9911796707
TMI Blog2023 (2) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... therapy equipment and life sciences products ("medical products"). The following additions have been made by the Assessing Officer (in short ''AO'') on which the assessee is in appeal: Particulars As per Final Assessment order (Rs.) As per Draft Assessment order (Rs.) Transfer Pricing adjustments: 383,84,57,641 3,83,84,57,641 Royalty 20,27,37,762 20,27,37,762 Distribution segment 253,10,21,733 2,53,10,21,733 Software Development segment 110,46,98,146 110,46,98,146 Distribution 253,10,21,733 253,10,21,733 Other Issues: 87,38,88,152 87,38,88,152 Disallowance u/s 37 of the Act - Disallowance of lease payment on financial lease 26,12,77,130 26,12,77,130 Disallowance u/s 37 of the Act - Miscellaneous expense 16,27,83,384 16,27,83,384 Disallowance u/s 36(1)(vii) of the Act - Doubtful Advances 1,63,36,390 1,63,36,390 Disallowance u/s 37 of the Act - Disallowance of Provisions 41,76,13,362 41,76,13,362 - Legal and Professional expenses 23,65,54,350 23,65,54,350 - Advertisement and sales promotion 10,92,813 10,92,813 - Repairs and Maintenance 59,19,766 59,19,766 - Dealer Commission 17,40,46,433 17,40,46, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns filed by the appellant have not been considered by the TPO befog passing order u/s 92CA. 10. The appellant denies the tax liability on the alleged surplus arising on the computation of arms length price for, the impugned assessment year. 11.(i) The Learned AO erred in bringing to tax a sum of Rs.383,84,57,64 /- as outlined below in the table under section 92CA of the Act as per the communication/order of the Transfer Pricing Officer and the directions of DRP. SI.No Description Amount 1 Arm's Length Price difference in the royalty paid Rs.20,27,37,762/- 2 Arm's Length Price difference in distribution segment Rs.253,10,21,733 / - 3 Arm's Length Price difference in the Software services segment Rs.110,46,98,146/- (ii) The learned TPO/ DRP erred in disregarding the use of multiple year data and ought to have accepted the use of contemporaneous data as per the transfer pricing regulations due to non-availability of current year data in public domain at the time of preparing the report. iii) The learned TPO/DRP erred in rejecting companies having different financial year ending or whose data does not fall within the 12 month period of impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Medical Systems Pvt Ltd 4) Indian Hospitex Systems Pvt Ltd 5) India Medtronic Pvt Ltd 6) Sandor Medicaids Pvt Ltd 7) Iris Healthcare Technologies Pvt: Ltd 8) Medicept Dental India Pvt Ltd 9) IDS Denmed Pvt Ltd 10)Affiance Medi Tech Pvt Ltd 11)Olympus Medical Systems India Pvt Ltd 12)Weldon Biotech (India) Pvt Ltd 13)Pinnacle Biomed Pvt Ltd 14) Schiller Healthcare India Pvt Ltd 15) Stryker India Pvt Ltd 16)Everest Instruments Pvt Ltd 17)Confident Sales India Pvt Ltd 18)Narang Medical Ltd 19)Indifoss Analytical Pvt Ltd xiii) The Learned AO / TPO / DRP erred in failing to rely on decision of the ITAT in assessee's own case for the years 2002 - 03 to 2004 - 05 and subsequent orders of the ITAT for other assessment years. xiv) The Learned AO / TPO / DRP erred in adopting TNMM as the MAM ignoring the findings of ITAT in the appellant's own case for earlier years and accepted by department on the same issue. xv) The Learned AO/TPO/DRP have failed to apply the provisions of Rule 10B(4)&,(5) and 10CA(2) while selecting the criteria and filters. xvi) The Learned AO / TPO / DRP erred in not carrying out the adjustments like r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AO/TPO/DRP erred in applying export 'turnover threshold of 75% to sales to select comparable companies. xi)The learned AO/TPO/DRP erred in rejecting the comparable companies having ratio of employee cost to sales less than 25%. xii) The learned AO/TPO/DRP erred in applying the Related party transactions threshold of 25% to revenues to select comparable companies. xiii) The learned AO/TPO/DRP erred in not applying the Turnover filter as per law. xiv)The Learned AO/TPO/DRP erred in not considering the company Taal Tech India Pvt Ltd as comparable rejecting the submissions made by the appellant. xv) The Learned AO/TPO/DRP erred in considering the following companies as comparables rejecting the submissions / objections made by the appellant. a) Kals Information Systems Ltd b) Rheal Software Pvt Ltd c) Sybrant Technologies Pvt Ltd d) Harbinger Systems Pvt Ltd e) Orion India Systems Private Limited f) Nihilent Technologies Ltd g) Inteq Software Pvt Ltd h) Persistent Systems Ltd i) Infobeans Technologies Ltd j) Thirdware Solutions Ltd k) Infosys Ltd 1) Aspire Systems (India) Pvt Ltd m) Cybage Software Pvt Ltd n) C G VAK Sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 3. Ground Nos.1 to 7 are general in nature, which do not require any adjudication. 3.1 Ground Nos.8 o 11 are general grounds relating to TP matters, which do not require any adjudication. Ground No.12: 4. The ground raised in ground No.12 is as follows: 12) i) The Learned AO / TPO / DRP erred in making adjustment towards the royalty for use of technology amounting Rs.20,27,37,762/- without determining the comparable transaction in the public domain as prescribed under the Act and Rules. ii) The Learned AO/TPO/DRP have failed to identify a comparable in terms of Rule 1013(3). iii) The Learned AO / TPO / DRP erred in failing to rely on decision of the ITAT in appellant's own case for the years 2002 - 03 to 2004 - 05 and subsequent orders of the ITAT for AY: 2005-06 & 2006-07. 