2 Software Consultancy Services 35,93,156 TNMM 3 Payment of publication/training expenses 13,918 TNMM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been applied by the TPO in his TP order. 15. The Ld. CIT(Appeals) vide Para 2.2.2.12.3 and 2.2.2.12.4 has observed that the company's annual report was placed before him which was not examined by the TPO and therefore, he directed the TPO/AO to examine the company's annual report submitted from the point of view of its comparability and re-adjudicate the matter. 16. The assessee on the other hand contends the very fact that in the public domain, annual report of Thinksoft Global Services Limited is available for which the assessee also has computed the margin for that company which is evident at Page 6 of the TPO's order. Therefore, the ground of TPO for not considering this company as comparable company that annual report of Thinksoft Global Services Limited is not available in public domain, is therefore, not correct. That further, the Ld. CIT(Appeals) after receiving the annual report of Thinksoft Global Services Limited could have called for remand report from AO/TPO. The Ld. Counsel for the assessee took us in detail through Director's report for Thinksoft Global Services Limited and demonstrated that it is functionally similar to that of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1096, the evidence of products of this company i.e. Cybermate Infotek Limited has been specifically mentioned. That, reiterating the submissions already made before the Department, the Ld. Counsel for the assessee submitted that this company is functionally dissimilar with that of the assessee company since the said company i.e. Cybermate Infotek Limited is into product development whereas the assessee provides software development services. Evidencing these facts at Page 1096 of the Paper book, where it is clearly mentioned that Cybermate Infotek Limited has made products called HEALSOFT . That apart from HEALSOFT, Cybermate Infotek Limited has made 38 products. Therefore, it can be seen Cybermate Infotek Limited is into product development. 21. The Pune Bench of the Tribunal in the case of M/s. PubMatic India Private Limited Vs. ACIT, ITA No. 655/PUN/2017 for the assessment year 2012-13 dated 09.03.2018 vide Para 10 to 14 of the decision has discussed this issue by observing as follows: 10. We proceed to decide the present appeal in line with the arguments put forward by the learned Authorized Representative for the assessee. The learned Departmental Representative for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were compared with a company which were involved in both software development services as well as sale of software products held that the said concern was to be rejected from final set of comparables. 12. The Mumbai Bench of Tribunal in Ness Technologies (India) Pvt. Ltd. Vs. ACIT in ITA No. 7016/Mum/2012, relating to assessment year 2008-09, order dated 24.09.2014 had excluded Cybermate as not comparable to the company providing software development support services to associated enterprises. The learned Authorized Representative for the assessee has pointed out that profile of concern Cybermate for assessment year 2008-09 and in the year under appeal i.e. assessment year 2012-13 is the same and hence, the said proposition is to be applied. We find merit in the plea of assessee in this regard. 13. We further find that Pune Bench of Tribunal in MSC Software Corporation India (P.) Ltd. Vs. ACIT (2017) 80 taxmann.com 55 (Pune-Trib) while deciding the case of exclusion of a product company had held as under:- 18. On perusal of record and the order of Tribunal in John Deere India Pvt. Ltd. Vs. ACIT (supra), we find that the concern E-zest Solutions Ltd. is a product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the company, Infobeans Systems India Private Limited ( the Demerged Company ) currently known as Seed Enterprises Private Limited) to Infobeans Software Solutions Private Limited ( Resulting Company, currently known as infobeans Systems India Private Limited ). Under the scheme, the Resulting Company had acquired the Software Business of the Demerged Company along with all the assets and liabilities pertaining to that business with retrospective effect from 1st April, 2011 (Appointed Date). The Scheme had accordingly been given effect to the Financial Statement. ACKNOWLEDGEMENT Yours Directors place on record their appreciation of the sincere cooperation received from the employees, banks and other Government Agencies. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS CHAIRMAN Place : Indore Date : 31st December, 2012 Therefore, he submitted, it was evident that accounts got finalized on 26th September, 2012 and the company was still in finalization of accounts and thus, the observation of the Ld. CIT(Appeals) is contrary to materials available on record. 25. On the same set of facts, the Pune Bench of the Tribunal in the case of M/s. PubMatic India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent cannot be applied and in any case the same cannot be applied to equate software product with software development company. Another aspect which had taken place during the accounting period is the demerger of business of Seed Enterprises Pvt. Ltd., for which the said concern had filed revised accounts. The extraordinary event which had taken place makes the said concern as not comparable to the assessee. In this regard, we find support from the ratio laid down by the Pune Bench of Tribunal in M/s. Aptara Technologies Pvt. Ltd. Vs. ACIT in ITA No. 259/PN/2015 and cross appeal in ACIT Vs. M/s. Aptara Technologies Pvt. Ltd. in ITA No. 579/PN/2015, relating to assessment year 2010-11, order dated 31.05.2016 and in Cummins Turbo Technologies Limited Vs. DDIT in ITA No. 784/PN/2014, relating to assessment year 2009-10, order dated 30.03.2016. Accordingly, we direct the Assessing Officer to exclude Infobeans Systems Pvt. Ltd. from final set of comparables. 26. The Ld. DR placed strong reliance on the orders of the Sub-ordinate Authorities but principally agreed that the issue is covered in favour of the assessee by the aforesaid decision of the Pune Bench of the Tribunal (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, the assessee submitted that they are not pressing this ground. After recording the submissions of the assessee, this additional ground of appeal i.e. Ground No. 13 is dismissed as not pressed. 31. Next additional ground i.e. Ground No. 12 pertains to rejection of Thirdware Solutions Limited as comparable company with that of the assessee. 32. The Ld. Counsel for the assessee brought to notice to the Bench at Page 1065 of the Paper book referring description of the products or services of Thirdware Solutions Limited wherein it has been specifically stated as follows: Acquisition/purchase of IT hardware and software including software as a service (SAAS). Therefore, Thirdware Solutions Limited is involved in purchase of IT hardware and thus, functionally different with that of the assessee company. 32.1. The Ld. Counsel for the assessee for this proposition further relied on the decision of the Delhi Bench of the Tribunal in the case of M/s. Siemens Industry Software (I) P. Ltd. Vs. DCIT, ITA No. 1307/Del/2014 for the assessment year 2009-10 wherein vide Para 33 to 36 of the said decision, the Tribunal has held and observed as follows: 33. It is the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnual report and other relevant documents in order to verify the nature and scope of the function of Thirdware Solutions Limited. The Ld. Counsel for the assessee did not raise any objection to this proposition. We are of the considered view, in the interest of justice, we agree with the submissions of the Ld. DR and considering the facts and circumstances, we restore this ground to the file of the AO/TPO for determining functionality of this company as per law while complying with the principles of natural justice. Thus, additional ground i.e. Ground No. 12 is allowed for statistical purposes. 34. In the result, appeal of the assessee in ITA No. 632/PUN/2017 is partly allowed for statistical purposes. ITA No. 619/PUN/2017 (By Revenue) A.Y. 2012-13 35. In ITA No. 619/PUN/2017, the Revenue has raised following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred on facts and in law in directing to consider M/s. Cigniti Technologies Ltd. as comparable ignoring AMD/Sales filter applied by the Transfer Pricing Officer (TPO)? 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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