9911796707
TMI Blog2022 (2) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following grounds: General: 1. On the facts and circumstances of the case and in contrary to law, the Additional Commissioner of Income-tax (Transfer Pricing), (hereinafter referred to as 'the Ld. TPO') and the Ld. AO under the directions issued by the Hon'ble Dispute Resolution Panel, Bengaluru ('the Hon'ble DRP'), erred in making a transfer Pricing addition of Rs. 50,31,76,086 to the Appellant's income and thereby determining a total income of Rs. 157,70,82,306 and the said addition being wholly unjustified are liable to be deleted. 2. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in violating the principle of natural justice by passing the Order under section 92CA(3) of the Act dated 31 October 2019 without providing the appellant with an opportunity of being heard and accordingly order passed by Ld. TPO is bad in law and liable to be quashed. Transfer Pricing: A. Provisions of software development services 3. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in upholding/confirming the action of Ld. TPO in accepting the following inappropriate companies as comparables: * Cross-domain Solutions Private Limited * Tech Mahindra Business Services Limited * Infosys BPO Limited * SPI Technologies India Private Limited * Eclerx Services Limited * MPS Limited 8. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in rejecting the following companies without providing cogent reasons, even though they are functionally comparable and pass all the filters applied by the Ld. TPO: * Sundaram Business Services Private Limited * Informed Technologies Limited * Allsec Technologies Limited * AXA Business Services Limited * Jindal Intellicom Limited * Cosmic Global Limited * Suprawin Technologies Limited * R. Systems International Limited * BNR Udyog Limited * Tata Consulting Engineers Limited * Tata Elxsi Limited * ACE BPO Services Private Limited * Cameo Corporate Services Limited 9. Without prejudice to the above mentioned grounds, the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure while computing the operating margin of the comparable companies D. Outstanding receivables 15. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO, in considering outstanding receivable as a separate and distinct international transaction and further erred in making transfer pricing adjustment in the nature of notional interest on receivables amounting to Rs. 1,23,24,559. 16. On the fact, and circumstances of the case and in contrary to law, the addition made by the Ld. TPO with respect to interest on outstanding receivables is untenable and be deleted since the addition has been made by computing interest on an invoice to invoice basis as against on a weighted average basis for all invoices raised during the year under consideration. 17. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO/the Hon'ble DRP erred in not providing justification for selection of State Bank of India's ('SBI') short term deposit rates as an appropriate comparable uncontrolled price ('CUP') to benchmar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in short grant of advance tax of INR 7,36,82,429. 24. On the facts and circumstance of the case and in law, the Ld. AO grossly erred in levying interest under Section 234A of the Act of INR 46,47,052, without giving cognizance to the fact that there was no delay in filing the income-tax return by the Appellant for the AY 2016-17. 25. On the facts and circumstance of the case and in law, the Ld. AO erred in levying interest under Section 234B and 234C of the Act amounting to INR 13,94,11,560 and INR 5,80,865 respectively. 26. Without prejudice to the above ground, on the facts and circumstance of the case and in law, the Ld. AO ought to have computed interest under Section 234C of the Act with reference to the tax due on the returned income as declared in the income-tax return and not on assessed income. 27. On the facts and circumstance of the case and in law, the Ld. AO has grossly erred in not granting credit of DDT paid by the Appellant on the dividends distributed to the shareholders and thereby determining a DDT liability of INR 41,72,50,334 including levy of interest under Section 115P of the Act amounting to INR 16,88,87,040. Consequential: 28. On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on delayed receivables. The AO thereafter passed his draft assessment order on 19-12-2019. 2.2. Aggrieved by the draft order, the taxpayer filed its objections before the DRP. Learned Panel's directions dated 10-022021, granted part relief to the assessee. Accordingly, the AO passed his assessment order whereby assessing the total income at Rs. 157,70,82,306/- by making the following adjustments: 1. Adjustments on account of provision of SDS - Rs. 25,82,73,886 2. Adjustment on account of provision of Information technology enabled serv. - Rs. 23,25,77,641 3. Interest on delayed receivables - Rs. 1,23,24,559 3. This leaves the assessee aggrieved. 