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2016 (9) TMI 1525 - ITAT MUMBAITP adjustment - comparable selection - functional similarity - HELD THAT:- The assessee is mainly in the business of installation, commissioning and after sales service in respect of Telecom equipment supplied by its Associated Enterprises (AEs) to basic wired and wireless telecommunication operators in India and supply of telecommunication equipment accessories. The assessee also provides marketing support and customer services in relation to the Indian market and software research and development services to its AE. Once it has been pointed out that there are factual and functional similarities then only the decisions rendered qua such comparables have a persuasive value which the Co-ordinate Bench is obliged to follow. However, before us, except for referring to these decisions no other material facts have been submitted before us with regard to the functional similarity or dissimilarity based on FAR analysis vis-à-vis the comparable companies. Hence, in the interest of justice, we feel that all the disputed comparable companies which has been sought to be excluded by the assessee needs to be remanded back to the file of the AO / TPO so that proper analysis on FAR basis can be presented by the assessee. In case the similarity of facts are found vis-à-vis the comparable companies as discussed in the ITAT orders relied by the assessee, then AO should consider the same. However, the onus will be on the assessee to show that, how these decisions of the Tribunal qua the comparable companies are applicable on the facts of the assessee’s case. With this direction so far as Transfer Pricing adjustment with regard to market support system is concerned, the same is remanded back to the file of the AO for fresh adjudication Software research and development services assessee has sought to challenge the inclusion of Infosys Technologies Ltd. and Satyam Computers Services Ltd by the TPO, when these two comparable companies were assessee’s own comparables which have been accepted by the TPO and also by the DRP. There is no whisper in the DRP’s order qua these two comparable companies. Before us, the Ld. Counsel has merely relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs. Agnity India Technologies (P) Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] It has not been pointed out as to why these two comparables were not disputed before the DRP and also why no separate ground has been taken before us. On these facts, the Ld. Counsel’s contention for exclusion of these two comparables cannot be accepted. However, in the interest of justice and also in wake of several decisions on these two comparables, we feel that so far as the inclusion and exclusion of these two comparables are concerned, the matter should be restored back to the file of the TPO/AO for fresh consideration whereby proper FAR analysis should be done while carrying out the comparability exercise based on principle laid down by the Hon’ble Delhi High Court as well as other decisions and be decided accordingly. Comparables selected by the assessee viz., Sagar Soft India Ltd; Birla Technologies Ltd.; and PSI Data Systems Ltd. TPO had rejected these comparable on the ground that it is providing BPO service, IT outsourcing services and, therefore, it is functionally not comparable. However, from perusal of the annual report of this company it is seen that it has shown two segments of services: - (i) hardware; and (ii) software services. So far as hardware services are concerned, it has earned revenue on account of sale of products and services, whereas, under the software services it has shown under the head “services” only. However, there is no separate bifurcation of license fee. For proper analysis, we of the opinion that this comparable company too should also be restored back to the to the file of the AO / TPO to carry out proper functional comparability and to examine whether its revenue is from software products or are mainly on account of rendering of software services. Appeal of the assessee stands allowed for statistical purposes.
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