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TMI Blog2023 (3) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... by AO u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] dated 16.7.2022 for the assessment year 2018-19. 2. The assessee raised 10 grounds with respect to the impugned additions. During the course of hearing, the ld. AR presented arguments only with respect to Ground Nos. 2 7. The relevant grounds read as follows:- 2. Turnover Filter 2.1 The Ld. AO / TPO erred in facts and in law by modifying the turnover filter applied by the Assessee. 2.2 Without prejudice, the Ld. AO / TPO erred in facts and in law by not applying the 10 times limit on the turnover filter and the Hon'ble DRP also erred in upholding the same. 7. Companies not part of TP Order and Draft Assessment Order, erroneously included in Final Assessment Order 7.1 The Ld. AO / TPO erred in facts by including the functionally dissimilar companies in the final assessment order when these companies were rejected by the TPO and were not a part of the TP Order and draft assessment order. objection was raised before Hon'ble DRP for these companies: Sr.No. Name of Company 1 Back Office IT Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transactions entered into by the assessee with its AE. The TPO passed an order u/s. 92CA proposing a TP adjustment of Rs.4,02,85,978. The AO passed a draft assessment order incorporating the TP adjustment. The assessee raised objections before the DRP. The DRP issued directions whereby the TP adjustment was recalculated @ Rs.2,65,85,158 in the order giving effect passed by the TPO. The assessee is in appeal before the Tribunal against the final order of assessment. 4. The assessee applied Transactional Net Margin Method as the most appropriate method for the purpose of TP document. Operating Profit/Operating Cost is the profit level indicator. The assessee had arrived at an operating margin of 18.19% which is computed as under:- Particulars Total (INR) Total (INR) Income Operating Income 88,00,51,718 88,00,51,718 Operating Income (A) 88,00,51,718 88,00,51,718 Operating Cost Employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 17.31 19.73 7 Elveego Circuits Pvt. Ltd. 8.3 40.17 6.75 20.19 8 Black Pepper 9.63 13.84 24.83 20.62 9 Mindtree Ltd. 26.11 20.12 18.41 21.21 10 Aptus Software Labs Pvt. Ltd. 27.67 24.83 15.16 22.70 11 Acewin Agriteck Ltd. 26.54 23.23 22.73 24.51 12 Persistent Systems Ltd. 23.9 24.44 26.94 24.98 13 Wipro Ltd. 27.27 26.38 27.03 26.83 14 Tata Elxsi Ltd. 24.9 29.13 30.56 28.24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded since the TPO has not applied the upper turnover filter Rs.200 crores. The ld. AR submitted that the turnover of the assessee is Rs.88 crores and accordingly these comparables need to be excluded. S.No. Companies Turnover for FY 2017- 18 (in INR crores) Page book Reference 1 Exilant Technologies Private Limited 332.44 Page 1219 of part 2 of paper book, volume 4 of 34 2 Larsen a Toubro Infotech Ltd. 6906.40 Page 1997 of part 2 of paper book, volume 6 of 34 3 Temenos India Pvt. Ltd* 376.91 Page 9443 of part 2 of paper book, volume 30 of 34 4 Mindtree Ltd. 5,325.00 Page 3263 of part 2of paper book, volume 10 of 34 5 Nihilent Ltd. 280.06 Page 6253 of Part 2 of paper book, volume 20 of 34 6 Persistent Systems Ltd. 1,732.75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay High Court on the issue. Respectfully following the aforesaid decision, we uphold the order of the DRP excluding 5 companies from the list of comparable companies chosen by the TPO on the basis that the 5 companies turnover was much higher compared to that the Assessee. 17.8. In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice that in the order giving effect [page. 8 to 10 of final assessment order], the following companies have been included : S.No. Companies Page book reference 1 Back Office IT Services India Private Limited Page 548 of part 1 of paper book, volume 3 of 4 2 XS Cad India Private Limited Page 550 of part 1 of paper book, volume 3 of 4 3 Smartstream Technologies India Private Limited Page 554 of part 1 of paper book, volume 3 of 4 4 Anjana Software Solutions Private Limited Page 555 of part 1 of paper book, volume 3 of 4 5 Consilient technologies Private Limited Page 561-562 of part 1 ofpaper book, volume 3 of 4 6 Temenos India Private Limited Page 550-551 of part 1 of paper book, volume 3 of 4 13. We also notice that in the final list of comparables as extracted in the earlier part of this order from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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