4. As regards ground No. 3 regarding provisions of software development services, the assessee's contention that the lower authorities have erred in adopting the following companies as comparables: 4.1. Larsen & Toubro Infotech Ltd. (Segmental): The ld. Authorised Re-presentative of the assessee submitted that this company is functionally different to the assessee company for the following reasons: 1. The principal business activity of the company comprise computer programming, consultancy and other activities. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted in the Company with effect from October 17, 2014. ISRC was engaged in the business of software services with respect to application development, information technology support and maintenance service to OTIS Elevator Company, USA and other companies of UTC group and was acquired by the Company on October 16, 2014." 4.4. From the above observations, which were extracted from the financial statements, the company named ISRC amalgamated with the company (Larsen & Toubro) and profitability with this amalgamation will impact. Therefore, If an extraordinary event has taken place by way of amalgamation in a company, that company cannot be considered as a comparable as held by the coordinate bench of ITAT, Pune, in the case of Entercoms Solutions (P.) Ltd. v. Assistant Commissioner of Income-tax [2022] 134 taxmann.com 59 (Pune - Trib.). Accordingly, we direct the AO/TPO to exclude this company as comparable from the list of comparables. 5. Tata Elxsi Ltd. (Segmental): The ld. AR of the assessee submitted that this company renders high-end KPO services i.e. digital content creation, technology and product engineering, chip design, embedded production design, visual computing lab, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. The relevant portions has been reproduced by us in the above paras. Respectfully following the same, these two companies are also directed to be excluded from the final list of ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad comparables. Thus, assessee's ground of appeal No. 2 is partly allowed." 5.3. In the said decision, it has been held that the company is functionally different and engaged in diversified activities and since the revenue could not controvert the said decision nor brought any contrary decision, following the same, we direct the AO/TPO to exclude this company from the final list of comparables. 6. Persistent Systems Ltd.: The ld. AR of the assessee submitted that this company is a global company specializing offers complete product life cycle services. It has earned revenue from software licensing amounting to Rs. 23.88 crores. He submitted that the revenue from licenses establishes that this comparable is engaged in developing of software products and not rendering of software development services. He, therefore submitted that this company may be excluded as comparable to the assessee company for determining ALP. He relied on various decisions of ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities and since the revenue could not controvert the said decision nor brought any contrary decision, following the same, we direct the AO/TPO to exclude this company from the final list of comparables. 7. Infobeans Technologies Ltd.: The ld. AR of the assessee submitted that this company is functionally different for the following reasons: 1. It is engaged in diversified activities in the nature of custom application development, content management systems, enterprise mobility, big data analytics, 2. No change in the business as compared to last year 3. Leading provider of consulting technology & next generation service. 4. There is abnormal increase in percentage of revenue from 35.35 crore to 62.06 crore. 5. It is also into IT enabled services i.e. business process management, HR and Payroll, commerce 6. No segmental details are available. 7.1. He relied on various decisions of ITAT including the decision in ITA No. 2233/Hyd/2018 for AY 2014-15 wherein this company is excluded as comparable. 7.2. The Ld. DR, on the other hand, submitted that this company is engaged in rendering of software services and, hence, functionally comparable to assessee company. 7.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this company fails related party transaction filter of 25% applied by TPO. Further, he submitted that this company shall also be excluded from the final set of comparables as it is functionally different and has undertaken extraordinary event. Amalgamation of applied development software (India) P. Ltd. and pure apps consulting services with assessee thereby impacting the operating margin. As a result of intangibles, there is an increase in turnover from Rs. 183.50 to 233.05 crore. He, therefore, submitted that this company may be excluded from the final set of comparables. 8.1. Ld. DR, on the other hand, relied on the orders of revenue authorities and submitted that the TPO has rightly included this company as comparable for determining the PLI as it satisfied the filters. 