9911796707
TMI Blog2025 (4) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee does not want to press Application for admissions of Additional ground of appeal. Thus, in light of above statement made by the ld. Counsel for the assessee, the application (supra) for admission of additional ground is dismissed. 4. The facts of the case in brief as emanating from records on merits are: The assessee is engaged in providing risk management services, insurance and re- Insurance, brokerage and Human Resources services, etc. under software development service segment. The assessee is also providing back office support services to its Associates Enterprises (AE's) all over the globe. The assessee/appellant is captive services provider. During the period relevant to assessment year under appeal the assessee entered into several international transactions with its AE's. The Transfer Pricing Officer (TPO) accepted all international transactions except international transaction of Software Development and Training Services and IT Enabled Services (ITeS). The assessee filed objections against the TP adjustment made by the TPO, before the Dispute Resolution Panel (DRP). The DRP vide directions dated 17.01.2022 upheld TP adjustments qua Software Development and Trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the filters, the AO/TPO shall pass speaking order in this regard. Thus, in principle the DRP accepted that activities of Sasken are not functionally different from that of the assessee. The TPO while giving effect to directions of the DRP without even looking at the financials of Sasken Technologies Ltd. and in violation of directions of the DRP excluded the company from the list of comparables holding the company as functionally dissimilar. The ld. Counsel submits that segmental financial results of Sasken Technologies Ltd. are available in public domain. The DRP had directed the TPO/AO to verify segmental information. Referring to segmental data of Sasken Technologies Ltd. at page 33 of the paper book containing Annual Reports of the comparable companies, he submitted that the TPO has not complied with the directions of DRP. The ld. Counsel thus, prayed for including Sasken in the list of comparables. 8. The ld. Counsel for the assessee also made submissions for exclusion of certain companies from the list of comparables finalized by the TPO. The submission of the ld. Counsel for exclusion of companies are as under:- Wipro:- 8.1. The activities of the company are diversif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftware services, segment information pertaining to software development is not available in the audited financial results. The ld. Counsel placed reliance on the decision rendered in the case of Intuit India Product Development Centre P Ltd vs DCIT in IT (TP)A No. 956/Bang/2022 for AY 2017-18, wherein the Tribunal vide order dated 29.04.2024 has rejected the said company as comparable to a company engaged in the provision of software development services. Larsen & Toubro Infotech Ltd:- 8.4. The ld. Counsel for assessee submits that the company is engaged in diversified activities which include application development, maintenance and outsourcing enterprises solutions, infrastructure management services, testing digital solutions and platform base solution. No segmental information pertaining to software development services is available in Audited financial results of the company. The said company reported two business segments i.e. Service Cluster and Industrial Cluster. Service cluster includes banking and financial services, insurance, media and entertainment, travel and logistics and health care and others. Therefore, the said company is functionally different. Cybercom Data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development services. Referring to the decision of Tribunal in the preceding assessment year in assessee's own case, the ld. DR submits that if DRP directions are not followed, the issue can be restored to the AO. As regards Infosys and L & T, the DR placed reliance on findings of the TPO and the DRP. Findings on Transfer Pricing Issue:- 10. We have heard the submissions made by rival sides and have examined the orders of the authorities below. We have also considered various documents including Annual Reports of the companies on which the ld. Counsel for the assessee has vehemently placed reliance to buttress his arguments for exclusion of companies from the list of comparables. In so far as selection of TNMM as the most appropriate method, there is no dispute. The TPO has accepted the same. The bone of contention between the rival sides is only the companies selected by the TPO as comparable. Our observations with regard to inclusion/exclusion of said companies is as under:- Inclusion of Sasken Communication Technologies Ltd:- The assessee is seeking inclusion of company in the final list of comparable Companies. The primary contention of the assessee is that the