4.1 Facts of the case are that the assessee has paid an amount of Rs. 20,27,37,762/- to its AE, M/s. Monogram Licensing International, Inc. based at Delaware, USA. The assessee was asked to submit the details of this payment along with the agreements. The assessee submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the AE, WGE places the order on behalf of the customer and that too for a GE product. Everyone involved knows very well what they are negotiating for. Moreover, when GE sells the product to the customer, it would have already included in its price the cost of the trademark and the trade name. Additionally, the trademark is owned by a different entity and whereas the trademark royalty is paid to a different entity. 4.3 In view of this, the assessee's contentions were rejected by the TPO. The TPO observed that the same issue was debated at length in the previous assessment year also. Since the facts and circumstances of the case has not changed, based on the points discussed in the previous assessment year and the points mentioned in the show cause notice issued and also the points mentioned in the above paragraphs, the TPO held the ALP of the Royalty payment as NIL. The entire amount of Rs. 20,27,37,762/-(Rs.9,98,86,675/-+Rs.10,28,51,087/-) was treated as adjustment u/s 92CA of the Act. 4.4 It is further observed by the TPO that the DRP has upheld the adjustment of Royalty to Nil in the assessee's own case for the AY 2014-15. The DRP has held that "In the case of JCB India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from one international transaction may be usurped by the income from the other international transaction giving higher income on transacted value. That is the reason for which the legislature has provided for determining the ALP of each international transaction separately, from the others. As the international transactions of payment of royalty and fees for technical services are separate transactions and not closely linked with the other transactions with which the assessee has merged them, we cannot permit such merger or aggregation for the purpose of the determining their ALP on entity level under TNMM." 4.7 The ld. TPO observed that although closely related transactions can be aggregated, but, unrelated transactions cannot be clubbed for determining ALP on a combined basis. The relevant criteria to determine whether certain transactions be considered as one international transaction or not is to see if such transactions were entered into a package deal or were intended to be simultaneously accepted or these are so closely linked that one cannot at all stand without the other. If the above criteria is satisfied, then, two or more related transactions can be considered as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 3.3 The Tribunal for AY 2005-06 and 2006-07 in IT(TP)A 40/B/11 & 1647/B/13 dt.21.04.2017 has set aside the issue of royalty to the file of the TPO/AO for reconsideration in the light of the directions of the Tribunal for the AY's 2002-03 to 2004-05. The Tribunal has dealt with the issue in para 16 to 18 of the order. Relevant portion is extracted as under: ''18. Since the issue was already set aside to the file of the Assessing Officer for choosing the proper comparable therefore in view of the earlier year of this Tribunal, we set aside this issue to the record of the TPO/AO for reconsideration of the same in the light of the directions of the Tribunal for the Assessment years 2002-03 to 2004-05 (supra). Further in case no comparable is found in respect of royalty payment by the assessee then the TPO/AO may consider the royalty payment as part of the international transactions under trading segment and then determine the ALP by considering the royalty as part of operating cost for the purpose of computing the margin in the trading segment.'' 3.4 During the set aside proceedings, the assessee vide reply dt.05.06.2019 submitted that by considering royalty paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, rendered by the A.E. were mere duplication of the functions being carried out by the tax payer on its own and independently. The assessee did not get any economic value from the alleged trade mark/trade name fee paid. The ALP of the so-called trade mark/trade name for charges so paid by the assessee was determined as nil and he prayed that the same to be confirmed. 3.7 We have heard the rival submissions and perused the materials available on record. In earlier occasion, assessee came in appeal before this Tribunal. The Tribunal remitted the issue with the directions in IT(TP)(A) No.40/Bang/2011 & 1647/Bang/203 dated 21.4.2017 as discussed in para 3.3 of this order. 