8.2. We have considered the rival submissions and perused the material on record as well as gone through the orders of AO/TPO/DRP. We find that the extraordinary events regarding amalgamation issue was not raised before them and the ld. AR of the assessee has raised this issue for the first time before us, which is placed on record. The ld. AR has also relied on various decisions. Therefore, we remit this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptable. 9.3. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The coordinate bench in assessee's own case in ITA No. 2233/Hyd/20189, for AY 2014-15, directed the AO/TPO to exclude this company from the list of comparables for determining ALP by observing as under: "25. Having regard to the rival contentions and the material on record, we find that in a number of decisions including the assessee's own case, Infosys Ltd. has been held to be not comparable with any other software development company such as the assessee due to its huge turnover and high profit margin and also as it is into software products and owns intangible intellectual property rights. In the case of Agnity India Technologies Ltd., 36 Taxmann.com 289 (Del), the Hon'ble Delhi High Court has held that Infosys Ltd. is not comparable to other software development company. Relevant paragraphs are reproduced hereunder: "8. It is a common case that Satyam Computer Services Ltd. should not be taken into consideration. The Tribunal for valid and good reasons has pointed out that Infosys Technologies Ltd. cannot be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in rendering of software services and hence, functionally comparable to assessee. In this regard, he has drawn inference to note 37 pertaining to earnings in foreign exchange earnings, which is placed at page 2268 of the paper book of assessee vide volume 3. 10.2. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The coordinate bench of this Tribunal in assessee's own case for AY 2014-15 in ITA No. 2233/Hyd/2018 vide order dated 18/12/2020 directed the AO/TPO to exclude this company as comparable for determining ALP by observing as under: "16. Having regard to the rival contentions and the material on record, we find that in the cases relied upon by the learned Counsel for the assessee, the assessees therein had also raised similar objections and the Tribunal has held Thirdware Solutions to be not comparable to the assessee. We find that the assessee before us is carrying on similar activities as the companies in those cases and therefore, the decisions taken by the Tribunal in those cases are applicable to the assessee before us. For the sake of ready reference, the relevant paras of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolved in development of software product and trading in software licenses has held that it cannot be a comparable to a software development service provider. Similar view has been expressed in the other decisions cited before us by the learned Authorised Representative. Since, many of these decisions relate to very same assessment year, following the ratio laid down in these decisions, we hold that this company cannot be a comparable to the assessee". (2) ITA Nos. 1196 & 1197/Hyd/2010 - Intoto Software India Private Ltd. Vs. ACIT 23. The other companies which are objected to by the assessee are Flextronics Software Limited, Foursoft Limited and Thirdware Software Solution Limited. As far as these three companies are concerned, the learned Counsel appearing on behalf of the assessee submitted that they are into both software as well as product development. He submitted that the TPO has taken note of the fact these companies are also into product development but has selected these companies as comparables by applying the filter of more than 70% of its revenue being from software development services. The learned Counsel ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e comparable companies. It is seen that the Assessing Officer/TPO has exercised this power to call for details with regard to the various companies. As seen from the annual report of Foursoft Limited which is reproduced at page 7 of the TPO's Order, the said company has derived income from software licence also and AMCs. 26. As far as Thirdware Software Solution Limited is concerned, we find from the information furnished by the said company that though the said company is also into product development, there are no software products that the company invoiced during the relevant financial year and the financial results are in respect of services only. Thus, it is clear that there is no sale of software products during the year but the said company might have incurred expenditure towards the development of the software products. 