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TMI Blog2024 (8) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... s having high turnover - Tribunal has continuously been following the turnover of the filter of ten times x and 1/10th of the turnover of the assessee on both the sides. We deem it appropriate to remand back this issue to the file of AO / TPO with a direction to apply ten times filter lower and upper on both the sides. The companies which are having turnover of more than 10 times are required to be excluded from the list of comparable and similarly, the companies whose turnover are less than 1/10th of the turnover of the assessee are also required to be excluded from the list of comparable. TPO is directed to exclude the comparable in the light of the above said directions. Thus, this ground is allowed for statistical purposes. Exclusion of Infobeans Technologies Limited - It is clear that this company was into software development services and cannot be said to be a KPO for any purposes. When the TNMM method is applied to benchmark the transaction, then the slight / little variation in the profile of the comparable company are required to be permitted for applying TNMM method, otherwise, the other methods as available are required to apply if the transaction entered by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable companies selected by the Appellant, on unjustifiable grounds even though they are functionally comparable to the assessee : (i) Sagarsoft (India) Limited (ii) Athena Global Technologies Limited (iii) Akshay Software Technologies Limited (iv) Batchmaster Software Private Limited (v) Celstream Technologies Private Limited (vi) Isummation Technologies Private Limited (vii) Evoke Technologies Private Limited (viii) DCIS DOT COM Solutions India Private Limited (ix) Maveric Systems Limited (x) Orangescape Technologies Limited (xi) Sasken Communication Technologies Limited (xii) Infomile Technologies Limited (xiii) E-Zest Solutions Limited Ground No. 3: The Ld. TPO and Hon ble DRP erred on facts and law by comparing the Appellant with the following companies having high turnover, despite the same failing the legally accepted criteria of turnover being greater than Rs. 200 crores in various judicial precedents: (i) Larsen Toubro Infotech Limited (Seg) (ii) Tata Elxsi Limited (Seg) (iii) Nihilent Technologies Limited (iv) Persistent Systems Limited (v) Aspire Systems (India) Private Limited (vi) Infosys Limited (vii) Thirdware Solution Limited (viii) Cybage Software Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections before the Dispute Resolution Panel (DRP) and pursuant to the directions of the DRP dt. 16.02.2021, Assessing Officer finalized the assessment, by making addition of TP adjustment and thereby assessed the total income at Rs. 2,78,45,897/-. Hence, this appeal 4. With respect to ground Nos.1 and 2, ld. AR has submitted that the TPO has rejected the following comparables : (i) Sagarsoft (India) Limited (ii) Athena Global Technologies Limited (iii) Akshay Software Technologies Limited (iv) Batchmaster Software Private Limited (v) Celstream Technologies Private Limited (vi) Isummation Technologies Private Limited (vii) Evoke Technologies Private Limited (viii) DCIS DOT COM Solutions India Private Limited (ix) Maveric Systems Limited (x) Orangescape Technologies Limited (xi) Sasken Communication Technologies Limited (xii) Infomile Technologies Limited (xiii) E-Zest Solutions Limited 4.1. The TPO while rejecting the TP objection of the assessee held that these comparables were not appearing in the search matrix of the appellant TP Study Report. It was submitted by the assessee by referring to the TP order that the contention of the TPO was incorrect and the DRP has not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of comparability: Determination of arm's length price under section 92C 10B. (1). . . . (e) transactional net margin method, by which, (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (2). . . . 