3.8 On set aside assessment, the TPO repeated the same what he has done on earlier occasion without considering the direction of the Tribunal where the Tribunal given a direction that in case comparable is not found in respect of payment of royalty by the assessee, then the TPO/AO may consider the royalty payment on part of the international transaction under trading segment and determine the ALP by considering the royalty as part of operating cost for the purpose of computing the margin in the trading se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of commission to each dealer is uncertain in nature, hence the amount of dealer commission expense is not booked against particular dealer account, but carried in the books under "Other Liabilities" account. Once the dealer fulfils the conditions related to the sales, he becomes eligible to claim the commission. Then, the commission will be moved from "Other liabilities" account to respective dealer account, and paid immediately after deducting TDS on the same. This practice is followed consistently and TDS is deducted where ever applicable. Hence it is prayed that the dealer commission incurred be allowed in the interests of justice as the same has been wholly and exclusively incurred for the purposes of its business. 4.3. The Ld. D.R. submitted that Ld. DRP in his order observed that the assessee is not in a position to furnish the particulars (name, address, evidence of deduction of TDS, etc.) in respect of persons to whom commission amounting to Rs.2,42,33,641/- have been paid pertaining to AY 2005-06. Therefore, he is not in a position to prove identity of the payee, genuineness of expenses incurred and substantiate that expenses are incurred wholly and exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are not in the business of trading/distribution. v) The Learned AO / TPO / DRP erred in not following their own orders passed for the earlier assessment years on this issue. vi) The selection of the method by the Learned AO / TPO / DRP is not as per law. vii) The Learned AO / TPO / DRP erred in not granting the variances deduction envisaged in the Act and Circular. viii) The Learned AO / TPO / DRP erred in not carrying out the adjustments as required under law as well as the facts. ix) The Learned AO/TPO/DRP have failed to identify a comparable in terms of Rule 1.013(3). x) The Learned AO/TPO/DRP erred in rejecting certain comparables on unsustainable and untenable grounds/reasons while considering comparables which failed to meet the filters /criteria as required under law. xii) The AO/TPO/DRP erred in considering the following comparables overlooking/rejecting the objections made by the assessee 1) Deccan Dental Depot Pvt Ltd 2) Covidien Healthcare India Pvt Ltd 3) Vinod Medical Systems Pvt Ltd 4) Indian Hospitex Systems Pvt Ltd 5) India Medtronic Pvt Ltd 6) Sandor Medicaids Pvt Ltd 7) Iris Healthcare Technologies Pvt: Ltd 8) Medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of medical products which provides after sales services on diagnostic and therapy equipment. Margin of the assessee as computed by the TPO in the TP Order is as under:- Particulars Rs. Operating Revenue 2535,87,21,072/- Operating Expenses 2302,03,25,347/- Operating Profit 233,83,95,725/- OP/OR 9.22% OP/OC 10.16% Comparables selected by Appellant in TP report and their arithmetic mean: Sl. No. Name of the company Wt. Avg ( %) 1 Advanced Micronic Devices Ltd -103.43 2 Thakral Services (India) Ltd -11.98 3 Max Medical Services Ltd -3.56 4 Usart Technologies India Pvt Ltd -0.50 5 Zicom Electronic Security Systems Ltd 1.71 6 Ind-Agiv Commerce Ltd 3.51 7 Lyka Exports Ltd 9.38 8 Keith Electronics Pvt Ltd 9.25 Median 3.59% Out of the 8 comparables selected by the assessee, the TPO has rejected all of them. Final Comparables selected by TPO: Sl No Company Name Wt. PLI (OP/OC)% 1 Deccan Dental Depot Pvt Ltd 0.65 2 Covidien Healthcare India Pvt Ltd 2.85 3 Vinod Medical Systems Pvt Ltd 3.88 4 Indian Hospitex Systems Pvt Ltd 3.89 5 India Medtronic Pvt Ltd 4.62 6 Sandor Medicaids Pvt Ltd 4.88 7 Iris Healthcare Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P)A No.703/Bang/2021 dated 7.10.2022 for the assessment year 2012-13. 9. The ld. D.R. relied on the orders of the lower authorities. 10. We have heard the rival submissions and perused the materials available on record. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in assessee's own case in assessment years 2012-13 in ITA No.703/Bang/2021 dated 7.10.2022, wherein held as under: "28. Wipro GE markets, distributes and services the complete range of GE's medical diagnostic imaging and therapy equipment in the Indian market. Based upon customer requirements, Wipro GE imports medical systems from other GE Healthcare global entities. Wipro GE also caters to the after sales market segment by way of supply of spare parts and service of equipment. Based on the functional analysis, Wipro GE is classified as a Distributor of medical products which provides after sales services on diagnostic and therapy equipment. 28.1 The ITAT in IT(TP)A 340/Bang/2017 dated 31.08.2017 has restored the matter for re-adjudication of all the issues in the light of the findings given in earlier years. However, the order of the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t orders of the ITAT for other assessment years. The direction of the ITAT to restrict the adjustment to the international transaction i.e, AE purchases has not been adhered to by the TPO. The TPO yet again as was made in the original proceeding has made the adjustment on domestic sales which is not an international transaction. 