27. As far as Flexitronics Software Limited is concerned, we find that at page 90 of his Order, the TPO has also observed that the said company has incurred expenditure for selling of products and has incurred R & D expenditure for development of the products. The above facts clearly demonstrate that there is functional dissimilarity between the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and operating sales of licence; software services, export from SEZ unit, export from STPI unit and revenue from subscription. It is also apparently clear that software services segment accounts for Rs. 8.91 crores out of the total sales of Rs. 77 crores whereas segmental results are not available. So, when this company's substantial revenue is from other various business segments like ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad sale of licence, software services and segmental results are not available, this company cannot be a valid comparable for benchmarking the international transaction, hence ordered to be excluded". (5) ITA No. 1810/Hyd/2012-Intoto Software India P. Ltd. vs. ITO 7. Thirdware Solutions Ltd. 15.3. We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any be omitted from the list of comparables for the period under consideration in the case on hand." 10.7 The ld. DR has not brought any material to our notice to demonstrate that the aforesaid finding of the coordinate bench will not be applicable to AY under consideration. Therefore, following the view expressed by the ITAT Bangalore Bench, we exclude this company from the list of comparables". (7) ITA No. 7280/Mum/2012 - Dialogic Networks (India) Pvt. Vs. ACIT 37. The thirteenth comparable under dispute is Thirdware Solutions Ltd. This company is engaged in application implementation, application management and application development. Accordingly company is not a pure software development company. This company is also engaged in trading of software which is evident from the financials of the company. It is also engaged in the purchase and sale of license as is apparent from page 167 of Paper book. We noted that this company has not disclosed any segmental information in the annual report. We therefore agree with the contention of the assessee's counsel that this company is functionally different and cannot be taken to be comparable to assessee. Our aforesaid view is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Authorised Representative, the Pune Bench of the Tribunal in the case of F-Gain Communications Pvt. Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decision of the Rune Tribunal (supra) we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand. "No contrary decision was brought to our knowledge. We therefore hold that this company be excluded from comparable as selected by TPO and we direct the AO accordingly". (8) ITA No. 655/PUN/2017-M/s. Pub-Matic India Private Limited. Vs. ACIT 20. Now, coming to the next concern i.e. Thirdware Solutions Ltd., which is functionally dissimilar as it was deriving revenue from sale of license and software services export from SEZ units and revenue from subscription, etc. Our attention was drawn to the financials of said concern placed at pages 708 onwards of Paper Book and it was pointed out that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be included in the list of comparable cases for the purpose of determining arm's length price of an international transaction. As already observed, the issue involved in this question has become infructuous in so far as the case of the assessee before the Special Bench is concerned and the same therefore no more survives for consideration in the present case. In generality, we are of the view that the answer to this question will depend on the facts and circumstances of each case inasmuch as potential comparable earning abnormally high profit margin should trigger further investigation in order to establish whether it can be taken as comparable or not. Such investigation should be to ascertain as to whether earning of high profit reflects a normal business condition or whether it is the result of some abnormal conditions prevailing in the relevant year. The profit margin earned by such entity in the immediately preceding year/s may also be taken into consideration to find out whether the high profit margin ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad represents the normal business trend. The FAR analysis in such case may be reviewed to ensure that the potential comparable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Thirdware Solutions Ltd. should not be included as a comparable. We accordingly set-aside the order of the CIT(A) and direct the Assessing Officer to exclude the same from the list of comparables." 12. Both the learned Authorized Representatives have admitted that Thirdware Solutions Ltd. was involved in similar functions as in ITA No. 2233 of 2018 ADP Private Ltd. Hyderabad earlier year and in view thereof, we hold that the said concern is functionally different and is to be excluded from final list of comparables." (9) ITA No. 2307/Hyd/2018-M/s. Infor (India) P. Ltd. Vs. ACIT 77. As regards Tata Elxsi Ltd., Thirdware Solutions Ltd. and Persistent Systems Ltd. are concerned, we find that their comparability to the assessee has been considered in the assessee's own case for the A.Y. 2007-08 and it is submitted that there is no change of activities of either the assessee or the comparables during the relevant A.Y. before us i.e. A.Y. 2014-15. 