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2022 (5) TMI 1441 - AT - Income TaxTP Adjustment - adjustment on provision for software development services - comparable selection - upper limit of the turnover for exclusion of companies having higher turnover - HELD THAT:- In the instant case, the assessee’s turnover is only Rs.40.87 crore. TPO / DRP had excluded companies having turnover of less than Rs.1 crore, however, the TPO / DRP has not put upper limit of the turnover for exclusion of companies having higher turnover. In deciding the above ground, the Tribunal in the case of Barracuda Networks India Private Limited [2022 (5) TMI 322 - ITAT BANGALORE], considered various judicial pronouncements and held that companies whose turnover is exceeding Rs.200 crore has to be excluded. In this case, the assessee’s turnover is Rs.40.87 crore and the assessee cannot be compared to the companies having high turnover exceeding Rs.200 crore. Therefore we direct the AO / TPO to exclude Larsen & Toubro Infotech Limited, Nihilient Technologies Limited, Persistent Systems Limited, Thirdware Solutions Limited, Infosys Limited, Aspire Systems (India) Private Limited and Cybage Software Private Limited, from the list of comparables. Also we direct the AO / TPO to include R S Software (India) Limited as a comparable company. However, the margins of the said company for assessment years 2014-2015 and 2015-2016 have to be ignored since the turnover exceeded Rs.200 crore for the said period. It is ordered accordingly. Adjustment on Interest on delayed receivables - We direct the AO / TPO to redo the transfer pricing analysis in respect of interest on outstanding receivables by taking into account the directions of the Tribunal in assessee’s own case for assessment year 2008-2009 [2016 (10) TMI 1211 - ITAT BANGALORE] TDS u/s 195 - Disallowance u/s 40(a)(i) - HELD THAT:- The assessee has produced End Users License Agreement (EULA) - AR has taken us through various clauses, especially, clause 9, wherein he emphasized that the assessee does not acquire any right, title or interest in any IPR - Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT] had clearly held that amounts paid by the resident end users to non-resident computer software manufacturer / suppliers for use of computer software through EULA is not payment of royalty for the use of copyright in computer software and the same does not give rise to any income taxable in India as a result of which the payer is not liable for TDS u/s 195 - we restore the issue to the files of the A.O. A.O. is directed to examine the EULA entered by the assessee with XGISL and decide the issue afresh. A.O. shall follow the dictum laid down by the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT (supra) while taking a decision in the said matter.
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