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TMI Blog2022 (2) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... of the information available in public domain. Thus ground as treated as allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... anies as comparable with the Assessee company and arrived at a set of 13 comparable companies. The PLI was reworked by the TPO at 24.83%. The TPO worked out the average arithmetic mean of their profit margins of the 13 comparable companies as follows: SL.NO Company Name Financial Year wise OP/OC (%) 2015-16 2014-15 2013-14 Average 1 Kals Information Systems Pvt. Ltd. 3.97% 5.77% 16.94% 8.60% 2 Rheal Software Pvt. Ltd 3.20% 2.76% 36.64% 14.50% 3 C G-V A K Software Exports Ltd. 19.60% 19.87% 13.81% 18.50% 4 R S Software (India) Ltd. -2.09% 32.75% 24.14% 20.87% 5 Larsen & Toubro 26.29% 24.22% 23 54% 24.83% Infotech Ltd. 6 Nihilent Ltd. 15.94% 29.19% 35.72% 26.36% 7 Inteq Software Pvt. Ltd. 7.53% 32.14% 45.00%- 28.20% 8 Persistent Systems Ltd. 26.92% 31.34% 35.64% 30.89% 9 Infobeans Technologies 34.98% 20.78% 41.95% 32.42% 10 Thirdware Solution Ltd. 23.89% 44.39% 44.68% 36.90% 11 Infosys Ltd. 38.22% 41.30% 36.28% 38.68% 12 Aspire S stems (India) 34.26% 47.56% 38.04% 39.28% 13 Cybage Software Pvt. 62.90% 68.68% 68.82% 66.45% 35th Percentile 24.83% Median 28.20% 65%th Percentile 32.42% 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and high turnover or on other filter etc. (i) Rheal, software Pvt.Ltd. (ii) Larsen & Toubro Infotech Ltd./ (iii) Nihilent Ltd / (iv) Inteq software Pvt. Ltd. (v) Persistent Svstems Ltd, (vi) Infobeans Technologies Ltd (vii) Thirdware Sol, on Ltd. (viii) Inforsys Ltd. , (ix) Aspire Systems (India) Pvt.Ltd. (x).Cybage Software Pvt.Ltd. 8. As far as Ground No. 6 is concerned, the learned Counsel for the Assessee prayed for exclusion of only 7 companies out of the 10 companies set out in Ground No.6. The three companies which the Assessee does not wish to press for exclusion (i) Rheal Software Pvt. Ltd., Inteq Software Pvt. Ltd., and (iii) Infobeans Technologies Ltd. The relevant provisions of the Act in so far as comparability of international transaction with a transaction of similar nature entered into between unrelated parties, provides as follows: Determination of arm's length price under section 92C . 10B (l) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be determined by any of the following methods, being the most appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail (3) An uncontrolled transaction shall be comparable to an international transaction specified domestic transaction] if- (i) none of the differences, if any, Between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. 9. A reading of Rule 10B(1)(e)(iii) of the Rules read with Sec. 92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 10. Chapters I and Ill of the OECD Transfer Pricing Guidelines fin r Multinational Enterprises and Tax Administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis can be excluded and that the effect of such high turnover on the margin should be seen. The DRP therefore held that a company which is otherwise functionally comparable cannot be excluded only on the basis of high turnover. The Assessee has raised Grd.No.4 before the Tribunal challenging the aforesaid view of the DRP. 12. On the issue of application of turnover filter, we have heard the rival submissions. The parties relied on several decisions rendered on the above issue by the various decisions of the ITAT Bangalore Benches in favour of the Assessee and in favour of the Revenue, respectively. The ITAT Bangalore Bench in the case of Dell International Services India (P) Ltd. vs. DCIT (2018) 89 Taxmann.com 44 (Bang-Trib) older dated 13.10.2017, took note of the decision of the ITA T Bangalore Bench in the case of Sysarris Software Pvt.Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT' Vs. Pentair Water India Pvt.Ltd. Tax Appeal No. 18 of 2015 dated 16.9.2015 wherein it was held that high turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study." 42. The Assessee's turnover was around Rs. 110 Crores. Therefore the action of the CIT(A) in directing TPO to exclude companies having turnover of more than Rs. 200 crores as not comparable with the Assessee was justified. As lightly pointed out by the learned counsel for the Assessee, there are two views expressed by two Hon'ble High Courts of' Bombay and Delhi and both are non-jurisdictional High Courts. The view expressed by the Bombay High Court is in favour of the Assessee and therefore following the said view, the action of the CIT (A) excluding companies with turnover of above crores from the list of computable companies is held to correct and such action does not call for any interference." 13. The Tribunal in the case of Autodesk India Pvt.Ltd. vs. DCIT (2018) 96 Taxmann.com 263 (Banglore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.201 1. 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 co-ordinate 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. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Assessee Sl.No. Name of the Comparable Margin(PL1) TPO's contentions Assessee's contentions 1 Sankhya Infotech Ltd. Assessee :4.46% [Same contention for 6companies]Data not available in public domain.Hence rejected [Same contention for 6 companies]Objection No.6 (as part of Form 35A,submitted on 12- Mar-2020] Screenshot of initial dump obtained from capitaline database was shared with TPO. All these companies' annual reports are available as public documents in the website of Ministry of Corporate Affairs (MCA). All these companies have their respective websites as well. Copies of Annual reports are provided in Appendix to Objections in the Paper book, as follows: 2 Evoke Technologies Pvt Ltd Assessee :6.56% 3 Sasken Communication Technologies Ltd Assessee :6.94% 4 Isummation Technologies Pvt Ltd Assessee :9.57% 5 Kireeti Soft Technologies Ltd Assessee :9.73% 6 Maveric Systems Ltd Assessee :9.64% Company Appendix No. p No. Sankya infotech Appendix 17, vol4. Pg 882 Evoke Technologies Appendix 18; Vol5 Pg 959 Sasken Appendix 19; vol5;pg 997 (summation tech Appendix 20; vol5 pg 1156 Kireeti Soft Appendix 21;Vol6; pg 1184 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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