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TMI Blog2024 (6) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... of L T Infotech Ltd. Exclusion of Persistent Systems Ltd - Once again we find that the said company is in the list of final comparable selected by the assessee in their TP study on the ground that the functions carried out by the Persistent Systems Ltd are similar to the appellant company. But, the appellant is now seeking exclusion of Persistent Systems Ltd on two grounds. First reasons given by assessee is that the above company is functionally different and had insufficient segmental information. The argument of assessee is fallacious for the simple reason that when the company is functionally different and insufficient information available in their annual report with regard to the comparison of data, then how and why the appellant company has selected the above company in the final list of comparable is not explained. Further, on broad analysis of the profile of the appellant company, on comparison with the Persistent Systems Ltd, in our considered opinion, both are functionally similar except for the reason that the Persistent Systems Ltd is having higher turnover when compared to appellant company. Since the appellant itself has included the above company in the final set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrency in which the outstanding receivable is denominated by the assessee and its AEs. Disallowance of employee contribution to PF u/s 36(1)(va) r.w.s. 2(24)(x) - We find that this issue is squarely covered by the decision in the case of Checkmate Services (P) Ltd [ 2022 (10) TMI 617 - SUPREME COURT] where it has been clearly held that the belated remittance of employees contribution to PF ESI is not deductible u/s 36(1)(va) r.w.s. 2(24)(x) even if such contribution has been deposited on or before the due date for filing return of income u/s 139(1) - DRP after considering the relevant facts has rightly disallowed the belated remittance of employees contribution and thus, we are inclined to uphold the orders of the learned Assessing Officer/DRP and reject the grounds taken by the assessee. - Shri Manjunatha, G. Accountant Member And Shri K. Narasimha Chary, Judicial Member For the Assessee : Shri Ravi Bhardwaj, CA For the Revenue : Smt. TH Vijaya Lakshmi, DR ORDER PER MANJUNATHA, G. A.M This appeal filed by the assessee is directed against the final assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) of the I.T. Act, 1961, in pursuant to DRP-1 Bengaluru dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exports Ltd (Software Services Seg); and c) Thinksoft Global Services Ltd;. Provision for doubtful debts 6) Considering the provision for doubtful debts in the comparable companies as non-operating in nature while computing the operating margins of comparables. Error in margin computation 7) Erred in not incorporating the Hon'ble DRP directions with regards to rectification of operating margins of the following companies: a) Larsen Toubro Infotech Limited ( L T ); b) Persistent Systems Limited; c) RS Software (India) Ltd; d) Thirdware Solutions Ltd Adjustment for risk differences 8) Not adjusting the net margins of the comparable companies selected taking into account the functional and risk differences between the international transaction of the Appellant and the comparable companies in accordance with the provisions of Rule 10B(1)(e) of the Rules; Imputing interest on outstanding receivables 2. Erred in making TP adjustment amounting to Rs. 19,53,369 by imputing interest at rate charged by SBI on short term fixed deposits on outstanding receivables relating to sale of services to Associated Enterprise's (AEs) as on March 31st 2012. (i) Not appreciating the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961. The case was selected for scrutiny and during the course of assessment proceedings, a reference was made to the learned TPO to determine the Arms Length Price (ALP) of international transaction of the assessee with its AEs in terms of section 92CA of the I.T. Act, 1961. During the course of TP proceedings, the learned TPO noticed that the assessee had entered into various international transactions with its AEs, including provision of software development services and reimbursement of expenses etc. The assessee has conducted TP study by adopting TNMM as the most appropriate method. The assessee has computed the OP/OC at 11.87% and claimed that the transactions with its AEs are at ALP. The TPO after considering the relevant TP documents submitted by the assessee and also taken note of various facts rejected the TP analysis and has conducted fresh TP study with final set of 13 comparables with average OP/OC of 20.05%. The assessee has objected for inclusion of certain companies including L T Infotech Ltd and Persistent Systems Ltd on the ground that both the companies are functionally dissimilar to the assessee company and cannot be compared. The TPO ignored the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the assessee is in appeal before us. 7. The first issue that came up for our consideration from Ground Nos. 1 to 8 of the assessee s appeal is transfer pricing adjustment in respect of provision of software development services to AE amounting to Rs. 1,36,52,580/-. Although the assessee has raised number of grounds in respect of incorrect rejection of transfer pricing study conducted by the assessee, use of additional filters, rejection of multiple year data, selection of comparables, rejection of comparable and error in margin computation, but the learned Counsel for the assessee restricted his argument in respect of Ground No.4 on exclusion of 2 comparables, namely L T infotech Ltd and Persistent Systems Ltd. Therefore, we are proceeding to adjudicate Ground No.4 qua 2 comparables and dismiss all other grounds taken by the assessee relating to TP adjustment in respect of provision of software development services to AE. 8. The learned Counsel for the assessee submitted that the learned TPO/DRP has erred in including L T Infotech Ltd as comparable without appreciating the fact that the above company is functionally different and also has significant intangible assets. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he considered opinion that there is no error in the reasons given by the learned TPO/DRP to include L T Infotech in the final set of comparable. In so far as various case law relied upon by the assessee in support of the argument, we find that all those case laws are rendered under different context and further since the appellant itself has included the above company in their TP study, in our considered opinion, in absence of any valid reason for exclusion, it should be treated that the assessee has taken U turn, since inclusion of the said company does not suit to their convenience. Thus, we reject the argument of the learned Counsel for the assessee and upheld the reasons given by the TPO/DRP for inclusion of L T Infotech Ltd. 11. In so far as the argument of the learned Counsel for the assessee for exclusion of Persistent Systems Ltd is concerned, once again we find that the said company is in the list of final comparable selected by the assessee in their TP study on the ground that the functions carried out by the Persistent Systems Ltd are similar to the appellant company. But, the appellant is now seeking exclusion of Persistent Systems Ltd on two grounds. First reasons give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that in case interest on receivables is held to be international transaction, then US LIBOR Plus appropriate mark up may be adopted for imputing interest on outstanding receivables. 14. The learned DR, on the other hand, supporting the order of the DRP submitted that after the amendment to section 92B, outstanding receivables from AE is treated as loan transaction and same needs to be benchmarked by adopting appropriate rate of interest. The TPO/DRP after considering the relevant facts has rightly adopted SBI PLR rate of interest for imputing the interest receivable from AE and this is further supported by the decision of the ITAT, Hyderabad Bench in the case of Aurobindo Pharma Ltd, wherein the Tribunal has adopted SBI short term deposit rate of 6% with credit period of 60 days. 15. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. We find no merit in the argument of the assessee that any outstanding receivable from AEs is not an international transaction for the simple reason that after the amendment to section 92B of the Act, the definition of international transaction has been enlarged so as to incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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