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TMI Blog2022 (5) TMI 1491X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the TPO has taken the margin at 11.16%, whereas, the correct margin of this company is 8.12% - TPO has merely incorporated the margin at 11.16% and has not verified the claim of the assessee. Therefore, in the interest of justice and equity, we confirm the directions of the DRP and restore the matter to the AO / TPO to examine the issue afresh. It is ordered accordingly. TP adjustment in Marketing Support Segment - TPO, while giving effect to the directions of the DRP, had deleted the TP adjustment in marketing support segment - AO, in the final assessment order, has included TP adjustment for marketing support segment. The matter is restored to the AO / TPO to examine the issue raised in ground and take a decision in accordance with law. TP adjustment for the software distribution segment - AR has placed on record the TPO s order passed pursuant to the DRP s directions, wherein the entire TP adjustment in this segment was deleted (refer page 18 of the TPO s order giving effect to DRP s directions). AO is directed to look into the issue raised in ground 12 and take a decision in accordance with law. It is ordered accordingly. X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by the final assessment order, the assessee filed the instant appeal before the ITAT. 2.3 The assessee has raised 14 grounds, however, during the course of hearing, the learned AR had only pressed grounds 5, 6(iii), 7 and 8 (in respect of Transfer Pricing Adjustment of software development segment), ground 11 (pertaining to the TP adjustment in marketing support segment), ground 12 (in respect of TP adjustment of software distribution segment). The grounds argued by the learned AR, we shall adjudicate as under: Grounds relating to TP adjustment in software development segment (Ground 5, 6(iii), 7 and 8). Ground 5 3. The above ground reads as follows:- "The learned AO has erred in making transfer pricing adjustment of Rs.6,92,14,199/- without considering OGE u/s 92CA(4) passed by the TPO pursuant directions of DRP, wherein the TPO had made revised TP adjustment to Rs.6,15,49,522/- for software development segment." 3.1 It is submitted by the learned AR that in the final assessment order, the A.O. has made TP adjustment of Rs.6,92,14,199 without considering the order giving effect to u/s 92CA(4) of the I.T.Act, passed by the TPO pursuant to the directions of the DRP, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rore for the relevant assessment year. The TPO/DRP has excluded the companies having turnover of less than Rs.1 crore, however, the TPO / DRP has not put upper limit of the turnover for exclusion of comparables having high turnover. The Bangalore Bench of the Tribunal in the case of Autodesk India (P) Ltd. v DCIT, Circle 11(1), Bangalore (supra) has held as follows:- "17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital 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 favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)." 4.2.1 In view of the judicial pronouncements, cited supra, we direct the AO to exclude Larsen & Toubro Infotech Limited, Mindtree Limited, Persistent Systems Limited, Tata Elxsi Limited, Nihilent Limited, Infosys Limited and Cybage Software Private Limited from the list of comparables, since the said companies are having turnover far exceeding Rs.200 crore for the relevant assessment year. It is ordered accordingly. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 409. The learned AR has placed on record the TPO's order passed pursuant to the DRP's directions, wherein, the TP adjustment for the marketing support segment was entirely deleted. The learned AR has also stated that the assessee had filed rectification application with the AO, however, the same is pending. Therefore, it was requested that the Tribunal may direct the AO to delete TP adjustment relating to marketing support segment. 7.1 We have heard rival submissions and perused the material on record. The TPO, while giving effect to the directions of the DRP, had deleted the TP adjustment in marketing support segment (refer page 18 of the TPO's order). The AO, in the final assessment order, has included TP adjustment of Rs.2,53,32,409 for marketing support segment. The matter is restored to the AO / TPO to examine the issue raised in ground 11 and take a decision in accordance with law. 7.2 In the result, ground 11 is allowed for statistical purposes. Ground 12 (TP adjustment in software distribution segment) 8. It is submitted by the learned AR that in the final assessment order, the A.O. has retained the TP adjustment of Rs.4,56,73,477 for the software distribution segment. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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