28.7 The TPO/DRP have adopted TNMM as the MAM to benchmark the transaction. It was submitted to the TPO/DRP that the Tribunal in ITA 810 to 812/Bang/2007 dated 16.05.2008 for the AY's 2002-03 to 2004-05 has held Resale Price Method as the MAM to benchmark the transaction. Relevant portion is reproduced as under: "Accordingly, he has held Resale Price Method as explained in Rule 10B(1)(b) will be the MAM since the trading segment involves purchases of goods which is resale. In my view resale price method offers a solution for the issue on hand. Accordingly TPO is directed to adopt resale price method of ALP determination. In doing so gross margin being the difference between the purchase price paid to AE and sale price realized offers a simple and reliable basis. Accordingly, TPO will do so. This decision takes care of the guidance offered in rule 10(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he margins of the comparable as well as assessee by considering the fresh material which was not available with the TPO/A.O. which it is not permissible to the CIT (Appeals) to do this exercise of recomputation without giving an opportunity to the TPO/A.O. The proper course of action on the part of CIT (Appeals) would have been to ask the TPO/A.O. for remand report by considering all the relevant material. However, the CIT (Appeals) did not choose to issue any remand order but undertaken the entire exercise on his own. Thus it is clear that the TPO/A.O. was not given an opportunity in this process of recomputing the margins of the comparable as well as assessee. Accordingly in view of the above facts and circumstances of the case, we set aside this issue to the record of the TPO/A.O. to consider and verify relevant record and then determine the ALP in the light of our above observations.'' 28.10 The TPO for the AY 2005-06 while passing the order giving effect vide order dt.28.10.2019 has followed the direction of the ITAT of applying RPM method and restricting the adjustment only in respect of the international transactions and thus held that no adjustment was required. Relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a margin of 29.57% and M/s. Advanced Micronic Devices Ltd at a margin of 7.29%, thus average being 18.43%. It may be seen in all the earlier years that M/s. Advanced Micronic Devices Ltd (7.29%) has been consistently considered as a comparable and thus the margin of the assessee at 50.11% being higher than that of M/s. Advanced Micronic Devices Ltd, the adjustment requires to be deleted. 28.15 The assessee has objected to M/s. Maestro Mediline Systems Ltd (seg) being considered as a comparable on various grounds. Without going into the merits of the said company being considered as a comparable and assuming without admitting that M/s. Maestro Mediline Systems Ltd (seg) is considered as a comparable for this year, the margin of the comparables as arrived at by TPO is 18.43%. Thus, the margin of the assessee at 50.11% is more than the margin of the comparables calculated by the TPO at 18.43%; therefore, no adjustment is required in the trading segment. 28.16 In view of the above, since the facts and law are the same and on the parity of reasoning the TP adjustment in the trading segment is to be deleted. 29. The Ld. D.R. relied on the order of the lower authorities. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a comparable in terms of Rule 10B(3). vi) The Learned AO/TPO/DRP erred in rejecting certain comparables on unsustainable and untenable grounds/reasons while considering comparables which failed to meet the filters /criteria as required under law. vi) The Learned AO / TPO / DRP erred in not granting the variances deduction envisaged in the Act and Circular. vii) The Learned AO/TPO/DRP have failed to apply the provisions of Rule 10B(4)86(5) and 10CA(2) while selecting the criteria and filters. viii) The learned AO/TPO/DRP erred in rejecting R D expense more than 3% on turnover to eliminate companies engaged in R 86 D activities. ix) The learned AO/TPO/DRP erred in applying the software development service income threshold of 75% to sales to select comparable companies. xii) The learned AO/TPO/DRP erred in applying export 'turnover threshold of 75% to sales to select comparable companies. xiii) The learned AO/TPO/DRP erred in rejecting the comparable companies having ratio of employee cost to sales less than 25%. xii) The learned AO/TPO/DRP erred in applying the Related party transactions threshold of 25% to revenues to select comparable companies. xiii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the TPO in the TP Order Particulars Rs. Operating revenue 740,73,35,817 Operating Cost 677,49,39,480 Operating profit 63,23,96,337 OP/OC 9.33% 11.5 The Comparables selected by assessee and their margins are as under: Sl No Name of the Company Wt. Avg (%) Remarks 1 CAT Technologies Ltd -14.47 Fails PBT>=0, hence rejected 2 Sasken Communication Technologies Ltd -0.97 Functionally different, hence rejected 3 C G-VAK Software & Exports Ltd 0.07 Passed all the filters, hence accepted 4 Taal Tech India Pvt Ltd 3.01 Different Financial year ending (Jan-Dec), hence rejected 5 Mindtree Ltd 15.64 