78. The learned DR has not rebutted this contention of the assessee. Therefore, respectfully following the decision of the Coordinate Bench at Mumbai in ITA No. 520/Mum/2012 dated 4.12.2018, in the case of Infor Global Solutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany being involved in development of products and since no segmental details are available in the annual report, it cannot be treated as comparable. The Co-ordinate Bench in Tech Mahindra Ltd. (supra) having found this company to be involved in development of software product and trading in software licenses has held that it cannot be a comparable to a software development service provider. Similar view has been expressed in the other decisions cited before us by the learned Authorised Representative. Since, many of these decisions relate to very same assessment year, following the ratio laid down in these decisions, we hold that this company cannot be a comparable to the assessee". 17. Thus, we direct the TPO to exclude this company i.e. Thirdware Solutions from the final list of comparables. 10.3. From the financial statements, we observe that it is functionally not comparable with respect to professional, technical and business services as well as IT consulting services. No segmental details between software services and consultancy services are available. Un-allocable expenses are Rs. 2.16 crores therefore, not possible to calculate correct PLI. Purchase of goods Rs. 39.88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed that the stand alone financials reported from 2013-14 include revenue and net profit figures of one Branch outside India also. The learned Counsel for the assessee brought to our notice that in the case of Infor (India) (P.) Ltd., the Coordinate Bench of this Tribunal in ITA No. 2307/Hyd/2018 has held as under: "73. As regards Evoke Technologies is concerned, the contentions of the assessee are that this company is functionally similar to the assessee, whereas the TPO & DRP have held that the financials of this company include the revenue of one branch outside India which are unaudited and hence are not reliable. The learned Counsel for the assessee however, drew our attention to page 963 of the Paper Book, which is part of the Annual Report of Evoke Technologies Ltd. wherein the revenue of Indian Branch of assessee is separately shown. Taking the same into consideration, we direct the AO/TPO to reconsider the comparability of this company by taking the revenue from Indian Branch only. Thus, the ground for Maveric Systems Ltd. is rejected and for Evoke Technologies Ltd. is allowed for statistical purposes. 32. Since the issue is similar, we direct the AO/TPO to reconside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO held the transaction between the assessee and the CDK Global is a deemed international transaction and imputed a mark up of 26.36% and 26.52% to software development services and ITES Segment respectively. DRP upheld the action of TPO. 15.1. Before us, the ld. AR of the assessee submitted as under: 1. It is not a deemed international Transaction. 2. DRP has referred to wrong transactions reported in T.P. Study. 3. A Transaction between two residents cannot be treated as an International Transaction. 4. There is an Agreement with CDK India Ltd. and this agreement was not examined by TPO & DRP despite placing it before them. 5. The Assessee has offered the capital gain in its returns of Income in the year of transfer of dealer services division (AY 2015-16). 15.2. He submitted that in A.Y. 2015-16, Hon'ble ITAT has set aside the same issue to the file of the TPO for reconsideration, therefore, he requested the Bench to remit this issue to the file of the TPO for reconsideration. 15.3. The ld. DR, on the other hand, relied on the orders of TPO/DRP. 15.4. We have considered the rival submissions and perused the material on record as well as the orders of TPO/DRP. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "6. The TPO has selected many comparables and among them M/s. Infosys BPO Ltd., TCS e-serve Ltd., and Eclerx Services Ltd., were objected to on the reason of high turnover and functionally different. With reference to Infosys BPO, the objection was that the said company renders vide array of services and has high brand value and turnover is also very high. With reference to TCS E-serve Ltd., there was exceptional event as the company was taken over by Tata Consultancy Services in the year 2008-09 and heavy turnover is due to its takeover. Further, it was submitted that the company was functionally different as it has three different services and segmental information was not arrived. As far as E-clerx Services Ltd., it was submitted that this company caters to high end KPO services and cannot be compared to routine BPO services provided by assessee. The DRP vide para 3.10 has accepted the assessee's objections and accordingly, directed the TPO to exclude the above three companies. There are other directions of the DRP on TP adjustments on which neither party has raised grounds, except the Revenue on the above exclusion of three companies. 