DRP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. There is further categorization in IT Services. However, no segmental details of software development services is available in the financial results of the company. Further, Wipro Ltd. enjoys brand value and has incurred significant expenditure on advertising and brand building. The Hon'ble Delhi High Court in the case of PCIT vs. Oracle (OFSS) BPO Services P. Ltd. reported as 416 ITR 54 (Delhi) has held that brand value of entity has a significant role in its ability to garner profits and negotiate contracts thus, even though functionally two entities may be similar but brand does play its own role in price or cost determination and hence, they would be incomparable. Considering, lack of availability of segmental information and a substantial difference in brand value of the company, we are of considered view that Wipro Ltd. is not a good comparable to the assessee/appellant. Tata Elxsi:- B. The TPO and the DRP has held Tata Elxsi Ltd. as good comparable to the assessee/appellant. However, the DRP has observed that if segmental data in respect of ITeS segment is available, the TPO after verification include/exclude the said company in list of comparables. The TPO while gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry-leading universal banking solution. The said company has reported segmental profitability under the heads financial services, manufacturing, energy and utilities, communications and services, retail, consumer packaged goods and logistics, life sciences, healthcare & insurance and combined revenue of all other segments. There is no segmental data available for Software Development Services. Therefore, in our considered view Infosys Ltd. cannot be considered as good comparable of the assessee. Functional disparity is evident from segmental reporting. Further, assessee is captive service provider, whereas, Infosys Ltd. is a giant company operating in the areas of development of software assuming risk leading to higher profits. In light of above observations, the TPO is directed to exclude Wipro Ltd. from the list of comparables in the instant case. Larsen & Toubro Infotech Ltd:- D. The assessee is seeking exclusion of company on account of functional differences and non availability of segmental data. A perusal of Annual Report of company for Financial Year 2016-17 at pages 188 to 242 of the paper book reveals that the said company is providing extensive range of IT services l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments and no exempt income has been earned by the assessee on investment made in subsidiary companies. However, the ld. DR vehemently supported the impugned order and prayed for dismissing ground no. 4 to 7 of appeal. The ld. DR submits that the assessee has earned substantial tax free income in the form of dividend. The AO in a reasoned order has recorded satisfaction as envisaged u/s. 14A(2) r.w.r. 8D of the Act rejecting assessee's disallowance made u/s. 14A of the Act. The ld. DR prayed for upholding findings of the AO on this issue. 14. Both sides heard. It is an undisputed fact that during the period relevant to assessment year under appeal, the assessee has earned dividend income of Rs. 5.60 crores from investments made in Mutual Funds. The assessee has made suo-moto disallowance of Rs. 14,14,000/- for earning of aforementioned exempt income. The contention of the assessee is that the assessee has not utilized borrowed funds for investment in mutual funds. This fact has not been rebuted by the Revenue. It is a well settled law, that where assessee is having mixed bag of 'own interest free funds' and 'interest bearing borrowed funds', it shall be presumed that investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard the submissions made by rival sides on this issue and have examined the orders of authorities below. The assessee in ground no. 8 to 13 of appeal has assailed adjustment made, while processing return of income u/s. 143(1) of the Act. The CPC has made adjustment qua: (i) assessee's claim of depreciation pursuant to merger of Aon Services India P Ltd. (ASIPL) and Aon Spatiality Services P Ltd. (ASSPL) with the assessee w.e.f. 01.10.2016. The entire business of ASIPL and ASSPL has been transferred to the assessee on going concern basis. Further, there was demerger of division of the assessee to Aon HR Services India P. Ltd. the assessee has claimed depreciation in the ratio of number of days assets used by the predecessor and successor; ii. claim of certain liabilities on payment basis u/s. 43B of the Act Rs. 6,41,01,443/- has been disallowed; and iii. short grant of TDS credit. 19.1. The assessee's grievance against adjustments made u/s. 143(1) cannot be redressed under the present proceedings. The assessee has to seek remedy available under the Act in separate proceedings against adjustment made u/s. 143(1) of the Act. The Co-ordinate Bench in the case of Microsoft ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
