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TMI Blog2024 (9) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue recognition, then only we find that the Revenue the assessee is recognizing the income from software services only and there is no reference of making development of any products. We do not agree with the contention of the assessee and accordingly, this ground is also dismissed. Mindtree - Assessee has not objected to the inclusion of this company in the list of comparable selected by the TPO while filing objection in response to the show cause notice before the TPO. Before the learned TPO, the assessee has only raised objection with respect to E-Infochips Bangalore Ltd, Infosys Technologies Ltd, Kal Infosystems Ltd, L T Infotech Ltd. No objection has been filed by the assessee with respect to any other comparables. In our view, once the assessee has forgone his right to raise objection before the TPO, it is not permissible in law to raise the objection before the Tribunal at this stage. Further, we are of the opinion that merely because the company is owning intangible and earned reasonable margin cannot be a ground to exclude this company if on FAR analysis, it is found to be otherwise comparable with that of the assessee. In view of the above, we do not find any rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ER PER LALIET KUMAR, J.M This appeal filed by the assessee is directed against the assessment order dated 27/02/2015 passed by the Assessing Officer u/s 143(3) r.w.s. 92CA(3) 144C of the I.T. Act, 1961. 2. The assessee has raised the following grounds: In the facts and the circumstances of the case, and in law, the learned Assessing Officer erred in making various additions/disallowances as under and further the Dispute Resolution Panel erred in confirming the said additions/ disallowances and observations relating thereto made by the Assessing Officer: 1. In concluding that the sum of Rs. 3,69,58,189 is to be the arm's length compensation receivable by the assessee on account of provision of software development services to its associated enterprises, Reimbursement of expenses received from the associated enterprises interest chargeable on the amounts due from the associate entities. 2. In confirming the rejection of the transfer pricing study conducted by the assessee. The transfer pricing study of the Transfer Pricing Officer resulted in selection of 19 companies as comparables and an Arm's Length Margin of 23.87% was arrived at. However, a relief was granted by the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated enterprises at cost without any mark up. 10. While passing the final assessment order u/s. 143(3) r.w.s. 92CA(3) 144C the learned Assessing Officer erred in setting off the profits of Rs. 7,69,85,754 of Pune STPI undertaking against the loss of Rs. 8,53,79,564 of the Hyderabad undertaking. Thus, no deduction u/s. 10A for Pune undertaking was allowed and the business loss of Rs. 8,53,79,564 of Hyderabad undertaking was not allowed to the carried forward. 11. Any other ground that may be urged at the time of hearing. 3. Facts of the case, in brief, are that the assessee is engaged in the business of Software Development filed its return of income for the A.Y 2010-11 on 01.10.2010 declaring total income at Rs NIL and claiming deduction u/s 10A amounting to Rs. 7,69,85,754/-. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 27.08.2011 and served on the assessee. In response to the said notice, the A.R of the assessee appeared before the Assessing Officer and furnished the requisite details as called for from time to time. Based on the material furnished by the assessee, the Assessing Officer completed the assessment and assessed the net tax demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allowing carried forward of loss suffered in the Hyderabad Unit. 9. The assessee in this regard relied upon the decision of the ITAT Pune Bench in the case of ACIT vs. MSS India (P) Ltd reported in (2009) 123 TTJ 657. 10. It is the submission of the assessee that the assessee is a fully funded company and does not bear working capital risks. The assessee submitted that it neither collects interest nor was charged interests and therefore, should not be imputed with notional interest. 11. The learned Counsel for the assessee submitted that the TPO charges interest @ 12% is charged on receivables of Rs. 1,17,55,791/- quantified at Rs. 14,10,695/-. The DRP directed the TPO to adopt LIBOR Plus 250 basis points for charging interest on delayed receivables from its AEs. 12. The assessee reiterated its submission before the TPO and submitted that no specific method was followed in imputing interest and the assessee neither charged interest on recoverables from AE as well as from Non-AEs. In this regard, the assessee relied on the decision of Global Logic India Ltd vs. ACIT (2020) 185 ITD 795(Del.). It is the submission of the learned Counsel for the ass that the TPO treated reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the TPO was correct in rejecting the contention of the assessee and has rightly, retained the comparable. Thus, this ground is dismissed. Kals Infosis 19. The next comparable i.e. Kals Infosis, the learned AR drew our attention to page 238 of the Paper Book and it was the contention of the assessee that this company is having extra ordinary margin and is also into diverse business. 20. Per contra, the learned DR relied on the order passed by the TPO/DRP. 21. We have examined the record and documents referred to by the assessee. In this regard, the TPO at page 27 of its order had discussed the extracts of the annual reports and recorded that this company is into the development of computer software which is similar to the functions performed by the assessee and therefore, the functions performed by the company are broadly comparable to that of the assessee. In view of the above, we do not find any reason to exclude this company as a comparable. We may point out that merely because this company has earned some extra ordinary profit is no reason to exclude this company as long as this company continues to be comparable with that of the assessee on FAR analysis. In view of the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nised in relation to work done on time and material projects and fixed price projects until the balance sheet date for which billing has not taken place. Unearned revenue represents the billing in resped of contracts for which the revenue is not recognised. ii. Interest Revenue from interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. iii. Dividends Revenue from dividend is recognised when the shareholder s right to receive Payment is established by the balance sheet date. Dividend from subsidiaries is recognised even if such dividend is declared after the balance sheet date but pertains to period on or before the date of Balance Sheet as per the requirement of Schedule VI of the Companies Act, 1956. 25. In view of the above, we do not agree with the contention of the assessee and accordingly, this ground is also dismissed. Mindtree 26. In this regard, the learned AR submitted that Mindtree company owns intangible and our attention was drawn to the page No.376 of the paper book. Further, the learned AR drew our attention to page 360 to 366 and 374 of the paper book to show that the profit of this company has increased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal against the finding given by the DRP and the assessee cannot be worsened off in the appeal filed by the assessee. 32. Further, if we look into the order passed by the DRP where the DRP has decided the issue in favour of the assessee by restricting the interest to be paid at LIBOR Plus 250-point basis, though the said decision of the DRP is contrary to the decision of the Tribunal. However, since the Revenue is not in appeal against the decision of the DRP, therefore, we deem it proper to dismiss the ground raised by the assessee and sustain the order passed by the DRP by reiterating that the delay on trade receivable will be restricted to LIBOR Plus 250 point basis, as there is no appeal of the Revenue and the assessee cannot be worsened off in its appeal by following the decision in the case of Satyam Ventures (Supra). Thus, this ground of appeal is dismissed. Set off of losses 33. Finally, the last ground raised by the assessee is with regard to the set off of losses of the Hyderabad Unit against the profit of the Pune Unit. In this regard the submission of the assessee is as under: 11. The Assessing Officer erred in setting off the profits of Rs. 7,69,85,754/- of Pune ..... X X X X Extracts X X X X X X X X Extracts X X X X
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