7. Referring to the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in assessee's own case for A.Y. 2009-10 while considering the comparability of the assessee with Infosys BPO Ltd., has taken note of the possession of the brand value and intangibles which influenced the financial results of this company. The Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P. Ltd., (2013) 219 Taxman 26 (Del.), held that huge turnover companies like Infosys and Wipro cannot be considered as comparable to smaller companies like assessee therein. In the case before the Hon'ble High Court (supra), the turnover of the assessee was about Rs. 15.79 crores as against the turnover of Rs. 1016 crores of the Infosys. Considering these facts, the Hon'ble High Court had directed for exclusion of Infosys BPO because of its brand value and also on the grounds of functional dissimilarity and huge turnover. Though, the company before us is TCS e-Service Ltd., and not Infosys BPO, we find that the turnover of the assessee company for this assessment year is around Rs. 50 crores as against the turnover of TCS e-Serve Limited of Rs. 1405.10 crores. Therefore, following the turnover filter as well as taking note of the fact that it owns an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord as well as the orders of TPO/DRP. We find that the coordinate bench in assessee's own case for AY 2014-15 cited supra has excluded this company as comparable by observing as under: 38. Having regard to the rival contentions and the material on record, we find we find that the Coordinate Bench of this Tribunal in the assessee's own case not only for the A.Ys. 2009-10 for the A.Y. 2010-11 has also considered this issue at Paras 6 to 9 in ITA No. 221/Hyd/2015 which reads as under: "6. The TPO has selected many comparables and among them M/s. Infosys BPO Ltd., TCS e-serve Ltd., and Eclerx Services Ltd., were objected to on the reason of high turnover and functionally different. With reference to Infosys BPO, the objection was that the said company renders vide array of services and has high brand value and turnover is also very high. With reference to TCS E-serve Ltd., there was exceptional event as the company was taken over by Tata Consultancy Services in the year 2008-09 and heavy turnover is due to its takeover. Further, it was submitted that the company was functionally different as it has three different services and segmental information was not arrived. As far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regards the extraordinary event or exceptional circumstance there is no material placed before us by the Ld. Counsel for the assessee. Therefore, merely because the TPO in another case has held that there is an extraordinary event for which this company has to be excluded from the list of comparables, it cannot be excluded. Such claim has to be supported by evidence on record. As regards the functional dissimilarity and huge turnover and brand value is concerned, we find that this Tribunal in assessee's own case for A.Y. 2009-10 while considering the comparability of the assessee with Infosys BPO Ltd., has taken note of the possession of the brand value and intangibles which influenced the financial results of this company. The Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P. Ltd., (2013) 219 Taxman 26 (Del.), held that huge turnover companies like Infosys and Wipro cannot be considered as comparable to smaller companies like assessee therein. In the case before the Hon'ble High Court (supra), the turnover of the assessee was about Rs. 15.79 crores as against the turnover of Rs. 1016 crores of the Infosys. Considering these facts, the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee submitted that this company may be included in the final list of comparable companies as this company is engaged in the business of providing ITeS and is leading content provider to securities and financial research industry, akin to ITeS segment of assessee. He submitted that this company also satisfies filters adopted by the TPO. He, therefore, requested the Bench to include this company in the final list of comparable companies. He relied on the following case laws: 1. Hyundai Motor India Engg. Pvt. Ld., ITA No. 1807/Hyd/2017 2. Infor (India) P. Ltd., ITA No. 212/Hyd/2017 3. TNS India (P.) Ltd., ITA No. 1875/Hyd/2012 4. CGI Information Systems & Management Consultants Pvt. Ltd., ITA No. 183/Bag/2017 5. PTC Software (India) Pvt. Ltd., ITA No. 1605/Pune/2011. He also relied on the decision of the coordinate bench in assessee's own case for AY 2014-15 in ITA No. 2233/Hyd/2018 wherein the coordinate bench included this company as comparable. 