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2015 (5) TMI 649 - AT - Income TaxTransfer pricing adjustment - wrong selection of comparable - Held that:- Plea of the assessee for exclusion of Infosys Technologies Ltd. cannot be shut out merely because the said concern was initially adopted by the assessee as a comparable in its Transfer Pricing Study. Quite clearly, the turnover of Infosys Technologies Ltd. stands at ₹ 15,051 crores (approx) whereas assessee’s turnover from software development services is to the tune of ₹ 73 crores (approx). It is also clear from the Tabulation above, that the said concern is undertaking diversified activities whereas assessee is providing software services, at minimal risk as 100% activities are to its associated enterprise. In-fact, assessee has rightly relied upon the judgement of the Hon’ble Delhi High Court in the case of Agnity India Technologies Pvt. Ltd. (2013 (7) TMI 696 - DELHI HIGH COURT ) wherein in a somewhat similar situation the action of the Tribunal in excluding Infosys Technologies Ltd., from the list of final comparables was affirmed. Thus M/s. Infosys Technologies Ltd. was liable to be excluded from the final set of comparables. E-Zest Solutions Limited. notably, Symphony Services Pune Pvt. Ltd. (2015 (5) TMI 258 - ITAT PUNE) was also a concern which was engaged in provision of software development and related services to its associated enterprises on cost plus markup basis. The Tribunal vide its order dated 30-04-2014 (Supra) considered the inclusion of E-Zest Solutions Ltd. for the purpose of comparability analysis of the transaction of development services for the very same assessment year, i.e. 2008-09, which is also the year before us. Following the aforesaid discussion which squarely covers the controversy in the present case, we direct that E-Zest Solutions be excluded from the final set of comparables. Kals Information Systems Limited is liable to be excluded from the list of comparables on account of functional dissimilarities for the purposes of benchmarking international transactions of provision of software development services. Bodhtree Consulting Ltd., the revenue recognition model of Bodhtree Consulting Ltd. is quite different from the model being pursued by assessee as the revenue is being recognized based on the cost plus markup basis and such distinction prevailed to exclude Bodhtree Consulting Ltd. from the list of comparables. M/s. FCS Software Solutions Ltd. the operating margins of the said concern do not reflect a consistent trend over the years, and in any case, the current year’s operations in comparison to the earlier years are quite abnormal. Considering the entirety of circumstances, in our view, the financial results declared by the said concern do not reflect a normal business trend and therefore in our view the said concern is liable to be excluded from the final set of comparables - Decided in favour of assessee.
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