Fails Export/Sales >75% filter, hence rejected 6 R S Software (India) Limited 18.24 Passed all the filters, hence accepted 7 Larsen & Toubro Infotech Ltd 18.24 Passed all the filters, hence accepted 8 Tata Elxsi Ltd 25.11 Functionally different, hence rejected Out of the 8 comparables selected by the assessee, the TPO accepted the 3 highlighted above and rejected 5 other comparables. The final list of Comparables selected by TPO and their margins are as under: Sl No. Name of the comparable OP/OC (%) Weighted Average 1 Kals In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decisions in Societe Generale Global Solution Centre P Ltd vs DCIT in IT(TP)A 1188/B/2011 and Capgemini India Pvt Ltd vs ACIT in ITA 7861/Mum2011. The DRP has held that comparables cannot be excluded on the ground of size and level of operations. 11.11 The assessee submitted that the ITAT Bangalore in the case of Fulcrum Fund Services (India) Pvt Ltd vs ITO in IT(TP)A 2521/B/2017 dt.12.04.2019 by considering wide range of decisions on this issue including that of Chryscapital Investment Advisors India (P) Ltd vs DCIT (held as obiter dicta) and the other decisions mentioned supra has held that the law laid down in Genisys Integrating System (India) Pvt Ltd. V. DCIT, ITA No.1231/Bang/2010 dt.05.08.2011 [152 TTJ 215/53 SOT 159] is the correct law on the application of turnover filter. In the case of Genisys the Tribunal has held that companies having turnover in the range of Rs.1crore to Rs.200 crores cannot be compared with companies having turnover above Rs.200 crores. The relevant observations of the Tribunal in the case of Fulcrum is extracted as hereunder: ''7.3. We have given a careful consideration to the rival submissions. The Bangalore Bench of the ITAT had an occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Systems Pvt. Ltd. and Thirdware Solution Ltd, the assessee had objected before the TPO and DRP that the same are not functionally comparable, however the DRP rejected the objections of the assessee. The ld. A.R. submitted that this Tribunal in the case of SanDisk India Device Design Centre Pvt. Ltd in IT(TP)A 288/Bang/2021 dt.30.06.2022 has directed to exclude both the comparables Persistent Systems Pvt. Ltd. and Thirdware Solution Ltd from the list on the ground of functional dissimilarity. For this purpose, the ld. A.R. has extracted the relevant portion as under: ''17.7 He placed reliance on the decision of Coordinate Bench of this Tribunal in case of OLF (India) Software Pvt. Ltd. vs. ACIT (supra) wherein this Tribunal following its decision in case of LSI India research development (P.) Ltd. vs. DCIT reported in [2021] 124 taxmann.com 83, excluded Persistent Systems Ltd., L&T Infotech Ltd., Thirdware Solutions and Infosys Ltd. by observing as under: "3.2 This Tribunal in LSI India research development (P.) Ltd. v. DCIT (supra) observed in respect of persistent systems, L & T Infotech, Thirdware Solutions, Infosys Ltd. as under: 16. As far as the challenge by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where in it was held that M/s Thirdware solutions Ltd is engaged in product development and earns revenue from sale of licenses and subscription. Further, the segmental details were not available. 8.1 It was stated that there is no change in facts. Accordingly, following the decision rendered in the assessee's own case in AY 2008-09, we direct exclusion of M/s Thirdware Solutions Ltd. 17. As far as exclusion of Larsen & Toubro Infotech Ltd., is concerned, the Tribunal in the very same case of LG Soft (P.) Ltd. (supra) in another order dated 27-9-2019 in MP No. 95/Bang/2019 held that exclusion of Larsen & Toubro Infotech Ltd., was omitted to be adjudicated in the original order dated 28-5-2019 passed by the Tribunal referred in the earlier paragraph and held that Larsen & Toubro Infotech Ltd., is also not a comparable company because there were extraordinary events that occurred in the relevant previous year and that it possessed brand and intangibles and there was no segmental information of sub-contracting expenses". 3.3 There is nothing on record brought by the Ld. CIT. DR in order to establish that these are comparable with assessee that is a captive service provider whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh." "Nihilent Analytics Ltd. (Nihilent) 44. The assessee sought exclusion of Nihilent on ground of its functional dissimilarity vis-à-vis assessee. We have examined the website information of Nihilent, made available by the assessee at page No.405 of the paper book, wherein it is mentioned that it is engaged in providing advanced analytics, artificial intelligence, blockchain, business intelligence, data science, cloud services etc. 45. Perusal of the disclosure of enterprise's reportable segment explanatory available at page No.A406 of the paper book shows that Nihilent is engaged in software development and consultancy, engineering services, web development and hosting and subsequently diversified itself into the domain of business analytics and business process outsourcing and financials of Nihilent available at page No.A304, A405-A406 of the paper book shows that Nihilent has only one business segment and in the absence of segmental financials, as it is into diversified