19.2. The ld. DR, on the other hand, relied on the orders of lower authorities. 19.3. We have considered the rival submissions and perused the material on record as well as the orders of TPO/DRP. We find that the coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO/TPO with a direction to re-examine the above facts/contentions of the assessee and if they are found to be correct, the said Company be adopted in the final list of comparables. Accordingly, this issue is remitted to the file of AO/TPO. 20. With regard to the following companies raised in Ground No. 8, the ld. AR of the assessee has not pressed, therefore, the same are dismissed as not pressed: 1. Suprawin Technologies Limited 2. Jindal Intellicom Limited 3. ACE BPa Services Private Limited 4. Sundaram Business services Private Limited 5. AXA Business Services Limited 6. R Systems International Limited 7. Tata Consulting engineers Limited 8. Tata Elxsi Limited 9. BNR Udyog Limited 10. Cosmic Global Limited 11. Allsec Technologies Limited. 12. Cameo Corporate Services Ltd.: 21. As regards ground No. 9 relating to wrong computation of margins of the following comparabies in ITES domain: 1. Microland Ltd. 2. Infosys BPO Ltd. 3. SPI Technologies India Pvt. Ltd. 21.1 On considering the submission of the ld. AR that the TPO has wrongly computed the margin of the said comparable companies, accordingly, we set aside these comparables to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the orders of TPO/DRP. Following the decision of the coordinate bench in assessee's own case cited supra for AY 2014-15 in ITA No. 2293/Hyd/2018, we remit this issue to the file of the AO with a direction decide the same in line with the order of ITAT cited supra. Thus, this ground is allowed for statistical purposes. 26. As regards ground Nos. 15 to 19 relating to outstanding receivables, the TPO made adjustment of Rs. 1,23,24,559/- by adopting SBI PLR for bench marking the transactions and charged interest for 365 days and not for the delayed period. The DRP upheld the action of TPO. 26.1. Before us, the ld. AR of the assessee submitted that the assessee's business model is cost plus and, therefore, delay in receiving amount will not make any difference as margin is assured. He submitted that tainted transaction is made as the basis against ALP principle. He submitted that CUP method is not applicable as the SBI is not providing software services, therefore, adopting SBI PLR is improper bench marking by TPO. He submitted that comparable transactions have to be from ITES. Further, he submitted that LIBOR plus method has to be adopted as receivables are in foreign c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, not granting deduction u/s. 80G, not granting of TDS, short grant of advance tax and wrongly charging of interest u/s. 234A and 234C, we remit these issues back to the file of AO with a direction to consider the evidences filed by the assessee and decide the issues in accordance with law after providing opportunity of being heard to the assessee. The assessee is directed to substantiate its claim by way of documentary evidence before the AO. Thus, ground Nos. 20 to 27 are treated as allowed for statistical purposes. ITA No. 228/Hyd/2021 28. In this appeal, the assessee has raised the following grounds of appeal: "Based on the facts and circumstances of the case, ADP Private Limited (hereinafter referred to as 'the Appellant') respectfully craves to prefer an appeal against the Assessment order passed by National e-Assessment Centre, Deputy Commissioner of Income Tax, Circle 2(1), Delhi/Deputy Commissioner of Income tax, Circle 1(1), Hyderabad [hereinafter referred to as the Ld. AO] under Section 143(3) R.W.S. 144C(13) and 144C(13) read with sections 143(3A) & 143(3B) of the Income-tax Act, 1961 ('the Act') on the following grounds: General: 1. On the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed * Harbinger Systems Private Limited 5. Without prejudice to the above mentioned grounds, on the facts and circumstances of the case and in contrary to law, the Ld. TPO erred by incorrectly computing the margin of following comparable companies: * CG-V AK Software & Exports Limited * Larsen & Toubro Infotech Limited (segmental) * Aspire Systems (India) Private Limited * Infosys Limited B. Provision of Information Technology enabled Services ('ITeS') 6. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO has erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in accepting the following inappropriate companies as comparables: * Cross-domain Solutions Private Limited * Tech Mahindra Business Services Limited * Infosys BPO Limited * SPI Technologies India Private Limited * Eclerx Services Limited * MPS Limited 7. