9911796707
TMI Blog2011 (6) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... t has filed its return of income on Ist of November 2004 declaring an income of Rs.7,82,54,384. The software related business was being carried out by the assessee from Software Technological Park (STP), Scheme notified by the Government of India in the Ministry of Commerce and Industries. The undertakings were operational at three different address, namely, (i) Birlasoft Software Technology Park Block-III, 2nd Floor Ganga Shopping Complex, Sector-29, NOIDA-201303 (ii) Birlasoft (GE-GDC) Software Technology Park Block-III, 3rd Floor, Ganga Shopping Complex, Sector 29, Noida-201303 (iii) Birlasoft 36, Vijayaraghava Road, 3 T. Nagar, Chennai. The assessee had a branch office in Australia and Singapore which were also engaged in the business of developing and supplying customized computer software and related software services to both associated enterprises and other unrelated enterprises outside India. On scrutiny of the accounts, Assessing Officer found three international transactions undertaken by the assessee with its associated enterprises during the accounting year relevant for the present assessment year. The Learned CIT(Appeals) has noticed the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed price method; (b) resale price method; (c) cost plus method; (d)profits split method; and (e) transactional net margin method and the residuary method is; such other method as may be prescribed by the board. In the present year, on an analysis of the international transaction with the associate parties and data of comparables, assessee has selected TNMM, using net profit margin based on cost as PLI. This method is not disputed by the TPO hence we can say that both sides are in agreement on the method. 6. The next area of dispute is use of current year data versus multiple year data. The assessee has used multiple year data but TPO has used current year data. This controversy has been sliced in a number of judgments, namely, M/s. Aztel Software & Tech. Services Vs. ACIT reported in 294 ITR (AT) 32 and Mentorgraphic (Noida) Pvt. Ltd. Vs. DCIT reported in 109 ITD 101 etc. 7. We have duly considered the rival contention and gone through the record carefully. Rule 10B(4) of the Income Tax Rules has a direct bearing on the controversy. Therefore, it is salutary upon us to take note of this rule it read as under :- "10(4) The data to be used in analysing the comparability of an unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has upheld the internal bench marking analysis undertaken by the assessee while justifying the ALP of international transaction for software development services. Learned DR at the time of hearing pointed out that internal comparison needs to be refined to account for geographical differences between internal and external segments. According to him, there can be various reasons for requiring adjustment and these factors are strength of currency, labour cost etc. in different geographical conditions. He pointed out that a service sold in India for some price the same service would fetch different price in Europe and America etc. Therefore, for taking up the internal benchmarking, an adjustment be made for eliminating the geographic condition effecting the value of such services. 10. Before adverting to the facts whether as a stand alone, unit for the purpose of determining the ALP relating to international transaction is right or wrong, we have a glance over the details placed on record by the learned counsel for the assessee in a tabular form at page 158 of the paper book exhibiting the transaction of each unit with related parties and unrelated parties. The first STP unit is No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n management, interlacing of the funds etc. 14. Thus, on due consideration of the order of the Learned CIT(Appeals), we are satisfied that Learned First Appellate Authority rightly did not concur with the conclusion of the TPO for segregating the each STP Unit and considering the result of each STP Unit as a stand alone for the purpose of determining the ALP relating to international transaction. 15. In assessment year 2006-07, ITAT has upheld the benchmarking of internal international transactions with unrelated parties for testing the ALP of assessee with its related parties. We have a glance over such result compiled at page 158 of the paper book, the operating profit margin with respect to unrelated transaction is minus 14.10% whereas the assessee is showing operating profit with related parties at 14.33%. The overall result shown by the assessee is 10.91%. Even if we examine this result within the right of the ITAT's order for assessment year 2006-07, then also no adjustment is required in the result of international transaction shown by the assessee. Learned First Appellate Authority has taken into consideration all these aspects elaborately and we do not see any reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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