business, this company cannot be a valid comparable visà-vis assessee, who is a low risk entity working on cost + markup model. Hence, Nihilent is ordered to be excluded as a comparable. Nih ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Software 17.1 The assessee contends that this company is mainly Onsite service provider whereas the assessee is offsite service provider and therefore, functionally different. Further, there is incorrect reporting figures which are unreliable. This company is product development as well as R & D Intensive Company. The arguments of the assessee were not accepted by the A.O/T.P.O and the company was held to be comparable. The ld. A.R demonstrated through Annual Report at page 1804, as per the description of the business of this company that it is onsite service provider. Furthermore at page 1796 of the Annual Report this company is doing other computer related activities but nowhere software services are mentioned. On the other hand, the assessee is offsite provider and thus functionally different. We direct the A.O/T.P.O to exclude this company from the list of comparables.'' Similarly, the Hon'ble Hyderabad tribunal in the case of Infor (India) Pvt Ltd - IT(TP)A 198/Hyd/2021 dt.06.10.2021 has directed exclusion of Cybage Software. Relevant portion is extracted hereunder: ''4.3. Next come M/s.Thirdware Solution Limited and M/s.Cybage Software Private Limited which have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it passes all other filters. 11.17 The final list of comparables after considering the above arguments are as hereunder: Sl. No Name of the Comparable company (OP/OC) before WC Adjustment 1 Sasken Communication technologies ltd 1.47% 2 Taal Tech India Pvt Ltd 5.60% ARITHMETIC MEAN 3.54% 11.18 Keeping in view of the above, the ld. A.R. submitted that assessee's margin for the SWD segment is 9.33% which is higher than the aforementioned adjusted margins of the comparable companies i.e, 3.54%. In view of the above submissions, the ld. A.R. for the assessee submitted that the transaction is at arms length and therefore the TP adjustment made requires to be deleted in the interest of justice. 12. The ld. D.R. relied on the orders of the lower authorities. 13. We have heard the rival submissions and perused the materials available on record. The ld. A.R. submitted that assessee's margin is higher than the comparable margin. Hence, no adjustment is required and he drew our attention to the following chart:- WIPRO GE HEALTHCARE PVT LTD ITA 285/B/2021 ; ASSESSMENT YEAR 2016-17 Assessee's Turnover - Rs.740,73,35,817/- FINAL LIST OF COMPANIES SELECTED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Design Centre Pvt. Ltd - IT(TP)A 288/Bang/2021 dt.30.06.2022 PB-III page 1107 to 1109, para 17.9 & 17.10 11 Inteq Software Private Ltd. TPO 17.47 28.2 Fails turnover filter Fulcrum Fund Services (India) Pvt Ltd - IT(TP) A 2521/B/2017 dt.12.04.2019 PB-II page 675, para 7.3.1 12 Persistent Systems Pvt. Ltd. TPO 1,463.81 30.89 Functionally different SanDisk India Device Design Centre Pvt. Ltd - IT(TP)A 288/Bang/2021 dt.30.06.2022 PB-III page 1105 to 1107, para 17.7 & 17.8 13 Infobeans Technologies Ltd . TPO 61.93 32.42 Fails turnover filter Fulcrum Fund Services (India) Pvt Ltd - IT(TP) A 2521/B/2017 dt.12.04.2019 PB-II page 675, para 7.3.1 14 Thirdware Solution Ltd. TPO 213.89 36.9 Functionally different & Lack of segment details SanDisk India Device Design Centre Pvt. Ltd - IT(TP)A 288/Bang/2021 dt.30.06.2022 PB-III page 1105 to 1107, para 17.7 & 17.8 15 Infosys Ltd. TPO 54,153.00 38.61 Fails turnover filter Fulcrum Fund Services (India) Pvt Ltd - IT(TP) A 2521/B/2017 dt.12.04.2019 PB-II page 675, para 7.3.1 16 Aspire Systems (India) Private Limited T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DRP, the assessee has submitted that the details sought were voluminous in nature and time given to comply notice was very short, therefore the assessee sought time vide its reply dated 26.12.2019 before the ld. DRP, which is as under: 'The above dated notice has been served on the assessee on the same day at 13.19.33 IST seeking compliance by 26.12.2019 at 4.00pm, thus giving hardly any time for the assessee to comply with the notice as 25th being Christmas holiday and 26th is the only working day available for the assessee to comply with the voluminous data and information sought by your good selves. The assessee submits that sufficient and reasonable opportunity and time be given as required under law so as to enable it to comply with notice as the required information is voluminous: not available in the required format and not readily available as the the same has to be sourced / assimilated from various departments, within the organisation. Hence the assessee request your goodselves to kindly grant three weeks time to .furnish the same in the interests of justice and oblige." 14.2 The assessee has claimed before the panel that deduction of Rs.26,12,77,130/- is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein held as under: 39. Ground No.6 is regarding disallowance of lease rentals paid on equipment and motor cars. The grounds raised by the assessee in this regard are as follows:- "6.1 The learned CIT(A) and the AO have erred in law and on facts in disallowing an amount of Rs 25,500,765 and Rs 77,520,788 pertaining to lease rentals paid by the Appellant on account of assets taken on lease being equipment and motor car respectively by treating the same as capital in nature. 