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of Ld. TPO in rejecting the following companies without providing cogent reasons, even though they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the action of the Ld. TPO in confirming the application/incorrect application of the following filters: * Rejection of companies with different financial year ending; * Rejection of companies with export revenue less than 75% of the total revenue; * Rejection of companies with peculiar economic circumstances. 13. On the facts and circumstances of the case and in contrary to law, the Ld. TPO erred in and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO in considering provision for bad and doubtful debts and bad debts as a non-operating expenditure while computing the operating margin of the comparable companies. D. Outstanding receivables 14. On the facts and in the circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding/confirming the action of the Ld. TPO, in considering outstanding receivable as a separate and distinct international transaction and further erred in making transfer pricing adjustment in the nature of notional interest on receivables amounting to Rs. 1,12,56,411. 15. On the facts and circumstances of the case and in contrary to law, the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction. 21. On the facts and circumstance of the case and in law, the Ld. AO erred in not granting any credit of tax deducted at source ('TDS') as against the eligible TDS credit of INR 2,19,11,954 available to the Appellant, thereby resulting in short grant of credit of TDS of INR 2,19,11,954. 22. On the facts and circumstance of the case and in law, the Ld. AO erred in not granting any advance tax credit as against the eligible advance tax credit of INR 25,63,17,571 available to the Appellant, thereby resulting in short grant of advance tax of INR 25,63,17,571. 23. On the facts and circumstance of the case and in law, the Ld. AO grossly erred in levying interest under Section 234A of the Act of INR 46,00,856, without giving cognizance to the fact that there was no delay in filing the income-tax return by the Appellant for the A.Y. 2016-17. 24. On the facts and circumstance of the case and in law, the Ld. AO erred in levying interest under Section 234B of the Act amounting to INR 13,80,25,680. Consequential: 25. On the facts and in the circumstances of the case and in law, the Ld. AO erred in in levying interest and penalty and the said levy of interest and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s M/s. CG-VAK Software & Exports Ltd. and Aspire Systems (India) Pvt. Ltd., the TPO and AR of the had computed PLI as under: PLI calculated by TPO Assessee M/s CG-VAK Software & Exports Ltd. 16.76% 12.03% Aspire Systems (India) Pvt. Ltd., 33.04% 32.00% 32.2. Since the PLI calculated by the TPO and assessee are having difference, we are of the view that the same requires factual verification and hence, we remit these companies to the file of the TPO to compute correct margin after factual verification. Thus, this ground is partly allowed for statistical purposes. 33. As regards ground No. 6 relating to provision of information technology enabled services (ITeS) wherein the assessee challenged the action of the TPO/DRP in accepting the inappropriate companies as comparables, namely, Infosys BPO Ltd. and Ecelerx Services Ltd. Since this ground is similar to ground No. 7 in ITA No. 227/Hyd/2021, following the decision therein vide para Nos. 16 to 17.4, we direct the AO/TPO to exclude the said two companies as comparable for determining ALO. 34. The ld. AR of the assessee has not pressed the following companies as comparables raised in Ground No. 7, therefore, the same are dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been pressed by the ld. AR of the assessee at the time of hearing, therefore, this ground is dismissed as not pressed. 41. Ground No. 13 is relating to the provision for bad and doubtful debts and bad debts as a non-operating expenditure by the TPO/DRP while computing the operating margin of the comparable companies. Since this ground is similar to ground No. 14 raised in ITA No. 227/Hyd/2021, following the decision therein vide paras No. 25 to 25.3, we remit this issue to the file of the AO with a direction decide the same in line with the order of ITAT cited supra. Thus, this ground is allowed for statistical purposes. 42. As regards ground Nos. 14 to 18 relating to outstanding receivables, these grounds are similar to ground Nos. 15 to 19 raised in ITA No. 227/Hyd/2021, following the decision therein vide paras No. 26 to 26.3, we direct the AO/TPO to delete the impugned adjustment on account of interest on outstanding receivables. 43. As regards ground Nos. 19 to 24, wherein, the assessee contended that the AO has grossly erred in not granting credit of DDT paid by the assessee on the dividends distributed to the shareholders. These issues are similar to ground Nos. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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