3) An uncontrolled transaction shall be comparable to an international transaction [or a specified domestic transaction] if (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. Further, Chapters I and III of the OECD Transfer Pricing Guidelines, Guidance on comparability adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the current year is more than Rs. 200 Crores should be excluded from the list of comparable companies (i) M/s. Auriga Software Technologies Private Limited vs ITO, Bangalore ITAT, IT(TP)A No. 178/Bang/2021, AY 2016-17, 03/02/2022 - Appendix AT (ii) M/s. Prism Networks Private Limited vs ACIT, Bangalore ITAT, IT(TP)A No. 349/Bang/2021, AY 2016-17 - Appendix AU (iii) M/s. Capco Technologies Private Limited vs DCIT, Bangalore ITAT, IT(TP)A No.204/Bang/2021, AY 2016-17, 18/11/2021 - Appendix AW (iv) M/s. Atmecs Technologies Private Limited vs ITO, Bangalore ITAT, IT(TP)A No.187/Bang/2021, AY 2016-17, 20/12/2021 - Appendix AX (v) M/s OLF (India) Software Pvt. Ltd. vs ACIT, Bangalore ITAT, IT(TP)A No.182/Bang/2021, AY, 28/09/2021 2016-17 - Appendix AS L T Infotech Ltd Tata Elxsi Ltd Nihilent Techno- logies Ltd Cybage Software Pvt Ltd Persistent Systems Ltd Aspire Systems Pvt Ltd Infosys Techno- logies Ltd Thirdware Solution Ltd Turnover (₹ in Crore) 2,919.07 1,041.46 251.22 722.25 1,447.13 230.80 53,983.00 221.36 M/s OLF (India) Software Pvt. Ltd. ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ M/s. Auriga Software Technologies Private Limited ✓ &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Technology India Private Ltd., (supra), we hold that the turnover is a relevant criteria for choosing companies as comparables in determining the ALP in Transfer Pricing cases. 14. Now turning to the next question as to the appropriate turnover filter, in all the decisions relied upon by the learned AR, a consistent view is taken that the application of tolerance range of turnover of ten times on both sides of assessee s turnover was proper. Following the same, we direct the learned Assessing Officer to adopt the same for a fresh search. With this view of the matter, we set aside the findings of the authorities below and direct the learned Assessing Officer/learned TPO to take the range of turnover filter at ten times on both the ends and conduct search afresh to take a plausible view. (Kindly refer Page 7 of case law of Infor India) Similarly, in the recent case of iMedx Information Services, the Hon ble Bench has itself directed in its order dated May 10, 2023 for the application of the turnover filter at 10 times of the turnover of the Appellant. The relevant extract from the said case is reproduced below: 17. We accordingly set aside the findings of the authorities and dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 523 - 524 of the paper book I. On the basis of the above, it was submitted that the financials of this company were available in public domain and therefore, and perusal of the financials, make it clear that this company is into Automation Engine and customized software and content management system, which is functionally different from that of assessee and hence, is required to be excluded in the list of comparable. 11. Per contra, the ld.DR relied upon the orders of lower authorities. 12. We have heard the rival submissions and perused the material on record. The ld.DRP while dismissing the objections of the assessee has recorded that the functions of the assessee are required to be examined based on the profile of the assessee as available in public domain and not on the basis of the dynamic website of the assessee. It was also noted that the assessee has not brought to the notice that the function performed by the company are appearing in annual report are different than that of the assessee. We may reproduce para 2.2.6.2 wherein the finding of the DRP was given to the following effect : 2.2.6.2. It was contended that the company is engaged in functionally dissimilar activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing the subject matter of turnover filter. Hence, the ground no.4 of the assessee is dismissed subject to our finding with respect to turnover filter. 13. Ground No.5 is with respect of adjustments made in the case of delay in receipts of sale proceeds from AE. 14. Before us, ld. AR has submitted that the assessee is accepting the order passed by the lower authorities whereby they have restricted to interest on trade receivable at as SBI short-term interest rate for the subject year as the ALP interested. It was submitted that the SBI 6% rate as upheld by this tribunal, in several cases, may kindly be applied in the case of the assessee for the assessment year under consideration. 15. The ld.DR has relied upon the order passed by the lower authorities. 16. We have heard the rival arguments and perused the material available on record. Admittedly, this Tribunal in the case of Satyam Ventures Engineering Services Vs. ACIT, Zeta Interactive Systems India Private Limited, M/s. Apache Footware India Private Limited etc has decided the issue in favour of the Revenue by holding that the SBI bank rate of 6% with a credit period of 60 days is to be applied for determining the interest on d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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