6.2. Without prejudice to the above, the learned AO has erred on facts in disallowing an amount of Rs 25,500,765 pertaining to lease rentals on equipment as against the amount of Rs 23,059,332 claimed by the Appellant in the computation of income. 6.3. The learned CIT(A) and the AO have erred in law and on facts in disregarding the reliance placed by the Appellant on the decision of the Honourable Supreme Court in the case of M/s ICDS Limited Vs CIT (350 ITR 527). 6.4. Without prejudice to the above, the CIT(A) and the AO have erred in law and on facts in failing to allow depreciation in respect of such assets even though it has been held that lease rentals are capital expenditure in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is computed in the books of accounts. However, the value at which the purchase is recorded does not contain margin on sale of the lessor; - This margin is accounted by way of interest in the books of the lessee (ie finance lease): - The monthly instalments paid by the lessee are towards principal and interest charges components - - The interest component is booked as finance charges in the books of accounts; and The principal amount is reduced from the lessor's account in the books of the lessee; - Any profit / loss on account of disposal of the leased asset are to be charged to the profit and loss account. 42. As far as Tax treatment of finance lease for income tax purposes is concerned, as per Circular No. 2 dated February 9, 2001 ("the Circular") issued by the Central Board of Direct Taxes ("CBDT"), pertaining to finance lease arrangements, it has been clarified that the provisions of AS 19 shall not be applicable for tax purposes. This Circular seeks to confirm that the introduction of AS-19 will not have any impact on the tax treatment for finance leased assets in as much as the depreciation allowance will be available to the lessor, if he is the owner of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the lease rentals as revenue expenditure, the Assessee ought to have debited the same to profit and loss account. An expenditure not debited to profit and loss account cannot be claimed as revenue expenditure; > The assessee has not deducted tax on the lease rental paid under section 1941 of the Act. Therefore, lease rentals are disallowed under section 40(a)(ia) of the Act; > The Assessee and the lessor have collided with each other, wherein both the parties have made undue claims with an intention to suppress their profits. 45. On appeal by the assessee, the CIT(A) upheld the order of the AO. Aggrieved by the order of the CIT(A), the assessee has preferred ground No.6 before the Tribunal. 46. We have heard the rival submissions. We have also perused copies of the lease agreement entered into between the assessee and the lessor. It is clear from the terms of the agreement that the assessee was only a lessee and the lessor was the owner of the equipment as well as the vehicles. The AO in the order of assessment has culled out certain clauses of the agreement and came to the conclusion that the assessee is the owner of the assets and the lease rentals paid was nothing but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rentals were subjected to TDS by the Assessee. The AO will afford due opportunity of being heard being to the Assessee. Thus, ground No.6 is partly allowed. 15.1 In view of the above, taking a consistent view, we remit this issue to the file of AO/TPO on similar lines. This ground of appeal is partly allowed. Ground No.16: 16. Ground No.16 of the assessee's appeal is reproduced below: The Learned AO/DRP erred in disallowing Miscellaneous Expenses of Rs. 16,27,83,384/- under section 37 of the I T Act. 16.1 Facts of the case are that during the course of assessment proceedings the AO noticed an expense of Rs.16,27,83,384/- classified as "miscellaneous expenses" under the head "other expense". In response to AO's notice asking why such expenses should be allowed, no reply was furnished by the assessee. As no reply was furnished, the assessing officer added back the amount of Rs 16,27,83,384/- being not laid out wholly and exclusively for the purpose of business. Before the ld. DRP, the assessee has summited that the details sought were voluminous in nature and time given to comply with the notice was very short. Therefore, the assessee sought time vide its reply dated 26.12.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot ask for any other evidence or detail. The notice u/s 142(1) on this issue does not bring out any lapse on the part of the assessee to submit any detail/evidence. This is a case wherein the AO has made an addition without any justification and for no lapse on the part of the assessee. The details furnished by the assessee are self-explanatory and has been incurred wholly and exclusively for the purpose of business and is allowable u/s 37 of the Act. Hence the addition has to be deleted. 65. After hearing both the parties, we are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient's details along with details of TDS. