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TMI Blog2025 (4) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... of Software Development Services: Adjustment - Rs 9,86,16,386 2. On the facts and in law, Hon'ble Dispute Resolution Panel ('DRP'), the Ld. AO and the Ld. Transfer Pricing Officer ('TPO') erred in making the addition of Rs. 9,86,16,386 under Section 92CA(3) of the Act to the international transaction of 'Provision of software development services'. 3. On the facts and in law, the Hon'ble DRP, Ld. AO and Ld. TPO erred in modifying the economic analysis applied in the Transfer Pricing ('TP') documentation maintained by the Assessee u/s 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 ('the Rules'), without providing any cogent reason. 4. Erroneous rejection and selection of comparable companies 4.1 On the facts and in law, the Hon'ble DRP, Ld. AO and Ld. TPO, in contravention of the section 92C(3) of the Act read with Rule 10B(2) of the Rules, erred in rejecting the comparable companies selected by the Appellant in the TP documentation prepared and maintained in compliance with section 92D of the Act read with Rule 10D of the Rules. 4.2 On the facts and in law, the Hon'ble DRP, the Ld. AO and the Ld. TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any under reporting' or 'misreporting' but is a mere difference in view. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant." 3. Brief facts of the case are that, the Assessee is incorporated in India and operates as a subsidiary of ION Trading UK Limited ("ION UK"). The Assessee is a captive software development services provider, engaged in providing generic, repetitive software development services involving development, maintenance, implementation and quality control of computer software relating to financial markets and financial instruments to ION Trading UK Ltd. During the year under consideration, the Assessee provided support services in relation to computer software development, quality assurance and customer support to ION UK Ltd. The Assessee provided software development services amounting to INR 138,07,97,523/- to ION UK Ltd. For the purpose of transfer pricing, the Assessee adopted Transactional Net Margin Method ("TNMM") as the Most Appropriate Method ("MAM") with Net Cost Plus ("NCP") as the Profit Level Indicator. The Assessee in its TP Study selected 9comparable and computed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act to the international transaction of "provision of Software Development Services". The Ld. Counsel for the Assessee submitted that, by exclusion of one comparable from the list of the comparable selected by the Ld. TPO in the Appeal effect order, the Assessee will be at Arm's Length, thereby, all other remaining contentions on other comparables will become academic in nature. Thus, the Ld. Assessee's Representative made submission only one comparable Company i.e. XS CAD India Private Limited and contended that the said comparable is liable to the rejected on the ground of functional dissimilarity and non-availability of segmental. The Ld. Assessee's Representative submitted that the XS CAD India Private Limited is into IT enabled services linked to (computer aided design)sector within the construction and building services which is different from the software coding services provided by the Appellant. Further submitted that the snapshot of the website extracted software by Ld. TPO in his order shows that the company provides services design support pre-construction planning, building to information modelling 3D modelling and walk through services for building engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides design support pre-construction planning building information modeling, 3D modeling and walk through services for building engineering consultants/contractors and fabricators etc. The services rendered by the said company is entirely different from the software development services provided by the Assessee. Further XS CAD India Private Limited earns 94.94% revenue from the CAD Services, which can be corroborated from the financials produced at page no. 315 of the Paper book II. The Companies revenue are from operation are CAD, training and coaching, manpower recruitment and web-site design and development and the said company is engaged in providing ITes Services and products linked to CAD sector within the construction and building services. It is also notable fact that the complete operations of the said company have been treated as a single segment/Information Technology Services. While company performs diversified functions, it has also provided segmental information based on geographical location and no segment has been drawn for software development services, which can be corroborated form Page No. 341 of the Paper Book-2 for segmental. 12. The Co-ordinate bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... academic, accordingly, Ground No. 5 of the Assessee is dismissed. 16. Ground No. 6 is regarding corporate tax addition of Rs. 10,14,600/- made by the A.O. by disallowing the claim of donation made under 80G of the Act. 17. Facts in brief are that, the Assessee had donated Rs. 20,29,000/- to trust and societies registered u/s 80G of the Act for the purpose of compliance with the provisions of Companies Act, 2013 regarding CSR activities. In the return of income, the Assessee treated the same as inadmissible expenditure as per Explanation 2 to Section 37(1) of the Act and claimed the same u/s 80G of the Act (i.e. 50% of Rs. 20,29,200/-). The Ld. A.O. rejected he entire claim of the Assessee holding that the sum paid by the Assessee missed the element of charity and the said payment was not made on a voluntary basis, but to fulfill mandatory requirement of law. 18. The Ld. Counsel for the Assessee submitted that the said issue is squarely covered by the decision of the Coordinate bench of the Tribunal in the case of Teradata India Pvt. Ltd. Vs. DCIT Circle 3(1), Gurgaon in ITA No. 1248 and 2337/Del/2022. Further, the Ld. Counsel has also relied on the order of Co-ordinate Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 21. Further in the case of Inter global Technology Quotient (P.) ltd. (supra) the Co-ordinate bench of the Tribunal held as under:- "7.5 As with regard to the reasoning that CSR expenditure are not voluntary but mandatory in nature due to penal consequences, we are of considered view that voluntary nature of donation is by nature of fact that it is not on the basis of any reciprocal promise of donee. The CSR expenditures are also without any reciprocal commitment from beneficiary being philanthropic in nature. The Act permits deduction of donations as per Section 80G of the Act, even though, assessee is not gaining any benefit out of any reciprocity from donee. Similar is the case of CSR expenditure. Thus, the reasoning of learned Tax Authority, the CSR expenditure is mandatory, does not justify disallowance of these expenditures u/s 80G, if other conditions of section 80G are fulfilled. There is no allegation of Revenue that other conditions of Section 80G are not fulfilled. We, thus sustain the ground." 22. The Mumbai Tribunal in the case of AluboundDacs India Pvt. ltd. (supra) held as under:- "11. We have heard the rival submissions and perused the materials available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would not fall under the two exceptions specified above which clearly mandates that the assessee is entitled to claim deduction for the donations contributed during the year under consideration u/s. 80G of the Act. The decision relied upon by the ld. A.O. in the case of PVGRaju, Raja of Vizianaram (supra) is distinguishable on the facts of the present case where there is no requirement of proving the voluntariness of the donation contributed by the assessee for claiming deduction u/s. 80G of the Act. The amendment brought about by Finance Act, 2015 to section80G of the Act which had inserted the sub clauses (iiihk) and (iiihl) to be the exception for qualifying a donation for claiming u/s. 80G of the Act could also be an evidencing factor to substantiate that CSR expenditures which falls under the nature specified in section 30 to 36 of the Act are an allowable deduction u/s. 80G of the Act. 12. On the above observation, we deem it fit to hold that the Assessee is entitled to deduction claimed u/s 80g of the Act towards the CSR expenditure incurred by it. We, therefore, direct the Ld. A.O. to allow the claim of the Assessee subject to the condition that the Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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