Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (2) TMI 2022 - ITAT DELHITP Adjustment - adjustment to the value of international transactions pertaining to provision of software development services by the Appellant under Section 92CA(3) - Comparable selection - PERSISTENT SYSTEMS LTD. (PERSISTENT) - HELD THAT:- As on non-availability of segmental data. So, we are of the considered view that Persistent is not a valid comparable, hence ordered to be excluded. TATA ELXSI LTD. (TATA ELXSI) - The taxpayer is not the owner of IP which is a captive software development service provider whereas, on the other hand, Tata Elxsi is the owner of IP design of it. Moreover, business unit of taxpayer is very diverse having four business segments as discussed in the preceding paras, whereas only segmental of two of its unit are available. Moreover, there are un-allocable expenses (Net) of ₹ 937.66 lakhs, as is evident from Schedule to the Financial Statements from the year ending March 31, 2010, available at page 526 of the paper book. So far as segmental reporting given at page 526 of the paper book (Annual Report) is concerned, it shows that the company’s operations predominantly relate to providing systems integration and software development services in the information technology field. So, all these facts go to prove that Tata Elxsi is functionally dissimilar vis-à-vis the taxpayer being engaged in the development of specialized/niche product, hence ordered to be excluded being not a valid comparable. E-INFOCHIPS BANGALORE LTD. (E-INFOCHIPS) - We are of the considered view that E-Infochips being a product and semiconductor engineering services having 500 products for key verticals like aerospace and defence, security and surveillance, etc., having huge intangibles which increases its brand value and its segmental financials are not available, is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded. INFINITE DATA SYSTEMS PVT. LTD. (INFINITE) - We are of the considered view that Infinite is functionally dissimilar vis-à-vis taxpayer having been into providing solutions that encompass technical consulting, design and development of software maintenance, systems integration, implementation, testing and infrastructure management services. Furthermore, Infinite has entered into Build, Operate and Transfer (BOT) agreement with Fujitsu Services Limited to set up global delivery centers in India to provide offshore capabilities to Fujitsu and Fujitsu’s associated companies. It has also shown exceptional growth in business operation in the last four years i.e. 908% growth rate over the previous year. So, Infinite cannot be a valid comparable vis-à-vis the taxpayer, hence ordered to be excluded. ZYLOG SYSTEMS LTD. (ZYLOG) - On account of diversified operation, substantial brand value and huge intangible assets having significant AMP spent and R & D expenses, Zylog cannot be a valid comparable vis-à-vis taxpayer which is a captive software development service provider to its AE only, so we order to exclude the same. Addition on account of overdue receivables from its AE by applying the ad hoc interest rate of 14.88% - HELD THAT:- It is the case of the taxpayer that as per para 5.7 of the Agreement, interest, if any, is to be charged on receivables which has been followed in the earlier years and subsequent years. So, TPO/AO is directed to compute the interest, if any, following the rule of consistency, in view of para 5.7 of the Agreement by taking into account the findings returned in earlier years and subsequent years. So, this issue is remanded back to TPO/AO to decide afresh after providing an opportunity of being heard to the taxpayer. Disallowance of severance cost incurred by the taxpayer - HELD THAT:- In view of the matter, this issue being of subsequent year is required to be decided by the AO along with AY 2009-10. Consequently, this issue is set aside to AO to decide afresh after providing an opportunity of being heard to the taxpayer.
|