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee." 17.1 In view of the above order of the Tribunal, we remit this issue to the file of AO/TPO to verify in the light of above decision. Ordered accordingly. Ground No.17: 18. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary reconciliation in support of his argument. However, no documentary evidences and reconciliation statement could be filed before the ld. DRP, which substantiates that assessee's argument. As the assessee has not discharged its primary onus, ld. DRP found it difficult to agree with the contention of the assessee. Accordingly, the ld. DRP upheld the disallowance of Rs. 1,63,36,390/-made by the Assessing Officer. 19. We have heard the rival submissions and perused the materials available on record. The main contention of the ld. A.R. is that the AO has not followed the ld. DRP's order and requested to give a direction to AO/TPO to pass consequential order in conformity with the ld. DRP's order. We accede to the request of th assessee's counsel and accordingly, the issue is remitted to the AO/TPO to pass consequential order in conformity with the order of the ld. DRP. Ground Nos.18 to 20: 20. Ground No.18 to 20 of the assessee's appeal are reproduced as under: 18. The Learned AO / DRP erred in disallowing the following provisions for expenses amounting to Rs. 41,76,13,362/- on an entirely unsustainable reason. Legal and Professional fees 23,65,54,350/- Advertisemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 42,16,77,863 20.4 The assessee submitted that during the impugned assessment year it had made provisions for expenses of Rs.42,16,77,863 in the nature of legal & professional fees, Advertising and sales promotion, Repairs and maintenance and dealer commission. Such amount has been reversed in the subsequent year and offered to tax in the year of reversal. Based on the above, the assessee submitted that the aforesaid amount, being in the nature of provision, the same should not be disallowed on the ground of non-deduction of taxes at source. The provision made was not credited to any party's or individual account, as it was not clear to whom payment was required to be made. Further, if the assessee was required to deduct TDS, it would not be able to issue Form 16A to the payee as the payee were not known while reating such provisions. 20.5 Reliance in this regard is placed by the ld. A.R. on the decision of Delhi Tribunal in the case of Apollo Tyres Ltd vs. DCIT [2017] 78 taxmann.com 195 wherein it was held that where assessee-company could not ascertain identity of payees while making provision for expenditure under several heads of income at year end, assessee was not requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP and restored the matter to the TPO/AO to re-adjudicate the issues raised before them after affording opportunity of being heard to the assessee. Copies of the orders of the Tribunal are placed on record. From a careful perusal of the orders of the TPO, we find that he started the proceedings from 28.07.2016 and concluded it on 25.10.2016 within a period of less than 3 months; whereas the DRP started its proceedings on 30.01.2017 and concluded it on 22.09.2017 after taking almost 8 months. Before the DRP the assessee has filed additional evidence on 29.08.2017 but it was not admitted by the DRP having observed that these evidence should have been filed before the TPO. Without looking to the additional evidence, the DRP has adjudicated the issues and confirmed the order of the TPO. In the earlier years also, the DRP did not admit the additional evidence and confirmed the order of the AO and the Tribunal in all these years set aside the order of the DRP and restored the matter to the AO/TPO to re-adjudicate the issues raised before the Tribunal afresh, after affording opportunity of being heard to the assessee. In all these years, the issues are almost common, therefore, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find no reason to adjudicate these issues at this stage. Accordingly, following earlier orders passed by this Tribunal in assessee's own case, we set aside all issues to Ld.AO for readjudication of issues in the light of the findings given in earlier years.(Refer Annexure - I) 6. In the result appeal filed by assessee stands allowed for statistical purposes." 21.2 Keeping in view of the above decision, we remit this issue in ground No.19 to the file of AO/TPO for reconsideration in the light the above decision. 21.3. Ground No.20:- We are of the opinion that this issue came for consideration in assessee's own case in IT(TP)A No.2442/Bang/2019 dated 11.12.2020 for the AY 2015-16, wherein held as under: "5. We have perused submissions advanced by both sides in the light of the records placed before us. 6. It has been submitted that Ground no. 1-12 are general in nature and therefore, do not require adjudication. Ld.AR has filed before us a chart detailing manner in which the grounds in present appeal are covered by orders of this Tribunal for earlier assessment years annexed as Annexure-I. As submitted by Ld.AR, we have perused all decisions passed by this Tribunal in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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